-----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, HuvxmlBXzB98+DavKvoCDrGA5rmeIUBWE5he+WUEjv20h6F5gLE6vLAt44s9kiUK IYfZjYZdB12Gnaktfr9xMQ== 0000950134-99-011057.txt : 19991216 0000950134-99-011057.hdr.sgml : 19991216 ACCESSION NUMBER: 0000950134-99-011057 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19991130 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XETA CORP CENTRAL INDEX KEY: 0000742550 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 731130045 STATE OF INCORPORATION: OK FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-16231 FILM NUMBER: 99774852 BUSINESS ADDRESS: STREET 1: 1814 WEST TACOMA CITY: BROKEN ARROW STATE: OK ZIP: 74012 BUSINESS PHONE: 9186648200 MAIL ADDRESS: STREET 1: 1814 WEST TACOMA CITY: BROKEN ARROW STATE: OK ZIP: 74012 8-K 1 FORM 8-K 1 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of earliest event reported): December 15, 1999 (November 30, 1999) XETA Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Oklahoma 0-16231 73-1130045 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 1814 West Tacoma, Broken Arrow, Oklahoma 74012 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 918-664-8200 ----------------------------- Not Applicable - -------------------------------------------------------------------------------- (Former name or address, if changed since last report.) 2 Item 2. Acquisition or Disposition of Assets On November 30, 1999, XETA Corporation (the "Company") closed the previously reported agreement to acquire from Mark A. Martin and Lawrence J. Hopp 100% of the outstanding stock (the "Shares") of U.S. Technologies Systems, Inc., a privately held Missouri corporation ("UST"). The acquisition was made pursuant to a Stock Purchase Agreement dated as of August 1, 1999 between Mark A. Martin and Mark A. Martin, Trustee Under Living Trust of Mark A. Martin dated April 4, 1994, and the Company (the "Martin Agreement"), and a Stock Purchase Agreement dated as of August 1, 1999 between Lawrence J. Hopp and Lawrence J. Hopp, Trustee Under Living Trust of Lawrence J. Hopp dated October 13, 1994, and the Company (the "Hopp Agreement"). UST is Lucent Technologies' largest authorized dealer of telecommunications equipment, including voice and data technology systems, to the commercial market. UST reported net sales and net income of $28,480,728 and $1,765,600, respectively, for its fiscal year ended December 31, 1998. It has sales offices in six cities, customers in thirty states, and 91 employees. The Company intends to operate UST as a commercial channel division of its business. The consideration for the Shares was the result of separate arms-length negotiations with each of the sellers and consisted, in the aggregate, of $26 million in cash, $23 million of which was paid at closing, and 150,000 shares of the Company's unregistered common stock issued to Mr. Martin at closing. The balance of the cash purchase price is being held by the Company pursuant to the terms of the Martin Agreement, which provides for a $2 million earn-out to be paid to Mr. Martin contingent upon UST's achievement of certain performance goals during the two years following the closing, and $1 million to be held for two years as security against any losses which may be incurred due to any breach of the representations and warranties contained in the Agreement. In addition, under both the Martin Agreement and the Hopp Agreement, the Company will pay the "net tax cost" (as defined in the respective agreements), if any, incurred by Mr. Martin and Mr. Hopp as a result of taxable income being allocated to them on earnings by UST from August 1, 1999 up to, but not including, the day of closing. The Company financed the cash portion of the purchase price through a $40 million credit facility established by the Company simultaneously with the UST acquisition pursuant to a Credit Agreement dated November 30, 1999 with Bank One, Oklahoma, NA and Mercantile Bank, NA, the Lenders named therein, Bank One, Oklahoma, NA, as Agent and Banc One Capital Markets, Inc., as Lead Arranger and Sole Book Runner (the "Credit Facility"). The $23 million advanced at closing under the Credit Facility is evidenced by two separate term notes, one in the principal amount of $12,650,000 and one in the principal amount of $10,350,000, payable to Bank One and to Mercantile Bank, respectively, both maturing on November 30, 2004 (the "Term Loan"), with aggregate principal payable in equal monthly installments of $383,333.33. Interest on the Term Loan is based on a margin above either Bank One, Oklahoma's prime rate or LIBOR. The margin added to the base rate is determined 2 3 by the ratio of Total Funded Debt to EBITDA (both terms defined in the Credit Facility) and ranges from zero to 75 basis points on prime rate based borrowings and ranges from 150 to 250 basis points on LIBOR based borrowings. Interest on the Term Loan is payable monthly. Of the remaining $17 million available under the Credit Facility, $5 million can be used for working capital needs under a revolving credit line and $12 million can be used to finance additional acquisitions. The Credit Facility is secured by a lien against all of the Company's and UST's assets, including a mortgage on the Company's Tulsa headquarters, and is guaranteed by UST. Following the closing, the Company entered into a two-year employment agreement with Mr. Martin, who will serve as President of the Company's commercial channel division. Mr. Martin will also be nominated to serve on the Company's Board of Directors to be elected at the next annual meeting of shareholders. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired. It is impracticable to provide the required financial statements at the time of filing this report. The required financial statements will be filed by amendment to this report no later than February 14, 2000. (b) Pro Forma Financial Information. It is impracticable to provide the required pro forma financial information at the time of filing this report. The required pro forma financial information will be filed by amendment to this report no later than February 14, 2000. (c) Exhibits. See Index to Exhibits for listing of those documents filed as exhibits to this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. XETA Corporation (Registrant) Dated: December 14, 1999 By: /s/ JON A. WIESE ----------------------------------- Jon A. Wiese President 3 4 EXHIBIT INDEX
SEC No. Description Page ------- ----------- ---- (1) Underwriting Agreement - None. (2) Plan of acquisition, reorganization, arrangement, liquidation or succession. 2.1 Stock Purchase Agreement dated as of August 1, 1999, between MARK A. MARTIN, individually, and MARK A. MARTIN, Trustee Under Living Trust of Mark A. Martin dated April 4, 1994 and XETA Corporation. The Schedules and Exhibits to the Stock Purchase Agreement, each of which are listed below, have been omitted from this report and will be furnished to the Securities and Exchange Commission upon request. Schedule 1.1 Corporate Existence; Qualification; Organizational Documents Schedule.1.3 Subsidiaries Schedule.1.4 Consents Schedule.1.5 Title to Shares Schedule.1.6 Financial Statements Schedule.1.7 Liabilities Schedule.1.8 Actions Since Balance Sheet Date Schedule.1.9 Absence of Material Changes Schedule.1.10 Taxes Schedule.1.11 Ownership of Assets; Trademarks; etc. Schedule.1.12 Insurance Schedule.1.13 Litigation and Legal Compliance Schedule 1.14 Real Property Schedule 1.15 Material Agreements Schedule 1.16 Condition of Assets Schedule 1.17 Accounts and Notes Receivable Schedule 1.18 Permits and Licenses Schedule 1.19 Banking Arrangements Schedule 1.20 Interest in Assets Schedule 1.21 Salary Information Schedule 1.22.1 Pension Plans Schedule 1.22.2 Welfare Plans Schedule 1.22.3 Prohibited Transactions
4 5 Schedule 1.22.4 Compliance Schedule 1.22.5 COBRA Schedule 1.22.6 Profit Sharing Plans Schedule 1.22.7 Miscellaneous Benefit Plan Matters Schedule 1.23 No Breach Schedule 1.24 Brokers Schedule 1.25 Labor Discussions Schedule 1.26 Change of Name Schedule 1.27 Environmental Matters Schedule 1.28 Year 2000 Compliance Exhibit 1.2 Non-Competition Agreement Exhibit 1.3.2 Definition of Gross Profit Exhibit 1.5 Employment Agreement Exhibit 2.1 Agreement Regarding Representations, Warranties and Covenants of the Company and the Seller Exhibit 4.3 Confidentiality Agreement Exhibit 5.7 Certificate Pursuant to Section 5.7 of Stock Purchase Agreement Exhibit 6.4 Certificate Pursuant to Section 6.4 of Stock Purchase Agreement
2.2 Stock Purchase Agreement dated as of August 1, 1999, between LAWRENCE J. HOPP, individually, and LAWRENCE J. HOPP, as Trustee under Living Trust of Lawrence J. Hopp, dated October 13, 1994 and XETA Corporation. The Schedules and Exhibits to the Stock Purchase Agreement, each of which are listed below, have been omitted from this report and will be furnished to the Securities and Exchange Commission upon request. Schedule 1.1 Corporate Existence; Qualification; Organizational Documents Schedule 1.3 Subsidiaries Schedule 1.4 Consents Schedule 1.5 Title to Shares Schedule 1.6 Financial Statements Schedule 1.7 Liabilities Schedule 1.8 Actions Since Balance Sheet Date Schedule 1.9 Absence of Material Changes Schedule 1.10 Taxes Schedule 1.11 Ownership of Assets; Trademarks; etc. Schedule 1.12 Insurance Schedule 1.13 Litigation and Legal Compliance Schedule 1.14 Real Property
5 6 Schedule 1.15 Material Agreements Schedule 1.16 Condition of Assets Schedule 1.17 Accounts and Notes Receivable Schedule 1.18 Permits and Licenses Schedule 1.19 Banking Arrangements Schedule 1.20 Interest in Assets Schedule 1.21 Salary Information Schedule 1.22.1 Pension Plans Schedule 1.22.2 Welfare Plans Schedule 1.22.3 Prohibited Transactions Schedule 1.22.4 Compliance Schedule 1.22.5 COBRA Schedule 1.22.6 Profit Sharing Plans Schedule 1.22.7 Miscellaneous Benefit Plan Matters Schedule 1.23 No Breach Schedule 1.24 Brokers Schedule 1.25 Labor Discussions Schedule 1.26 Change of Name Schedule 1.27 Environmental Matters Schedule 1.28 Year 2000 Compliance Exhibit 1.2 Non-Competition Agreement Exhibit 2.1 Agreement Regarding Representations, Warranties and Covenants of the Company and the Seller Exhibit 4.3 Confidentiality Agreement Exhibit 5.6 Certificate Pursuant to Section 5.6 of Stock Purchase Agreement Exhibit 5.7 Counsel's Opinion Letter Exhibit 6.4 Certificate Pursuant to Section 6.4 of Stock Purchase Agreement
2.3 Credit Agreement dated as of November 30, 1999, among XETA, the Lenders, the Agent and the Arranger. The Schedules and Exhibits to the Credit Agreement, each of which are listed below, have been omitted from this report and will be furnished to the Securities and Exchange Commission upon request. Exhibit A-1 Form of Opinion of Counsel (Borrower) Exhibit A-2 Form of Opinion of Counsel (UST) Exhibit B Compliance Certificate Exhibit C Assignment Agreement Exhibit D Loan/Credit Related Money Transfer Instruction Exhibit E-1 Form of Revolving Note Exhibit E-2 Form of Term Note Exhibit E-3 Form of Acquisition Note 6 7 Exhibit E-4 Form of Acquisition Term Note Schedule 1 Subsidiaries and Other Investments Schedule 2 Indebtedness and Liens 2.4 Pledge and Security Agreement. The Schedules and Exhibits to the Pledge and Security Agreement, each of which are listed below, have been omitted from this report and will be furnished to the Securities and Exchange Commission upon request. Exhibit A (See Sections 3.3, 3..4, 4.1.7 and 9.1 of Security Agreement) Exhibit B (See Section 3.8 of Security Agreement) Exhibit C (See Section 3.8 of Security Agreement) Exhibit D (See Sections 3.9 and 4.1.6 of Security Agreement) Exhibit E List of Pledged Securities (See Sections 3.11 of Security Agreement) Exhibit F (See Section 3.1 of Security Agreement) Exhibit G Supplement to Security Agreement 2.5 Real Estate Mortgage, Security Agreement, Financing Statement and Fixture Filing (with Power of Sale). The Schedules and Exhibits to the Real Estate Mortgage, each of which are listed below, have been omitted from this report and will be furnished to the Securities and Exchange Commission upon request. Exhibit A (Legal Description) Exhibit B Description of Personal Property Exhibit C Title Exceptions 2.6 Subsidiary Guaranty. 2.7 $12,650,000 Term Note - Bank One, Oklahoma, NA. 2.8 $10,350,000 Term Note - Mercantile Bank. (4) Instruments defining rights of security holders, including indentures - previously filed as Exhibits 3.1, 3.2 and 3.3 to the registrant's Registration Statement on Form S-1, Registration No. 33-7841. (16) Letter on change in certifying accountant - N/A. 7 8 (17) Letter on director resignation - N/A. (20) Other documents or statements to security holders - None. (23) Consents of experts and counsel - To be filed with the financial statements required by Item 7, by amendment to this report no later than February 14, 2000. (24) Power of attorney - None. (27) Financial Data Schedule - N/A. (99) Additional exhibits. 99.1 Employment Agreement dated November 30, 1999 between Mark A. Martin and the Company. 8 EX-2.1 2 STOCK PURCHASE AGREEMENT-MARK A. MARTIN 1 EXHIBIT 2.1 STOCK PURCHASE AGREEMENT DATED AUGUST 1, 1999 BY AND BETWEEN XETA CORPORATION (THE "PURCHASER") AND MARK A. MARTIN AND MARK A. MARTIN, TRUSTEE UNDER LIVING TRUST OF MARK A. MARTIN DATED APRIL 4, 1994 (COLLECTIVELY, THE "SELLER") 2
TABLE OF CONTENTS SECTION OF AGREEMENT PAGE NO. ARTICLE I - Purchase of Shares....................................................................................1 1.1 Acquisition of Shares...........................................................................1 1.2 Purchase Consideration..........................................................................1 1.3 Hold-Back.......................................................................................2 1.4 Tax Treatment...................................................................................3 1.5 Employment Agreement............................................................................4 ARTICLE II - Representations and Warranties of the Seller.........................................................4 2.1 Joint Representations and Warranties............................................................4 2.2 Investment Representation.......................................................................4 2.3 Access to Information...........................................................................4 2.5 Value...........................................................................................5 2.6 Concurrent Transaction..........................................................................5 ARTICLE III - Representations and Warranties of Purchaser.........................................................5 3.1 Corporate Existence and Qualification...........................................................5 3.2 Consents........................................................................................5 3.3 Corporate Authority.............................................................................6 3.4 No Breach.......................................................................................6 3.5 Brokers.........................................................................................6 3.6 Value...........................................................................................6 3.7 SEC Filings Complete............................................................................7 3.8 Litigation......................................................................................7 3.9 Shares Validly Issued...........................................................................7 3.10 Generally.......................................................................................7 ARTICLE IV - Covenants............................................................................................7 4.1 Pre-Closing Covenants of the Seller and the Company.............................................7 4.2 Pre-Closing Covenants of Purchaser..............................................................8 4.3 Seller's Confidentiality........................................................................8 4.4 Post-Closing Covenants of Purchaser.............................................................8 4.5 Fulfillment of Conditions.......................................................................8 4.6 Retention of Business Records...................................................................8 4.7 Tax Covenants...................................................................................9 4.8 Tax Records.....................................................................................9 4.9 Privilege.......................................................................................9 4.10 Employee Bonuses...............................................................................10 ARTICLE V - Conditions Precedent to the Obligation of Purchaser to Close.........................................10 5.1 Representations and Warranties.................................................................10 5.2 Covenants......................................................................................10 5.3 No Actions.....................................................................................10 5.4 Consents; Licenses and Permits.................................................................10 5.5 No Material Change.............................................................................11
i 3 5.6 Completion of Due Diligence....................................................................11 5.7 Certificate....................................................................................11 5.8 Opinion........................................................................................11 5.9 Lucent Distributorship.........................................................................11 5.10 Hopp Transaction...............................................................................11 5.11 Non-Competition and Confidentiality............................................................11 5.12 Section 338(h)(10) Election....................................................................11 5.13 Board Approval.................................................................................11 5.14 Fairness Opinion...............................................................................11 5.15 Bank Financing.................................................................................12 5.16 Additional Documents...........................................................................12 5.17 Employment Agreement...........................................................................12 ARTICLE VI - Conditions Precedent to the Obligation of the Seller to Close.......................................12 6.1 Representations and Warranties.................................................................12 6.2 Covenants......................................................................................12 6.3 No Actions.....................................................................................12 6.4 Certificate....................................................................................12 6.5 Hopp Transaction...............................................................................12 6.6 Board Approval.................................................................................13 6.7 Additional Documents...........................................................................13 ARTICLE VII - Closing............................................................................................13 7.1 The Closing....................................................................................13 7.2 Location, Time and Date........................................................................13 7.3 Seller's Deliveries............................................................................13 7.4 Purchaser's Deliveries.........................................................................14 7.5 Transfer of Possession.........................................................................14 ARTICLE VIII - Survival of Representations; Indemnification......................................................14 8.1 Survival.......................................................................................14 8.2 Indemnification by the Seller..................................................................14 8.3 Indemnification by Purchaser...................................................................15 8.4 Claims.........................................................................................15 8.5 Seller's Liability.............................................................................15 8.6 Purchaser's Liability..........................................................................15 8.8 Final Determination............................................................................16 8.9 Defense of Claims..............................................................................16 8.9 Extension of Time..............................................................................16 ARTICLE IX - Termination and Waiver..............................................................................17 9.1 Termination....................................................................................17 9.2 Waivers........................................................................................17 ARTICLE X - Miscellaneous Provisions.............................................................................18 10.1 Expenses.......................................................................................18 10.2 Confidential Information.......................................................................18 10.3 Publicity......................................................................................18 10.4 Modification, Termination or Waiver............................................................18
ii 4 10.5 Notices........................................................................................18 10.6 Binding Effect and Assignment..................................................................19 10.7 Exhibits and Schedules.........................................................................19 10.8 Entire Agreement...............................................................................19 10.9 Governing Law..................................................................................19 10.10 Section Headings...............................................................................20 10.11 Gender.........................................................................................20 10.12 Severability...................................................................................20 10.13 Attorneys' Fees................................................................................20 10.14 Counterparts...................................................................................20 10.15 Recitals.......................................................................................20 10.16 Equitable Relief...............................................................................20
iii 5 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), which is to be effective as of the 1st day of August, 1999 (the "EFFECTIVE DATE"), is entered into by and between XETA CORPORATION, an Oklahoma corporation ("PURCHASER"), and MARK A. MARTIN, individually, and MARK A. MARTIN, TRUSTEE UNDER LIVING TRUST OF MARK A. MARTIN DATED APRIL 4, 1994 (herein collectively referred to as "Seller"). RECITALS: A. Seller owns fifty (50) shares (the "SHARES") of the $1.00 par value common stock of U. S. Technologies Systems, Inc., a Missouri corporation (the "COMPANY"). B. The shares constitute fifty percent (50%) of the Company's issued and outstanding common stock. C. Purchaser desires to acquire from the Seller, and the Seller desires to sell to Purchaser, all of the Shares and all associated goodwill. NOW, THEREFORE, in consideration of the mutual benefits to be derived hereby, the representations, warranties, covenants, and agreements herein contained, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Purchaser, and Seller do hereby agree as follows: ARTICLE I Purchase of Shares 1.1 Acquisition of Shares. Upon the terms of, and subject to the conditions set forth in this Agreement at the Closing, Seller shall convey to Purchaser and Purchaser shall acquire all of the Shares and associated goodwill from the Seller, free and clear of all manner of liens, charges, encumbrances and claims, but subject to generally applicable laws and regulations with respect to unregistered securities. The Shares shall constitute one-half (1/2) of all of the Company's capital stock issued and outstanding as of the date of Closing. 1.2 Purchase Consideration. The purchase consideration for the Shares ("PURCHASE CONSIDERATION") shall be the sum of $15,000,000 plus $11,361 (which is the amount of interest accrued on the Company's indebtedness to Seller for the period July 1, 1999, through July 31, 1999), plus the amount required to be paid under Section 4.4 below, plus 150,000 shares of the Purchaser's unregistered common capital stock (the "XETA STOCK"). The XETA Stock shall be restricted stock as that term is defined in Rule 144 of the regulations to the Securities Act of 1 6 1933. Upon the sale, transfer and delivery by the Seller of the Shares to Purchaser as set forth in Section 1.1, and in consideration therefor, Purchaser shall cause the XETA Stock to be issued in the name of Seller or his nominee and shall pay to the Seller, at the Closing Date as defined herein, by cashier's check or by electronic wire transfer or other immediately available funds the amount which is equal to $15,000,000 plus $11,361 (which is the amount of the interest accrued on the Company's indebtedness to Seller for the period July 1, 1999, through July 31, 1999), less the "Hold-Back" described in Section 1.3 below, and less the principal amount of all indebtedness of the Company to Seller (the "SELLER DEBT") unpaid and outstanding as of the Closing (said amount being herein called the "CASH PORTION OF THE PURCHASE CONSIDERATION"), $1,000 of which shall be allocated as consideration for Seller's agreement not to compete with Purchaser or the Company, nor to solicit any of its employees, customers or vendors, in the manner and for the periods more particularly described in a Non-Competition Agreement in the form of Exhibit "1.2" attached hereto ("NON-COMPETITION AGREEMENT"). In addition to the Cash Portion of the Purchase Consideration, Purchaser shall pay to Seller, at the Closing Date, the Seller Debt, and Seller shall assign to Purchaser, without recourse or warranty (except as set forth herein), all rights of Seller in relation to the Seller Debt. 1.3 Hold-Back. The Cash Portion of the Purchase Price shall be subject to a $3,000,000 Hold-Back (the "HOLD-BACK"), consisting of an "INDEMNITY FUND" and an "INCENTIVE FUND": 1.3.1 The Indemnity Fund shall consist of $1,000,000 of the total Hold-Back and shall be held by Purchaser to secure Purchaser, for a period of two (2) years after Closing (the "SECURITY PERIOD"), against loss from the breach of any warranty or representation made by Seller in or in connection with this Agreement, or any related indemnity given by Seller. This component of the Hold-Back shall not serve to limit Seller's liability to Purchaser in connection with any such representation, warranty or indemnity; provided, however, that to the extent Purchaser has no indemnifiable claims at the end of the Security Period, Purchaser will pay to Seller the entire amount of Indemnity Fund. In the event Purchaser has indemnifiable claims hereunder at the end of the Security Period, which have not been resolved under Article VIII, Purchaser shall pay Seller such portion of the Indemnity Fund as is in excess of any amounts reasonably required to indemnify Purchaser, in Purchaser's judgment, against such then existing indemnifiable claims. Thereafter, Purchaser shall pay to Seller the unapplied portion of the Indemnity Fund (if any) within ten (10) days after a Final Determination has been made with respect to such unresolved claims. 1.3.2 The Incentive Fund shall consist of the remaining $2,000,000 of the total Hold-Back, the release of which to the Seller shall be subject to the Company's achieving certain increases in its aggregate "GROSS PROFIT" (as defined in Exhibit "1.3.2" hereto attached) according to the provisions of this Section 1.3.2. For purposes of this Section, the terms below have the following definitions: "1999 GROSS PROFIT" means the Company's Gross Profit for the 12 months ended October 31, 1999. 2 7 "YEAR 1" means the 12 months ending October 31, 2000. "YEAR 2" means the 12 months ending October 31, 2001. (i) The entire $2,000,000 Incentive Fund shall be payable by Purchaser to Seller if the Gross Profit in Year 1 is at least 140% of the 1999 Gross Profit. (ii) $1,000,000 of the Incentive Fund shall be payable by Purchaser to Seller if the Gross Profit in Year 1 is at least 120%, but less than 140% of the 1999 Gross Profit; and the second $1,000,000 of the Incentive Fund shall be payable by Purchaser to Seller if the Gross Profit in Year 2 is at least 144% of the 1999 Gross Profit. (iii) If the Gross Profit in Year 1 is less than 120% of the 1999 Gross Profit, the entire $2,000,000 Incentive Fund shall nevertheless be payable by Purchaser to Seller if the Company's Gross Profit in Year 2 exceeds 144% of the Company's 1999 Gross Profit. 1.3.3 Amounts payable by the Purchaser to the Seller pursuant to paragraphs 1.3.1 and 1.3.2 above shall be accompanied by the payment of interest from the Closing Date at a variable rate at all times equal to Purchaser's lowest corporate borrowing rate for short term funds (which is currently approximately 7.75% per annum). 1.3.4 Payments of the Incentive Fund shall be made no later than the November 30 that immediately follows the twelve-month period with respect to which Gross Profit is determined. Seller and his representatives shall have the right upon reasonable notice to inspect the Company's books and financial records in order to verify or determine the Gross Profit of the Company for any relevant period. All costs of such inspection shall be the responsibility of Seller, except that such costs shall be reimbursed by Purchaser to Seller if it is determined that the Purchaser failed to correctly compute Gross Profit in accordance with this Agreement under circumstances in which a correct computation results in Seller's receiving all or a portion of the Incentive Fund. All payments of the Holdback Fund and Incentive Fund too Seller, if any, shall be treated as part of the Purchase Consideration, and all applications against and deductions from the Holdback Fund and the Incentive Fund by Purchaser, if any, shall be treated as reductions of the Purchase Consideration. 1.4 Tax Treatment. Seller is aware of the fact, and hereby acknowledges that Purchaser is contemporaneously, but separately, negotiating for the possible purchase of all of Larry Hopp's stock in the Company. Seller hereby agrees, upon request, to promptly and timely execute and file Form 8023-A and to otherwise cooperate with Purchaser, the Company and Mr. Hopp in a joint election to treat each transaction as a sale of assets under Section 338(h)(10) of the U. S. Internal Revenue Code (the "CODE"). 3 8 1.5 Employment Agreement. At Closing, the Company and Seller shall enter into an Employment Agreement in the form of Exhibit "1.5" hereto attached ("EMPLOYMENT AGREEMENT") for a primary term of two (2) years subject to extension for a period of one (1) additional year if performance targets are met. ARTICLE II Representations and Warranties of the Seller 2.1 Joint Representations and Warranties. Contemporaneously with Seller's execution and delivery of this Agreement, to be effective as of the execution date hereof ("EXECUTION DATE") as well as the Closing Date, the Seller shall make the representations and warranties to Purchaser (the "REPRESENTATIONS AND WARRANTIES") contained in Article I of Exhibit "2.1" hereto attached (the "INDUCEMENT"). As an inducement to the Purchaser to enter into this Agreement and an accommodation to the Seller as a principal shareholder of the Company, the Company shall make the Representations and Warranties jointly and severally with the Seller. Seller and the Company shall acknowledge in making the Representations and Warranties that Purchaser, in executing, delivering, and consummating this Agreement, has relied and will rely upon the correctness and completeness of each of such Representations and Warranties. 2.2 Investment Representation. The Seller hereby represents that he understands that the transaction contemplated by this Agreement is to be carried out as a transaction exempt from registration under the Securities Act of 1933, as amended (the "ACT") and, accordingly the XETA Stock will not have been registered under the Act at the time of Closing. The Seller further represents that he is acquiring the XETA Stock for investment purposes only and not with a view to or for resale in connection with any distribution of the XETA Stock, nor with any present intention of distribution (within the meaning of the Act) of the XETA Stock. The Seller understands that because the XETA Stock will not have been registered under the Act, the Purchaser will not permit the transfer of any of the XETA Stock without registration under the Act, which is not contemplated by this Agreement, or upon the issuance to the Purchaser of a favorable opinion of its counsel or of the submission to the Purchaser of such other evidence as may be satisfactory to counsel for the Purchaser, in either case, to the effect that any such transfer, whether pursuant to Rule 144 of the Act or otherwise, shall not be in violation of the Act, and any applicable state securities laws, and that the share certificates representing such shares will be issued with a restrictive legend providing notice of such restriction. 2.3 Access to Information. The Seller represents and warrants to the Purchaser that he has had an opportunity to ask questions of, and to receive answers from, appropriate officers and representatives of the Purchaser concerning the terms and conditions of the issuance of the XETA Stock and to obtain any additional information concerning the Purchaser which the Seller has requested. In addition, the Seller represents and acknowledges that the Purchaser has made available for inspection by the Seller various documents connected with the Purchaser's business that have been requested by Seller, and has not refused in any way to permit the Seller to inspect any document requested to be inspected by the Seller. 4 9 2.4 Continuity of Representations. The Seller covenants and agrees to advise Purchaser promptly of any material adverse change or deviation in or from any of the representations and warranties herein from the Execution Date through the Closing Date. 2.5 Value. In deciding to sell the Shares at the price provided herein, Seller represents and warrants that he has relied on his own financial, tax, business and legal advisors and has not relied on any express or implied representation by Purchaser or any other person or entity as to the value of the Shares. Seller has been employed by the Company, has been actively involved in the management of the Company's day-to-day affairs, has had full and complete access to all documents, records and books of the Company and has had a reasonable opportunity to obtain such other information as he has deemed necessary to determine the value of the Shares. 2.6 Concurrent Transaction. Seller understands and acknowledges that the Company's other shareholder, Larry Hopp ("HOPP") has negotiated separately with the Purchaser for the sale and purchase of Hopp's shares of the capital stock of the Company. Seller further understands and acknowledges that the Purchaser would not have agreed to purchase the Shares without Hopp's concurrent agreement to sell his shares in the Company to the Purchaser, that the concurrent purchase of Hopp's shares in the Company is a condition of Closing, and that if negotiations with the Purchaser had been conducted by him jointly with Hopp, Seller might have realized a higher price for the Shares. Nevertheless, Seller is satisfied with the Purchase Consideration and other terms provided herein, and he is willing and has freely agreed to sell the Shares to the Purchaser for such consideration and on such terms. ARTICLE III Representations and Warranties of Purchaser Purchaser makes the following representations and warranties to the Seller, and Seller, in executing, delivering and consummating this Agreement, has relied and will rely upon the correctness and completeness of each of such representations and warranties: 3.1 Corporate Existence and Qualification. Purchaser is a company duly organized, validly existing and in good standing under the laws of the State of Oklahoma. Purchaser has the corporate power to own its assets and properties and to carry on its business as now conducted, and Purchaser is duly qualified and is in good standing as a foreign corporation in those jurisdictions in which it is required to qualify in order to own its assets or properties or to carry on its business as now conducted. 3.2 Consents. No consent of any governmental or other regulatory agency, foreign or domestic, or any other party is required to be received by or on the part of Purchaser to enable it to enter into and carry out this Agreement in all material respects. 5 10 3.3 Corporate Authority. Purchaser has the power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by Purchaser's Board of Directors, and no other corporate proceeding on the part of Purchaser will be necessary to authorize the execution and delivery of this Agreement or the consummation of such transactions. This Agreement constitutes the legal, valid and binding agreement of Purchaser and, assuming that this Agreement constitutes the legal, valid and binding agreement of the Seller, it is enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting the rights of creditors and to general principles of equity. 3.4 No Breach. Neither the execution or delivery of this Agreement nor Purchaser's compliance with any of the provisions hereof or its consummation of the transactions contemplated hereby, will: (a) violate or conflict with any provision of its Certificate of Incorporation or Bylaws; (b) violate or result, alone or with the passage of time, in the material breach or termination of, or otherwise give any contracting party the right to terminate or declare a default under, the terms of any material agreement, document or undertaking, oral or written, to which Purchaser is a party, or by which it or any of its properties or assets may be bound (except for such violations, conflicts, breaches or defaults as to which required waivers or consents by other parties have been or, prior to Closing, will be obtained); (c) result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Purchaser; (d) violate any judgment, order, injunction, decree, or award against or binding upon Purchaser, its properties or assets; or (e) violate any law or regulation of any jurisdiction relating to Purchaser or any of its securities, assets or properties. 3.5 Brokers. Purchaser has not engaged, consented to, or authorized any broker, finder, investment banker or other third party to act on its behalf, directly or indirectly, as a broker or finder in connection with the transactions contemplated by this Agreement, and Purchaser agrees to indemnify the Seller against, and to hold him harmless from, any claim for brokerage or similar commission or other compensation, which may be made against Seller by any third party in connection with the transactions contemplated hereby based upon any action by Purchaser. 3.6 Value. In deciding to acquire the Shares for the Purchase Consideration, Purchaser represents and warrants that it has relied on its own financial, tax, business and legal advisors and on the representations and warranties of Seller and Company in this Agreement and 6 11 the Inducement. Purchaser has not relied on any express or implied representation by Seller or any other person or entity as to the value of the Shares. 3.7 SEC Filings Complete. As of the time such document was filed, Purchaser's most recent Annual Report on Form 10-K, all intervening 8-Ks (if any) and Form 10-Qs, and Purchaser's most recent annual meeting proxy statement (the "DISCLOSURE DOCUMENTS"), all as filed with the Securities and Exchange Commission ("SEC"): (a) did not contain a misstatement of a material fact or an omission of a material fact required to be stated therein or necessary to make the statements therein not misleading; and (b) complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such documents. Since the filing of the most recent 10-K, no other document has been required to be filed by Purchaser with the SEC which has not been filed. 3.8 Litigation. Except as disclosed in the Disclosure Documents, there is no action, suit, litigation, arbitration or other proceeding pending or, to the knowledge of Purchaser threatened, against Purchaser or any of its subsidiaries which would have a material adverse effect on its properties, assets or business, or which would prevent or hinder the consummation of the transactions contemplated by this Agreement or its obligations thereunder. 3.9 Shares Validly Issued. All of the XETA Stock to be issued to the Seller pursuant to the terms of this Agreement, when issued pursuant to the terms of this Agreement, shall be duly and validly issued, fully paid and non-assessable, without violation of any preemptive or dissenters' or similar rights and in full compliance with all applicable securities laws. 3.10 Generally. To the Purchaser's knowledge, no representation or warranty by Purchaser in the Agreement or in any exhibit, schedule or closing certificate furnished or to be furnished to the Seller pursuant to this Agreement or in connection with the transactions contemplated by this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact, necessarily to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. ARTICLE IV Covenants 4.1 Pre-Closing Covenants of the Seller and the Company. Seller and the Company shall bind themselves, jointly and severally, to the covenants in favor of Purchaser set forth in Article II of the Inducement. In addition, the Seller covenants and agrees that from the Execution Date through the Closing Date he shall not: (a) trade in any of the Purchaser's stock; (b) permit the Company to conduct its business other than in the ordinary course consistent with past practice; 7 12 (c) permit the Company, its employees, agents or representatives, directly or indirectly, to solicit, encourage or participate in discussions concerning, or to supply information relating to, any other sale of any material portion of the Company's assets or capital stock; or (d) permit the Company to make any distributions of any kind to its shareholders, whether of operating profits or in payment of any debt due to any such shareholder(s), or any interest thereon, from or after July 31, 1999, other than normal salary payable for services rendered. 4.2 Pre-Closing Covenants of Purchaser. Purchaser hereby covenants that, from and after the Execution Date until the Closing or the earlier termination of this Agreement, Purchaser will use its best efforts to insure that all of its representations and warranties contained herein are true in all material respects as of the Closing as if repeated at and as of such time. Purchaser shall promptly notify the Seller of any event or fact constituting or which is likely to cause a breach or default of its covenants, representations or warranties herein. 4.3 Seller's Confidentiality. At the Closing, Seller shall execute and deliver to the Purchaser a Confidentiality Agreement in the form of Exhibit 4.3 hereto attached containing covenants prohibiting Seller, for the period described therein (the "RESTRICTED PERIOD") from disclosing any confidential or proprietary information of or concerning the Company to any third party, including but not limited to Lucent Technologies, Inc. ("LUCENT"). 4.4 Post-Closing Covenants of Purchaser. Purchaser hereby agrees to pay Seller, within sixty (60) days after Closing,, the amount which is equal to the "Net Tax Cost" incurred by the Seller, if any, accruing from the Effective Date (August 1, 1999) up to but not including, the day of Closing. As used herein, the term "Net Tax Cost" shall mean the actual cost to the Seller, which shall include, without limitation, the actual tax cost resulting from any required tax allocations of the Company's federal and state taxable income (excluding taxable income, if any, resulting from the transaction contemplated by this Agreement), reduced by the amount of any benefit derived by the Seller from any increase in Seller's tax basis in the Shares that result from any such allocation(s). Purchaser further agrees to cause Seller to be nominated as one of the slate of nominees to serve on Purchaser's Board of Directors provided the Closing occurs on or before December 15, 1999. 4.5 Fulfillment of Conditions. Purchaser and Seller each shall use all commercially reasonable efforts to cause the conditions to Closing under this Agreement which are reasonably within their control to be satisfied. 4.6 Retention of Business Records. For a period of six (6) years after the Closing, the Purchaser shall retain, or cause the Company to retain, all business records of the Company in its possession as of the Closing or otherwise relating to periods prior to Closing. Purchaser shall permit Seller and his authorized representatives to have access to such records upon reasonable prior notice for any proper purpose. 8 13 4.7 Tax Covenants. Without limiting Purchaser's payment obligation in Section 4.4, Seller shall cause to be timely paid, before the same shall become delinquent and before penalties accrue thereon, Seller's proportionate share of all federal and state income taxes (including any such taxes resulting from the sale of the Shares to Purchaser) shown on any return filed by Company with respect to taxable periods or portions thereof ending on or before the Closing Date, but only to the extent applicable law requires such taxes to be paid by the shareholders of the Company. Prior to Closing Seller shall not, without the prior written consent of Purchaser, permit Company to make or change any election, change an annual tax accounting period, adopt or change any tax accounting method, file any amended return, enter into any closing agreement, settle any tax claim or assessment, surrender any right to claim a refund of taxes, consent to any extension or waiver of the limitation period applicable to any tax claim or assessment, or take any other action that may have the effect of increasing the tax liability of Purchaser or Company. After the Closing Purchaser shall not, without the prior written consent of the Seller, make or change any tax election, change an annual tax accounting period, adopt or change any tax accounting method, file any amended return, enter into any closing agreements, settle any tax claim or assessment, surrender any right to claim a refund of taxes, consent to any extension or waiver of the limitation period applicable to any tax claim or assessment, or take any other action that may have the effect of increasing the tax liability of Seller. 4.8 Tax Records. Each party hereto shall provide, and shall cause its accountants and other representatives to provide, to the other party on a timely basis, the information (including but not limited to all work papers and records) that such party or its accountants or other representatives have within their control and that may be reasonably necessary in connection with the preparation of any and all returns required to be filed by such other party or any other examination by any taxing authority or other administrative or judicial proceeding relating to taxes of the Company or Purchaser. Each of Seller and Purchaser shall retain or cause to be retained, until the applicable statutes of limitations (including any extensions) have expired, copies of all tax returns for all taxable periods of the Company beginning before the Closing Date, together with supporting work schedules and other records or information that may be relevant to such returns. 4.9 Privilege. The Seller and Purchaser acknowledge that Seller's legal counsel, Thompson Coburn LLP, has acted primarily as counsel to Seller, but also has acted as counsel to the Company and will be rendering an opinion of counsel on behalf of the Company, in connection with this Agreement and the Inducement. Notwithstanding such firm's role as counsel, Purchaser acknowledges that the Company's role in this transaction, assuming the Closing occurs, is comparable to that of an accommodation party, and Purchaser recognizes the importance to Seller that communications with such counsel be protected by the attorney-client privilege. Accordingly, Purchaser hereby acknowledges and agrees that all communications between the Seller and the Company, on the one hand, and such counsel, on the other, in connection with or in contemplation of the transactions contemplated by this Agreement and the Inducement, shall be entitled to protection of the attorney-client privilege, and that Seller (and not the Company) shall be regarded as the owner of, and entitled to the benefits and protections afforded by, such privilege. 9 14 4.10 Employee Bonuses. Following the Closing, Purchaser agrees to take such action as may be necessary to approve and cause to be paid to all eligible employees of the Company, the incentive compensation bonuses which have been accrued and reflected on the Company's books and records as of the Effective Date pursuant to the Company's discretionary employee bonus plan. ARTICLE V Conditions Precedent to the Obligation of Purchaser to Close The obligation of Purchaser to close is subject to the fulfillment, prior to or on the Closing Date (or, in the case of Sections 5.6, 5.8 and 5.13, prior to or on November 15, 1999), of each of the following conditions, any one or more of which may be waived in writing by Purchaser: 5.1 Representations and Warranties. All of the representations and warranties of the Company and the Seller contained in this Agreement and in any written statement, Exhibit, Schedule or certificate delivered to Purchaser pursuant to this Agreement shall be true and correct in all material respects as at the Effective Date as well as on the Closing Date, as if made at the Closing as of the Closing Date. 5.2 Covenants. The Company and the Seller shall have in all material respects performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by each of them prior to or at the Closing. 5.3 No Actions. No action, suit, proceeding or investigation shall have been instituted, and be continuing before a court or before or by a governmental body or agency, or shall have been threatened and be unresolved, to restrain or to prevent or to obtain damages in respect of, the carrying out of the transactions contemplated hereby, or which, if successful, would materially affect the right of Purchaser to own the Shares, or which, if successful, would have a material adverse effect on such right, the prospects or net worth of the Company, or the value of the Shares. 5.4 Consents; Licenses and Permits. The Company and the Seller shall have each obtained all consents, licenses and permits of third parties to any of the Material Agreements ( as defined in Section 1.15 of the Inducement) which are necessary for the performance by Seller and the Company of all of their respective obligations under this Agreement, and such other consents, if any, which are necessary to prevent (i) any agreements of the Company from terminating, the termination of which, in the aggregate, would have a material adverse effect on the business, financial condition or assets of the Company, or (ii) any material indebtedness of the Company from becoming due then or with notice or the passage of time as a result of the performance of this Agreement. 10 15 5.5 No Material Change. There shall have been no material change, whether or not adverse, at the Closing Date in the business, assets, properties, operations, financial status or prospects of the Company since December 31, 1998; provided, however, that the Seller shall release and discharge, at or before Closing, all indebtedness of the Company outstanding to the Seller not included as part of the Seller Debt. 5.6 Completion of Due Diligence. The Purchaser shall have completed its due diligence examination of the Company by November 15, 1999, and found the Shares to be in all respects satisfactory as an investment by the Purchaser. 5.7 Certificate. Purchaser shall have received a certificate in the form of Exhibit 5.7 hereto attached, dated as of the Closing Date and signed by the Seller and by the Company, verifying their satisfaction of the conditions set forth in Sections 5.1 through 5.5. 5.8 Opinion. Purchaser shall have received the written opinion of legal counsel to the Seller and the Company, dated as of the Closing Date, in form and substance reasonably satisfactory to Purchaser and its counsel, the form and content of such opinion to be agreed upon by November 15, 1999. 5.9 Lucent Distributorship. The Company shall have successfully renewed and extended its existing distributorship relationship with Lucent on terms reasonably acceptable to Purchaser. 5.10 Hopp Transaction. The Purchaser shall have been successful in purchasing all of Mr. Hopp's shares in the Company and shall have obtained from him his non-competition and confidentiality agreements contemplated in connection with such transaction. 5.11 Non-Competition and Confidentiality. At the Closing, the Seller shall have executed and delivered the Non-Competition Agreement and the Confidentiality Agreement. 5.12 Section 338(h)(10) Election. If requested by Purchaser, the Seller and Mr. Hopp shall have made an election under Section 338(h)(10) of the Code to treat the sale of their shares in the Company to Purchaser as a sale of the Company's assets for tax purposes. In such event, Purchaser shall prepare the appropriate IRS tax forms and will provide copies of the same to Seller for inclusion with the appropriate tax returns. 5.13 Board Approval. No later than November 15, 1999, the Board of Directors of Purchaser shall have given its approval to the closing of the purchase of the Shares, subject only to the conditions described in 5.14 and 5.15 hereof. 5.14 Fairness Opinion. Purchaser shall have obtained a "fairness opinion" from the investment banking firm previously engaged by the Purchaser, at its sole expense, in connection with the transaction contemplated by this Agreement, finding the terms of this transaction, including the Purchase Price and other consideration to be paid for the Shares, to be fair, from a financial point of view, to the shareholders of the Purchaser. 11 16 5.15 Bank Financing. The Purchaser shall have received firm commitments from one or more financing syndicates to lend Purchaser the aggregate sum of not less than $23,000,000, at a weighted-average interest rate per annum not to exceed the London Interbank Offer Rate plus 2.5% per annum and repayable over a term of not less than five (5) years. 5.16 Additional Documents. The Seller and the Company shall have delivered all such other certificates and documents consistent with this Agreement as Purchaser or its counsel may have reasonably requested. 5.17 Employment Agreement. At the Closing, the Seller and the Company shall have executed and delivered the Employment Agreement. ARTICLE VI Conditions Precedent to the Obligation of the the Seller to Close The obligation of the Seller to close is subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions, any one or more of which may be waived in writing by the Seller: 6.1 Representations and Warranties. All representations and warranties of Purchaser contained in this Agreement and in any Exhibit, Schedule or certificate delivered pursuant hereto or in connection with the transactions contemplated hereby shall be true and correct in all material respects as at the Closing Date, as if made at the Closing and as of the Closing Date. 6.2 Covenants. Purchaser shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by it prior to or at the Closing. 6.3 No Actions. No action, suit, proceeding, or investigation shall have been instituted, and be continuing, before a court or before or by a governmental body or agency, or shall have been threatened, and be unresolved, by any governmental body or agency to restrain or prevent, or obtain damages in respect of, the carrying out of the transactions contemplated hereby. 6.4 Certificate. The Seller shall have received a certificate in the form annexed hereto as Exhibit 6.4 dated the Closing Date, signed by the Purchaser verifying the satisfaction of the conditions contained in Sections 6.1 through 6.3. 6.5 Hopp Transaction. Hopp shall have sold his interest in Company to Purchaser prior to or concurrently with the Closing, and shall have executed and delivered the noncompetition and confidentiality agreements contemplated thereby. 12 17 6.6 Board Approval. No later than November 15, 1999, the Board of Directors of Purchaser shall have given its approval to the closing of the purchase of the Shares, subject only to the conditions described in 5.14 and 5.15 hereof. 6.7 Additional Documents. The Purchaser shall have delivered all such other certificates and documents consistent with this Agreement as Seller or his counsel may have reasonably requested. ARTICLE VII Closing 7.1 The Closing. The closing of the sale and acquisition of the Shares contemplated by this Agreement (the "CLOSING") shall occur upon satisfaction of all of the conditions precedent to the obligations of the parties to close as set forth in Articles V and VI and upon the delivery by the parties of all of the items to be delivered by them pursuant to Sections 7.3 and 7.4 hereof. 7.2 Location, Time and Date. The Closing shall be deemed to occur in the offices of Barber & Bartz, 110 West 7th Street, Suite 200, Tulsa, Oklahoma, 74103, at 10:00 o'clock a.m. on November 15, 1999, subject to postponement by Purchaser as may be reasonably necessary to satisfy the conditions precedent to Purchaser's obligation to close hereunder, but in any event not later than December 15, 1999, or at such other time and place as may be actually agreed to by the parties hereto,. The date on which the Closing shall occur is referred to in this Agreement as the "CLOSING DATE". 7.3 Seller's Deliveries. At the Closing, the Company and the Seller will deliver or cause to be delivered to Purchaser: (a) All certificates representing the Shares, constituting fifty percent (50%) of the outstanding shares of the Company immediately prior to the Closing; (b) The Non-Competition Agreement required by Section 1.2; (c) The Employment Agreement required by Section 1.5; (d) The Confidentiality Agreement required by Section 4.3; (e) The certificate required by Section 5.7; (f) The opinion of counsel required by Section 5.8; (g) Seller's resignation as a Director and officer of the Company, to the extent requested by Purchaser; and (h) Such other certified resolutions, releases, documents, and certificates, as are required to be delivered by the Seller and/or the Company 13 18 pursuant to the provisions of this Agreement, including but not limited the Inducement. 7.4 Purchaser's Deliveries. At the Closing, Purchaser will deliver or cause to be delivered to the Seller: (a) One or more duly executed certificates evidencing the XETA Stock; (b) The Cash Portion of the Purchase Consideration and the principal amount of the Seller Debt; (c) The certificate required by Section 6.4; (d) The Employment Agreement required by Section 1.5; and (e) Such other certified resolutions, documents and certificates as are required to be delivered by Purchaser pursuant to the provisions of this Agreement. 7.5 Transfer of Possession. As of the Closing Date, the Seller shall give Purchaser full possession and ownership of the Shares. ARTICLE VIII Survival of Representations; Indemnification 8.1 Survival. The parties hereto agree that their respective representations, warranties, covenants, and agreements contained herein shall survive the Closing for a period of three (3) years after the Closing Date except that those covenants, representatives and warranties made by the Seller and/or the Company with respect to Taxes, Employee Benefit Plans and Environmental Matters (Sections 1.10, 1.22 through 1.22.7, and 1.27 of the Inducement) shall survive the Closing for such periods of time that the government agencies having jurisdiction over the subject matter of those covenants, representations and warranties may be empowered to assess a liability or deficiency with respect to any of the matters covered thereby (the "INDEMNIFICATION PERIOD"); provided that the Indemnification Period for Environmental Matters (Section 1.27 of the Inducement) with respect to properties not owned by the Company, Seller, Hopp or any of their affiliates shall be limited to three (3) years after the Closing Date. 8.2 Indemnification by the Seller. Subject to the other provisions of this Article VIII, the Seller agrees to save and indemnify Purchaser against, and hold it harmless from, any and all liabilities, of every kind, nature and description, fixed or contingent, including without limitation reasonable attorney fees and expenses incurred in connection with any action, claim or proceeding relating to such liabilities ("DAMAGES"), arising from the breach of any of his representations, warranties, covenants, or agreements, contained herein or in the Exhibits or 14 19 Schedules hereto, a claim for which is asserted in writing by Purchaser during the Indemnification Period. 8.3 Indemnification by Purchaser. Purchaser agrees to save and indemnify the Seller against and to hold him harmless from any and all Damages arising from the breach of any of Purchaser's representations, warranties, covenants or agreements contained herein or the Exhibits hereto, a claim for which is asserted in writing by Seller during the Indemnification Period. 8.4 Claims. All claims for Damages shall be computed net of the present value of all readily ascertainable future tax benefits associated therewith. No claim shall be made for matters adequately covered by insurance, nor may any party recover punitive damages as part of its Damages. 8.5 Seller's Liability. Notwithstanding the other provisions of this Article VIII, Purchaser shall not be entitled to indemnification for its Damages unless and until Purchaser has sustained otherwise indemnifiable Damages of Fifty Thousand Dollars ($50,000) (the "BASKET"), and thereafter Purchaser shall be entitled to indemnification only for its Damages exceeding the Basket. Prior to a Final Determination with respect to any claim against Seller for indemnification under this Article VIII, Purchaser may withhold, from the Indemnity Fund or Incentive Fund otherwise payable to Seller, an amount representing Purchaser's reasonable estimate of the indemnifiable Damages associated with such claim. Upon a Final Determination of the amount of such claim, Purchaser shall be entitled to receive from Seller, within ten (10) days after written demand therefor, the Damages as provided in the Final Determination. If Seller does not pay such amount in full within such ten day period, Purchaser may set off its unsatisfied Damages against such withheld portion of the Indemnity Fund or Incentive Fund, as applicable, and remit the balance of such Indemnity Fund or Incentive Fund, if any, to Seller in accordance with this Agreement. Purchaser's right to indemnification from Seller shall not be limited to such rights of withholding and offset. The aggregate liability of Seller for indemnification for Damages under this Article VIII shall not exceed an amount equal to the Purchase Consideration; and for such purpose the XETA Stock shall be valued at an amount per share equal to the lesser of (i) the closing price per share on the trading day next preceding the Closing Date or (ii) the closing price per share on the trading day next preceding the date on which the Purchaser first becomes aware of the claim underlying its right to indemnification. In the event an indemnifiable claim arises hereunder by virtue of Seller's breach of a representation or warranty herein and a similar indemnifiable claim arises simultaneously in favor of Purchaser by virtue of Hopp's breach of a similar representation or warranty contained in his stock purchase agreement with Purchaser such that both Seller and Hopp are equally responsible for 100% of the Damages resulting from such claim and are each financially capable of compensating Purchaser for one-half (1/2) of the Damages resulting therefrom, Purchaser shall limit its recovery from Purchaser to no more than one-half (1/2) of the total of such Damages. 8.6 Purchaser's Liability. Notwithstanding the other provisions of this Article VIII, Seller shall not be entitled to indemnification for its Damages unless and until Seller has sustained otherwise indemnifiable Damages of Fifty Thousand Dollars ($50,000) (the "BASKET"), and thereafter Seller shall be entitled to indemnification only for its Damages exceeding the Basket. Upon a Final Determination of the amount of any claim for Damages made against 15 20 Purchaser by the Seller, the Seller shall be entitled to recover the amount of such Damages as finally determined. 8.7 Final Determination. For the purposes of this Agreement, a "FINAL DETERMINATION" shall exist when (i) the parties agree in writing upon the amount, or (ii) a court of competent jurisdiction shall have made a determination on the merits with respect thereto and appeal therefrom shall not have been taken within a timely fashion from the date of such determination. The asserting party will assign to the other party any claims against which the asserting party has been indemnified and paid as provided herein, as to which there may be claims against persons other than the Company, and the other party in all respects shall be subrogated to the rights of the asserting party in connection therewith. 8.8 Defense of Claims. Each party entitled to indemnification under this Article VIII (the "INDEMNIFIED PARTY") agrees to notify the party required to provide indemnification (the "INDEMNIFYING PARTY") with reasonable promptness of any claim asserted against it in respect of which the Indemnifying Party may be liable under this Agreement, which notification shall be accompanied by a written statement setting forth the basis of such claim and the manner of calculation thereof. The Indemnifying Party shall have the right, at its election, to defend or compromise any such claim at its own expense with counsel of its choice; provided, however, that (i) such counsel shall have been approved by the Indemnified Party, which approval shall not be unreasonably withheld or delayed; (ii) the Indemnified Party may participate in such defense if it so chooses with its own counsel and at its own expense; and (iii) any such defense or compromise shall be conducted in a manner which is reasonable and not prejudicial to the Indemnified Party's interest in such matter. In the event the Indemnifying Party does not undertake to defend or compromise the claim, the Indemnifying Party shall promptly notify the Indemnified Party of its intention not to undertake to defend or compromise the claim, and the Indemnifying Party shall be bound by (a) the final decree of any court of competent jurisdiction deciding the validity and amount of the claim asserted against the Indemnified Party, and (b) any compromise of such claim made with the prior consent of the Indemnifying Party, which shall not be unreasonably withheld or delayed. 8.9 Extension of Time. To the extent that an Indemnified Party delivers written notice of a claim for Damages against an Indemnifying Party prior to the expiration of the Indemnification Period, reasonably identifying the basis for the claim and the amount of any reasonably ascertainable Damages, the Indemnification Period shall be extended for such claim until such claim is resolved by a Final Determination, subject to the limitations hereinabove provided. 8.10 Restriction on Transfers. For a period of three (3) years following the Closing Date, Seller shall at all times hold in Seller's name (or in the name of a revocable Grantor Trust of which Seller is the grantor, beneficiary and trustee), free and clear from any encumbrances whatsoever, the XETA Shares and any and all property acquired with the proceeds from the sale of any portion of the XETA Shares. 16 21 ARTICLE IX Termination and Waiver 9.1 Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the transactions provided for herein abandoned at any time prior to the Closing Date: (a) By mutual consent of the parties; (b) By the Purchaser if, through no fault of Purchaser, any of the conditions set forth in Article V hereof shall not have been fulfilled on or prior to December 15, 1999, or shall become incapable of fulfillment, and shall not have been waived; (c) By the Seller if, through no fault of Seller, any of the conditions set forth in Article VI hereof shall not have been fulfilled on or prior to December 15, 1999, or shall have become incapable of fulfillment, and shall not have been waived; or (d) By either party, if any legal action or proceeding shall have been instituted or threatened seeking to restrain, prohibit, invalidate or otherwise affect the consummation of the transactions contemplated by this Agreement which makes it inadvisable, in the judgment of such party, to consummate same. If terminated as described above, this Agreement shall terminate, without any liability or obligation on the part of either party hereto to proceed to the Closing, except for any liability (i) arising from a breach prior to or in connection with such termination, or (ii) under any covenant that survives termination. 9.2 Waivers. Any condition to performance by the Seller or the Purchaser which may be legally waived on or before the Closing Date may be waived by the party entitled to the benefit of such condition by duly authorized instrument in writing executed by the waiving party. The failure of any party at any time or times to require performance of any provision hereof shall not affect or impair the right of such party to require such performance at a later time. No waiver by any party of the breach of any term, covenant, representation or warranty contained in this Agreement as a condition to such party's obligations hereunder shall release or affect any liability resulting from such breach, and no waiver of any nature, whether by conduct or otherwise, in any one or more instances, shall be construed as, or be deemed to be, a further or continuing waiver either of any such condition or of any breach of any other term, covenant, representation or warranty contained in this Agreement. 9.3 Exclusivity of Remedy. Seller and Purchaser acknowledge and agree that the provisions of Article VIII shall be the sole remedy of any party against the other party after the Closing for breach of any representation or warranty made by such other party pursuant to this Agreement. Each party hereby waives any other statutory, legal or equitable remedy for relief 17 22 from such breach of representation or warranty that would otherwise be available to the injured party, even if such other statutory, legal or equitable remedy would extend beyond the survival dates set forth in Article VIII above. ARTICLE X Miscellaneous Provisions 10.1 Expenses. Each party shall bear its own legal, accounting and other professional fees, costs and expenses incurred in connection with this Agreement and the transactions hereby intended to be effected. 10.2 Confidential Information. Each party agrees it and its representatives shall hold in strict confidence, and shall not divulge or disclose to any person without a need to know, any information and documents received from the other party and, if the transactions herein contemplated are not consummated, each party will continue to hold such information and documents in strict confidence and shall return to such other party all such documents then in such receiving party's possession (including the Exhibits and Schedules to this Agreement) without retaining copies thereof; provided, that each party's obligations under this Section 10.2 to maintain such confidentiality shall not apply to any information or documents that are in the public domain when furnished by the other or to be disclosed required by applicable law . In the event of a breach or threatened breach under this Section 10.2, the parties to this Agreement acknowledge that the person harmed or threatened to be harmed thereby will not have an adequate remedy at law, and shall be entitled to such equitable and injunctive relief as may be available to restrain such breach; provided, that nothing herein shall be construed as prohibiting such person from pursuing any other remedies available for such breach or threatened breach, including the recovery of damages. 10.3 Publicity. The parties agree that no publicity, release or other public announcement concerning the transactions contemplated by this Agreement shall be issued by either party without the advance approval of the form and substance of the same by the other party and its counsel, which approval shall not be unreasonably withheld or delayed. 10.4 Modification, Termination or Waiver. This Agreement may be amended, modified, superseded or terminated, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, but only by a written instrument executed by both parties. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. 10.5 Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be either (a) delivered personally, (b) sent by U. S. Mail, certified or registered mail with postage prepaid, return receipt requested, or by overnight courier service with shipping fees prepaid, receipt requested, or (c) transmitted by telefacsimile to a telephone number as to which the intended recipient notifies the other. Notice shall be deemed 18 23 given when so delivered personally, or if mailed or sent by courier service, five (5) days after the date of mailing or deposited with the courier service, addressed as follows: If to Purchaser, to: XETA Corporation 1814 West Tacoma Broken Arrow, OK 74012 Attn: Jon A. Wiese With a copy to: Barber and Bartz 110 West 7th Street, Suite 200 Tulsa, OK 74119-1018 Attn: Ron B. Barber If to the Seller: Mark A. Martin 55 Trent Drive St. Louis, MO 63124 With copy to: Benjamin H. Hulsey Thompson Coburn LLP One Mercantile Center St. Louis, MO 63101-1693 If notice is provided by facsimile it shall be deemed given upon confirmation of transmission. Either party may change the person and/or address to which notices or other communications are to be sent by giving written notice of any such change to the other in the manner herein provided. 10.6 Binding Effect and Assignment. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto; provided, however, that no voluntary assignment of any rights or delegation of any obligations provided for herein may be made by any party without the express written consent of the other. 10.7 Exhibits and Schedules. All exhibits hereto (the "EXHIBITS") and all schedules annexed hereto or thereto (the "SCHEDULES") are expressly made a part of this Agreement as fully as though completely set forth herein, and all references to this Agreement herein or in any of such Exhibits or Schedules shall be deemed to refer to and include all such Exhibits and Schedules. 10.8 Entire Agreement. This Agreement represents the entire understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all of the negotiations, understandings and representations (if any) made by and between such parties. 10.9 Governing Law. This Agreement shall be construed and enforced in accordance with the local laws of the State of Oklahoma applicable to agreements to be executed and performed wholly within said State without giving effect to its conflicts of laws provisions. The parties further agree that in any dispute between them relating to this Agreement, exclusive 19 24 jurisdiction shall be in the trial courts located within Tulsa County, Oklahoma, any objections as to jurisdiction or venue in such court being expressly waived. 10.10 Section Headings. The section headings contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 10.11 Gender. Words of the masculine gender in this Agreement shall be deemed and construed to include correlative words of the feminine and neuter genders and words of the neuter gender shall be deemed and construed to include correlative words of the masculine and feminine genders. 10.12 Severability. The invalidity or unenforceability of any term or provision of this Agreement shall in no way impair or affect the balance thereof, which shall remain in full force and effect. 10.13 Attorneys' Fees. In the event of any litigation or controversy arising out of or in connection with this Agreement between the parties hereto, the prevailing party in such litigation or controversy shall be entitled to recover from the other party all reasonable attorneys' fees, expenses and suit costs, including those associated with any appellate or post-judgment collection proceeding. 10.14 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument. 10.15 Recitals. The recitals set forth at the beginning of this Agreement are true and correct and incorporated by reference into the body of this Agreement. 10.16 Equitable Relief. Each party recognizes that the other is likely to suffer irreparable damage if the provisions of Sections 10.2 or 10.3 are not specifically enforced. In the event of a dispute concerning any of these sections, each party agrees that the other may, without posting bond or security, obtain an temporary or permanent injunction restraining the consummation of any action or transaction prohibited thereby pending determination of such dispute. The provisions of Sections 10.2 and 10.3 shall likewise be enforceable by a decree of specific performance. In the event of litigation relating to such provisions, if the court determines that either party or any of its employees, agents or representatives has breached any thereof, the injured party shall be entitled to recover from the breaching party its reasonable fees, costs, and expenses (including attorney fees) incurred in connection with the negotiation of this Agreement, any related due diligence review, and/or the prosecution of any equitable or legal proceedings and any appeal therefrom. 20 25 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "Seller" "Purchaser" XETA CORPORATION /s/ Mark Martin By /s/ Jon A. Wiese - --------------------------------- ----------------------- MARK MARTIN, individually Jon A. Wiese, President /s/ Mark A. Martin - --------------------------------- MARK A. MARTIN, Trustee Under Living Trust of Mark A. Martin dated April 4, 1994 21 26 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 1.2 Non-Competition Agreement 1.3.2 Gross Profit Definition 1.5 Employment Agreement 2.1 Agreement Regarding Representations, Warranties and Covenants of the Company and the Seller (the "Inducement") 4.3 Confidentiality Agreement 5.7 "Bring-Down" Certificate of the Seller and the Company 6.4 "Bring-Down" Certificate of the Purchaser
EX-2.2 3 STOCK PURCHASE AGREEMENT-LAWRENCE J. HOPP 1 EXHIBIT 2.2 STOCK PURCHASE AGREEMENT DATED AUGUST 1, 1999 BY AND AMONG XETA CORPORATION (THE "PURCHASER"), LAWRENCE J. HOPP, INDIVIDUALLY, AND LAWRENCE J. HOPP, TRUSTEE UNDER LIVING TRUST OF LAWRENCE J. HOPP, DATED OCTOBER 13, 1994 (COLLECTIVELY, THE "SELLER") 2 TABLE OF CONTENTS
SECTION OF AGREEMENT PAGE NO. ARTICLE I - Purchase of Shares................................................1 1.1 Acquisition of Shares.......................................1 1.2 Purchase Price..............................................1 1.3 Tax Treatment...............................................2 ARTICLE II - Representations and Warranties of the Seller.....................2 2.1 Joint Representations and Warranties........................2 2.2 Continuity of Representations...............................3 2.3 Value.......................................................3 2.4 Concurrent Transaction......................................3 Article III - Representations and Warranties of Purchaser.....................3 3.1 Corporate Existence and Qualification.......................3 3.2 Consents....................................................4 3.3 Corporate Authority.........................................4 3.4 No Breach...................................................4 3.5 Brokers.....................................................4 Article IV - Covenants........................................................5 4.1 Pre-Closing Covenants of the Seller and the Company.........5 4.2 Pre-Closing Covenants of Purchaser..........................5 4.3 Seller's Confidentiality Agreement..........................5 4.4 Post-Closing Covenant of Purchaser..........................6 Article V - Conditions Precedent to the Obligation of Purchaser to Close......7 5.1 Representations and Warranties..............................7 5.2 Covenants...................................................7 5.3 No Actions..................................................7 5.4 Consents; Licenses and Permits..............................7 5.5 No Material Change..........................................7 5.6 Certificate.................................................8 5.7 Opinion.....................................................8 5.8 Lucent Distributorship......................................8 5.9 Non-Competition and Confidentiality.........................8 5.10 Section 338 Election........................................8 5.11 Board Approval..............................................8 5.12 Fairness Opinion............................................8 5.13 Bank Financing..............................................8 5.14 Martin Stock................................................8 5.15 Additional Documents........................................8 Article VI - Conditions Precedent to the Obligation of the Seller to Close....9 6.1 Representations and Warranties..............................9
i 3 6.2 Covenants...................................................9 6.3 No Actions..................................................9 6.4 Certificate.................................................9 6.5 Martin Agreement............................................9 6.6 Headquarters Lease Extension................................9 Article VII - Closing.........................................................9 7.1 The Closing.................................................9 7.2 Location, Time and Date....................................10 7.3 Seller's Deliveries........................................11 7.4 Purchaser's Deliveries.....................................11 7.6 Transfer of Possession.....................................11 Article VIII - Survival of Representations; Indemnification..................11 8.1 Survival...................................................11 8.2 Indemnification by the Seller..............................12 8.3 Indemnification by Purchaser...............................12 8.4 Claims.....................................................12 8.5 Seller's Liability.........................................12 8.6 Purchaser's Liability......................................12 8.7 Final Determination........................................12 8.8 Defense of Claims..........................................13 8.9 Extension of Time..........................................13 Article IX - Termination and Waiver..........................................14 9.1 Termination................................................14 9.2 Waivers....................................................14 Article X - Miscellaneous Provisions.........................................15 10.1 Expenses...................................................15 10.2 Confidential Information...................................15 10.3 Publicity..................................................15 10.4 Modification, Termination or Waiver........................15 10.5 Notices....................................................15 10.6 Binding Effect and Assignment..............................16 10.7 Exhibits and Schedules.....................................16 10.8 Entire Agreement...........................................16 10.9 Governing Law..............................................16 10.10 Section Headings...........................................17 10.11 Gender.....................................................17 10.12 Severability...............................................17 10.13 Attorneys' Fees............................................17 10.14 Counterparts...............................................17 10.15 Recitals...................................................17 10.16 Equitable Relief...........................................17
ii 4 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), which is to be effective as of the 1st day of August, 1999 (the "EFFECTIVE DATE"), is entered into by and among XETA CORPORATION, an Oklahoma corporation ("PURCHASER"), LAWRENCE J. HOPP, individually, and LAWRENCE J. HOPP, AS TRUSTEE UNDER LIVING TRUST OF LAWRENCE J. HOPP, DATED OCTOBER 13, 1994 (collectively, the "Seller"). RECITALS: A. Seller owns fifty (50) shares (the "SHARES") of the $1.00 par value common stock of U. S. Technologies Systems, Inc., a Missouri corporation (the "COMPANY"). B. The shares constitute fifty percent (50%) of the Company's issued and outstanding common stock. C. Purchaser desires to acquire from the Seller, and the Seller desires to sell to Purchaser, all of the Shares and all associated goodwill. NOW, THEREFORE, in consideration of the mutual benefits to be derived hereby, the representations, warranties, covenants, and agreements herein contained, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Purchaser, and Seller do hereby agree as follows: ARTICLE I Purchase of Shares 1.1 Acquisition of Shares. Upon the terms of, and subject to the conditions set forth in this Agreement at the Closing, Seller shall convey to Purchaser and Purchaser shall acquire all of the Shares and associated goodwill from the Seller, free and clear of all manner of liens, charges, encumbrances and claims. The Shares shall constitute one-half (1/2) of all of the Company's capital stock issued and outstanding as of the date of Closing. 1.2 Purchase Price. The purchase price for the Shares ("PURCHASE PRICE") shall be $9,485,209. Upon the sale, transfer and delivery by the Seller of the Shares to Purchaser as set forth in Section 1.1, and in consideration therefor, Purchaser shall pay to the Seller, at the Closing Date as defined herein, by cashier's check or by electronic wire transfer or other immediately available funds the Purchase Price, $100,000 of which shall be allocated as consideration for Seller's agreement not to compete with Purchaser or the Company nor to solicit any of its 5 employees, customers or vendors for a period of one (1) year after the Closing Date, as more particularly set out in a Non-Competition Agreement in the form of Exhibit "1.2" attached hereto ("NON-COMPETITION AGREEMENT"). In addition to the Purchase Price, Purchaser shall pay, or cause to be paid, at the Closing, by cashier's check or by electronic wire transfer or other immediately available funds, the sum of $1,514,791 plus $11,361, the amount of interest accrued on the Company's indebtedness to Seller for the period July 1, 1999, through July 31, 1999 (collectively, the "DEBT PAYMENT"), being the principal balance of all indebtedness of the Company to Seller. Upon payment in full of the Debt Payment, Seller shall release and discharge the Company from any further liability in relation to any and all indebtedness, obligations and liabilities of any and every kind owed by the Company to Seller, whether absolute or contingent, liquidated or unliquidated, matured or unmatured, known or unknown, and however acquired or arising. 1.3 Tax Treatment. Seller is aware of the fact, and hereby acknowledges that Purchaser is contemporaneously, but separately, negotiating for the possible purchase of all of Mark Martin's stock in the Company. Though neither purchase transaction is affected by the terms of the other, Seller hereby agrees, upon request, to promptly and timely execute and file Form 8023-A and to otherwise cooperate with XETA and Mr. Martin in a joint election to treat each transaction as a sale of assets under Section 338(h)(10) of the U. S. Internal Revenue Code (the "CODE"). 1.4 Automobile. As additional consideration for and inducement to Seller to enter into this Agreement and sell Purchaser the Shares, Purchaser hereby agrees that it will cooperate and use its best efforts to cause the Company-owned automobile currently being driven by Seller to be conveyed to Seller at or immediately after Closing, free of liens and encumbrances and at no cost to Seller, except for any tax liability incurred as a result of such conveyance. ARTICLE II Representations and Warranties of the Seller 2.1 Joint Representations and Warranties. Contemporaneously with Seller's execution and delivery of this Agreement, to be effective as of the execution date hereof ("EXECUTION DATE") as well as the Closing Date, the Seller shall make the representations and warranties to Purchaser (the "REPRESENTATIONS AND WARRANTIES") contained in Article I of the supplementary agreement, a copy of which constitutes Exhibit "2.1" hereto attached (the "INDUCEMENT"). As an inducement to the Purchaser to enter into this Agreement and an accommodation to the Seller as a principal shareholder of the Company, the Company shall make the Representations and Warranties jointly and severally with the Seller. Each of the Representations and Warranties shall be deemed material, and Seller and the Company shall acknowledge in making the Representations and Warranties that Purchaser, in executing, delivering, and consummating this Agreement, has relied and will rely upon the correctness and completeness of each of such Representations and Warranties. 2 6 2.2 Continuity of Representations. The Seller covenants and agrees that the all representations and warranties made by him herein or in connection herewith shall be deemed given as of the Closing Date the same as on the Execution Date and that there will be no material adverse change or deviation in or from the Representations and Warranties from the Execution Date through the Closing Date, unless and only to the extent that the Company and/or the Seller shall have particularly advised Purchaser of such each such adverse change or deviation in writing prior to Closing. 2.3 Value. In deciding to sell the Shares at the price provided herein, Seller represents and warrants to the Purchaser that he has relied on his own financial, tax, business and legal advisors and has not relied on any express or implied representation by Purchaser or any other person or entity as to the value of the Shares. Seller has been employed by the Company, has been actively involved in the management of the Company's day-to-day affairs, has had full and complete access to all documents, records and books of the Company, and has had a reasonable opportunity to obtain all such other information as he has deemed necessary to determine the value of the Shares. 2.4 Concurrent Transaction. Seller understands and acknowledges that the Company's other shareholder, Mark Martin ("MARTIN") has negotiated separately with the Purchaser for the sale and purchase of Martin's shares of the capital stock of the Company. Seller further understands and acknowledges that the Purchaser would not have agreed to purchase the Shares without Martin's concurrent agreement to sell his shares in the Company to the Purchaser, that the concurrent purchase of Martin's shares in the Company is a condition of Closing, and that if negotiations with the Purchaser had been conducted by him jointly with Martin, Seller might have realized a higher price for the Shares. Nevertheless, Seller is satisfied with the Purchase Price and terms provided herein, and he is willing and has freely agreed to sell the Shares to the Purchaser at such price and on such terms. ARTICLE III Representations and Warranties of Purchaser Purchaser makes the following representations and warranties to the Seller, each of which shall be deemed material, and Seller, in executing, delivering and consummating this Agreement, has relied and will rely upon the correctness and completeness of each of such representations and warranties: 3.1 Corporate Existence and Qualification. Purchaser is a company duly organized, validly existing and in good standing under the laws of the State of Oklahoma. Purchaser has the corporate power to own its assets and properties and to carry on its business as now conducted, and Purchaser is duly qualified and is in good standing as a foreign corporation in those jurisdictions in which it is required to qualify in order to own its assets or properties or to carry on its business as now conducted. 3 7 3.2 Consents. No consent of any governmental or other regulatory agency, foreign or domestic, or any other party is required to be received by or on the part of Purchaser to enable it to enter into and carry out this Agreement in all material respects. 3.3 Corporate Authority. Purchaser has the power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by Purchaser's Board of Directors, and no other corporate proceeding on the part of Purchaser will be necessary to authorize the execution and delivery of this Agreement. This Agreement constitutes the legal, valid and binding agreement of Purchaser and, assuming that this Agreement constitutes the legal, valid and binding agreement of the Seller, it is enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting the rights of creditors and to general principles of equity. 3.4 No Breach. To the knowledge of Purchaser, neither the execution or delivery of this Agreement nor Purchaser's compliance with any of the provisions hereof or its consummation of the transactions contemplated hereby, will: (a) violate or conflict with any provision of its Certificate of Incorporation or Bylaws; (b) violate or result, alone or with the passage of time, in the material breach or termination of, or otherwise give any contracting party the right to terminate or declare a default under, the terms of any material agreement, document or undertaking to which Purchaser is a party, or by which it or any of its properties or assets may be bound (except for such violations, conflicts, breaches or defaults as to which required waivers or consents by other parties have been or, prior to Closing, will be obtained); (c) result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Purchaser; (d) violate any judgment, order, injunction, decree, or award against or binding upon Purchaser, its properties or assets; or (e) violate any law or regulation of any jurisdiction relating to Purchaser or any of its securities, assets or properties. 3.5 Brokers. Purchaser has not engaged, consented to, or authorized any broker, finder, investment banker or other third party to act on its behalf, directly or indirectly, as a broker or finder in connection with the transactions contemplated by this Agreement, and Purchaser agrees to indemnify the Seller against, and to hold him harmless from, any claim for brokerage or similar commission or other compensation, which may be made against Seller by any third party in connection with the transactions contemplated hereby based upon any wrongful action by Purchaser. 4 8 ARTICLE IV Covenants 4.1 Pre-Closing Covenants of the Seller and the Company. Seller and the Company shall bind themselves, jointly and severally, to the covenants in favor of Purchaser set forth in Article II of the Inducement. In addition, the Seller covenants and agrees that from the Execution Date through the Closing Date he shall not: (a) trade in any of the Purchaser's stock; (b) permit the Company to conduct its business other than in the ordinary course consistent with past practice; (c) permit the Company, its employees, agents or representatives, directly or indirectly, to solicit, encourage or participate in discussions concerning, or to supply information relating to, any other sale of any material portion of the Company's assets or capital stock; or (d) permit the Company to make any distributions of any kind to its shareholders, whether of operating profits or in payment of any debt due to any such shareholder(s), or any interest thereon, from or after July 31, 1999, other than normal salary payable for services rendered. 4.2 Pre-Closing Covenants of Purchaser. Purchaser hereby covenants that, from and after the Execution Date until the Closing or the earlier termination of this Agreement, Purchaser will use its best efforts to insure that all of its representations and warranties contained herein are true in all material respects as of the Closing as if repeated at and as of such time, and that no material breach or default that has not been cured by the Closing shall occur with respect to any of its covenants, representations or warranties contained herein. Purchaser will not voluntarily take any action or do anything which will cause a breach of or default respecting such covenants, representations and warranties and shall promptly notify the Seller of any event or fact constituting or which is likely to cause such a breach or default. 4.3 Seller's Confidentiality Agreement. At the Closing, Seller shall execute and deliver to the Purchaser a Confidentiality Agreement in the form of Exhibit 4.3 hereto attached ("CONFIDENTIALITY AGREEMENT") containing covenants prohibiting Seller, for a period of five (5) years after the Closing Date (the "RESTRICTED PERIOD") from disclosing any confidential or proprietary information of or concerning the Company to any third party, including but not limited to Lucent Technologies, Inc. ("LUCENT"), which information shall include but not be limited to: (i) any information that the Company considers or treats as confidential whether or not the Company 5 9 has marked such information as confidential; (ii) any financial information of the Company including its assets and results of operations; (iii) any information concerning or related to the Company's Total Quality Management program or its repair procedures or purchase methods; (iv) any information concerning past contractual disputes with Lucent and the subject matter thereof; and (v) any information concerning previous allegations of breaches by the Company made by Lucent, the subject matter thereof, and the disposition of such allegations. 4.3.1 If the Seller receives a request to disclose all or any part of the foregoing information under the terms of a subpoena or order issued by a court or governmental body, the Seller agrees: (a) To notify the Purchaser, as promptly as practicable, of the existence, terms, and circumstances surrounding such request; and (b) To consult with the Purchaser on the advisability of taking legally available steps to resist or narrow such request. If disclosure of such information is required to prevent the Seller from being held in contempt or subject to other penalty, Seller may furnish the information, provided that Seller shall furnish only such portion of the information as he is, in the written opinion of counsel satisfactory to Seller and Purchaser, legally compelled to disclose, and he shall afford Purchaser such reasonable cooperation as it may request to obtain an order or other reliable assurance that confidential treatment will be accorded to the disclosed information. 4.3.2 Specifically including, and without limiting any of his obligations under this Section 4.3, Seller further agrees, subject to the provisions of Section 4.3.1 hereof, that he shall not directly or indirectly provide to Lucent, any of its affiliates, or any of its employees, officers or agents any information that is in addition to, different from, or contrary to the information provided earlier by the Company or any of its officers or employees to Lucent in connection with the disposition of any earlier allegations by Lucent that the Company had breached or was in breach of any current or previous agreement between the Company and Lucent or its predecessor. 4.4 Post-Closing Covenant of Purchaser. Purchaser hereby agrees to reimburse the Seller, on or before January 15, 2000, for the "Net Tax Cost" incurred by the Seller, if any, accruing from the Effective Date up to, but not including, the day of Closing. As used herein, the term "Net Tax Cost" shall mean the excess of the income allocated to the Seller from the Company's operations at the date of Closing for calendar year 1999 over the income allocated to Seller from the Company's operations for calendar year 1999 at July 31, 1999, multiplied by 19.6 % (excluding any transaction gains or losses, if any, resulting from the sale of Shares contemplated by this Agreement). 6 10 ARTICLE V Conditions Precedent to the Obligation of Purchaser to Close The obligation of Purchaser to close is subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions, any one or more of which may be waived by Purchaser (except when the fulfillment of such condition is a requirement of law: 5.1 Representations and Warranties. All of the Representations and Warranties and all other representations and warranties of the Company and the Seller contained in this Agreement and in any written statement, Exhibit, Schedule or certificate delivered to Purchaser pursuant to this Agreement or in connection with the transactions contemplated hereby shall be true and correct in all material respects as at the Execution Date as well as on the Closing Date, as if made at the Closing as of the Closing Date. 5.2 Covenants. The Company and the Seller shall have in all material respects performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by each of them prior to or at the Closing. 5.3 No Actions. No action, suit, proceeding or investigation shall have been instituted, and be continuing before a court or before or by a governmental body or agency, or shall have been threatened and be unresolved, to restrain or to prevent or to obtain damages in respect of, the carrying out of the transactions contemplated hereby, or which, if successful, would materially affect the right of Purchaser to own the Shares, or which, if successful, would have a material adverse effect on such right, the prospects or net worth of the Company, or the value of the Shares. 5.4 Consents; Licenses and Permits. The Company and the Seller shall have each obtained all consents, licenses and permits of third parties necessary for the performance by each of them of all of their respective obligations under this Agreement, and such other consents, if any, which are necessary to prevent (i) any agreements of the Company from terminating, the termination of which, in the aggregate, would have a material adverse effect on the business, financial condition or assets of the Company, or (ii) any material indebtedness of the Company from becoming due then or with notice or the passage of time as a result of the performance of this Agreement. 5.5 No Material Change. The Purchaser shall have completed its due diligence examination of the Company and found the Shares to be in all respects satisfactory as an investment by the Purchaser, and there shall have been no material change, whether or not adverse, at the Closing Date in the business, assets, properties, operations, financial status or prospects of the Company since December 31, 1998; provided, however, that the Seller shall release and discharge the Company, at or before Closing, from all of the Seller Claims. 7 11 5.6 Certificate. Purchaser shall have received a certificate in the form of Exhibit 5.6 hereto attached, dated as of the Closing Date and signed by the Seller and by the Company, verifying their satisfaction of the conditions set forth in Sections 5.1 through 5.5. 5.7 Opinion. Purchaser shall have received the written opinion of legal counsel to the Seller and the Company, dated as of the Closing Date, in form and substance reasonably satisfactory to Purchaser and its counsel covering the matters set forth in Exhibit 5.7 hereto. 5.8 Lucent Distributorship. The Company shall have successfully renewed and extended its existing distributorship relationship with Lucent on terms and for a period acceptable to Purchaser. 5.9 Non-Competition and Confidentiality. At the Closing, the Seller shall have executed and delivered the Non-Competition Agreement and the Confidentiality Agreement, shall have tendered his resignation as a director, officer and employee of the Company, and shall have turned over and relinquished to the Purchaser all written notes, memoranda, reports and other documents containing any confidential or proprietary information of or concerning the Company. 5.10 Section 338 Election. If requested by Purchaser, the Seller shall have made an election under Section 338(h)(10) of the Code to treat the sale of the Shares for tax purposes as a sale of the Company's assets. In such event Purchaser shall prepare the appropriate IRS tax forms, and will provide copies of the same to Seller for inclusion with the appropriate tax returns. 5.11 Board Approval. The Board of Directors of Purchaser shall have given its final approval to the closing of the purchase of the Shares. 5.12 Fairness Opinion. Purchaser shall have obtained a "fairness opinion" from the investment banking firm previously engaged by the Purchaser, at its sole expense, in connection with the transaction contemplated by this Agreement, finding the terms of this transaction, including the Purchase Price and other consideration to be paid for the Shares, to be fair, from a financial point of view, to the Shareholders of the Purchaser. 5.13 Bank Financing. The Purchaser shall have received firm commitments from one or more financing syndicates to lend Purchaser the aggregate sum of not less than $23,000,000, at a weighted-average interest rate per annum not to exceed the London Interbank Offer Rate plus 2.5% per annum and repayable over a term of not less than five (5) years. 5.14 Martin Stock. Purchaser shall have entered into a binding contract with Martin for the purchase of all of the Company's remaining outstanding stock. 5.15 Additional Documents. The Seller and the Company shall have delivered, in a form mutually acceptable to Purchaser and Seller, all such other certificates and documents as Purchaser or its counsel may have reasonably requested as necessary to consummate the transaction contemplated by this Agreement. 8 12 ARTICLE VI Conditions Precedent to the Obligation of the Seller to Close The obligation of the Seller to close is subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions, any one or more of which may be waived by the Seller (except when the fulfillment of such condition is a requirement of law): 6.1 Representations and Warranties. All representations and warranties of Purchaser contained in this Agreement and in any Exhibit, Schedule or certificate delivered pursuant hereto or in connection with the transactions contemplated hereby shall be true and correct in all material respects as at the Closing Date, as if made at the Closing and as of the Closing Date. 6.2 Covenants. Purchaser shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by it prior to or at the Closing. 6.3 No Actions. No action, suit, proceeding, or investigation shall have been instituted, and be continuing, before a court or before or by a governmental body or agency, or shall have been threatened, and be unresolved, by any governmental body or agency to restrain or prevent, or obtain damages in respect of, the carrying out of the transactions contemplated hereby. 6.4 Certificate. The Seller shall have received a certificate in the form annexed hereto as Exhibit 6.4 dated the Closing Date, signed by the Purchaser verifying the satisfaction of the conditions contained in Sections 6.1 through 6.3. 6.5 Martin Agreement. On or before November 1, 1999, the Purchaser and Martin shall have entered into a stock purchase agreement for his sale to the Purchaser of all of his stock in the Company. 6.6 Headquarters Lease Extension. If on the Closing Date, Seller is the sole owner of the building in which the Company's executive offices are located (the "BUILDING"), a ninety (90) day extension of the Company's existing month-to-month lease thereof, duly executed by Seller and further providing for such lease to continue thereafter on a month-to-month basis, until terminated by either party upon thirty (30) days' prior written notice to the other ("HEADQUARTERS LEASE EXTENSION"). ARTICLE VII Closing 7.1 The Closing. The closing of the sale and acquisition of the Shares contemplated by this Agreement (the "CLOSING") shall occur upon satisfaction of all of the conditions precedent to 9 13 the obligations of the parties to close as set forth in Articles V and VI and upon the delivery by the parties of all of the items to be delivered by them pursuant to Sections 7.3 and 7.4 hereof. 7.2 Location, Time and Date. The Closing shall be held in the offices of Barber & Bartz, 110 West 7th Street, Suite 200, Tulsa, Oklahoma, 74103, at 10:00 o'clock a.m. on November 15, 1999, or at such other time and place as may be mutually agreed to by the parties hereto; provided, however, that the Purchaser shall have the right, as provided in Section 7.2.1 below, to extend the date of Closing for one (1) thirty-day period; provided, further, that the Closing shall in no event occur later than December 15, 1999 (the "TERMINATION DATE"). (The date on which the Closing shall occur is referred to in this Agreement as the "CLOSING DATE"). 7.2.1 The Purchaser shall be entitled to extend the Closing from November 15, 1999, to the Termination Date provided (a) Purchaser pays Seller the sum of $150,000 as earnest money to be applied to the Purchase Price at Closing and (b) the conditions to Purchaser's obligation to close described in Sections 5.8, 5.11 and 5.14 shall have been satisfied or waived. Purchaser will accompany its payment of such earnest money with a written status report to Seller confirming that Purchaser has completed its due diligence review of the Company and that Mark Martin executed a stock purchaser agreement with Purchaser by November 1, 1999, and informing Seller of any breach or breaches of the conditions to Purchaser's obligation to close described in Sections 5.1, 5.2, 5.3 and 5.5 of this Agreement of which Purchaser is aware as of the date of such status report; provided, however, that the furnishing of such status report shall in no way waive or impair Purchaser's right to require Seller's strict compliance with all of the representations, warranties and covenants made by Seller in this Agreement, including but not limited to those described in said Sections 5.1, 5.2, 5.3 and 5.5. 7.2.2 If the Closing shall not occur by the Termination Date and Seller shall have satisfied all conditions imposed on Seller hereunder prior to that date, Seller shall be entitled to retain said $150,000 of earnest money as liquidated damages in full satisfaction of Purchaser's obligations under this Agreement. The parties hereby expressly agree that this liquidated damage amount has been calculated by the parties based upon their good faith estimate of the actual damage that Seller would likely suffer as a result of Purchaser's failure to close by the Termination Date, assuming Seller is ready, willing and able to close on that date and has satisfied all conditions to Purchaser's obligation to close hereunder. The parties further agree, (i) that such amount is reasonable in light of the anticipated actual harm that the Seller would suffer by reason of Purchaser's wrongful failure to close, and (ii) that the difficulty of proving Seller's actual damages and the lack of an adequate remedy at law require the inclusion of liquidated damages herein. 7.2.3 The parties expressly agree, notwithstanding any other contrary provision in this Agreement, that the retention of such earnest money as liquidated damages shall be the Seller's sole and exclusive remedy for Purchaser's failure to close by the Termination Date; provided, however, that Purchaser shall be entitled to a full refund of its earnest money if any condition to its obligation to close hereunder (other than those described in Section 7.2.1) shall remain unsatisfied as of the Termination Date. 10 14 7.3 Seller's Deliveries. At the Closing, the Company and the Seller will deliver or cause to be delivered to Purchaser: (a) All certificates representing the Shares, constituting fifty percent (50%) of the outstanding shares of the Company immediately prior to the Closing; (b) The certificate required by Section 5.6; (c) The opinion of counsel required by Section 5.7; (d) The Non-Competition Agreement, the Confidentiality Agreement, and the Seller's resignation as an officer, director and employee of the Company; (e) If Seller is the sole owner of the Building on the Closing Date, the Headquarters Lease Extension; and (f) Such other certified resolutions, releases, documents, and certificates, as are required to be delivered by the Seller and/or the Company pursuant to the provisions of this Agreement, including but not limited the Inducement. 7.4 Purchaser's Deliveries. At the Closing, Purchaser will deliver or cause to be delivered to the Seller: (a) The Purchase Price and the Debt Payment; (b) The certificate required by Section 6.4; (c) If the Seller is the sole owner of the Building on the Closing Date, the Headquarters Lease Extension; and (d) Such other certified resolutions, documents and certificates as are required to be delivered by Purchaser pursuant to the provisions of this Agreement. 7.5 Transfer of Possession. As of the Closing Date, the Seller shall give Purchaser full possession and ownership of the Shares. ARTICLE VIII Survival of Representations; Indemnification 8.1 Survival. The parties hereto agree that their respective representations, warranties, covenants, and agreements contained herein shall survive the Closing for a period of three (3) years after the Closing Date except that those covenants, representatives and warranties made by the Seller and/or the Company with respect to Taxes, Employee Benefit Plans and 11 15 Environmental Matters (Sections 1.10, 1.22 through 1.22.7, and 1.27 of the Inducement) shall survive the Closing for such periods of time that the government agencies having jurisdiction over the subject matter of those covenants, representations and warranties may be empowered to assess a liability or deficiency with respect to any of the matters covered thereby (the "INDEMNIFICATION PERIOD"). 8.2 Indemnification by the Seller. The Seller agrees to save, defend, and indemnify Purchaser against, and hold it harmless from, any and all liabilities, of every kind, nature and description, fixed or contingent, including without limitation reasonable attorney fees and expenses incurred in connection with any action, claim or proceeding relating to such liabilities ("DAMAGES"), arising from the breach of any of his representations, warranties, covenants or agreements contained herein or in the Exhibits or Schedules hereto, which arise or a claim for which is made during the Indemnification Period. Purchaser shall be entitled to set-off against any amounts due to the Seller hereunder (including, without limitation, any compensation due pursuant to the terms of the Non-Competition Agreement), the amount of any indemnity claims, as reasonably estimated by Purchaser, which may arise under this Agreement; provided, however, Purchaser's right to indemnification shall in no way be limited to the amount of such set-off. 8.3 Indemnification by Purchaser. Purchaser agrees to save, defend and indemnify the Seller against and to hold him harmless from any and all Damages arising from the breach of any of Purchaser's representations, warranties, covenants or agreements contained herein or the Exhibits hereto, which arise and a claim for which is made during the Indemnification Period. 8.4 Claims. All claims for Damages arising out of breaches of representations or warranties regarding tax deficiency assessments relating to federal and state income tax returns filed prior to Closing, shall be computed net of the present value of all readily ascertainable future tax benefits associated therewith. No claim shall be made for matters adequately covered by insurance. 8.5 Seller's Liability. Subject to the limitation contained in Section 8.2, upon a Final Determination of the amount of any claim for Damages made against the Seller by Purchaser, Purchaser shall be entitled to recover the amount of such Damages as finally determined; provided that Seller's liability to Purchaser shall be limited to the sum of the Purchase Price and the Debt Payment. 8.6 Purchaser's Liability. Upon a Final Determination of the amount of any claim for Damages made against Purchaser by the Seller, the Seller shall be entitled to recover the amount of such Damages as finally determined. 8.7 Final Determination. For the purposes of this Article VIII, a "FINAL DETERMINATION" shall exist when (i) the parties agree upon the amount, or (ii) a court of competent jurisdiction shall have made a Final Determination with respect thereto and appeal therefrom shall not have been taken within a timely fashion from the date of such determination. The asserting party will assign to the other party any claims against which the asserting party has been indemnified and paid as provided herein, as to which there may be claims against persons other 12 16 than the Company, and the other party in all respects shall be subrogated to the rights of the asserting party in connection therewith. 8.8 Defense of Claims. Each party entitled to indemnification under this Article VIII (the "INDEMNIFIED PARTY") agrees to notify the party required to provide indemnification (the "INDEMNIFYING PARTY") with reasonable promptness of any claim asserted against it in respect of which the Indemnifying Party may be liable under this Agreement, which notification shall be accompanied by a written statement setting forth the basis of such claim and the manner of calculation thereof. The Indemnifying Party shall have the right, at its election, to defend or compromise any such claim at their own expense with counsel of their choice; provided, however, that (i) such counsel shall have been approved by the Indemnified Party prior to engagement, which approval shall not be unreasonably withheld or delayed; (ii) the Indemnified Party may participate in such defense if it so chooses with its own counsel and at its own expense; and (iii) any such defense or compromise shall be conducted in a manner which is reasonable and not contrary to the Indemnified Party's interest. In the event the Indemnifying Party does not undertake to defend or compromise the claim, the Indemnifying Party shall promptly notify the Indemnified Party of its intention not to undertake to defend or compromise the claim, and the Indemnifying Party shall be bound by the final decree of any court of competent jurisdiction deciding the validity and amount of the claim asserted against the Indemnified Party. 8.9 Extension of Time. To the extent that an Indemnified Party files a claim for Damages against an Indemnifying Party prior to the expiration of the Indemnification Period, reasonably identifying the basis for the claim and the amount of any reasonably ascertainable damages, the Indemnification Period shall be extended for such claim until such claim is resolved, subject to the limitations hereinabove provided. 8.10 Restriction on Transfers. From and after the Closing Date, Seller shall not assign or transfer, for consideration less than fair market value, to Seller's parents, siblings, spouse or children, or a trust for any of their benefit, any portion of or interest in the Restricted Portion of the Purchase Price (as hereinafter defined) received by Seller for the Shares, nor or any portion of or interest in any property purchased or acquired by Seller with any part of the Restricted Portion of the Purchase Price if the result of such assignment or transfer might be in any manner to diminish the assets to which Purchaser could resort in order to recover on any claim for Damages under this Article VIII, unless Seller first obtains Purchaser's prior written consent to the proposed assignment or transfer, which consent shall not be unreasonably withheld, and the proposed assignee/transferee first signs a security agreement and/or limited guaranty in favor of, and acceptable to, Purchaser and equal to the value of the portion of or interest in the Restricted Portion of the Purchase Price to be received by the assignee/transferee. As used herein, "Restricted Portion of the Purchase Price" means: (a) $7,500,000 during the first twelve (12) months after the Closing Date; (b) $5,000,000 during the period commencing twelve (12) months after the Closing Date through the date which is thirty-six (36) months after the Closing Date; and 13 17 (c) $3,000,000 during the period commencing thirty-six (36) months after the Closing Date through the date which is forty-eight (48) months after the Closing Date. ARTICLE IX Termination and Waiver 9.1 Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the transactions provided for herein abandoned at any time prior to the Closing Date: (a) By mutual consent of the parties; (b) By the Purchaser if any of the conditions set forth in Article V hereof shall not have been fulfilled on or prior to the Termination Date, or shall become incapable of fulfillment, and shall not have been waived; (c) By the Seller if any of the conditions set forth in Article VI hereof shall not have been fulfilled on or prior to the Termination Date, or shall have become incapable of fulfillment, and shall not have been waived; or (d) By either party, if any legal action or proceeding shall have been instituted or threatened seeking to restrain, prohibit, invalidate or otherwise affect the consummation of the transactions contemplated by this Agreement which makes it inadvisable, in the judgment of such party, to consummate same. If terminated as described above, this Agreement shall be void and of no further force or effect, without any liability or obligation on the part of either party hereto except for any liability which may arise pursuant to Sections 10.1, 10.2 and 10.3. 9.2 Waivers. Any condition to performance by the Seller or the Purchaser which may be legally waived on or before the Closing Date may be waived by the party entitled to the benefit of such condition by duly authorized instrument in writing executed by the waiving party. The failure of any party at any time or times to require performance of any provision hereof shall not affect or impair the right of such party to require such performance at a later time. No waiver by any party of the breach of any term, covenant, representation or warranty contained in this Agreement as a condition to such party's obligations hereunder shall release or affect any liability resulting from such breach, and no waiver of any nature, whether by conduct or otherwise, in any one or more instances, shall be construed as, or be deemed to be, a further or continuing waiver either of any such condition or of any breach of any other term, covenant, representation or warranty contained in this Agreement. 14 18 ARTICLE X Miscellaneous Provisions 10.1 Expenses. Each party shall bear its own legal, accounting and other professional fees, costs and expenses incurred in connection with this Agreement and the transactions hereby intended to be effected. 10.2 Confidential Information. Each party agrees it and its representatives shall hold in strict confidence, and shall not divulge or disclose to any person without a need to know, any information and documents received from the other party and, if the transactions herein contemplated are not consummated, each party will continue to hold such information and documents in strict confidence and shall return to such other party all such documents then in such receiving party's possession (including the Exhibits and Schedules to this Agreement) without retaining copies thereof; provided, that each party's obligations under this Section 10.2 to maintain such confidentiality shall not apply to any information or documents that are in the public domain when furnished by the other or to be disclosed required by applicable law . In the event of a breach or threatened breach under this Section 10.2, the parties to this Agreement acknowledge that the person harmed or threatened to be harmed thereby will not have an adequate remedy at law, and shall be entitled to such equitable and injunctive relief as may be available to restrain such breach; provided, that nothing herein shall be construed as prohibiting such person from pursuing any other remedies available for such breach or threatened breach, including the recovery of damages. 10.3 Publicity. The parties agree that no publicity, release or other public announcement concerning the transactions contemplated by this Agreement shall be issued by either party without the advance approval of the form and substance of the same by the other party and its counsel, which approval, in the case of any publicity, release or other public announcement required by applicable law, shall not be unreasonably withheld or delayed. 10.4 Modification, Termination or Waiver. This Agreement may be amended, modified, superseded or terminated, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, but only by a written instrument executed by both parties. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. 10.5 Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be either (a) delivered personally, (b) sent by U. S. Mail, certified or registered mail with postage prepaid, return receipt requested, or by overnight courier service with shipping fees prepaid, receipt requested, or (c) transmitted by telefacsimile to a telephone number as to which the intended recipient notifies the other. Notice shall be deemed given when so delivered personally, or if mailed or sent by courier service, five (5) days after the date of mailing or deposited with the courier service, addressed as follows: If to Purchaser, to: XETA Corporation 1814 West Tacoma Broken Arrow, OK 74012 Attn: Jon A. Wiese, President 15 19 With a copy to: Barber and Bartz 110 West 7th Street, Suite 200 Tulsa, OK 74119-1018 Attn: Ron B. Barber If to the Seller: Lawrence J. Hopp, Individually 8836 Raleigh Drive St. Louis, MO 63123 and Lawrence J. Hopp, Trustee 8836 Raleigh Drive St. Louis, MO 63123 With a copy to: James R. Dankenbring Dankenbring, Greiman, Osterholt & Hoffmann, P.C. Clayton Centre, Fifth Floor 120 S. Central Avenue St. Louis, MO 63105 If notice is provided by facsimile it shall be deemed given upon confirmation of transmission. Either party may change the person and/or address to which notices or other communications are to be sent by giving written notice of any such change to the other in the manner herein provided. 10.6 Binding Effect and Assignment. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto; provided, however, that no assignment of any rights or delegation of any obligations provided for herein may be made by any party without the express written consent of the other. 10.7 Exhibits and Schedules. All exhibits hereto (the "EXHIBITS") and all schedules annexed hereto or thereto (the "SCHEDULES") are expressly made a part of this Agreement as fully as though completely set forth herein, and all references to this Agreement herein or in any of such Exhibits or Schedules shall be deemed to refer to and include all such Exhibits and Schedules. 10.8 Entire Agreement. This Agreement represents the entire understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all of the negotiations, understandings and representations (if any) made by and between such parties. 10.9 Governing Law. This Agreement shall be construed and enforced in accordance with the local laws of the State of Oklahoma applicable to agreements to be executed and performed wholly within said State without giving effect to its conflicts of laws provisions. The parties further agree that in any dispute between them relating to this Agreement, exclusive 16 20 jurisdiction shall be in the trial courts located within Tulsa County, Oklahoma, any objections as to jurisdiction or venue in such court being expressly waived. 10.10 Section Headings. The section headings contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 10.11 Gender. Words of the masculine gender in this Agreement shall be deemed and construed to include correlative words of the feminine and neuter genders and words of the neuter gender shall be deemed and construed to include correlative words of the masculine and feminine genders. 10.12 Severability. The invalidity or unenforceability of any term or provision of this Agreement shall in no way impair or affect the balance thereof, which shall remain in full force and effect. 10.13 Attorneys' Fees. In the event of any litigation or controversy arising out of or in connection with this Agreement between the parties hereto, the prevailing party in such litigation or controversy shall be entitled to recover from the other party all reasonable attorneys' fees, expenses and suit costs, including those associated with any appellate or post-judgment collection proceeding. 10.14 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument. 10.15 Recitals. The recitals set forth at the beginning of this Agreement are true and correct and incorporated by reference into the body of this Agreement. 10.16 Equitable Relief. Each party recognizes that the other is likely to suffer irreparable damage if the provisions of Section 4.3 or Sections 10.2 or 10.3 are not specifically enforced. In the event of a dispute concerning any of these sections, each party agrees that the other may, without posting bond or security, obtain an temporary or permanent injunction restraining the consummation of any action or transaction prohibited thereby pending determination of such dispute. The provisions of Section 4.3 and Sections 10.2 and 10.3 shall likewise be enforceable by a decree of specific performance. In the event of litigation relating to such provisions, if the court determines that either party or any of its employees, agents or representatives has breached any thereof, the injured party shall be entitled to recover from the breaching party its reasonable fees, costs, and expenses (including attorney fees) incurred in connection with the negotiation of this Agreement, any related due diligence review, and/or the prosecution of any equitable or legal proceedings and any appeal therefrom. 17 21 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "Seller" "Purchaser" XETA CORPORATION /s/ Lawrence J. Hopp By /s/ Jon A. Wiese - -------------------------------- ---------------------------- LAWRENCE J. HOPP, individually JON A. WIESE, President "Seller's Spouse" (for purposes of acknowledging and agreeing to be bound by Section 8.10 only) /s/ Christine T. Hopp - -------------------------------- CHRISTINE T. HOPP /s/ Lawrence J. Hopp - -------------------------------- LAWRENCE J. HOPP, Trustee under Living Trust of Lawrence J. Hopp, dated October 13, 1999 18 22 Index to Exhibits
Exhibit Number Description ------- ----------- 1.2 Non-Competition Agreement 2.1 Agreement Regarding Representations, Warranties and Covenants of The Company and the Seller (the "Inducement") 4.3 Confidentiality Agreement 5.6 "Bring-Down" Certificate of the Seller and the Company 5.7 Opinion of Counsel 6.4 Purchaser's "Bring-Down" Certificate
EX-2.3 4 CREDIT AGREEMENT DATED AS OF NOVEMBER 30, 1999 1 EXHIBIT 2.3 CREDIT AGREEMENT This Credit Agreement, dated as of November 30, 1999, is among Xeta Corporation, an Oklahoma corporation, the Lenders (as hereinafter defined), Bank One, Oklahoma, NA, a national banking association, as Agent, and Banc One Capital Markets, Inc., as Lead Arranger and Sole Book Runner. The parties hereto agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION 1.1. Certain Definitions. As used in this Agreement: "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company. "Acquisition Document" means, with respect to any Acquisition or proposed Acquisition, each asset purchase agreement, stock purchase agreement, merger agreement or other similar transaction document pertaining thereto. "Acquisition Loan" means, with respect to a Lender, any loan made by such Lender pursuant to Section 2.1.3 (or any continuation or conversion thereof). "Acquisition Loan Commitment" means, for each Lender, the obligation of such Lender to make Acquisition Loans to the Borrower in an aggregate amount not exceeding the amount set forth opposite such Lender's name on the signature pages hereto directly underneath the caption "Acquisition Loan Commitment" or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.2, as such amount may be modified from time to time pursuant to the terms hereof. "Acquisition Loan Facility" means the revolving credit facility established by the Lenders pursuant to Section 2.1.3. "Acquisition Loan Facility Conversion Balance" means the aggregate principal amount of Acquisition Loans outstanding on any Acquisition Loan Conversion Date and on the Acquisition 2 Loan Facility Termination Date, after giving effect to any Acquisition Loans made or repaid on such date. "Acquisition Loan Facility Conversion Date" means each of November 30, 2000, and November 30, 2001. "Acquisition Loan Facility Termination Date" means November 30, 2002, or any earlier date on which the Aggregate Acquisition Loan Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof. "Acquisition Note" means a promissory note issued at the request of a Lender pursuant to Section 2.13, substantially in the form of Exhibit "E-3". "Acquisition Term Loan" means, with respect to a Lender, the loan made by such Lender upon conversion of its Acquisition Loans outstanding on any Acquisition Loan Facility Conversion Date pursuant to Section 2.1.4 (or any continuation or conversion thereof). "Acquisition Term Note" means a promissory note issued at the request of a Lender pursuant to Section 2.13, substantially in the form of Exhibit "E-4". "Advance" means a borrowing under the Revolving Credit Facility, the Term Loan Facility or the Acquisition Loan Facility that is (i) made by the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Acquisition Loan Commitment" means the aggregate of the Acquisition Loan Commitments of all of the Lenders, as reduced from time to time pursuant to the terms hereof. "Aggregate Revolving Credit Commitment" means the aggregate of the Revolving Credit Commitments of all of the Lenders, as reduced from time to time pursuant to the terms hereof. "Aggregate Term Loan Commitment" means, at any time, the aggregate of the Term Loan Commitments of all of the Lenders. 2 3 "Agreement" means this Credit Agreement, as it may be amended or modified and in effect from time to time. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. "Applicable Fee Rate" means, at any time, the percentage rate per annum at which Commitment Fees are accruing on the unused portion of the Aggregate Revolving Credit Facility Commitment and the Aggregate Acquisition Loan Commitment at such time as set forth in the Pricing Schedule. "Applicable Margin" means, with respect to Advances of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Advances of such Type as set forth in the Pricing Schedule. "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, and its successors, in its capacity as Lead Arranger and Sole Book Runner. "Article" means an article of this Agreement unless another document is specifically referenced. "Authorized Officer" means any of Jack R. Ingram, Jon A. Wiese and Robert B. Wagner, acting singly. "Bank One" means Bank One, Oklahoma, NA, a national banking association, in its individual capacity, and its successors. "Borrower" means Xeta Corporation, an Oklahoma corporation, and its successors and assigns. "Borrowing Date" means a date (including the Closing Date) on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.8. "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in New York and Tulsa for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Tulsa for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. 3 4 "Capital Expenditures" means, without duplication, any expenditures for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP, excluding (i) the cost of assets acquired with Capitalized Lease Obligations, (ii) expenditures of insurance proceeds to rebuild or replace any asset after a casualty loss and (iii) leasehold improvement expenditures for which the Borrower or a Subsidiary is reimbursed promptly by the lessor. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in conformity with GAAP. "Cash Equivalent Investments" means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts maintained in the ordinary course of business, and (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided, in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest. "Change in Control" means (i) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934) of 35% or more of the outstanding shares of voting stock of the Borrower, or (ii) the existence of any circumstance or the occurrence of any event whereby the individuals who comprise the Incumbent Board shall cease for any reason to constitute at least two-thirds of the voting members of the Board of Directors of the Borrower. For purposes of this definition: (i) the "Incumbent Board" means the individuals who are members of the Board of Directors of the Borrower as of the date of this Agreement and any individual who is hereafter elected to the Board of Directors by the Borrower's common stockholders after his or her nomination for election as a new director is approved by a vote of at least two-thirds of the Incumbent Board, provided, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumes office as a result of either an actual or threatened "election contest" (as described in Rule 14A-11 of the SEC promulgated under the Securities Exchange Act of 1934) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors, including an individual elected by reason of any agreement intended to avoid or settle any election contest or proxy contest; and (ii) Jon A. Wiese and Mark A. Martin shall be deemed members of the Incumbent Board if elected to the Board of Directors of the Borrower at the annual meeting of the Borrower's common stockholders to be held in December, 1999. 4 5 "Closing Date" means the date on or before December 15, 1999, on which the conditions precedent set forth in Section 4.1 are satisfied or waived by the Required Lenders and the Term Loans are made hereunder. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Collateral Documents" means, collectively, the Security Agreement, the Mortgage and all other agreements and instruments now or hereafter securing all or any part of the Obligations, and all UCC-1 financing statements, fixture filings, lien entry forms and other documents, instruments, agreements and certificates executed and delivered by the Borrower or any Subsidiary in connection with the foregoing. "Commitment" means, for each Lender, such Lender's Term Loan Commitment, Revolving Credit Commitment and Acquisition Loan Commitment, collectively, and as the context requires, refers to each of them individually. "Consolidated Capital Expenditures" means, with reference to any period, the Capital Expenditures of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated EBIDA" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) depreciation, and (iii) amortization, all calculated for the Borrower and its Subsidiaries on a consolidated basis. In calculating Consolidated EBIDA (and any other financial ratios or determinations which refer to Consolidated EBIDA) following the closing of any Acquisition, such calculation shall be adjusted to take into account the financial impact of such Acquisition (as if such Acquisition had occurred prior to, and the Subsidiary or Property acquired pursuant to such Acquisition had been owned by the Borrower throughout, the entire calculation period prior to the date as of which such calculation is being made), but the manner of making such adjustment shall be determined by the Lender in its sole discretion using such methodology as the Lender deems appropriate under the circumstances. "Consolidated EBITDA" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid in cash, (iii) depreciation, and (iv) amortization, all calculated for the Borrower and its Subsidiaries on a consolidated basis. In calculating Consolidated EBITDA (and any other financial ratios or determinations which refer to Consolidated EBITDA) following the closing of any Acquisition, such calculation shall be adjusted to take into account the financial impact of such Acquisition (as if such Acquisition had occurred prior to, and the Subsidiary or Property acquired pursuant to such Acquisition had been owned by the Borrower throughout, the entire calculation period prior to the date as of which such calculation is being made), but the manner of making such adjustment shall be determined by the Lender in its sole discretion using such methodology as the Lender deems appropriate under the circumstances. 5 6 "Consolidated Funded Indebtedness" means at any time the aggregate dollar amount of Consolidated Indebtedness which has actually been funded and is outstanding at such time, whether or not such amount is due or payable at such time. "Consolidated Indebtedness" means at any time the Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time. "Consolidated Interest Expense" means, with reference to any period, the interest expense of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated Net Income" means, with reference to any period, the net income (or loss) of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated Net Worth" means at any time the consolidated stockholders' equity of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership. "Conversion/Continuation Notice" is defined in Section 2.9. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Corporate Base Rate" means a rate per annum equal to the corporate base rate or prime rate of interest announced by Bank One or by its parent, Bank One Corporation, from time to time, changing when and as said corporate base rate or prime rate changes. "Default" means an event described in Article VII. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, 6 7 distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "Eurodollar Advance" means an Advance which, except as otherwise provided in Section 2.11, bears interest at the applicable Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, (i) if Reuters Screen FRBD is not available to the Agent for any reason, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Interest Period. "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.11, bears interest at the applicable Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the Applicable Margin. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced. "Facility" means any of the Revolving Credit Facility, the Term Loan Facility or the Acquisition Loan Facility. 7 8 "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Tulsa time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Fee Letter" means that certain letter agreement dated as of October 27, 1999, by and among the Borrower, the Agent and the Arranger. "Financial Contract" of a Person means (i) any exchange-traded or over-the-counter futures, forward, swap or option contract or other financial instrument with similar characteristics, or (ii) any Rate Management Transaction. "Floating Rate" means, for any day, a rate per annum equal to the Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case changing when and as the Alternate Base Rate changes. "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate. "GAAP" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Guaranty" means the Subsidiary Guaranty to be executed by UST in favor of the Agent for the benefit of the Lenders and the Agent, as the same may be amended, modified or supplemented from time to time. "Indebtedness" of a Person means such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) any other obligation for borrowed money or other financial accommodation which in 8 9 accordance with GAAP would be shown as a liability on the consolidated balance sheet of such Person, and (viii) Off-Balance Sheet Liabilities. "Interest Period" means, with respect to a Eurodollar Advance, a period of one, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Interest Period shall end on the day which corresponds numerically to such date one, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. "Lending Installation" means, with respect to a Lender or the Agent, the office, branch, subsidiary or affiliate of such Lender or the Agent listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender or the Agent pursuant to Section 2.17. "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Leverage Ratio" means, as of any date of calculation, the ratio of (i) Consolidated Funded Indebtedness outstanding on such date to (ii) Consolidated EBITDA for the Borrower's then most-recently ended four fiscal quarters. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). 9 10 "Loan" means, with respect to a Lender, any loan made by such Lender pursuant to Article II (or any conversion or continuation thereof). A "Loan" may be a Revolving Loan, a Term Loan, an Acquisition Loan or an Acquisition Term Loan. "Loan Documents" means this Agreement, any Notes issued pursuant to Section 2.13, the Collateral Documents, the Guaranty, any guaranty agreement hereafter executed by a Subsidiary in connection herewith, and any other documents, agreements, instruments and writings executed by the Borrower or any Subsidiary in connection with this Agreement or the Facilities. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. "Material Indebtedness" is defined in Section 7.5. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means the Real Estate Mortgage, Security Agreement, Assignment of Rents, Financing Statement and Fixture Filing to be executed by the Borrower in favor of the Agent for the benefit of the Lenders, covering the Borrower's real property located in Broken Arrow, Oklahoma, as the same may be amended, modified or supplemented from time to time. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Non-U.S. Lender" is defined in Section 3.5(iv). "Note" means any promissory note issued at the request of a Lender pursuant to Section 2.13 (whether a Revolving Note, a Term Note, an Acquisition Note or an Acquisition Term Note). "Notice of Assignment" is defined in Section 12.3.2. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent or any indemnified party arising under the Loan Documents. "Off-Balance Sheet Liability" of a Person means (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any so-called "synthetic lease" transaction entered into by such Person, or (iv) any 10 11 obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding from this clause (iv) Operating Leases. "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Other Taxes" is defined in Section 3.5(ii). "Participants" is defined in Section 12.2.1. "Payment Date" means the last day of each calendar month. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Pricing Schedule" means the Schedule attached hereto identified as such. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Pro Rata Share" means, with respect to any Lender at any time, the percentage obtained by dividing (A) the sum of (i) such Lender's Term Loan outstanding at such time, plus (ii) such Lender's Revolving Credit Commitment at such time, as adjusted from time to time in accordance with the provisions of this Agreement (or, in the event the Aggregate Revolving Credit Commitment has terminated, the sum of such Lender's Revolving Loans outstanding at such time), plus (iii) such Lender's Acquisition Loan Commitment at such time, as adjusted from time to time in accordance with the provisions of this Agreement (or, in the event the Aggregate Acquisition Loan Facility Commitment has terminated, the sum of such Lender's Acquisition Loans and Acquisition Term Loans outstanding at such time) by (B) the sum of (i) the aggregate amount of all Term Loans outstanding at such time, plus (ii) the Aggregate Revolving Credit Commitment at such time (or, in the event the Aggregate Revolving Credit Commitment has terminated, the total of all Revolving Loans outstanding at such time) plus (iii) the Aggregate Acquisition Loan Commitment at such time (or, in the event the Aggregate Revolving Credit Commitment has terminated, the total of all Acquisition Loans and Acquisition Term Loans outstanding at such time). 11 12 "Purchasers" is defined in Section 12.3.1. "Rate Management Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions. "Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter entered into between the Borrower and any Lender or Affiliate thereof which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Rentals" of a Person means the aggregate fixed amounts payable by such Person under any Operating Lease. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Reports" is defined in Section 9.5. 12 13 "Required Lenders" means Lenders whose Pro Rata Shares, in the aggregate, are greater than 66.67%, except that, in the event there are not more than two (2) Lenders as of any relevant date, "Required Lenders" means all of the Lenders. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Revolving Credit Commitment" means, for each Lender, the obligation of such Lender to make Revolving Loans to the Borrower in an amount not exceeding the amount set forth opposite such Lender's name on the signature pages hereto directly underneath the caption "Revolving Loan Commitment" or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.2, as such amount may be modified from time to time pursuant to the terms hereof. "Revolving Credit Facility" means the revolving credit facility established by the Lenders pursuant to Section 2.1.1. "Revolving Credit Facility Termination Date" means November 30, 2002, or any earlier date on which the Aggregate Revolving Credit Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof. "Revolving Loan" means, with respect to a Lender, any loan made by such Lender pursuant to Section 2.1.1 (or any continuation or conversion thereof). "Revolving Note" means a promissory note issued at the request of a Lender pursuant to Section 2.13, substantially in the form of Exhibit "E-1". "S&P" means Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "SEC" means the Securities and Exchange Commission of the United States of America, or any successor agency to its functions. "Sale and Leaseback Transaction" means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee. "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Secured Obligations" means, collectively, (i) the Obligations and (ii) all Rate Management Obligations owing to one or more Lenders. 13 14 "Security Agreement" means the Pledge and Security Agreement to be executed by the Borrower, UST and each Subsidiary hereafter formed or acquired by the Borrower in favor of the Agent for the benefit of the Lenders, as the same may be amended, modified or supplemented from time to time. "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which (i) represents more than 10% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made, or (ii) is responsible for more than 10% of the consolidated net sales or of the consolidated net income of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. "Target" is defined in Section 6.12.2. "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. "Term Loan" means, with respect to a Lender, the loan made by such Lender pursuant to Section 2.1.2 (and any conversion or continuation thereof). "Term Loan Commitment" means, for each Lender, the amount set forth opposite such Lender's name in the signature pages hereto directly underneath the caption "Term Loan Commitment." "Term Loan Facility" means the term loan facility established by the Lenders pursuant to Section 2.1.2. "Term Note" means a promissory note issued at the request of a Lender pursuant to Section 2.13, substantially in the form of Exhibit "E-2". 14 15 "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance. "UST" means U. S. Technologies Systems, Inc., a Missouri corporation. "UST Acquisition" means the Acquisition contemplated by the UST Acquisition Agreements. "UST Acquisition Agreements" means, collectively, (i) that certain Stock Purchase Agreement dated August 1, 1999, between the Borrower, as purchaser, and Mark A. Martin, individually, and Mark A. Martin, Trustee Under Living Trust of Mark A. Martin dated April 4, 1994, as seller, and (ii) that certain Stock Purchase Agreement dated August 1, 1999, between the Borrower, as purchaser, and Lawrence J. Hopp, individually, and Lawrence J. Hopp, Trustee Under Living Trust of Lawrence J. Hopp dated October 13, 1994, as seller. "Unfunded Liabilities" means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. "Year 2000 Issues" means anticipated costs, problems and uncertainties associated with the inability of certain computer applications to effectively handle data including dates on and after January 1, 2000, as such inability affects the business, operations and financial condition of the Borrower and its Subsidiaries and of the Borrower's and its Subsidiaries' material customers, suppliers and vendors. "Year 2000 Program" is defined in Section 5.19. 1.2. Plural Terms. The definitions set forth in Section 1.2 shall be equally applicable to both the singular and plural forms of the defined terms. 15 16 1.3. References to Subsidiaries. Reference in this Agreement to Subsidiaries of the Borrower shall be applicable only during such periods of time that the Borrower (with the consent of the Required Lenders) has one or more Subsidiaries. 1.4. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP. References herein to the "consolidated" financial statements of the Borrower and to accounting or financial determinations which are to be made hereunder on a "consolidated" basis shall apply only during such periods of time that the Borrower (with the consent of the Required Lenders) has one or more consolidated Subsidiaries. 1.5. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. ARTICLE II THE CREDITS 2.1. The Credit Facilities. 2.1.1. Revolving Credit Facility. From and including the Closing Date and prior to the Revolving Credit Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make revolving loans to the Borrower from time to time (each individually a "Revolving Loan" and, collectively, the "Revolving Loans") in amounts not to exceed in the aggregate at any one time outstanding the amount of its Revolving Credit Commitment. Each Advance under the Revolving Credit Facility shall consist of Revolving Loans made by the Lenders ratably in proportion to each Lender's Pro Rata Share of the Aggregate Revolving Credit Commitment, and at no time shall the aggregate principal amount of all Revolving Loans outstanding hereunder exceed the Aggregate Revolving Credit Commitment. No Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Revolving Loan hereunder nor shall the Revolving Credit Commitment of any Lender be increased or decreased as a result of any such failure. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow Revolving Loans at any time prior to the Revolving Credit Facility Termination Date. The Revolving Credit Commitments of the Lenders shall expire on the Revolving Credit Facility Termination Date. 2.1.2. Term Loan Facility. On the Closing Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make a term loan to the Borrowers in an amount equal to the amount of its Term Loan Commitment (each individually a "Term Loan" and collectively, the "Term Loans"). No Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Term Loan hereunder nor shall the Term Loan Commitment of any Lender be increased or decreased as a result of such failure. No portion of any Term Loan shall be reborrowed once it is repaid. 16 17 2.1.3. Acquisition Loan Facility. After the Closing Date and prior to the Acquisition Loan Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make acquisition loans to the Borrower from time to time (each individually an "Acquisition Loan" and, collectively, the "Acquisition Loans") in amounts not to exceed in the aggregate the amount of its Acquisition Loan Commitment. Each Advance under the Acquisition Loan Facility shall consist of Acquisition Loans made by the Lenders ratably in proportion to each Lender's Pro Rata Share of the Aggregate Acquisition Loan Commitment, and at no time shall the aggregate principal amount of all Acquisition Loans at any time made hereunder exceed the Aggregate Acquisition Loan Commitment. No Lender shall be responsible for any failure by any other Lender to perform its obligation to make an Acquisition Loan hereunder nor shall the Acquisition Loan Commitment of any Lender be increased or decreased as a result of any such failure. No portion of any Acquisition Loan may be reborrowed once it is repaid. The Acquisition Loan Commitments of the Lenders shall expire on the Acquisition Loan Facility Termination Date. 2.1.4. Conversion of Acquisition Loans. On each Acquisition Loan Facility Conversion Date and on the Acquisition Loan Facility Termination Date, the Acquisition Loan Facility Conversion Balance then outstanding shall be converted into Acquisition Term Loans of the Lenders, with the Acquisition Term Loan of each Lender being in an amount equal to such Lender's Pro Rata Share of the Acquisition Loan Facility Conversion Balance. 2.2. Purpose; Use of Proceeds. 2.2.1 Revolving Credit Facility. Proceeds of each Advance made under the Revolving Credit Facility shall be used by the Borrower for general corporate working capital purposes and to finance Capital Expenditures. 2.2.2. Term Loan Facility. Proceeds of the Advance made on the Closing Date under the Term Loan Facility shall be used by the Borrower to finance the consideration payable by it under the terms of the UST Acquisition Agreements. 2.2.3. Acquisition Loan Facility. Proceeds of each Advance made under the Acquisition Loan Facility shall be used by the Borrower to finance an Acquisition which is permitted to be made without the consent of the Required Lenders under the provisions of Section 6.12.2(ii) or which has been approved by the Required Lenders in accordance with the provisions of Section 6.12.2(iii). 2.3. Required Principal Payments; Termination. 2.3.1. Revolving Credit Facility. Any outstanding Revolving Loans and all other unpaid Obligations arising under or relating to the Revolving Credit Facility shall be due and payable in full on the Revolving Credit Facility Termination Date. 2.3.2. Term Loan Facility. The Term Loans shall be payable as to principal in sixty (60) consecutive monthly payments, which shall be due on each Payment Date 17 18 commencing December 31, 1999, and continuing on the last day of each calendar month thereafter, with each installment (except the final installment due at maturity) to be in the aggregate principal amount of $383,333.33 and with the final installment due at maturity to be equal to the then outstanding principal balance of the Term Loans and all other unpaid Obligations arising under or relating to the Term Loan Facility. 2.3.3. Acquisition Loan Facility. The Acquisition Term Loans made on either of the Acquisition Loan Facility Conversion Dates shall be payable as to principal in sixty (60) consecutive monthly payments, which shall be due on each Payment Date commencing on the first Payment Date occurring after the applicable Acquisition Loan Facility Conversion Date and continuing on the last day of each calendar month thereafter, with each installment to be in the aggregate principal amount equal to one-sixtieth (1/60th) of the applicable Acquisition Loan Facility Conversion Balance. The Acquisition Term Loans made on the Acquisition Loan Facility Termination Date shall be payable as to principal in forty-eight (48) consecutive monthly payments, which shall be due on each Payment Date commencing on the first Payment Date occurring after the Acquisition Loan Facility Termination Date and continuing on the last day of each calendar month thereafter, with each installment to be in the aggregate principal amount equal to one forty-eighth (1/48th) of the applicable Acquisition Loan Facility Conversion Balance. 2.3.4. Mandatory Prepayments. Within three (3) Business Days after receipt thereof, the Borrower shall make a mandatory prepayment on the Loans in an amount equal to the net proceeds received by the Borrower from (i) the sale of a Substantial Portion of its Properties, (ii) the creation or incurrence of additional Indebtedness (other than Loans and additional Indebtedness permitted under Section 6.11), or (iii) the sale or issuance of any equity securities (but in the case of any sale or issuance of equity securities, prepayment shall be required only to the extent that the net proceeds thereof are less than or equal to the aggregate principal amount of all outstanding Term Loans, Acquisition Loans and Acquisition Term Loans). Any mandatory prepayment made pursuant to clause (i) or (ii) preceding shall be applied as follows (to the extent of available proceeds): first, to the principal installments payable under Section 2.3.2 with respect to the Term Loans in the inverse order of maturity; then, to the principal installments payable under Section 2.3.3 with respect to the Acquisition Term Loans in the inverse order of maturity; then, to any outstanding Acquisition Loans; and finally, to any outstanding Revolving Loans. Any mandatory prepayment made pursuant to clause (iii) preceding shall be applied as follows (to the extent of available proceeds): first, to the principal installments payable under Section 2.3.2 with respect to the Term Loans in the inverse order of maturity; then, to the principal installments payable under Section 2.3.3 with respect to the Acquisition Term Loans in the inverse order of maturity; and finally, to any outstanding Acquisition Loans. To the extent any mandatory prepayment is applied to the outstanding Revolving Loans, the Aggregate Revolving Credit Commitment shall be permanently reduced by a like amount. Nothing contained in this Section 2.3.4 shall nullify the requirements, as set forth in Section 6.11 and 6.13, respectively, for consent of the Required Lenders to any sale by the Borrower of a Substantial Portion of its Properties or the creation or incurrence of additional Indebtedness. 18 19 2.4. Types of Advances. The Advances under the Revolving Credit Facility, the Term Loan Facility and the Acquisition Loan Facility may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the Borrowers in accordance with Sections 2.8 and 2.9. Not more than three (3) Eurodollar Advances may be outstanding at any time under any Facility. 2.5. Commitment Fee; Reductions in Aggregate Commitments. The Borrower agrees to pay to the Agent for the account of each Lender a commitment fee at a per annum rate equal to the Applicable Fee Rate on the daily unused portion of such Lender's Revolving Credit Commitment and Acquisition Loan Commitment from the date hereof to and including the Revolving Credit Facility Termination Date, payable on each Payment Date hereafter and on the Revolving Credit Facility Termination Date. The Borrower may permanently reduce the Aggregate Revolving Credit Commitment or the Aggregate Acquisition Loan Commitment, in whole or in part ratably among the Lenders, in integral multiples of $2,000,000, upon at least three Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate Revolving Credit Commitment and/or the Aggregate Acquisition Loan Commitment may not be reduced below the aggregate principal amount of the Advances outstanding under the Revolving Credit Facility or the Acquisition Loan Facility, as applicable. All accrued commitment fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder. 2.6. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in the minimum amount of $500,000 (and in multiples of $250,000 if in excess thereof), and each Floating Rate Advance shall be in the minimum amount of $250,000 (and in multiples of $100,000 if in excess thereof), provided, however, that any Floating Rate Advance under the Revolving Credit Facility or the Acquisition Loan Facility may be in the amount of the unused Aggregate Revolving Credit Commitment or unused Aggregate Acquisition Loan Commitment, as the case may be. 2.7. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or, in a minimum aggregate amount of $250,000 or any integral multiple of $100,000 in excess thereof, any portion of the outstanding Floating Rate Advances upon one Business Days' prior notice to the Agent. The Borrower may pay, without premium or penalty, any Eurodollar Advance at the end of the applicable Interest Period, but no Eurodollar Advance may be pre-paid prior to the end of the applicable Interest Period. Principal prepayments made on the Term Loans or the Acquisition Term Loans shall be applied to the principal installments payable under Section 2.3.2 or 2.3.3, as applicable, in the inverse order of maturity. 2.8. Method of Selecting Types and Interest Periods for New Advances. The Borrower shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period applicable thereto from time to time. The Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. (Tulsa time) at least one Business Day before the Borrowing Date of each Floating Rate Advance and three Business Days before the Borrowing Date for each Eurodollar Advance, specifying: 19 20 (i) the Borrowing Date, which shall be a Business Day, of such Advance, (ii) the aggregate amount of such Advance, (iii) the Type of Advance selected, and (iv) in the case of each Eurodollar Advance, the Interest Period applicable thereto. Not later than noon (Tulsa time) on each Borrowing Date, each Lender shall make available its Loan or Loans in funds immediately available in Tulsa to the Agent at its address specified pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. 2.9. Conversion and Continuation of Outstanding Advances. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.9 or are repaid in accordance with Section 2.3 or 2.7. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless the Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period or unless such Eurodollar Advance is repaid in accordance with Section 2.3. Subject to the terms of Section 2.6, the Borrower may elect from time to time to convert all or any part of a Floating Rate Advance into a Eurodollar Advance. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a Floating Rate Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 10:00 a.m. (Tulsa time) at least three Business Days prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation, (ii) the aggregate amount and Type of the Advance which is to be converted or continued, and (iii) the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest Period applicable thereto. 2.10. Interest; Changes in Interest Rate. Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9, to but excluding the date it is paid or is converted into a Eurodollar Advance pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base 20 21 Rate. Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by the Agent as applicable to such Eurodollar Advance based upon the Borrower's selections under Sections 2.8 and 2.9 and otherwise in accordance with the terms hereof. No Interest Period with respect to any Advance under any Facility may end after the maturity or termination of such Facility. The Borrower shall select Interest Periods so that it is not necessary to repay any portion of a Eurodollar Advance prior to the last day of the applicable Interest Period in order to make a payment (including a mandatory prepayment) required pursuant to Section 2.3. 2.11. Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.8 or 2.9, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuation of a Default, the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time plus 2% per annum, provided that, during the continuance of a Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above shall be applicable to all Advances without any election or action on the part of the Agent or any Lender. 2.12. Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due and shall be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of the Borrower maintained with Bank One for each payment of principal, interest and fees as it becomes due hereunder. 2.13. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. 21 22 (ii) The Agent shall also maintain accounts in which it will record (a) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (c) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof. (iii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms. (iv) Any Lender may request that its Loans be evidenced by one or more promissory notes (each, a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender one or more Notes payable to the order of such Lender in a form supplied by the Agent. Thereafter, the Loans evidenced by such Notes and interest thereon shall at all times (including after any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein or any assignee pursuant to Section 12.3, except to the extent that any such Lender or assignee subsequently returns any such Notes for cancellation and requests that such Loans once again be evidenced as described in paragraphs (i) and (ii) above. 2.14. Telephonic Notices. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.15. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof and at maturity. Interest accrued on that portion of the outstanding principal amount of any Floating Rate Advance converted into a Eurodollar Advance on a day other than a Payment Date shall be payable on the date of conversion. Interest accrued on each Eurodollar Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Advance is prepaid, whether by mandatory prepayment, upon acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest and commitment fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is 22 23 received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. 2.16. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each reduction notice with respect to the Aggregate Revolving Credit Commitment or Aggregate Acquisition Loan Commitment, Borrowing Notice, Conversion/Continuation Notice and repayment notice received by it hereunder. The Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. 2.17. Lending Installations. Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans and any Notes issued hereunder shall be deemed held by each Lender for the benefit of any such Lending Installation. Each Lender may, by written notice to the Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it and for whose account Loan payments are to be made. 2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. 2.19. Replacement of Lender. If the Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lender's obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender so affected, an "Affected Lender"), the Borrower may elect, if such amounts continue to be charged or such suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such replacement, and provided further that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower and the Agent shall agree, as of such date, to purchase 23 24 for cash the Advances and other Obligations due to the Affected Lender pursuant to an assignment substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such Affected Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender. 2.20 Collateral. To secure the Obligations, the Borrower shall grant and convey, and cause UST and each Subsidiary hereafter formed or acquired by the Borrower to grant and convey, to the Agent, and further, shall maintain and cause to be maintained in favor of the Agent at all times during the term of this Agreement and until the Obligations are paid and satisfied in full, valid and perfected first priority security interests and mortgage liens in all of the now existing and after-acquired tangible and intangible Property of the Borrower and each of its Subsidiaries, whether real, personal or mixed, subject only to Permitted Liens, including, without limitation, all accounts, inventory, equipment, fixtures (including trade fixtures), real estate, buildings and improvements, leaseholds, general intangibles, patents, trademarks, trade names, franchises, investment property (including all shares of capital stock or other equity securities of each of the Borrower's Subsidiaries) and deposit accounts of the Borrower and each of its Subsidiaries, and all proceeds of any thereof. In order to provide the Agent with such first priority perfected security interests and mortgage liens, the Borrower shall, from time to time, execute and deliver, or cause to be executed and delivered, such instruments, agreements, assignments, financing statements and other documents, and take or cause to be taken such actions as may be necessary in the opinion of the Agent and the Agent's counsel to provide such valid and perfected first priority security interests and mortgage liens, including, without limitation, the Collateral Documents. 2.21 Guaranties. The Borrower shall further cause UST and each Subsidiary hereafter formed or acquired by the Borrower to guarantee to the Lenders and the Agent the prompt payment and performance of the Obligations and to maintain such guarantees in full force and effect at all times during the term of this Agreement and until the Obligations are paid and satisfied in full. In order to provide the Lenders and the Agent with such guarantees, the Borrower shall cause UST to execute and deliver the Guaranty and shall cause each Subsidiary hereafter formed or acquired by the Borrower to execute and deliver a guaranty in the same form and containing substantially the same terms as the Guaranty. 24 25 ARTICLE III YIELD PROTECTION; TAXES 3.1. Yield Protection. If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) subjects any Lender or any applicable Lending Installation to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender in respect of its Eurodollar Loans, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining its Eurodollar Loans or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with its Eurodollar Loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of Eurodollar Loans held or interest received by it, by an amount deemed material by such Lender, and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation of making or maintaining its Eurodollar Loans or Commitment or to reduce the return received by such Lender or applicable Lending Installation in connection with such Eurodollar Loans or Commitment, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction in amount received. 3.2. Changes in Capital Adequacy Regulations. If a Lender determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Loans or its Commitment to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental 25 26 or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 3.3. Availability of Types of Advances. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, then the Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be converted to Floating Rate Advances. 3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance. 3.5. Taxes. (i) All payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (ii) In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise 26 27 from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note ("Other Taxes"). (iii) The Borrower hereby agrees to indemnify the Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agent or such Lender and any liability (including penalties, interest and expenses, other than penalties, interest and expenses proximately arising from the gross negligence of the party seeking to be indemnified) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent or such Lender makes demand therefor pursuant to Section 3.6. (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not less than ten Business Days after the date of this Agreement, (i) deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to each of the Borrower and the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Borrower and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (v) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv), above, the Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. 27 28 (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement. 3.6. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement. ARTICLE IV CONDITIONS PRECEDENT 4.1. Conditions to Closing. The obligation of the Lenders to establish the Facilities, to make the initial Advance under the Revolving Credit Facility and to make the Term Loans under 28 29 the Term Loan Facility is subject to the Borrower's satisfaction of the following conditions precedent at or as of the Closing Date: 4.1.1 Execution and Delivery of Loan Documents. The Borrower shall have executed and delivered to the Agent, and (as applicable) caused UST to execute and deliver to the Agent, the following Loan Documents in sufficient copies for the Agent and each of the Lenders: (i) This Agreement. (ii) Any Notes requested by a Lender pursuant to Section 2.13 payable to the order of each such requesting Lender. (iii) The Security Agreement, together with appropriate UCC-1 financing statements. (iv) The Mortgage. (v) The Guaranty. 4.1.2. Delivery of Documents. The Borrower shall have executed (where necessary) and delivered to the Agent sufficient copies for the Agent and the Lenders: (i) Copies of the articles or certificate of incorporation of each of the Borrower and UST, together with all amendments thereto, and a certificate of good standing for each of the Borrower and UST, each certified by the appropriate governmental officer in its jurisdiction of incorporation, and copies of a certificate of good standing issued by the appropriate governmental officer in each other jurisdiction in which the Borrower and/or UST has any offices or conducts any significant business operations. (ii) Copies of the bylaws of each of the Borrower and UST, each certified by its Secretary or Assistant Secretary. (iii) Copies of the resolutions or other actions of the Board of Directors or other governing body of each the Borrower and UST, authorizing the execution of the Loan Documents to which it is a party. (iv) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of the Borrower authorized to sign the Loan Documents to which the Borrower is a party, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower, and an incumbency certificate, executed by the Secretary or Assistant Secretary of UST, which shall identify by name and title and bear the signatures of the officers of the UST authorized to sign the Loan Documents to 29 30 which UST is a party, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by UST. (v) A certificate, signed by the chief financial officer of the Borrower, stating that, to the best of such officer's knowledge, after diligent inquiry, on or as of the Closing Date, (A) no Default or Unmatured Default has occurred and is continuing, (B) the representations and warranties continued in Article V of this Agreement are true and correct, (C) the Borrower has experienced no material adverse change in its financial condition since July 31, 1999 and (D) UST has experienced no material adverse change in its financial condition since August 31, 1999. (vi) A written opinion of the Borrower's counsel, addressed to the Agent and the Lenders, in substantially the form of Exhibit A-1, and a written opinion of UST's counsel, addressed to the Agent and the Lenders, in substantially the form of Exhibit A-2. (vii) Written money transfer instructions, in substantially the form of Exhibit D, addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested. (viii) Information satisfactory to the Agent and the Required Lenders regarding the Borrower's and UST's Year 2000 Program. (ix) Evidence of compliance with applicable federal regulations governing loans in areas having special flood hazards. (x) The insurance certificate described in Section 5.21. (xi) A pro forma opening-day consolidated balance sheet of the Borrower and UST reflecting the UST Acquisition and the consolidating entries relating thereto. (xii) Such other documents as any Lender or its counsel may have reasonably requested. 4.1.3 UST Acquisition. The following conditions precedent shall have been satisfied with respect to the UST Acquisition: (i) The Borrower shall have delivered to the Agent fully executed copies of each of the UST Acquisition Agreements and all other Acquisition Documents relating to the UST Acquisition, and the terms and provisions of the same shall be satisfactory to the Lenders. (ii) The Lenders shall have completed a due diligence review of the financial condition, operations and prospects of the Borrower and UST (including a review 30 31 of the due diligence conducted by the Borrower in connection with the UST Acquisition Agreements), and the results of such due diligence review shall be satisfactory to the Lenders. (iii) The closings of the transactions contemplated by each of the UST Acquisition Agreements shall have occurred simultaneously with the closing of this Agreement in accordance with the terms and provisions of the respective UST Acquisition Agreements. (iv) Each of the parties to the respective UST Acquisition Agreements and UST shall have satisfied or performed all obligations required under the terms of the UST Acquisition Agreements to be satisfied or performed at or prior to the closing thereof and all other conditions precedent to the closings of the UST Acquisition Agreements shall have been satisfied, and evidence of the foregoing shall have been delivered to the Agent with sufficient copies for the Lenders. (v) All legal matters incident to the UST Acquisition shall be satisfactory to the Lenders and their counsel. 4.1.4. Other Conditions. The Borrower shall have satisfied the following additional conditions precedent at or as of the Closing Date: (i) The Borrower shall have paid all fees set forth in the Fee Letter, to the extent such fees are dues and payable at or as of the Closing Date. (ii) There shall not have occurred any material adverse change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower or UST. 4.2 Acquisition Loans. The Lenders shall not be required to make any Acquisition Loans under the Acquisition Loan Facility unless on or as of the applicable Borrowing Date: (i) Either (A) the proposed Acquisition shall be permitted without the consent of the Required Lenders under the provisions of Section 6.12.2(ii), and the Borrower shall have delivered all documents required to be delivered under the terms of Section 6.12.2(ii), or (B) the proposed Acquisition, including the terms and conditions thereof, and all related Acquisition Documents shall have been approved by the Required Lenders in accordance with Section 6.12.2(iii). (ii) All conditions precedent to the closing of the proposed Acquisition (as set forth in the applicable Acquisition Documents and as otherwise required by applicable law) shall have been satisfied, including the procurement of all necessary approvals of governmental agencies and authorities, and the closing of the proposed Acquisition shall have occurred simultaneously in accordance with the provisions of such Acquisition Documents. 31 32 (iii) The Borrower and, if applicable, the Target to be acquired pursuant to such Acquisition shall have executed and delivered, or caused to be executed and delivered, such agreements and documents and taken such other actions as may be necessary to comply with Section 6.25. (iv) All legal matters incident to the proposed Acquisition shall be satisfactory to the Lenders and their counsel. 4.3. Each Advance. The Lenders shall not be required to make an Advance under any Facility unless on the applicable Borrowing Date: (i) There exists no Default or Unmatured Default. (ii) The representations and warranties contained in Article V are true and correct as of such Borrowing Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date. (iii) All legal matters incident to the making of such Advance shall be satisfactory to the Lenders and their counsel. 4.4 Effect of Borrowing Notice. Each Borrowing Notice with respect to each such Advance shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit B as a condition to making an Advance. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders as follows (and, to the extent any of the representations and warranties on this Article V are given or deemed given at the Closing Date or at any date prior to the Closing Date, references to Subsidiaries of the Borrower shall be deemed to include a reference to UST): 5.1. Existence and Standing. Each of the Borrower and its Subsidiaries is and will continue to be a corporation, partnership or limited liability company, duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority and is duly qualified or licensed to conduct its business in each jurisdiction in which it owns any Property or conducts any business (except where failure to be so qualified or licensed could not reasonably be expected to have a Material 32 33 Adverse Effect or result in the forfeiture of any Property). Neither the Borrower nor any of its Subsidiaries owns any Property or conducts business outside the United States of America. 5.2. Authorization and Validity. Each of the Borrower and its Subsidiaries has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by each of the Borrower and its Subsidiaries of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which it is a party constitute its legal, valid and binding obligations, enforceable against it in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. 5.3. No Conflict; Government Consent. Neither the execution and delivery by the Borrower and its Subsidiaries of the Loan Documents to which each is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or (ii) the Borrower's or any Subsidiary's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents. 5.4. Financial Statements. (i) The audited financial statements of the Borrower for the fiscal year ended October 31, 1998, and the unaudited interim financial statements of the Borrower for the nine months ended July 31, 1999, copies of which have heretofore been delivered to the Lenders, were prepared in accordance with GAAP in effect on the date such statements were prepared and fairly present the financial position of the Borrower at such date and the results of operations for the periods then ended. (ii) The audited financial statements of UST for the fiscal year ended December 31, 1998, and the unaudited interim financial statements of UST for the nine months ended September 30, 1999, copies of which have heretofore been delivered to the Lenders, were prepared in accordance with GAAP in effect on the date such 33 34 statements were prepared and fairly present the financial position of UST at such date and the results of operations for the periods then ended. 5.5. Material Adverse Change. Since the respective dates of the financial statements referred to in Section 5.4, there has been no adverse change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. 5.6. Taxes. The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except for (i) such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with GAAP and as to which no Lien exists, and (ii) such taxes, if any, which may be owing by UST as a result of certain matters which have been disclosed in a letter of even date addressed to the Lenders. As of the date of this Agreement, the United States income tax returns of the Borrower have been audited by the Internal Revenue Service through the fiscal year ended October 31, 1996. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.7. Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Loans. Other than any liability incident to any litigation, arbitration or proceeding which could not reasonably be expected to have a Material Adverse Effect, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8. Subsidiaries. Schedule 1 contains an accurate list of all Subsidiaries of the Borrower as of the date of this Agreement and as of the Closing Date, setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable. 5.9. ERISA. No Single Employer Plan has any Unfunded Liabilities. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan. 34 35 5.10. Accuracy of Information. No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading. 5.11. Regulation U. Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. 5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness. 5.13. Compliance With Laws. The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property. 5.14. Ownership of Properties. Except as set forth on Schedule 2, on the date of this Agreement, the Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.15, to all of the Property and assets reflected in the Borrower's most recent consolidated financial statements provided to the Agent as owned by the Borrower and its Subsidiaries. 5.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. ss. 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 5.16. Environmental Matters. In the ordinary course of its business, the officers of the Borrower consider the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Borrower due to Environmental Laws. On the basis of this consideration, the Borrower has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or 35 36 substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.17. Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.18. Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 5.19. Year 2000. The Borrower has made a full and complete assessment of the Year 2000 Issues and has a realistic and achievable program for remediating the Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on such assessment and on the Year 2000 Program, the Borrower does not reasonably anticipate that Year 2000 Issues will have a Material Adverse Effect. 5.20. Post-Retirement Benefits. Neither the Borrower nor any Subsidiary provides or is obligated to provide any post-retirement medical and insurance benefits to its employees or former employees. 5.21. Insurance. The certificate signed by the President or chief financial officer of the Borrower, that attests to the existence and adequacy of, and summarizes, the property and casualty insurance program carried by the Borrower with respect to itself and its Subsidiaries and that has been furnished by the Borrower to the Agent and the Lenders, is complete and accurate. This summary includes the insurer's or insurers' name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s) of coverage, exclusion(s), and deductibles. This summary also includes similar information, and describes any reserves, relating to any self-insurance program that is in effect. 5.22. Solvency. (i) Immediately after the consummation of the transactions to occur on the Closing Date and immediately following the making of each Loan to be made on the Closing Date or at any time thereafter, and after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (b) the present fair saleable value of the Properties of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and its Subsidiaries on 36 37 a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted after the Closing Date. (ii) The Borrower does not intend to, or to permit any of its Subsidiaries to, and does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary. ARTICLE VI COVENANTS During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with GAAP, and will furnish to the Lenders: (i) Within 90 days after the close of each of its fiscal years, an unqualified audit report certified by independent certified public accountants acceptable to the Lenders, prepared in accordance with GAAP on a consolidated and consolidating basis (consolidating statements need not be certified by such accountants) for itself and its Subsidiaries, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by any management letter prepared by said accountants. (ii) Within 45 days after the close of the first three quarterly periods of each of its fiscal years, for itself and its Subsidiaries, consolidated and consolidating unaudited balance sheets as at the close of each such period and consolidated and consolidating profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer. (iii) Together with the financial statements required under Sections 6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit B signed by its chief financial officer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof. 37 38 (iv) Within 90 days after the close of each of its fiscal years, a financial projection and budget forecast covering the immediately subsequent three (3) year period. (v) Within 270 days after the close of each fiscal year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as correct by an actuary enrolled under ERISA. (vi) As soon as possible and in any event within 10 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto. (vii) As soon as possible and in any event within 10 days after receipt by the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries. (viii) Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished. (ix) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the SEC. (x) Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. 6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Advances only for the purposes stated in Section 2.2. The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Advances to purchase or carry any "margin stock" (as defined in Regulation U). 6.3. Notice of Default. The Borrower will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise (including, without limitation, developments with respect to Year 2000 Issues), which could reasonably be expected to have a Material Adverse Effect. 6.4. Conduct of Business. The Borrower will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated 38 39 or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a domestic corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted. 6.5. Taxes. The Borrower will, and will cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with GAAP. 6.6. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried. 6.7. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws. 6.8. Maintenance of Properties. The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. 6.9. Inspection. The Borrower will, and will cause each Subsidiary to, permit the Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent or any Lender may designate. 6.10. Dividends. The Borrower will not, nor will it permit any Subsidiary to, declare or pay any dividends or make any distributions on its capital stock (other than dividends payable in its own capital stock) or redeem, repurchase or otherwise acquire or retire any of its capital stock at any time outstanding, except that (i) any Subsidiary may declare and pay dividends or make distributions to the Borrower or to a Wholly-Owned Subsidiary and (ii) the Borrower may pay cash dividends on its capital stock so long as (A) no Default or Unmatured Default exists on the date any such dividend is paid or declared, and (B) the payment of such dividend will not result in or give rise to any Default or Unmatured Default, including a violation of any of the financial covenants set forth in Section 6.24. 39 40 6.11. Indebtedness. The Borrower will not, nor will it permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except: (i) The Loans. (ii) Indebtedness existing on the date hereof and described in Schedule 2. (iii) Purchase money Indebtedness incurred in the ordinary course of business in connection with the Borrower's purchase of equipment used in connection with its business and not exceeding $250,000 at any one time outstanding. (iv) Obligations, not exceeding $5,000,000 in the aggregate at any one time outstanding, representing the deferred purchase price (or other seller financing) payable to the seller or sellers in connection with any Acquisition permitted or approved under Section 6.12.2, provided that the terms and conditions of such seller financing are approved in advance by the Required Lenders. (v) Rate Management Obligations arising under Rate Management Transactions related to the Loans. 6.12. Mergers and Acquisitions. 6.12.1 Mergers and Consolidations. Except for any merger or consolidation incident to an Acquisition permitted under Section 6.12.2, the Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that a Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary. 6.12.2 Acquisitions. The Borrower will not, nor will it permit any Subsidiary to, make any Acquisition of any Person, except that Acquisitions may be permitted or approved in accordance with the following: (i) For any proposed Acquisition, the following conditions must be satisfied: (A) the Acquisition must be non-hostile, (B) the Acquisition must be made in compliance with all applicable laws and regulations, (C) the Person to be acquired (the "Target") must be engaged in the business of providing telecommunications equipment, services and/or applications or in a substantially related line of business, (D) the Target must be located in the United States, (E) if the Acquisition is structured as a merger or consolidation, the Borrower must be the surviving entity, (F) if the Target will become a Subsidiary, it must become a consolidated Subsidiary, (G) there must not exist any Default or Unmatured Default prior to or as of the effective date of such Acquisition, and (H) the consummation of such Acquisition must not result in or give rise to any Default or Unmatured Default, including a violation of any of the financial covenants set forth in Section 6.24. 40 41 (ii) If the total consideration payable by the Borrower in connection with a proposed Acquisition (including Indebtedness to be paid or assumed) does not exceed $7,000,000, the Borrower may make such Acquisition without the prior consent of the Required Lenders so long as the conditions set forth in clause (i) above are satisfied, provided that, prior to the consummation of such Acquisition, the Borrower shall deliver to the Agent, with sufficient copies for the Lenders, (A) a Compliance Certificate (which shall not be binding on the Lenders), prepared on a pro forma basis giving effect to the transactions contemplated to be conducted at the closing thereof, demonstrating that the Borrower will be in compliance with the financial covenants set forth in Section 6.24 immediately following the consummation of the Acquisition, (B) the Acquisition Documents relating to the proposed Acquisition, (C) the Target's audited financial statements for the three fiscal years immediately preceding (to the extent available) or such other financial statements and federal income tax returns of the Target as are available for the three fiscal years immediately preceding or such shorter period as the Target has been in existence, (D) the Target's interim unaudited financial statements for the fiscal period most recently ended, and (E) if applicable, all registration statements, reports and other filings made by the Target with the SEC during the two years immediately preceding. (iii) If the total consideration payable by the Borrower in connection with a proposed Acquisition (including Indebtedness to be paid or assumed) exceeds $7,000,000, the Borrower may not make such Acquisition without the prior consent of the Required Lenders (such consent to be given, withheld or conditioned by the Required Lenders in their sole and absolute discretion based upon such factors as the Lenders shall deem appropriate). The Borrower may request that the Lenders consent to a proposed Acquisition by submitting a written request to the Agent accompanied by sufficient copies for the Lenders of the following documents: (A) a description of the business conducted by the Target, (B) a summary of the material terms and conditions of the proposed Acquisition, (C) the Acquisition Documents relating to the proposed Acquisition, (D) a Compliance Certificate (prepared on a pro forma basis giving effect to the transactions contemplated to be conducted at the closing of the proposed Acquisition) demonstrating that the Borrower will be in compliance with the financial covenants set forth in Section 6.24 immediately following the consummation of such Acquisition, (E) the Target's audited financial statements for the three fiscal years immediately preceding (to the extent available) or such other financial statements and federal income tax returns of the Target as are available for the three fiscal years immediately preceding or such shorter period as the Target has been in existence, (F) the Target's interim unaudited financial statements for the fiscal period most recently ended, and (G) if applicable, all registration statements, reports and other filings made by the Target with the SEC during the two years immediately preceding. Any Acquisition proposed for approval pursuant to this clause (iii) must at a minimum satisfy the conditions set forth in clause (i) above. In evaluating any request submitted by the Borrower, the Lenders shall be given an 41 42 opportunity to complete a due diligence review of the financial condition, operations and prospects of the Target, and the results of such due diligence review shall be satisfactory to the Required Lenders. The Borrower agrees to furnish, or cause to be furnished, such additional information and documents as any Lender may request for purposes of conducting its due diligence review and evaluating the merits of the proposed Acquisition. If the Required Lenders do not consent in writing to the proposed Acquisition within thirty (30) days following the Borrower's submission of its request for approval, the Required Lenders will be deemed not to have approved such request. Any determination by the Required Lenders not to approve a proposed Acquisition shall be final. (iv) Prior to or simultaneously with the consummation of any Acquisition permitted under clause (ii) above or approved by the Required Lenders pursuant to clause (iii) above, the Borrower shall also comply with Section 6.25. 6.13. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except: (i) Sales of inventory in the ordinary course of business. (ii) Leases, sales or other dispositions of its Property (exclusive of any notes receivable or accounts receivable) that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than inventory in the ordinary course of business) as permitted by this Section 6.13(ii) during the twelve-month period ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and its Subsidiaries. 6.14. Investments. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, except: (i) Cash Equivalent Investments. (ii) Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 1. (iii) Any Investment arising from an Acquisition permitted or approved under Section 6.12.2. (iv) Other Investments not exceeding $500,000 in the aggregate at any time outstanding. 42 43 6.15. Liens. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books. (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries. (v) Liens existing on the date hereof and described in Schedule 2. (vi) Liens in favor of the Agent, for the benefit of the Lenders, granted pursuant to any Collateral Document. 6.16. Capital Expenditures. The Borrower will not, nor will it permit any Subsidiary to, expend, or be committed to expend, in excess of $1,500,000 for Capital Expenditures during any one fiscal year on a non-cumulative basis in the aggregate for the Borrower and its Subsidiaries. 6.17. Year 2000. The Borrower will take and will cause each of its Subsidiaries to take all such actions as are reasonably necessary to successfully implement the Year 2000 Program and to assure that Year 2000 Issues will not have a Material Adverse Effect. At the request of the Agent, the Borrower will provide a description of the Year 2000 Program, together with any updates or progress reports with respect thereto. 6.18. Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction. 43 44 6.19. Operating Leases. The Borrower will not, nor will it permit any Subsidiary to, enter into or remain liable upon any Operating Lease, except to the extent that the aggregate annual payments due on all Operating Leases of the Borrower and its Subsidiaries do not exceed $250,000. 6.20. Sale and Leaseback Transactions and Other Off-Balance Sheet Liabilities. The Borrower will not, nor will it permit any Subsidiary to, enter into or suffer to exist any (i) Sale and Leaseback Transaction or (ii) any other transaction pursuant to which it incurs or has incurred Off-Balance Sheet Liabilities, except for Rate Management Obligations permitted to be incurred under the terms of Section 6.11(v). 6.21. Contingent Obligations. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Contingent Obligation (including, without limitation, any Contingent Obligation with respect to the obligations of a Subsidiary), except by endorsement of instruments for deposit or collection in the ordinary course of business. 6.22. Letters of Credit. None of the Borrowers will apply for or become liable upon or in respect of any Letter of Credit. 6.23. Financial Contracts. The Borrower will not, nor will it permit any Subsidiary to, enter into or remain liable upon any Financial Contract, other than Rate Management Transactions related to the Loans. 6.24. Financial Covenants. 6.24.1. Current Ratio. The Borrower will not permit its current ratio, determined as of the end of each of its fiscal quarters in accordance with GAAP, to be less than 1.25 to 1.0. 6.24.2. Debt Service Coverage Ratio. The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters for the then most-recently ended four fiscal quarters, of (i) Consolidated EBIDA minus (A) unfunded Consolidated Capital Expenditures and (B) dividends paid or declared, to (ii) Consolidated Interest Expense, plus current maturities of long-term Consolidated Funded Indebtedness (for the immediately following twelve (12) month period), all calculated for the Borrower and its Subsidiaries on a consolidated basis, to be less than 1.20 to 1.0. 6.24.3. Leverage Ratio. The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters, of (i) Consolidated Funded Indebtedness to (ii) Consolidated EBITDA for the then most-recently ended four fiscal quarters to be greater than 2.75 to 1.0. 6.24.4. Minimum Net Worth. The Borrower will at all times maintain Consolidated Net Worth of not less than the sum of (i) $17,000,000 plus (ii) 75% of Consolidated Net Income earned in each fiscal quarter beginning with the quarter ending January 44 45 31, 2000 (without deduction for losses), plus (iii) 100% of the net proceeds of any offering by the Borrower of equity securities of the Borrower. 6.25 Additional Collateral and Guaranties. 6.25.1 Acquisitions. In the event that, subsequent to the Closing Date, any Person becomes a Subsidiary of the Borrower, whether pursuant to an Acquisition or otherwise, the Borrower shall pledge all shares of capital stock or other equity securities of such Subsidiary to the Agent, as provided in the Security Agreement, and deliver the original stock certificates evidencing such shares to the Agent, together with appropriate stock powers executed in blank, and shall cause such Subsidiary (i) to grant a Lien (security interest) in all of its personal property by joining the Security Agreement and filing such UCC-1 financing statements or similar instruments required by the Agent, (ii) if such Subsidiary owns or leases any real property, to comply with Section 6.25.2 below, (iii) to execute and deliver to the Agent for the benefit of the Lenders a guaranty with respect to the Obligations, in the same form and containing substantially the same terms as the Guaranty, and (iv) otherwise, to provide such documentation and take such other actions as such Subsidiary would have provided and taken if such Person had been a Subsidiary on the Closing Date. The Borrower agrees that, following the delivery of any Collateral Documents required to be executed and delivered by this Section 6.25.1, the Agent shall have a valid and enforceable first priority Lien on the respective Collateral covered thereby, free and clear of all Liens other than Permitted Liens. All actions to be taken pursuant to this Section 6.25.1 shall be at the expense of the Borrower, shall be taken to the reasonable satisfaction of the Agent, and shall be taken prior to or simultaneously with the formation or Acquisition of such Subsidiary. 6.25.2 Real Property. In the event that, subsequent to the Closing Date, the Borrower or any of its Subsidiaries intends to acquire or lease any real property which is material or otherwise important to the business operations of the Borrower or such Subsidiary, the Borrower shall, or shall cause such Subsidiary to, notify the Agent of such intent as soon as is reasonably practicable prior to the acquisition or lease of such real property. At the request of the Agent or the Required Lenders, the Borrower shall cause the Borrower or Subsidiary acquiring or leasing the real property to execute and deliver a mortgage instrument, substantially in the form of the Mortgage delivered on the Closing Date (subject to variation for compliance with local law), and provide all relevant documentation with respect thereto. The Borrowers agree that, following the taking of the actions with respect to any real property required by this Section 6.25.2, the Agent shall have a valid and enforceable first priority Lien on such real property, free and clear of all defects and Liens, except for Permitted Liens and other matters acceptable to the Agent in its reasonable discretion. All actions to be taken pursuant to this Section 6.25.2 shall be at the expense of the Borrower, shall be taken to the reasonable satisfaction of the Agent, and shall be taken within ten (10) days after such real property is acquired or leased. 45 46 ARTICLE VII DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any Loan, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made. 7.2. Nonpayment of principal of any Loan when due, or nonpayment of interest upon any Loan or of any commitment fee or other obligations under any of the Loan Documents within five days after the same becomes due. 7.3. The breach by the Borrower of any of the terms or provisions of Section 6.2, 6.10, 6.11, 6.12.1, 6.12.2, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.23, 6.24.1, 6.24.2, 6.24.3 or 6.24.4. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement which is not remedied within 20 days after written notice from the Agent or any Lender. 7.5. Failure of the Borrower or any of its Subsidiaries to pay when due any Indebtedness aggregating in excess of $250,000 ("Material Indebtedness"), or the default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any agreement under which any such Material Indebtedness was created or is governed, or any other event shall occur or condition exist, the effect of which default or event is to cause, or to permit the holder or holders of such Material Indebtedness to cause, such Material Indebtedness to become due prior to its stated maturity; or any Material Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or partnership action to 46 47 authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days. 7.8. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Borrower and its Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such action occurs, constitutes a Substantial Portion. 7.9. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of $500,000 in the aggregate, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith. 7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate $250,000 or any Reportable Event shall occur in connection with any Plan. 7.11. The Borrower or any of its Subsidiaries shall (i) be the subject of any proceeding or investigation pertaining to the release by the Borrower, any of its Subsidiaries or any other Person of any toxic or hazardous waste or substance into the environment, or (ii) violate any Environmental Law, which, in the case of an event described in clause (i) or clause (ii), could reasonably be expected to have a Material Adverse Effect. 7.12. Any Change in Control shall occur. 7.13. The occurrence of any "default", as defined in any Loan Document (other than this Agreement) or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided. 7.14. Any Collateral Document shall for any reason fail to create a valid and perfected first priority security interest in the collateral purported to be covered thereby (other than with respect to motor vehicles included in the Collateral, to the extent the Agent's lien is not noted on the certificates of title relating thereto), except as permitted by the terms of any Collateral Document, or any Collateral Document shall fail to remain in full force or effect or any action 47 48 shall be taken to discontinue or to assert the invalidity or unenforceability of any Collateral Document, or the Borrower or any Subsidiary shall fail to comply with any of the terms or provisions of any Collateral Document. 7.15. The Guaranty or any other guaranty hereafter delivered to the Agent by any Subsidiary in respect of the Obligations shall for any reason cease to remain in full force or effect, or any action shall be taken by UST or other Subsidiary party thereto to revoke, cancel or terminate the same or to assert the invalidity or unenforceability thereof, or UST or such other Subsidiary shall fail to comply with any of the terms or provisions of the Guaranty or other guaranty. 7.16. Nonpayment by the Borrower or any Subsidiary of any Rate Management Obligation when due or the breach by the Borrower or any Subsidiary of any term, provision or condition contained in any Rate Management Transaction. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Lender. If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may terminate or suspend the obligations of the Lenders to make Loans hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives. If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. 8.2. Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Lenders: (i) Extend the final maturity of any Loan, or postpone any regularly scheduled payment of principal of any Loan, or forgive all or any portion of the principal 48 49 amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon. (ii) Reduce the percentage specified in the definition of Required Lenders. (iii) Extend the Revolving Credit Facility Termination Date or the Acquisition Loan Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Section 2.3, or increase the amount of any Commitment of any Lender hereunder, or permit the Borrower to assign its rights under this Agreement. (iv) Amend this Section 8.2. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. 8.3. Preservation of Rights. No delay or omission of the Lenders or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full. ARTICLE IX GENERAL PROVISIONS 9.1. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement shall survive the making of the Loans herein contemplated. 9.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 9.3. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof other than the Fee Letter. 49 50 9.4. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns. The parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.5, 9.8 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name. 9.5. Expenses; Indemnification. 9.5.1. Expenses. The Borrower shall reimburse the Agent and the Arranger for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent or the Arranger in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification, and administration of the Loan Documents; provided, however, that the fees of Crowe & Dunlevy, counsel to the Agent, incurred in connection with the preparation, negotiation, execution and delivery of the Loan Documents shall not exceed the amounts set forth in the memorandum to David Page dated October 22, 1999 (subject to the assumptions and exceptions stated in such memorandum). The Borrower also agrees to reimburse the Agent, the Arranger and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Agent, the Arranger and the Lenders, which attorneys may be employees of the Agent, the Arranger or the Lenders) paid or incurred by the Agent, the Arranger or any Lender in connection with the collection and enforcement of the Loan Documents. Expenses being reimbursed by the Borrower under this Section include, without limitation, costs and expenses incurred in connection with the Reports described in the following sentence. The Borrower acknowledges that from time to time Bank One may prepare and may distribute to the Lenders (but shall have no obligation or duty to prepare or to distribute to the Lenders) certain audit reports (the "Reports") pertaining to the Borrower's assets for internal use by Bank One from information furnished to it by or on behalf of the Borrower, after Bank One has exercised its rights of inspection pursuant to this Agreement. 9.5.2. Indemnification. The Borrower hereby further agrees to indemnify the Agent, the Arranger, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, the Arranger, any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder except to the extent that they are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification. 50 51 9.5.3 Survival. The obligations of the Borrower under this Section 9.5 shall survive the termination of this Agreement. 9.6. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. 9.7. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.8. Nonliability of Lenders. The relationship between the Borrower on the one hand and the Lenders and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent, the Arranger nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent, the Arranger nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. The Borrower agrees that neither the Agent, the Arranger nor any Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent, the Arranger nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect or consequential damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. 9.9. Confidentiality. Each Lender agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Lenders and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 12.4. 9.10. Nonreliance. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) for the repayment of the Loans provided for herein. 51 52 9.11. Disclosure. The Borrower and each Lender hereby (i) acknowledge and agree that Bank One and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates, and (ii) waive any liability of Bank One or such Affiliate of Bank One to the Borrower or any Lender, respectively, arising out of or resulting from such investments, loans or relationships other than liabilities arising out of the gross negligence or willful misconduct of Bank One or its Affiliates. ARTICLE X THE AGENT 10.1. Appointment; Nature of Relationship. Bank One is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the "Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Agent," it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives. 10.2. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person. 10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any 52 53 Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrower's or any such guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 10.5. Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders, based upon their Pro Rata Shares, against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document. 10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. 10.8. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent in proportion to their Pro Rata Shares (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement 53 54 of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (x) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (y) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. 10.9. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. 10.10. Rights as a Lender. The Agent shall be a Lender, and as such the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Loans as any other Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. 10.11. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. 10.12. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the 54 55 retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty (30) days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term "Corporate Base Rate" as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent. 10.13. Agent's Fee. The Borrower agrees to pay to the Agent, for its own account, the fees agreed to be paid by the Borrower pursuant to the Fee Letter, or as otherwise agreed from time to time. 10.14. Delegation to Affiliates. The Borrower and the Lenders agree that the Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X. 10.15. Collateral Releases. The Lenders hereby empower and authorize the Agent to execute and deliver to the Borrower on their behalf any agreements, documents or instruments as shall be necessary or appropriate to effect any releases of Collateral which shall be permitted by the terms hereof or of any other Loan Document or which shall otherwise have been approved by the Required Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in writing. 55 56 ARTICLE XI SETOFF; RATABLE PAYMENTS 11.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due. 11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 12.3. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and does not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan 56 57 (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan. 12.2. Participations. 12.2.1. Permitted Participants; Effect. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Loans and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such Loan or Commitment, extends the Revolving Credit Facility Termination Date or the Acquisition Loan Facility Termination Date, postpones any date fixed for any regularly-scheduled payment of principal of, or interest or fees on, any such Loan or Commitment, releases any guarantor of any such Loan or releases all or substantially all of the collateral, if any, securing any such Loan. 12.2.3. Benefit of Setoff. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. 57 58 12.3. Assignments. 12.3.1. Permitted Assignments. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents; provided, however, that each Purchaser must purchase the same Pro Rata Share in each of the Term Loan Facility, the Revolving Credit Facility and the Acquisition Loan Facility. Such assignment shall be substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto. The consent of the Borrower and the Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof; provided, however, that if a Default has occurred and is continuing, the consent of the Borrower shall not be required. Such consent shall not be unreasonably withheld or delayed. Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate thereof shall (unless each of the Borrower and the Agent otherwise consents) be in an amount not less than the lesser of (i) $5,000,000 or (ii) the remaining amount of the assigning Lender's total Commitment (calculated as at the date of such assignment) or its outstanding Loans (if all of the applicable Commitments have been terminated). 12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent of an assignment, together with any consents required by Section 12.3.1, and (ii) payment of a $4,000 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement constitutes "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Lenders or the Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment and Loans assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. 12.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information 58 59 in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries, including without limitation any information contained in any Reports; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement. 12.5. Tax Treatment. If any interest in any Loan Document is transferred 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, to comply with the provisions of Section 3.5(iv). ARTICLE XIII NOTICES 13.1. Notices. Except as otherwise permitted by Section 2.14 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower, any of the initial Lenders or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Person who hereafter becomes a Lender, at its address or facsimile number set forth below in its administrative questionnaire or (z) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in accordance with this Section 13.1 and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until received. 13.2. Change of Address. The Borrower, the Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XIV COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrower, the Agent and the Lenders and each party has notified the Agent by facsimile transmission or telephone that it has taken such action. 59 60 ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL 15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF OKLAHOMA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR OKLAHOMA STATE COURT SITTING IN TULSA, OKLAHOMA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN TULSA, OKLAHOMA. 15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. [SIGNATURES BEGIN ON FOLLOWING PAGE] 60 61 IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this Agreement as of the date first above written. XETA CORPORATION By: /s/ ROBERT B. WAGNER ------------------------------------ Title: VP Finance --------------------------------- 1814 W. Tacoma Broken Arrow, Oklahoma 74012 Attention: Robert B. Wagner ----------------------------- Telephone: (918) 664-8200 FAX: (918) 664-6876 Term Loan Commitment: BANK ONE, OKLAHOMA, NA, $12,650,000 Individually and as Agent Revolving Loan Commitment: By: /s/ TIMOTHY T. KOSKI $ 2,750,000 ------------------------------------ Title: Vice President Acquisition Loan Commitment: --------------------------------- $ 6,600,000 Attention: Timothy T. Koski Telephone: (918) 586-5147 FAX: (918) 586-5474 Address: 15 East Fifth Street Tulsa, Oklahoma 74103 Term Loan Commitment: MERCANTILE BANK, N.A. $10,350,000 Revolving Loan Commitment: By: /s/ GREGORY B. VATTEROTT, JR. $ 2,250,000 ------------------------------------ Title: Assistant Vice President Acquisition Loan Commitment: --------------------------------- $ 5,400,000 Attention: Gregory B. Vatterott, Jr. Telephone: (314) 418-2243 FAX: (314) 418-8090 Address: 8th & Locust Streets P.O. Box 524 St. Louis, Missouri 63166 Total Commitments: $ 40,000,000 ============= 61 62 BANC ONE CAPITAL MARKETS, INC., as Lead Arranger and Book Runner By: /s/ ELIZABETH CADWALLADER ------------------------------------ Name: Elizabeth Cadwallader ---------------------------------- Title: Managing Director --------------------------------- 1717 Main Street, 4th Floor Dallas, Texas 75201 Attention: Elizabeth E. Cadwallader, Managing Director Telephone: (214) 290-2393 FAX: (214) 290-2336 62 63 PRICING SCHEDULE
============================================================================================================== APPLICABLE MARGIN LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V STATUS STATUS STATUS STATUS STATUS - -------------------------------------------------------------------------------------------------------------- Eurodollar Rate 1.50% 1.75% 2.00% 2.25% 2.50% - -------------------------------------------------------------------------------------------------------------- Floating Rate 0.0% 0.0% 0.25% 0.50% 0.75% ==============================================================================================================
============================================================================================================== APPLICABLE FEE RATE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V STATUS STATUS STATUS STATUS STATUS - -------------------------------------------------------------------------------------------------------------- Commitment Fee 0.20% 0.25% 0.30% 0.35% 0.45% ==============================================================================================================
For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule: "Financials" means the annual or quarterly financial statements of the Borrower delivered pursuant to Section 6.1(i) or (ii). "Level I Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, the Leverage Ratio is less than or equal to 1.0 to 1.00. "Level II Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status and (ii) the Leverage Ratio is less than or equal to 1.5 to 1.00. "Level III Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status or Level II Status and (ii) the Leverage Ratio is less than or equal to 2.0 to 1.00. "Level IV Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status, Level II Status or Level III Status and (ii) the Leverage Ratio is less than or equal to 2.5 to 1.00. "Level V Status" exists at any date if the Borrower has not qualified for Level I Status, Level II Status, Level III Status or Level IV Status. "Status" means either Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status. The Applicable Margin and Applicable Fee Rate shall be determined in accordance with the foregoing table based on the Borrower's Status as reflected in the then most recent Financials. 63 64 Adjustments, if any, to the Applicable Margin or Applicable Fee Rate shall be effective five Business Days after the Agent has received the applicable Financials. If the Borrower fails to deliver the Financials to the Agent at the time required pursuant to Section 6.1, then the Applicable Margin and Applicable Fee Rate shall be the highest Applicable Margin and Applicable Fee Rate set forth in the foregoing table until five days after such Financials are so delivered. 64 EX-2.4 5 PLEDGE AND SECURITY AGREEMENT 1 EXHIBIT 2.4 PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT is entered into as of November 30, 1999 by and among Xeta Corporation, an Oklahoma corporation (the "Borrower"), U.S. Technologies Systems, Inc., a Missouri corporation ("UST"), and each of the Borrower's Subsidiaries hereafter party hereto (the Borrower, UST and each of such Subsidiaries shall be singularly referred to as a "Grantor" and collectively as the "Grantors"), and Bank One, Oklahoma, NA, a national banking association having its principal office in Tulsa, Oklahoma, in its capacity as agent (the "Agent") for the lenders party to the Credit Agreement referred to below. PRELIMINARY STATEMENT The Borrower, the Agent and the Lenders are entering into a Credit Agreement dated as of November 30, 1999 (as it may be amended or modified from time to time, the "Credit Agreement"). Each Grantor is entering into this Pledge and Security Agreement (as it may be amended or modified from time to time, the "Security Agreement") in order to induce the Lenders to enter into and extend credit to the Borrower under the Credit Agreement. ACCORDINGLY, each Grantor and the Agent, on behalf of the Lenders, hereby agree as follows: ARTICLE I DEFINITIONS 1.1. Terms Defined in Credit Agreement. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. 1.2. Terms Defined in Oklahoma Uniform Commercial Code. Terms defined in the Oklahoma Uniform Commercial Code which are not otherwise defined in this Security Agreement are used herein as defined in the Oklahoma Uniform Commercial Code as in effect on the date hereof. 1.3. Definitions of Certain Terms Used Herein. As used in this Security Agreement, in addition to the terms defined in the Preliminary Statement, the following terms shall have the following meanings: "Accounts" means all rights to payment for goods sold or leased or services rendered by any Grantor, whether or not earned by performance, together with all security interests or other security held by or granted to such Grantor to secure such rights to payment. "Article" means a numbered article of this Security Agreement, unless another document is specifically referenced. "Chattel Paper" means any writing or group of writings which evidences both a monetary obligation and a security interest in or a lease of specific goods. 2 "Collateral" means all Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Investment Property, Instruments, Inventory, Pledged Deposits, Stock Rights and Other Collateral, wherever located, in which any Grantor now has or hereafter acquires any right or interest, and the proceeds, insurance proceeds and products thereof, together with all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto. "Control" shall have the meaning set forth in Article 8 of the Oklahoma Uniform Commercial Code as in effect from time to time. "Default" means an event described in Section 5.1. "Deposit Accounts" means all demand, time, savings, passbook and other deposit accounts maintained with any bank, savings and loan association, credit union or like organization, other than an account represented by a certificate of deposit. "Documents" means all documents of title and goods evidenced thereby, including without limitation all bills of lading, dock warrants, dock receipts, warehouse receipts and orders for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers. "Equipment" means all equipment, machinery, furniture and goods used or usable by each Grantor in its business and all other tangible personal property (other than Inventory), and all accessions and additions thereto, including, without limitation, all Fixtures. "Exhibit" refers to a specific exhibit to this Security Agreement, unless another document is specifically referenced. "Fixtures" means all goods which become so related to particular real estate that an interest in such goods arises under any real estate law applicable thereto, including, without limitation, all trade fixtures. "General Intangibles" means all intangible personal property (other than Accounts) including, without limitation, all contract rights, rights to receive payments of money, choses in action, causes of action, judgments, tax refunds and tax refund claims, patents, trademarks, trade names, copyrights, licenses, franchises, computer programs, software, goodwill, customer and supplier contracts, interests in general or limited partnerships, joint ventures or limited liability companies, reversionary interests in pension and profit sharing plans and reversionary, beneficial and residual interests in trusts, leasehold interests in real or personal property, rights to receive rentals of real or personal property and guarantee and indemnity claims, including without limitation any indemnity claims arising from or in connection with the UST Acquisition Agreements or any other Acquisition Documents. "Investment Property" means all securities, whether certificated or uncertificated, security entitlements, securities accounts, commodity contracts, and commodity accounts and any Stock Rights related thereto. 2 3 "Instruments" means all negotiable instruments and other writings which evidence a right to the payment of money and which are not themselves security agreements or leases and are of a type which in the ordinary course of business are transferred by delivery with any necessary endorsement or assignment, including, without limitation, all checks, drafts, notes, bonds, debentures, government securities, certificates of deposit and letters of credit. "Inventory" means all goods held for sale or lease, or furnished or to be furnished under contracts of service, or consumed in any Grantor's business, including without limitation raw materials, intermediates, work in process, packaging materials, finished goods, semi-finished inventory, scrap inventory, manufacturing supplies and spare parts, all such goods that have been returned to or repossessed by or on behalf of such Grantor, and all such goods released to any Grantor or to third parties under trust receipts or similar documents. "Lenders" means the lenders party to the Credit Agreement and their successors and assigns. "Lien" means any lien (statutory or other), security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, capitalized lease or other title retention agreement). "Obligations" means any and all existing and future indebtedness, obligation and liability of every kind, nature and character, direct or indirect, absolute or contingent (including all renewals, extensions and modifications thereof and all fees, costs and expenses incurred by the Agent or the Lenders in connection with the preparation, administration, collection or enforcement thereof), of any Grantor to the Agent or any Lender or any branch, subsidiary or affiliate thereof, arising under or pursuant to this Security Agreement, the Credit Agreement and any promissory note or notes now or hereafter issued under the Credit Agreement. "Other Collateral" means any other personal property of any Grantor not included within the defined terms Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Instruments, Inventory, Investment Property, Pledged Deposits and Stock Rights, including, without limitation, all cash on hand and all deposit accounts or other deposits (general or special, time or demand, provisional or final) with any bank or other financial institution, it being intended that the Collateral include all personal property of each Grantor. "Pledged Deposits" means all time deposits of money, whether or not evidenced by certificates, which a Grantor may from time to time designate as pledged to the Agent or to any Lender as security for any Obligation, and all rights to receive interest on said deposits. "Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter entered into between the Borrower and any Lender or Affiliate thereof which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. 3 4 "Rate Management Obligations" means any and all obligations of the Borrower, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions. "Receivables" means the Accounts, Chattel Paper, Deposit Accounts, Documents, Investment Property, Instruments, Pledged Deposits or Stock Rights, and any other rights or claims to receive money which are General Intangibles or which are otherwise included as Collateral. "Required Secured Parties" means (x) prior to an acceleration of the Obligations under the Credit Agreement, the Required Lenders and (y) after an acceleration of the Obligations under the Credit Agreement, Lenders and their Affiliates holding in the aggregate at least 66-2/3% of the total of (i) the unpaid principal amount of outstanding Advances and (ii) the aggregate net early termination payments and all other amounts then due and unpaid from the Borrower to the Lenders or their Affiliates under Rate Management Transactions, as determined by the Agent in its reasonable discretion, except that, in the event there are not more than two (2) Lenders as of any relevant date after an acceleration of the Obligations under the Credit Agreement, "Required Secured Parties" means all of the Lenders and their Affiliates holding in the aggregate at least 66-2/3% of the total of (i) the unpaid principal amount of outstanding Advances and (ii) the aggregate net early termination payments and all other amounts then due and unpaid from the Borrower to the Lenders or their Affiliates under Rate Management Transactions. "Section" means a numbered section of this Security Agreement, unless another document is specifically referenced. "Secured Obligations" means the Obligations and Rate Management Obligations entered into with one or more of the Lenders or their Affiliates. "Security" has the meaning set forth in Article 8 of the Oklahoma Uniform Commercial Code as in effect from time to time "Stock Rights" means any securities, dividends or other distributions and any other right or property which any Grantor shall receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for or in exchange for any securities or other ownership interests in a corporation, partnership, joint venture or limited liability company constituting Collateral and any securities, any right to receive securities and any right to receive earnings, in which any Grantor now has or hereafter acquires any right, issued by an issuer of such securities. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. 4 5 ARTICLE II GRANT OF SECURITY INTEREST Each Grantor hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Lenders and (to the extent specifically provided herein) their Affiliates, a security interest in and to the Collateral to secure the prompt and complete payment and performance of the Secured Obligations. ARTICLE III REPRESENTATIONS AND WARRANTIES Each Grantor represents and warrants to the Agent and the Lenders that: 3.1. Title, Authorization, Validity and Enforceability. Each Grantor has good and valid rights in and title to the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except for Liens permitted under Section 4.1.6, and has full power and authority to grant to the Agent the security interest in such Collateral pursuant hereto. The execution and delivery by each of the Grantors of this Security Agreement has been duly authorized by proper corporate, partnership, limited liability company or other proceedings, as applicable, and this Security Agreement constitutes a legal, valid and binding obligation of each Grantor and creates a security interest which is enforceable against each Grantor in all now owned and hereafter acquired Collateral. When financing statements have been filed in the appropriate offices against the Grantors in the locations listed on Exhibit "F", the Agent will have a fully perfected first priority security interest in that Collateral in which a security interest may be perfected by filing, subject only to Liens permitted under Section 4.1.6. 3.2. Conflicting Laws and Contracts. Neither the execution and delivery by the Grantors of this Security Agreement, the creation and perfection of the security interest in the Collateral granted hereunder, nor compliance with the terms and provisions hereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Grantor or such Grantor's articles or certificate of incorporation or by-laws, partnership agreements, or operating agreements, as the case may be, the provisions of any indenture, instrument or agreement to which any Grantor is a party or is subject, or by which it, or its property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien pursuant to the terms of any such indenture, instrument or agreement (other than any Lien of the Agent on behalf of the Lenders). 3.3. Principal Location. Each Grantor's mailing address, and the location of its chief executive office and of the books and records relating to the Receivables, is disclosed in Exhibit "A"; no Grantor has any other places of business except those set forth in Exhibit "A". 3.4. Property Locations. The Inventory, Equipment and Fixtures are located solely at the locations described in Exhibit "A". All of said locations are owned by a Grantor except for locations (i) which are leased by a Grantor as lessee and designated in Part B of Exhibit "A" and (ii) at which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment as designated in Part C of Exhibit "A", with respect to which Inventory such Grantor has delivered bailment agreements, warehouse receipts, financing statements or other documents satisfactory to the Lenders to protect the Agent's and the Lenders' security interest in such Inventory. 5 6 3.5. No Other Names. No Grantor has conducted business under any name except the name in which it has executed this Security Agreement. 3.6. No Default. No Default or Unmatured Default exists. 3.7. Accounts and Chattel Paper. The names of the obligors, amounts owing, due dates and other information with respect to the Accounts and Chattel Paper are and will be correctly stated in all records of the Grantors relating thereto and in all invoices and reports with respect thereto furnished to the Agent by the Grantors from time to time. As of the time when each Account or each item of Chattel Paper arises, the Grantors shall be deemed to have represented and warranted that such Account or Chattel Paper, as the case may be, and all records relating thereto, are genuine and in all respects what they purport to be. 3.8. Filing Requirements. None of the Equipment is covered by any certificate of title, except for the vehicles described in Part A of Exhibit "B". None of the Collateral is of a type for which security interests or liens may be perfected by filing under any federal statute except for (i) the vehicles described in Part B of Exhibit "B" and (ii) patents, trademarks and copyrights held by a Grantor and described in Part C of Exhibit "B". The legal description, county and street address of the property on which any Fixtures are located is set forth in Exhibit "C" together with the name and address of the record owner of each such property. 3.9. No Financing Statements. No financing statement describing all or any portion of the Collateral which has not lapsed or been terminated naming any Grantor as debtor has been filed in any jurisdiction except (i) financing statements naming the Agent on behalf of the Lenders as the secured party, (ii) as described in Exhibit "D" and (iii) as permitted by Section 4.1.6 3.10. Federal Employer Identification Number. The Borrower's Federal employer identification number is 73-1130045, and UST's Federal employer identification number is 43-1528852. 3.11. Pledged Securities and Other Investment Property. Exhibit "E" sets forth a complete and accurate list of the Instruments, Securities and other Investment Property delivered to the Agent. As designated, the applicable Grantor is the direct and beneficial owner of each Instrument, Security and other type of Investment Property listed on Exhibit "E" as being owned by it, free and clear of any Liens, except for the security interest granted to the Agent for the benefit of the Lenders hereunder. Each Grantor further represents and warrants that (i) all such Instruments, Securities or other types of Investment Property which are shares of stock in a corporation or ownership interests in a partnership or limited liability company have been (to the extent such concepts are relevant with respect to such Instrument, Security or other type of Investment Property) duly and validly issued, are fully paid and non-assessable and (ii) with respect to any certificates delivered to the Agent representing an ownership interest in a partnership or limited liability company, either such certificates are Securities as defined in Article 8 of the Uniform Commercial Code of the applicable jurisdiction as a result of actions by the issuer or otherwise, or, if such certificates are not Securities, such Grantor has so informed the Agent so that the Agent may take steps to perfect its security interest therein as a General Intangible. 6 7 ARTICLE IV COVENANTS From the date of this Security Agreement, and thereafter until this Security Agreement is terminated: 4.1. General. 4.1.1. Inspection. Each Grantor will permit the Agent or any Lender, by its representatives and agents (i) to inspect the Collateral, (ii) to examine and make copies of the records of the Grantors relating to the Collateral and (iii) to discuss the Collateral and the related records of the Grantors with, and to be advised as to the same by, the Grantors' officers and employees (and, in the case of any Receivable, with any person or entity which is or may be obligated thereon), all at such reasonable times and intervals as the Agent or such Lender may determine, and all at the Grantors' expense. 4.1.2. Taxes. Each Grantor will pay when due all taxes, assessments and governmental charges and levies upon the Collateral, except those which are being contested in good faith by appropriate proceedings and with respect to which no Lien exists. 4.1.3. Records and Reports; Notification of Default. Each Grantor will maintain complete and accurate books and records with respect to the Collateral, and furnish to the Agent, with sufficient copies for each of the Lenders, such reports relating to the Collateral as the Agent shall from time to time request. Each Grantor will give prompt notice in writing to the Agent and the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which might materially and adversely affect the Collateral. 4.1.4. Financing Statements and Other Actions; Defense of Title. Each Grantor will execute and deliver to the Agent all financing statements and other documents and take such other actions as may from time to time be requested by the Agent in order to maintain a first perfected security interest in and, in the case of Investment Property, Control of, the Collateral. Each Grantor will take any and all actions necessary to defend title to the Collateral against all persons and to defend the security interest of the Agent in the Collateral and the priority thereof against any Lien not expressly permitted hereunder. 4.1.5. Disposition of Collateral. No Grantor will sell, lease or otherwise dispose of the Collateral except (i) prior to the occurrence of a Default or Unmatured Default, dispositions specifically permitted pursuant to Section 6.13 of the Credit Agreement, (ii) until such time following the occurrence of a Default as such Grantor receives a notice from the Agent instructing the Grantor to cease such transactions, sales or leases of Inventory in the ordinary course of business, and (iii) until such time as such Grantor receives a notice from the Agent pursuant to Article VII, proceeds of Inventory and Accounts collected in the ordinary course of business. 4.1.6. Liens. No Grantor will create, incur, or suffer to exist any Lien on the Collateral except (i) the security interest created by this Security Agreement, (ii) existing Liens described 7 8 in Exhibit "D" and (iii) other Liens permitted pursuant to Section 6.15 [Liens] of the Credit Agreement. 4.1.7. Change in Location or Name. No Grantor will (i) have any Inventory, Equipment or Fixtures or proceeds or products thereof (other than Inventory and proceeds thereof disposed of as permitted by Section 4.1.5) at a location other than a location specified in Exhibit "A", (ii) maintain records relating to the Receivables at a location other than at the location specified on Exhibit "A", (iii) maintain a place of business at a location other than a location specified on Exhibit "A", (iv) change its name or taxpayer identification number or (v) change its mailing address, unless such Grantor shall have given the Agent not less than 30 days' prior written notice thereof, and the Agent shall have determined that such change will not adversely affect the validity, perfection or priority of the Agent's security interest in the Collateral. 4.1.8. Other Financing Statements. No Grantor will sign or authorize the signing on its behalf of any financing statement naming it as debtor covering all or any portion of the Collateral, except as permitted by Section 4.1.6. 4.2. Receivables. 4.2.1. Certain Agreements on Receivables. No Grantor will make or agree to make any discount, credit, rebate or other reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable less than the original amount thereof, except that, prior to the occurrence of a Default, such Grantor may reduce the amount of Accounts arising from the sale of Inventory in accordance with consistent past practice and present policies and in the ordinary course of business. 4.2.2. Collection of Receivables. Except as otherwise provided in this Security Agreement, each Grantor will collect and enforce, at such Grantor's sole expense, all amounts due or hereafter due to such Grantor under the Receivables. 4.2.3. Delivery of Invoices. Each Grantor will deliver to the Agent immediately upon its request after the occurrence of a Default duplicate invoices with respect to each Account bearing such language of assignment as the Agent shall specify. 4.2.4. Disclosure of Counterclaims on Receivables. If (i) any discount, credit or agreement to make a rebate or to otherwise reduce the amount owing on a Receivable exists or (ii) if, to the knowledge of any Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been asserted or threatened with respect to a Receivable, such Grantor will disclose such fact to the Agent in writing in connection with the inspection by the Agent of any record of such Grantor relating to such Receivable and in connection with any invoice or report furnished by such Grantor to the Agent relating to such Receivable. 4.3. Inventory and Equipment. 4.3.1. Maintenance of Goods. Each Grantor will do all things necessary to maintain, preserve, protect and keep the Inventory and the Equipment in good repair and working and saleable condition. 8 9 4.3.2. Insurance. The Grantors will (i) maintain fire and extended coverage insurance on the Inventory and Equipment containing a lender's loss payable clause in favor of the Agent, on behalf of the Lenders, and providing that said insurance will not be terminated except after at least 30 days' written notice from the insurance company to the Agent, (ii) maintain such other insurance on the Collateral for the benefit of the Agent as the Agent shall from time to time request, (iii) furnish to the Agent upon the request of the Agent from time to time the originals of all policies of insurance on the Collateral and certificates with respect to such insurance and (iv) maintain general liability insurance naming the Agent, on behalf of the Lenders, as an additional insured. 4.3.3. Titled Vehicles. Each Grantor will give the Agent notice of its acquisition of any vehicle covered by a certificate of title and deliver to the Agent, upon request, the original of any vehicle title certificate and do all things necessary to have the Lien of the Agent noted on any such certificate. 4.4. Instruments, Securities, Chattel Paper, Documents and Pledged Deposits. Each Grantor will (i) deliver to the Agent immediately upon execution of this Security Agreement the originals of all Chattel Paper, Securities and Instruments (if any then exist), (ii) hold in trust for the Agent upon receipt and immediately thereafter deliver to the Agent any Chattel Paper, Securities and Instruments constituting Collateral, (iii) upon the designation of any Pledged Deposits (as set forth in the definition thereof), deliver to the Agent such Pledged Deposits which are evidenced by certificates included in the Collateral endorsed in blank, marked with such legends and assigned as the Agent shall specify, and (iv) upon the Agent's request, after the occurrence and during the continuance of a Default, deliver to the Agent (and thereafter hold in trust for the Agent upon receipt and immediately deliver to the Agent) any Document evidencing or constituting Collateral. 4.5. Uncertificated Securities and Certain Other Investment Property. Each Grantor will permit the Agent from time to time to cause the appropriate issuers (and, if held with a securities intermediary, such securities intermediary) of uncertificated securities or other types of Investment Property not represented by certificates which are Collateral to mark their books and records with the numbers and face amounts of all such uncertificated securities or other types of Investment Property not represented by certificates and all rollovers and replacements therefor to reflect the Lien of the Agent granted pursuant to this Security Agreement. Each Grantor will take any actions necessary to cause (i) the issuers of uncertificated securities which are Collateral and which are Securities and (ii) any financial intermediary which is the holder of any Investment Property, to cause the Agent to have and retain Control over such Securities or other Investment Property. Without limiting the foregoing, each Grantor will, with respect to Investment Property held with a financial intermediary, cause such financial intermediary to enter into a control agreement with the Agent in form and substance satisfactory to the Agent. 4.6. Stock and Other Ownership Interests. 4.6.1. Changes in Capital Structure of Issuers. No Grantor will (i) permit or suffer any issuer of privately held corporate securities or other ownership interests in a corporation, partnership, joint venture or limited liability company constituting Collateral to dissolve, liquidate, retire any of its capital stock or other Instruments or Securities evidencing ownership, 9 10 reduce its capital or merge or consolidate with any other entity, or (ii) vote any of the Instruments, Securities or other Investment Property in favor of any of the foregoing. 4.6.2. Issuance of Additional Securities. No Grantor will permit or suffer the issuer of privately held corporate securities or other ownership interests in a corporation, partnership, joint venture or limited liability company constituting Collateral to issue any such securities or other ownership interests, any right to receive the same or any right to receive earnings, except to such Grantor. 4.6.3. Registration of Pledged Securities and other Investment Property. Each Grantor will permit any registerable Collateral to be registered in the name of the Agent or its nominee at any time at the option of the Required Secured Parties. 4.6.4. Exercise of Rights in Pledged Securities and other Investment Property. Each Grantor will permit the Agent or its nominee at any time after the occurrence of a Default, without notice, to exercise all voting and corporate rights relating to the Collateral, including, without limitation, exchange, subscription or any other rights, privileges, or options pertaining to any corporate securities or other ownership interests or Investment Property in or of a corporation, partnership, joint venture or limited liability company constituting Collateral and the Stock Rights as if it were the absolute owner thereof. 4.7. Pledged Deposits. No Grantor will withdraw all or any portion of any Pledged Deposit or fail to rollover said Pledged Deposit without the prior written consent of the Agent. 4.8. Deposit Accounts. Each Grantor will (i) upon the Agent's request, notify each bank or other financial institution in which it maintains a deposit account or other deposit (general or special, time or demand, provisional or final) of the security interest granted to the Agent hereunder and cause each such bank or other financial institution to acknowledge such notification in writing and (ii) upon the Agent's request after the occurrence and during the continuance of a Default, deliver to each such bank or other financial institution a letter, in form and substance acceptable to the Agent, transferring dominion and control over each such account to the Agent. In the case of deposits maintained with Lenders, the terms of such letter shall be subject to the provisions of the Credit Agreement regarding setoffs. 4.9. Federal, State or Municipal Claims. Each Grantor will notify the Agent of any Collateral which constitutes a claim against the United States government or any state or local government or any instrumentality or agency thereof, the assignment of which claim is restricted by federal, state or municipal law. ARTICLE V DEFAULT 5.1. Default. The occurrence of any one or more of the following events shall constitute a Default: 5.1.1. Any representation or warranty made by or on behalf of any Grantor under or in connection with this Security Agreement shall be materially false as of the date on which made. 10 11 5.1.2. The breach by any Grantor of any of the terms or provisions of Article IV or Article VII. 5.1.3. The breach by any Grantor (other than a breach which constitutes a Default under Section 5.1.1 or 5.1.2) of any of the terms or provisions of this Security Agreement which is not remedied within 20 days after the giving of written notice to such Grantor by the Agent. 5.1.4. Any material portion of the Collateral shall be: (i) transferred or otherwise disposed of, either voluntarily or involuntarily, in any manner not permitted by Section 4.1.5 or 8.7 or (ii) lost, stolen, damaged or destroyed. 5.1.5. Any Secured Obligation shall not be paid when due, whether at stated maturity, upon acceleration, or otherwise. 5.1.6. The occurrence of any "Default" under, and as defined in, the Credit Agreement. 5.1.7. Any limited partnership interests or ownership interests in a limited liability company which are included within the Collateral shall at any time constitute a Security or the issuer of any such interests shall take any action to have such interests treated as a Security unless (i) all certificates or other documents constituting such Security have been delivered to the Agent and such Security is properly defined as such under Article 8 of the Uniform Commercial Code of the applicable jurisdiction, whether as a result of actions by the issuer thereof or otherwise, or (ii) the Agent has entered into a control agreement with the issuer of such Security or with a securities intermediary relating to such Security and such Security is defined as such under Article 8 of the Uniform Commercial Code of the applicable jurisdiction, whether as a result of actions by the issuer thereof or otherwise. 5.2. Acceleration and Remedies. Upon the acceleration of the obligations under the Credit Agreement pursuant to Section 8.1 thereof, the Obligations and, to the extent provided for under the Rate Management Transactions evidencing the same, the Rate Management Obligations, shall immediately become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and the Agent may, with the concurrence or at the direction of the Required Secured Parties, exercise any or all of the following rights and remedies: 5.2.1. Those rights and remedies provided in this Security Agreement, the Credit Agreement, or any other Loan Document, provided that this Section 5.2.1 shall not be understood to limit any rights or remedies available to the Agent and the Lenders prior to a Default. 5.2.2. Those rights and remedies available to a secured party under the Oklahoma Uniform Commercial Code (whether or not the Oklahoma Uniform Commercial Code applies to the affected Collateral) or under any other applicable law (including, without limitation, any law governing the exercise of a bank's right of setoff or bankers' lien) when a debtor is in default under a security agreement. 5.2.3. Without notice except as specifically provided in Section 8.1 or elsewhere herein, sell, lease, assign, grant an option or options to purchase or otherwise dispose of the Collateral 11 12 or any part thereof in one or more parcels at public or private sale, for cash, on credit or for future delivery, and upon such other terms as the Agent may deem commercially reasonable. 5.3. Debtor's Obligations Upon Default. Upon the request of the Agent after the occurrence of a Default, each Grantor will: 5.3.1. Assembly of Collateral. Assemble and make available to the Agent the Collateral and all records relating thereto at any place or places specified by the Agent. 5.3.2. Secured Party Access. Permit the Agent, by the Agent's representatives and agents, to enter any premises where all or any part of the Collateral, or the books and records relating thereto, or both, are located, to take possession of all or any part of the Collateral and to remove all or any part of the Collateral. 5.4. License. The Agent is hereby granted a license or other right to use, following the occurrence and during the continuance of a Default, without charge, each Grantor's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, customer lists and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral, and, following the occurrence and during the continuance of a Default, each Grantor's rights under all licenses and all franchise agreements shall inure to the Agent's benefit. In addition, each Grantor hereby irrevocably agrees that the Agent may, following the occurrence and during the continuance of a Default, sell any of such Grantor's Inventory directly to any person, including without limitation persons who have previously purchased such Grantor's Inventory from the Grantor and in connection with any such sale or other enforcement of the Agent's rights under this Agreement, may sell Inventory which bears any trademark owned by or licensed to any Grantor and any Inventory that is covered by any copyright owned by or licensed to any Grantor and the Agent may finish any work in process and affix any trademark owned by or licensed to any Grantor and sell such Inventory as provided herein. ARTICLE VI WAIVERS, AMENDMENTS AND REMEDIES No delay or omission of the Agent or any Lender to exercise any right or remedy granted under this Security Agreement shall impair such right or remedy or be construed to be a waiver of any Default or an acquiescence therein, and any single or partial exercise of any such right or remedy shall not preclude any other or further exercise thereof or the exercise of any other right or remedy. No waiver, amendment or other variation of the terms, conditions or provisions of this Security Agreement whatsoever shall be valid unless in writing signed by the Agent with the concurrence or at the direction of the Lenders required under Section 8.2 of the Credit Agreement and then only to the extent in such writing specifically set forth. All rights and remedies contained in this Security Agreement or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Secured Obligations have been paid in full. 12 13 ARTICLE VII PROCEEDS; COLLECTION OF RECEIVABLES 7.1. Lockboxes. Upon request of the Agent after the occurrence of a Default or Unmatured Default, each Grantor shall execute and deliver to the Agent irrevocable lockbox agreements in the form provided by or otherwise acceptable to the Agent, which agreements shall be accompanied by an acknowledgment by the bank where the lockbox is located of the Lien of the Agent granted hereunder and of irrevocable instructions to wire all amounts collected therein to a special collateral account at the Agent. 7.2. Collection of Receivables. The Agent may at any time after the occurrence of a Default, by giving the Grantors written notice, elect to require that the Receivables be paid directly to the Agent for the benefit of the Lenders. In such event, each Grantor shall, and shall permit the Agent to, promptly notify the account debtors or obligors under the Receivables of the Lenders' interest therein and direct such account debtors or obligors to make payment of all amounts then or thereafter due under the Receivables directly to the Agent. Upon receipt of any such notice from the Agent, each Grantor shall thereafter hold in trust for the Agent, on behalf of the Lenders, all amounts and proceeds received by it with respect to the Receivables and Other Collateral and immediately and at all times thereafter deliver to the Agent all such amounts and proceeds in the same form as so received, whether by cash, check, draft or otherwise, with any necessary endorsements. The Agent shall hold and apply funds so received as provided by the terms of Sections 7.3 and 7.4. 7.3. Special Collateral Account. The Agent may require all cash proceeds of the Collateral to be deposited in a special non-interest bearing cash collateral account with the Agent and held there as security for the Secured Obligations. No Grantor shall have any control whatsoever over said cash collateral account. If no Default or Unmatured Default has occurred or is continuing, the Agent shall from time to time deposit the collected balances in said cash collateral account into the Borrower's general operating account with the Agent. If any Default or Unmatured Default has occurred and is continuing, the Agent may (and shall, at the direction of the Required Secured Parties), from time to time, apply the collected balances in said cash collateral account to the payment of the Secured Obligations whether or not the Secured Obligations shall then be due. 7.4. Application of Proceeds. The proceeds of the Collateral shall be applied by the Agent to payment of the Secured Obligations in the following order unless a court of competent jurisdiction shall otherwise direct: (a) FIRST, to payment of all costs and expenses of the Agent incurred in connection with the collection and enforcement of the Secured Obligations or of the security interest granted to the Agent pursuant to this Security Agreement; (b) SECOND, to payment of that portion of the Secured Obligations constituting accrued and unpaid interest and fees, pro rata among the Lenders and their Affiliates in accordance with the amount of such accrued and unpaid interest and fees owing to each of them; (c) THIRD, to payment of the principal of the Secured Obligations and the net early termination payments and any other Rate Management Obligations then due and unpaid from the Borrower to any of the Lenders or their Affiliates, pro rata among the Lenders and their 13 14 Affiliates in accordance with the amount of such principal and such net early termination payments and other Rate Management Obligations then due and unpaid owing to each of them; (d) FOURTH, to payment of any Secured Obligations (other than those listed above) pro rata among those parties to whom such Secured Obligations are due in accordance with the amounts owing to each of them; and (e) FIFTH, the balance, if any, after all of the Secured Obligations have been satisfied, shall be deposited by the Agent into the Borrower's general operating account with the Agent. ARTICLE VIII GENERAL PROVISIONS 8.1. Notice of Disposition of Collateral. Each Grantor hereby waives notice of the time and place of any public sale or the time after which any private sale or other disposition of all or any part of the Collateral may be made. To the extent such notice may not be waived under applicable law, any notice made shall be deemed reasonable if sent to the applicable Grantor, addressed as set forth in Article IX, at least ten days prior to (i) the date of any such public sale or (ii) the time after which any such private sale or other disposition may be made. 8.2. Compromises and Collection of Collateral. The Grantors and the Agent recognize that setoffs, counterclaims, defenses and other claims may be asserted by obligors with respect to certain of the Receivables, that certain of the Receivables may be or become uncollectible in whole or in part and that the expense and probability of success in litigating a disputed Receivable may exceed the amount that reasonably may be expected to be recovered with respect to a Receivable. In view of the foregoing, each Grantor agrees that the Agent may at any time and from time to time, if a Default has occurred and is continuing, compromise with the obligor on any Receivable, accept in full payment of any Receivable such amount as the Agent in its sole discretion shall determine or abandon any Receivable, and any such action by the Agent shall be commercially reasonable so long as the Agent acts in good faith based on information known to it at the time it takes any such action. 8.3. Secured Party Performance of Debtor Obligations. Without having any obligation to do so, the Agent may perform or pay any obligation which any Grantor has agreed to perform or pay in this Security Agreement and each Grantor shall reimburse the Agent for any amounts paid by the Agent pursuant to this Section 8.3. The Grantors' obligation to reimburse the Agent pursuant to the preceding sentence shall be a Secured Obligation payable on demand. 8.4. Authorization for Secured Party to Take Certain Action. Each Grantor irrevocably authorizes the Agent at any time and from time to time in the sole discretion of the Agent and appoints the Agent as its attorney in fact (i) to execute on behalf of such Grantor as debtor and to file financing statements necessary or desirable in the Agent's sole discretion to perfect and to maintain the perfection and priority of the Agent's security interest in the Collateral, (ii) to indorse and collect any cash proceeds of the Collateral, (iii) to file a carbon, photographic or other reproduction of this Security Agreement or any financing statement with respect to the Collateral as a financing statement in such offices as the Agent in its sole discretion deems necessary or desirable to perfect and to maintain the 14 15 perfection and priority of the Agent's security interest in the Collateral, (iv) to contact and enter into one or more agreements with the issuers of uncertificated securities which are Collateral and which are Securities or with financial intermediaries holding other Investment Property as may be necessary or advisable to give the Agent Control over such Securities or other Investment Property, (v) subject to the terms of Section 4.1.5, to enforce payment of the Receivables in the name of the Agent or any Grantor, (vi) to apply the proceeds of any Collateral received by the Agent to the Secured Obligations as provided in Article VII and (vii) to discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for such Liens as are specifically permitted hereunder), and each Grantor agrees to reimburse the Agent on demand for any payment made or any expense incurred by the Agent in connection therewith, provided that this authorization shall not relieve any Grantor of any of its obligations under this Security Agreement or under the Credit Agreement. 8.5. Specific Performance of Certain Covenants. Each Grantor acknowledges and agrees that a breach of any of the covenants contained in Sections 4.1.5, 4.1.6, 4.4, 5.3, or 8.7 or in Article VII will cause irreparable injury to the Agent and the Lenders, that the Agent and Lenders have no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of the Agent or the Lenders to seek and obtain specific performance of other obligations of the Grantors contained in this Security Agreement, that the covenants of each Grantor contained in the Sections referred to in this Section 8.5 shall be specifically enforceable against each Grantor. 8.6. Use and Possession of Certain Premises. Upon the occurrence of a Default, the Agent shall be entitled to occupy and use any premises owned or leased by any Grantor where any of the Collateral or any records relating to the Collateral are located until the Secured Obligations are paid or the Collateral is removed therefrom, whichever first occurs, without any obligation to pay such Grantor for such use and occupancy. 8.7. Dispositions Not Authorized. No Grantor is authorized to sell or otherwise dispose of the Collateral except as set forth in Section 4.1.5 and notwithstanding any course of dealing between any Grantor and the Agent or other conduct of the Agent, no authorization to sell or otherwise dispose of the Collateral (except as set forth in Section 4.1.5) shall be binding upon the Agent or the Lenders unless such authorization is in writing signed by the Agent with the consent or at the direction of the Required Lenders. 8.8. Benefit of Agreement. The terms and provisions of this Security Agreement shall be binding upon and inure to the benefit of each Grantor, the Agent and the Lenders and their respective successors and assigns, except that no Grantor shall have the right to assign its rights or delegate its obligations under this Security Agreement or any interest herein, without the prior written consent of the Agent. 8.9. Survival of Representations. All representations and warranties of each Grantor contained in this Security Agreement shall survive the execution and delivery of this Security Agreement. 8.10. Taxes and Expenses. Any taxes (including income taxes) payable or ruled payable by Federal or State authority in respect of this Security Agreement shall be paid by the Grantors, together with interest and penalties, if any. The Grantors shall reimburse the Agent for any and all out-of-pocket expenses and internal charges (including reasonable attorneys', auditors' and accountants' fees and reasonable time charges of attorneys, paralegals, auditors and accountants who may be employees of 15 16 the Agent) paid or incurred by the Agent in connection with the preparation, execution, delivery, administration, collection and enforcement of this Security Agreement and in the audit, analysis, administration, collection, preservation or sale of the Collateral (including the expenses and charges associated with any periodic or special audit of the Collateral). Any and all costs and expenses incurred by any Grantor in the performance of actions required pursuant to the terms hereof shall be borne solely by such Grantor. 8.11. Headings. The title of and section headings in this Security Agreement are for convenience of reference only, and shall not govern the interpretation of any of the terms and provisions of this Security Agreement. 8.12. Termination. This Security Agreement shall continue in effect (notwithstanding the fact that from time to time there may be no Secured Obligations outstanding) until (i) the Credit Agreement has terminated pursuant to its express terms and (ii) all of the Secured Obligations have been indefeasibly paid and performed in full and no commitments of the Agent or the Lenders which would give rise to any Secured Obligations are outstanding. 8.13. Entire Agreement. This Security Agreement embodies the entire agreement and understanding between the Grantors and the Agent relating to the Collateral and supersedes all prior agreements and understandings between the Grantors and the Agent relating to the Collateral. 8.14. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF OKLAHOMA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 8.15. Distribution of Reports. Each Grantor authorizes the Agent, as the Agent may elect in its sole discretion, to discuss with and furnish to its Affiliates and to the Lenders or to any other person or entity having an interest in the Secured Obligations (whether as a guarantor, pledgor of collateral, participant or otherwise) all financial statements, audit reports and other information pertaining to any Grantor whether such information was provided by such Grantor or prepared or obtained by the Agent. Neither the Agent nor any of its employees, officers, directors or agents makes any representation or warranty regarding any audit reports or other analyses of the Grantors' condition which the Agent may in its sole discretion prepare and elect to distribute, nor shall the Agent or any of its employees, officers, directors or agents be liable to any person or entity receiving a copy of such reports or analyses for any inaccuracy or omission contained in or relating thereto. 8.16. Indemnity. Each Grantor hereby agrees to indemnify the Agent and the Lenders, and their respective successors, assigns, agents and employees, from and against any and all liabilities, damages, penalties, suits, costs, and expenses of any kind and nature (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent or any Lender is a party thereto) imposed on, incurred by or asserted against the Agent or the Lenders, or their respective successors, assigns, agents and employees, in any way relating to or arising out of this Security Agreement, or the manufacture, purchase, acceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of any Collateral (including, without limitation, latent and other defects, whether or not discoverable by the Agent or the Lenders or the Grantors, and any claim for patent, trademark or copyright infringement). 16 17 ARTICLE IX NOTICES 9.1. Sending Notices. All notices, requests and other communications to the Grantors, the Agent or the Lenders hereunder shall be in writing or by telecopy, and shall be sufficiently given to the Agent, the Lenders or the Grantors if addressed or delivered to them at, in the case of the Borrower, the Agent and the Lenders, their respective addresses and telecopier numbers specified in Article XIII of the Credit Agreement, in the case of UST at the address and telecopier number set forth on the signature page hereto and, in the case of any other Grantors, at their respective addresses and telecopier numbers specified in the instruments pursuant to which such Person becomes an Additional Grantor. 9.2. Change in Address for Notices. Each of the Grantors, the Agent and the Lenders may change the address for service of notice upon it by a notice in writing to the other parties. ARTICLE X THE AGENT Bank One, NA has been appointed Agent for the Lenders hereunder pursuant to Article X of the Credit Agreement. It is expressly understood and agreed by the parties to this Security Agreement that any authority conferred upon the Agent hereunder is subject to the terms of the delegation of authority made by the Lenders to the Agent pursuant to the Credit Agreement, and that the Agent has agreed to act (and any successor Agent shall act) as such hereunder only on the express conditions contained in such Article X. Any successor Agent appointed pursuant to Article X of the Credit Agreement shall be entitled to all the rights, interests and benefits of the Agent hereunder. ARTICLE XI ADDITIONAL GRANTORS In the event that any Subsidiary of the Borrower is required, under the terms of the Credit Agreement or otherwise, to grant a security interest in its Collateral, such Subsidiary shall become a Grantor hereunder and shall be bound by all of the terms and conditions hereof, upon the delivery to the Agent of an executed counterpart of a Supplement to this Security Agreement in the form of Exhibit G attached hereto. [SIGNATURES CONTAINED ON FOLLOWING PAGE] 17 18 IN WITNESS WHEREOF, the Borrower, UST and the Agent have executed this Security Agreement as of the date first above written. XETA CORPORATION, an Oklahoma corporation By: /s/ ROBERT B. WAGNER --------------------------------- Name: Robert B. Wagner ------------------------------- Title: VP Finance ------------------------------ U. S. TECHNOLOGIES SYSTEMS, INC., a Missouri corporation By: /s/ JON A. WIESE --------------------------------- Name: Jon A. Wiese ------------------------------- Title: President ------------------------------ 891 Bolger Court Fenton, Missouri 63026 Attention: --------------------------- Telephone: (314) 349-4440 FAX: (314) 349-1110 BANK ONE, OKLAHOMA, NA, as Agent By: /s/ TIMOTHY T. KOSKI --------------------------------- Name: Timothy T. Koski ------------------------------- Title: Vice President ------------------------------ 18 EX-2.5 6 REAL ESTATE MORTGAGE, SECURITY AGREEMENT 1 EXHIBIT 2.5 REAL ESTATE MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING (with Power of Sale) THIS REAL ESTATE MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING (hereinafter called "Mortgage") is made effective as of the 30th day of November, 1999, by and among XETA CORPORATION, an Oklahoma corporation, with its business offices at 1814 W. Tacoma, Broken Arrow, Oklahoma 74012, as mortgagor (the "Mortgagor"), and BANK ONE, OKLAHOMA, N. A., having a mailing address at 15 East Fifth Street, Tulsa, Oklahoma 74103, in its capacity as Agent (the "Agent") for itself and the other lenders (the "Lenders") party to the Credit Agreement referred to below. The Agent (for itself and for the other Lenders) is hereinafter referred to as "Mortgagee." WHEREAS, Mortgagor, the Agent and the Lenders are entering into a Credit Agreement dated as of November 30, 1999 (as it may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"); capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement; WHEREAS, pursuant to the Credit Agreement, Mortgagee has agreed, upon satisfaction of the terms and conditions set forth therein, to make the Loans to Mortgagor; NOW, THEREFORE, to secure to Mortgagee the payment of the aforesaid mortgage indebtedness and the indebtedness and obligations hereafter described, Mortgagor does hereby grant, bargain, sell, convey, mortgage and grant a security interest unto Mortgagee and its successors and assigns, with power of sale, all of its right, title and interest in and to the tracts of real property located in Tulsa County, State of Oklahoma, described at Exhibit A annexed hereto together with all and singular the tenements, hereditaments and appurtenances thereof; all buildings and improvements now or hereafter constructed thereon including (without limitation) all fixtures, equipment, machinery, apparatus, appliances and articles of personal property of every kind, item, type and character now owned or hereafter acquired by Mortgagor and now or hereafter located in, at or on and used for or useful in the operation, management and maintenance of the aforesaid real property, buildings or improvements (all of which property is herein called the "Collateral"), which shall include, but not be limited to all of the items and types of Collateral described at Exhibit B annexed hereto and (d) all proceeds and products thereof. The above-described real property, appurtenances, buildings, improvements and Collateral are hereinafter collectively called the "Mortgaged Premises" and are hereby declared to be subject to the lien of this Mortgage as continuing and continuous, first and prior security for the payment of the following-described indebtedness and obligations: A. Any and all existing and future indebtedness, obligation, and liability of every kind, nature and character, direct or indirect, absolute or contingent (including all renewals, extensions and modifications thereof and all fees, costs and expenses incurred 2 by the Agent or the Lenders in connection with the preparation, administration, collection or enforcement thereof), of Mortgagor to the Agent or any Lender or any branch, subsidiary or affiliate thereof, arising under or pursuant to this Mortgage, the Credit Agreement and any promissory note or notes now or hereafter issued under the Credit Agreement. B. The performance by Mortgagor of each covenant, agreement and obligation of Mortgagor under this Mortgage and each covenant, agreement and obligation of Mortgagor under the Credit Agreement. C. All Obligations (as described and defined in the Credit Agreement), including without limitation, any sums which may be advanced or paid by Mortgagee under the terms of this Mortgage on account of the default or failure of Mortgagor to comply with the covenants herein. D. The payment by Mortgagor to Mortgagee of any and all amounts reasonably expended by Mortgagee in exercising or attempting to exercise any right or remedy granted or otherwise available to Mortgagee upon the occurrence of an Event of Default. E. The payment by Mortgagor to Mortgagee of interest on all amounts expended by Mortgagee for any purpose specified in paragraphs C and D above at the default rate provided in Section 2.11 of the Credit Agreement. TO HAVE AND TO HOLD the Mortgaged Premises with all the rights, improvements and appurtenances thereunto belonging, or in anywise appertaining unto Mortgagee, their successors and assigns, forever. Mortgagor covenants that, except only as stated at Exhibit C annexed hereto, Mortgagor is well and lawfully seized of a good and indefeasible fee simple estate in the Mortgaged Premises, that Mortgagor is the lawful owner of and has a good and lawful right and title to sell, convey and mortgage and encumber the same, that the Mortgaged Premises are free and clear of all general and special taxes, liens, charges, assessments and encumbrances of every kind and character and that Mortgagor hereby warrants and will forever defend the title thereto against the claims or demands of all persons. 1. Payment of Obligations. If Mortgagor shall pay the indebtedness herein described, including (without limitation) the Obligations, and shall in all things do and timely perform all other acts and agreements herein contained to be done, then, and in that event only, this Mortgage shall be and become null and void. 2. Maintenance; Waste. With respect to the Mortgaged Premises, Mortgagor covenants and agrees: to keep the same in good condition and repair; to pay all general and special taxes and assessments and other charges that may be levied or assessed upon or against the same as they become due and payable and to furnish to Mortgagee receipts showing payment of any such taxes and assessments, if demanded; to pay all debts for repair or improvements now existing or hereafter arising which may become liens upon or charges against the Mortgaged Premises; to comply with or cause to be complied with all requirements of any governmental 2 3 authority relating to the Mortgaged Premises; pursuant to the terms and conditions of paragraph 3 below, to promptly repair, restore, replace or rebuild any part of the Mortgaged Premises which may be damaged or destroyed by any casualty whatsoever or which may be affected by any condemnation proceeding or exercise of eminent domain; and to promptly notify Mortgagee of any damage to the Mortgaged Premises in excess of Twenty Thousand Dollars ($20,000). Mortgagor further covenants and agrees that Mortgagor will not: commit or suffer to be committed any waste of or on the Mortgaged Premises; initiate, join in or consent to any change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting, restricting or defining the uses which may be made of the Mortgaged Premises or any part thereof; or permit any lien or encumbrance of any kind or character to accrue or remain on the Mortgaged Premises or any part thereof other than the lien of this Mortgage. 3. Insurance. Mortgagor will keep the Mortgaged Premises insured for the benefit of Mortgagee against loss or damage by fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, aircraft, vehicles, smoke, vandalism and malicious mischief, all in amounts approved by Mortgagee, and shall provide Mortgagee with evidence of liability insurance in amounts approved by Mortgagee and, if applicable, flood insurance in an amount equal to the maximum amount of coverage made available with respect to the Mortgaged Premises under the National Flood Insurance Program (or evidence satisfactory to Mortgagee that the Mortgaged Premises are not located in an area designated by the Secretary of Housing and Urban Development as an area having special flood or mudslide hazards and that flood insurance is not required for this mortgage loan under the terms of any law, regulation or rule governing Mortgagee's activities), and when and to the extent reasonably required by Mortgagee, against any other risk insured against by persons operating like properties in the locality of the Mortgaged Premises; all insurance herein provided for shall be in form and with insurance companies reasonably approved by Mortgagee; regardless of the types or amounts of insurance reasonably required and approved by Mortgagee, Mortgagor will assign and deliver to Mortgagee all certificates and copies of policies of insurance which insure against any loss or damage to the Mortgaged Premises as collateral and further security for the payment of the indebtedness secured by this Mortgage, with Mortgagee named as first mortgagee, loss payee or an additional insured, whichever is appropriate as determined by Mortgagee pursuant to a mortgage clause endorsement acceptable to Mortgagee, on each such certificate and policy of insurance. If Mortgagee by reason of such insurance receives any money for loss or damage, such amount shall, subject to the following proviso, be held by Mortgagee and paid to Mortgagor for the repair or restoration of the Mortgaged Premises, provided that Mortgagor shall not be in default hereunder, and if Mortgagor shall have delivered to Mortgagee within sixty (60) days after such casualty: (a) evidence reasonably satisfactory to Mortgagee that none of Mortgagor's leases covering space in the Mortgaged Premises will be materially adversely affected by any such casualty or the delay caused thereby in completion of or repairs in the Mortgaged Premises, (b) evidence reasonably satisfactory to Mortgagee that any sale contract or long term loan commitment held by Mortgagor for the Mortgaged Premises will not be materially adversely affected by the casualty or the delay caused thereby in completion of or repairs in the Mortgaged Premises, (c) plans and specifications, in form and substance reasonably satisfactory to Mortgagee, for any such rebuilding or restoration, (d) a budget for rebuilding or restoration 3 4 reasonably satisfactory to Mortgagee, and (e) evidence reasonably satisfactory to Mortgagee that Mortgagor has or will have upon receipt of insurance proceeds, all amounts necessary to pay the cost of such rebuilding or restoration. Otherwise, Mortgagee may retain and apply the insurance proceeds toward payment of the indebtedness and obligations secured by this Mortgage. Mortgagee shall not be obligated to see to the proper application of any amount paid over to Mortgagor. Not less than twenty (20) days prior to the expiration dates of each certificate or policy required of Mortgagor pursuant to this paragraph, Mortgagor will deliver to Mortgagee a renewal certificate and copy of the policy or policies marked "premium paid" or accompanied by other evidence of payment satisfactory to Mortgagee. In the event of a foreclosure of this Mortgage, the purchaser of the Mortgaged Premises shall succeed to all the rights of Mortgagor, including any right to unearned premiums, in and to all certificates and policies of insurance assigned and delivered to Mortgagee pursuant to the provisions of this paragraph. Mortgagor specifically covenants and agrees that in the event Mortgagor has provided Mortgagee with evidence reasonably satisfactory to Mortgagee that flood insurance covering the Mortgaged Premises should not be required at time of execution of this Mortgage and the Mortgaged Premises should thereafter become eligible for flood insurance under the National Flood Insurance Program, or under any subsequent Act of Congress of the United States, and should the Mortgaged Premises be located in an area now or thereafter designated by the Secretary of Housing and Urban Development as an area having special flood or mudslide hazards, Mortgagor and Mortgagor's successors in title shall maintain at its or their sole cost and expense flood insurance available under the National Flood Insurance Program, in such amounts and in such form as may be required by Mortgagee. 4. Alterations. No building or other property now or hereafter subject to the lien of this Mortgage shall be removed, demolished or materially altered, without the prior written consent of Mortgagee, except that Mortgagor shall have the right, without such written prior consent, to remove and dispose of, free from the lien of this Mortgage, such Collateral as from time to time may become worn or obsolete, provided that either: (a) simultaneously with or prior to such removal, any such Collateral shall be replaced with other Collateral of a value at least equal to that of the replaced Collateral and free from any title retention device, security agreement or other encumbrance, and by such removal or replacement, Mortgagor shall be deemed to have subjected such Collateral to the lien of this Mortgage; or (b) any net cash proceeds received from such disposition shall be paid over promptly to Mortgagee to be applied to the indebtedness hereby secured. 5. Defaults. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an event of default (an "Event of Default") hereunder: (a) the failure of Mortgagor to make any payment of any monetary Obligation or of any other principal or interest or fees or other amounts payable by Mortgagor hereunder, under the Credit Agreement or under any of the Notes when and as the same shall become due 4 5 and payable whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; or (b) Mortgagor shall default in the due performance and observance of any non-monetary Obligation or of any other obligation, covenant or agreement contained herein; or (c) Any representation or warranty of Mortgagor hereunder is or shall be incorrect when made in any material respect; or (d) the occurrence of any "Default" under the Credit Agreement or any other Loan Document; or (e) the occurrence of any other event which, by the express term hereof, constitutes a default or an event of default under this Mortgage, including, without limitation, the occurrence of any default specified in paragraphs 19, 24 or 25 below. 6. Remedies. Upon the occurrence of any one or more Events of Default, the Mortgagee shall have the right (but shall not be obligated) in addition to its rights and remedies under the Credit Agreement, any other Loan Document and hereunder, to take such action personally, or by its agents or attorneys, with or without entry, and without notice, demand, presentment or protest (each and all of which are hereby expressly waived), as it deems necessary or advisable to protect or enforce its rights and remedies against Mortgagor and to the Mortgaged Premises, including the following actions, each of which may be pursued concurrently or otherwise, at such time and in such order as Mortgagee may determine, in its sole discretion, without impairing or otherwise effecting its other rights or remedies: (a) Declare the entire balance of the Obligations (including the entire principal balance thereof, all accrued and unpaid interest thereon and all other such sums secured hereby) to be immediately due and payable and upon any such declaration the entire unpaid balance of all of the Obligations shall become and be immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration, or further notice of any kind, all of which are hereby expressly waived by Mortgagor; or (b) Foreclose this Mortgage or sell the Mortgaged Premises in accordance with the Oklahoma Power of Sale Mortgage Foreclosure Act, as the same may be amended from time to time, and shall be entitled to the possession of the Mortgaged Premises and the rents, lease payments, security deposits and profits and proceeds thereof; or (c) Institute an action, suit or proceeding in equity for the specific performance of any of the provisions contained in the Credit Agreement, in any other Loan Document or herein; or 5 6 (d) Subject to applicable law, sue and recover a judgment on the Obligations, as the same becomes due and payable, or on account of any default or defaults by Mortgagor under the Obligations, the Credit Agreement, under any other Loan Document or hereunder; or (e) Enter upon the Mortgaged Premises, and exclude Mortgagor and its agents and servants wholly therefrom, without liability for trespass, damages or otherwise and take possession of all books, records and accounts relating thereto, and Mortgagor agrees to surrender possession of the Mortgaged Premises and of such books, records and accounts to Mortgagee on demand after the happening of any Event of Default; and having and holding the same may use, operate, manage, preserve, control and otherwise deal therewith and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or receivers without interference from Mortgagor; and upon each such entry and from time to time thereafter may, at the expense of Mortgagor, without interference by Mortgagor, and as may seem advisable to Mortgagee, (i) by purchase, repair or construction, maintain and restore the Mortgaged Premises, (ii) insure or reinsure the same, (iii) make all necessary or proper repairs, renewals, replacements, alterations, additions, betterments and improvements thereto and thereon, (iv) complete the construction, repair or rehabilitation of any improvements and, in the course of such completion, make such changes in the contemplated or completed improvements as it may deem advisable, and/or (v) in every such case in connection with the foregoing have the right to exercise all rights and powers of Mortgagor with respect to the Mortgaged Premises, either in Mortgagor's name or otherwise, including the right to make, cancel, enforce or modify leases, and obtain and evict tenants and subtenants on such terms as it may deem advisable; or (f) With or without the entrance upon or taking possession of the Mortgaged Premises, collect and receive all Rents and cash collateral derived from the Mortgaged Premises; or (g) Release any portion of the Mortgaged Premises for such consideration as the Mortgagee may require without, as to the remainder of the Mortgaged Premises, in anyway impairing or affecting the lien or priority of this Mortgage, or improving the position of any subordinate lienholder or other person with respect thereto, except to the extent that the Obligations shall have been reduced by the actual monetary consideration, if any, received by Mortgagee for such release, and may accept by assignment, pledge or otherwise any other property in place thereof as Mortgagee may require without being accountable for so doing to any other lienor; or (h) Take any other action, or pursue any other right or remedy, as Mortgagee may have under applicable law, and Mortgagor does hereby grant the same to Mortgagee. In the event that Mortgagee shall exercise any of the rights or remedies set forth herein, Mortgagee shall not be deemed to have entered upon or taken possession of the Mortgaged Premises except upon the exercise of its option to do so, as evidenced by its demand and overt act for such purpose, nor shall Mortgagee be deemed a mortgagee-in-possession by reason of 6 7 such entry or taking possession. Mortgagee will not be liable to account for action taken pursuant to any such exercise other than for rents actually received by such party, nor for any loss sustained by Mortgagor resulting from any failure to let the Mortgaged Premises, nor from any other act or omission of Mortgagee except to the extent such loss is caused by the gross negligence or willful misconduct of Mortgagee. Mortgagor hereby consents to, ratifies and confirms the exercise by Mortgagee of said rights and remedies, and appoints Mortgagee as its attorney-in-fact. This power, being coupled with an interest, shall be irrevocable as long as the Obligations are not fully repaid and discharged and shall be granted distinctly to Mortgagee, and Mortgagee may utilize its power to the extent permitted by applicable law. In any proceeding, judicial or otherwise, to foreclose this Mortgage or enforce any other remedy of Mortgagee under the Credit Agreement, under any other Loan Document or hereunder, there shall be allowed and included as an addition to and a part of the Obligations in the decree for sale or other judgment or decree all expenditures and expenses which are paid or incurred in connection with the exercise by Mortgagee of any of its rights and remedies provided or referred to herein (including, without limitation, court costs and attorneys' fees), and the same shall be secured by this Mortgage. If the Mortgagor shall fail to pay any of the taxes, assessments, debts, liens or other charges as the same become due and payable, or to insure the Mortgaged Premises or deliver the certificates of insurance and copies of the policies of insurance as herein provided, or to perform Mortgagor's covenants and agreements herein, Mortgagee is hereby authorized, at its option, to insure the Mortgaged Premises, or any part thereof, and pay the costs of such insurance, and to pay such taxes, assessments, debts, liens or other charges herein described, or any part thereof, and to remedy Mortgagor's failure to perform hereunder and pay the costs associated therewith, and Mortgagor hereby agrees to refund on demand all sum or sums so paid, with interest thereon at the default rate specified in Section 2.11 of the Credit Agreement; and any such sum or sums so paid together with interest thereon shall become a part of the indebtedness hereby secured; provided, however, that the retention of a lien hereunder for any sum so paid shall not be a waiver of subrogation or substitution which Mortgagee might otherwise have. Mortgagor hereby represents and warrants to Mortgagee that this mortgage transaction does not involve a consumer loan as said term is defined in Section 3-104 of Title 14A of the Oklahoma Statutes, that this Mortgage does not secure an extension of credit made primarily for an agricultural purpose as defined in paragraph 4 of Section 1-301 of Title 14A of the Oklahoma Statutes and is not a mortgage on any of Mortgagor's homestead or personal residence. 7. Receivership. Mortgagor hereby voluntarily and expressly consents and stipulates to the appointment of a receiver over the Mortgaged Premises in the event Mortgagee elects to seek the appointment of a receiver following Mortgagor's non-performance, breach, default or violation of any condition, covenant or other agreement in this Mortgage or the Obligations secured hereby. In such event Mortgagee shall be entitled to appointment of a receiver without the necessity of establishing that the property is probably insufficient to discharge the mortgage debt, the express purpose and intent of this clause being hereby acknowledged to provide for the appointment of a receiver in accordance with the provisions of 12 O.S. Section 1551(2)(c), as amended, 7 8 upon the occurrence of any breach, default, violation or other non-performance under this Mortgage by Mortgagor. 8. Taxes; Expenses. Mortgagor will pay, before same become delinquent or any penalty attaches thereto for nonpayment, any and all taxes, assessments and charges, general or special, of every nature and to whomsoever assessed, that may be now or hereafter levied or assessed under any law now existing or hereafter enacted, directly or indirectly upon the Mortgaged Premises or any part thereof, upon the rents, issues, income or profits thereof or upon the indebtedness secured hereby. Mortgagor will not suffer or permit any liens, security interests, levies, attachments or other encumbrances to become effective, or to be asserted, against any of the Mortgaged Premises, and will regularly and promptly submit to Mortgagee such evidence of the due and punctual payment of such taxes, assessments or charges as Mortgagee may require. The foregoing notwithstanding, Mortgagor may in good faith contest, by a proper legal proceeding, the validity or amount of any such taxes, assessments or charges, provided Mortgagor deposit with Mortgagee as security for payment of such contested taxes, assessments or charges an amount equal thereto, plus interest and penalties, and further provided that Mortgagor will pay such contested item and all costs and penalties, if any, at least thirty (30) days before the date the Mortgaged Premises may be sold by the taxing authorities because of nonpayment of said taxes, assessments or charges. Upon violation of the foregoing undertaking in any part, or upon the passage by the State of Oklahoma of any law imposing payment of the whole or any part of the aforesaid taxes or assessments upon Mortgagee, or deducting from the value of the Mortgaged Premises for the purpose of taxation any liens thereon, or changing in any way the laws now in force for the taxation of mortgages or debts secured by mortgage for state or local purposes, or the manner of the collection of any such taxes so as to materially adversely affect this Mortgage, or upon the rendering by any court of competent jurisdiction of a decision holding that any undertaking by Mortgagor to pay such taxes or assessments, or any of them, or any similar undertaking, is in whole or in part legally inoperative or void, then in such event, unless the applicable law permits Mortgagor to pay the same and Mortgagor in fact promptly pays all such taxes, the indebtedness secured hereby will, at the option of Mortgagee, without notice to any party, become immediately mature, due and payable. Mortgagor also agrees to pay any and all taxes which may be levied or assessed directly or indirectly upon the Obligations (except only any federal and state income taxes on the Obligations), this Mortgage and the indebtedness hereby secured, and further agree to pay all reasonable expenses incurred in connection with the creation of the indebtedness hereby secured, including, without limitation, attorney's fees, title insurance fees, survey expenses and recording costs, without regard to any law which may be hereafter enacted imposing payment of the whole or any part thereof upon Mortgagee; and, upon violation of the foregoing agreement to pay such taxes and assessments, or if the rate of said taxes and expenses added to the respective rates of interest provided for in the Credit Agreement shall exceed the then maximum legal rate of interest, then, and in any such event, the indebtedness hereby secured, without deduction, shall, at the option of Mortgagee become immediately due and payable, anything contained in this Mortgage or in the Credit Agreement notwithstanding. The additional amounts which may become due and payable hereunder shall be regarded as part of the indebtedness secured by this Mortgage. This paragraph shall not apply to the amount to be 8 9 paid under the present Oklahoma mortgage registration tax laws, which amount Mortgagee agrees to pay. 9. Tax and Insurance Accounts. Mortgagor will deposit monthly with Mortgagee (on each Payment Date) an amount equal to one-twelfth (1/12) of the sum of the amounts Mortgagee shall estimate to be the annual ad valorem personal and real property taxes, assessments due and payable with respect to the Mortgaged Premises and annual insurance premiums required so that Mortgagee will have sufficient funds on hand to pay said taxes, assessments and insurance premiums twenty (20) days before the due date thereof; provided, however, that for so long as such taxes, special assessments and premiums are being timely paid and Mortgagor provides Mortgagee with evidence of such payment and no other condition or event exists or has occurred or failed to occur which but for the passage of time or the giving of notice or both would constitute an Event of Default and no such Event of Default exists, Mortgagee waives the monthly escrow of taxes, special assessments and insurance premiums, thereby permitting Mortgagor to forego such monthly escrow deposits. Such monthly tax and insurance deposits shall be held by Mortgagee and shall not bear or accrue interest, shall not be trust funds and upon the occurrence of an Event of Default all such funds may be applied by Mortgagee on account of the indebtedness and Obligations secured hereby. Failure of Mortgagor so to make such monthly deposits or any deficiency in the amount thereof, unless made good or cured by Mortgagor prior to the next succeeding monthly installment due date, shall constitute an event of default hereunder. It shall be the responsibility of Mortgagor to furnish Mortgagee with tax bills or statements in sufficient time to timely pay the taxes and assessments before any penalty attaches or interest charges accrue thereon and the insurance premiums before any of the policies lapse. 10. Expenses of Collection. It is agreed that if, and as often as, this Mortgage, the Credit Agreement or any of the Notes is placed in the hands of an attorney for collection or for representation of Mortgagee in any bankruptcy, insolvency, probate or other judicial proceeding, or this Mortgage is referred to an attorney for collection or foreclosure, or to protect the priority or validity of this Mortgage, or to prosecute or defend any suit affecting the Mortgaged Premises, or to enforce or defend any of Mortgagee's rights hereunder, Mortgagor shall pay to Mortgagee its reasonable attorneys' fees, together with all court costs, expenses for abstracting or title examination, title insurance or other disbursements, costs or expenses relating to the Mortgaged Premises, all of which sums, together with interest thereon, shall be secured hereby. 11. Appraisement. In case of judicial foreclosure hereof and sale hereunder, appraisement of the Mortgaged Premises is hereby expressly waived, or not waived, at the sole option of Mortgagee, such option to be exercised thereby at the time judgment is entered in such foreclosure, or at any time prior thereto. 12. Sale in Parcels. In case of any sale under this Mortgage by virtue of judicial proceedings, power of sale or otherwise, the Mortgaged Premises may be sold in one parcel and as an entirety or in such parcels, manner or order as Mortgagee in its sole discretion may elect, and Mortgagor waives any and all rights which Mortgagor may have to insist upon the sale of the Mortgaged Premises in one parcel or in separate parcels. 9 10 13. Condemnation Awards. Mortgagor covenants and agrees that if at any time all or any portion of the Mortgaged Premises shall be taken or damaged under the power of eminent domain, the award received by condemnation proceedings for any property so taken or any payment received in lieu of such condemnation proceedings shall be paid directly to Mortgagee and applied as a principal prepayment on the Obligations in such order as Mortgagee shall determine in its sole discretion; provided, however, subject to the same terms and conditions for payment of insurance proceeds to Mortgagor as set forth above, such award or payment from condemnation proceedings shall be paid to Mortgagor for the purpose of altering, restoring or rebuilding any part of the Mortgaged Premises which may have been altered, damaged or destroyed as a result of any such taking or damage; provided, that Mortgagee shall not be obligated to see to the application of any amount paid over to Mortgagor. If the terms for payment of such award to Mortgagor are not met, then Mortgagee may retain and apply the award toward payment of the indebtedness and other Obligations secured by this Mortgage. Mortgagor, immediately upon obtaining knowledge of the institution of any proceedings or negotiations for the condemnation of the Mortgaged Premises, or any portion thereof, will notify Mortgagee in writing of the pendency of such negotiations or proceedings. Mortgagee may participate in any such negotiations or proceedings, and Mortgagor from time to time will execute and deliver to Mortgagee all instruments requested by Mortgagee to permit such participation. 14. Certificate. Mortgagor, upon written request of Mortgagee, made either personally or by mail, shall certify, by a writing duly acknowledged, to Mortgagee or to any proposed assignee of this Mortgage, the amount of principal and interest then secured by this Mortgage and whether Mortgagor has knowledge of any offsets or defenses against the indebtedness or other Obligations hereby secured, within twenty (20) days after such request by Mortgagee. 15. Notice. Unless expressly provided to the contrary therein, every provision for notice, demand, consent or request shall be deemed fulfilled only upon compliance with the notice provisions more particularly described in paragraph 27 hereof. 16. Renewals/Extensions/Future Advances. This Mortgage shall secure the payment of the Obligations under the Credit Agreement, which include obligations not only with respect to existing indebtedness, but also with respect to such future advances made pursuant to the terms of the Credit Agreement or this Mortgage, whether such advances are made before, during or, to the extent allowable under applicable law, after the pendency of any proceedings to foreclose the lien of this Mortgage or otherwise enforce the rights of Mortgagee hereunder to the same extent as if such future advances were made on the date of the execution of this Mortgage. The total amount of indebtedness represented by such Obligations and that may be so secured may decrease or increase from time to time, and shall include any disbursements by or on behalf of the Lenders made for the payment of taxes, levies or insurance on the Mortgaged Premises, with interest on such disbursements at the applicable interest rates. The provisions of this Section 16 shall not be construed to imply any obligation on the Lenders to make any future advances, it being the intention of the parties that any future advances shall be solely at the 10 11 discretion and option of the Lenders, except as otherwise expressly provided in the Credit Agreement. 17. Inspection. Mortgagee and any persons authorized by Mortgagee shall have the right to enter and inspect the Mortgaged Premises at all reasonable times upon reasonable prior notice to Mortgagor. 18. Indulgences, Extensions, No Waiver. No failure by Mortgagee to insist upon the strict performance by Mortgagor of any of the terms and provisions hereof shall be deemed to be a waiver of any of the terms and provisions hereof, and Mortgagee, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by Mortgagor of any and all of the terms and provisions of this Mortgage to be performed by Mortgagor. Neither Mortgagor nor any other person now or hereafter obligated for the payment of the whole or any part of the indebtedness now or hereafter secured by this Mortgage shall be relieved of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor or of any other person so obligated to take action to foreclose this Mortgage or otherwise enforce any of the provisions of this Mortgage or of any obligations secured by this Mortgage, or by reason of the release, regardless of consideration, of the whole or any part of the security held for the indebtedness secured by this Mortgage, or by reason of any agreement or stipulation between any subsequent owner or owners of the Mortgaged Premises and Mortgagee extending, from time to time, the time of payment or modifying the terms of the Credit Agreement or this Mortgage if the consent of Mortgagor has been obtained in connection with such modification to the extent Mortgagor remains liable for repayment of the Obligations, and in the latter event, Mortgagor and all such other persons shall continue to be liable to make such payments according to the terms of any such agreement of extension or modification unless expressly released and discharged in writing by Mortgagee. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate lien on the Mortgaged Premises, Mortgagee may release the obligation of anyone at any time liable for any of the indebtedness secured by this Mortgage or any part of the security held for such indebtedness and may from time to time extend the time of payment or otherwise modify the terms of the Credit Agreement, the Notes and/or this Mortgage without, as to the security for the remainder thereof, in any way impairing or affecting the lien of this Mortgage or the priority of such lien, as security for the payment of the indebtedness as it may be so extended or modified, over any subordinate lien. Mortgagee may resort for the payment of indebtedness hereby secured to any other security therefor held by Mortgagee in such order and manner as Mortgagee may elect. 19. Prohibited Acts. Mortgagor will not, without the express prior written approval of Mortgagee sell, agree to sell, convey, mortgage, pledge or otherwise transfer or encumber all or any part of the Mortgaged Premises or any interest therein (such prohibition on encumbrance is deemed not to include either mechanics' or materialmen's liens for which Mortgagor has provided indemnification, bonding or other action sufficient to prevent enforcement of such lien satisfactory to Mortgagee within thirty (30) days after the inception of such lien). The occurrence of any of the aforesaid events, whether by operation of law or otherwise, without Mortgagee's prior written approval, shall constitute an event of default hereunder, and Mortgagee may declare the indebtedness hereby secured immediately due and payable and exercise any or 11 12 all of Mortgagee's rights herein provided without other or further notice. This provision shall apply to each and every sale, agreement to sell, conveyance, mortgage, transfer or encumbrance, regardless of whether or not Mortgagee has consented to or waived its rights hereunder, whether by action or inaction, in connection with any previous sale, agreement to sell, conveyance, mortgage, transfer or encumbrance, whether one or more. 20. Hazardous Materials. Mortgagor shall not cause or permit the violation of any law relating to industrial hygiene or environmental conditions in connection with the Mortgaged Premises, including without limitation, soil and ground water conditions; or use, generate, manufacture, store or dispose of any Hazardous Materials on, under or about the Mortgaged Premises, except in accordance with all applicable laws. Mortgagor shall indemnify and hold Mortgagee harmless from any loss, damage, liability, cost, expense and/or claim (including without limitation the cost of any fines, remedial action, damage to the environment and cleanup, court related costs and the fees of attorneys and other experts) arising from (i) the use, release or disposal of any Hazardous Materials on, under or about the Mortgaged premises or the transport of any Hazardous Materials to or from the Mortgaged Premises; and (ii) the violation of any law relating to industrial hygiene or environmental conditions in connection with the Mortgaged Premises, including soil and ground water conditions; and (iii) the breach of any of the representations, warranties and covenants of Mortgagor with respect to Hazardous Materials herein set forth. For purposes of this paragraph 20, "Hazardous Materials" shall be defined as: any flammable explosives, radioactive materials, oil or petroleum or chemical liquids or solids, liquid or gaseous products or hazardous wastes, toxic substances and similar substances and materials, including all substances and materials defined as hazardous or toxic wastes, substances or materials under any applicable law. 21. Cumulative Remedies. The rights of Mortgagee arising under the clauses and covenants contained in this Mortgage shall be separate, distinct and cumulative and none of them shall be in exclusion of the other. No act of Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision, anything herein or otherwise to the contrary notwithstanding. 22. Reserved. 23. Security Interest. This Mortgage shall also be considered to be and shall be construed as a security agreement and a financing statement with respect to any and all of the items and types of the Collateral herein described or referenced which may be subject to a security interest pursuant to the Oklahoma Uniform Commercial Code and Mortgagor hereby grants and pledges to Mortgagee a first and prior, continuing security interest in and to the Collateral (including all proceeds and products thereof) described or referred to herein (including Exhibit B annexed hereto) whether now owned or hereafter acquired. Mortgagee shall be entitled to exercise any and all rights that it may have hereunder or under the Oklahoma Uniform Commercial Code with respect to the Collateral. A. Assembly of Collateral. Upon the occurrence of an Event of Default hereunder and acceleration of the indebtedness pursuant to the provisions hereof, Mortgagee may at 12 13 its discretion require Mortgagor to assemble the Collateral and make it available to Mortgagee at a place reasonably convenient to both parties to be designated by Mortgagee. B. Manner of Sale. Upon the occurrence of an Event of Default hereunder and acceleration of the indebtedness pursuant to the provisions hereof, or of the Obligations secured hereby, all or any part of the Collateral may, at the sole discretion of Mortgagee, be combined with the real property covered hereby and sold together with such real property as an entirety, or the Collateral (or any part of the Collateral not sold together with the real property) may be sold separately, as one parcel or in such parcels, manner or order as Mortgagee, in its sole discretion, may elect. C. Notice of Sale. Mortgagee shall give Mortgagor written notice of the time and place of any public sale of any of the Collateral or of the time after which any private sale or other intended disposition thereof is to be made by sending notice to Mortgagor at least ten (10) days before the time of the sale or other disposition, which provisions for notice each and all of Mortgagor and Mortgagee agree are reasonable. D. Additional Documents. Mortgagor will from time to time, within ten (10) days after request by Mortgagee, execute, acknowledge and deliver any financing statement, continuation statement, inventory list or other similar documents that Mortgagee may reasonably request in order to protect, preserve, continue, perfect, extend or maintain the security interest under and the priority of this Mortgage and will, upon demand, pay any expenses and fees incurred by Mortgagee in the preparation, execution and filing of any such documents. E. Financing Statement Filings. Mortgagor agrees that this Mortgage may be filed by Mortgagee in the appropriate records or tract index as a financing statement and in the office(s) necessary to perfect a chattel filing and a fixture filing. For financing statement filing purposes the address of Mortgagee, as secured party, is: BANK ONE, OKLAHOMA, N.A. 15 East Fifth Street Tulsa, Oklahoma 74103 Attention: Tim Koski, Corporate Banking and the mailing address of Mortgagor, as debtor, is: XETA CORPORATION an Oklahoma corporation 1814 W. Tacoma Broken Arrow, Oklahoma 74012 Attention: 13 14 F. Copy of Financing Statement. A carbon, photographic or other reproduction of this Mortgage shall be sufficient as financing statement for all purposes, whether or not the original hereof has been recorded or filed in the State of Oklahoma. G. Fixture Filing. This Mortgage shall be filed of record against the tract index of the real estate records of the County Clerk of Tulsa County, Oklahoma as a fixture filing and covers all of the items and types of Collateral constituting or to constitute fixtures as defined in 12A O.S. Section 9-313(1)(a) and this Mortgage shall constitute a "fixture filing" as set forth in 12A O.S. Section 9-313(1)(b). 24. Bankruptcy. The entire indebtedness secured by this Mortgage shall become immediately due and payable at the option of Mortgagee if by order of a court of competent jurisdiction a receiver or liquidator or trustee of any one or more of Mortgagor, or of all or any part of the Mortgaged Premises, shall be appointed and shall not have been discharged within thirty (30) days; or, if by decree of any such court, any one or more of Mortgagor shall be insolvent or the Mortgaged Premises shall have been sequestered and such decree shall have continued undischarged and unstayed for thirty (30) days after the entry thereof; or if any one or more of Mortgagor shall file or have filed against it a proceeding seeking relief under any provision or chapter of any bankruptcy or insolvency law or shall consent to the filing of any bankruptcy petition against any one or more of Mortgagor under any such law; or if any one or more of Mortgagor shall file a petition or answer seeking reorganization, rehabilitation or an arrangement with creditors; or if (without limitation of the generality of the foregoing) any one or more of Mortgagor shall make an assignment for the benefit of creditors, become insolvent or shall admit in writing an inability to pay debts generally as they become due, or shall consent to the appointment of a receiver, trustee or liquidator of any one or more of Mortgagor, or of all or any part of the Mortgaged Premises. 25. Leases/Assignment of Rents and Profits. With respect to any and all applicable subsisting and future leases (collectively the "Leases") affecting the Mortgaged Premises, Mortgagor represents and agrees as follows: (a) to perform faithfully Mortgagor's covenants under the Leases and neither do nor neglect to do, nor permit to be done, anything (other than pursuing the enforcement of the terms of such leases in the exercise of remedies thereunder) which might cause the modification or termination of any of the Leases (or of the obligations of any lessee or any person claiming through such lessee), or which might diminish or impair the value of any of the Leases or the rents provided for therein (or the interest of Mortgagor or Mortgagee therein or thereunder); (b) to permit no assignment of any of the Leases or any subletting thereunder and not to anticipate for more than one (1) month in advance of any rents that may become collectible under any of the Leases; (c) except for this Mortgage and any other mortgage expressly permitted by the terms hereof, not to execute a mortgage or create or permit a lien affecting the Mortgaged Premises; (d) to execute and/or deliver to Mortgagee, within ten (10) days after request therefor, such rent rolls, collateral assignments, estoppel certificates (reciting, among other things, that all outstanding Leases are effective and binding), and other instruments as might be reasonably required by Mortgagee with respect to any Lease now or hereafter affecting the Mortgaged Premises; and (e) that all representations made by Mortgagor to Mortgagee in connection with the Leases are and will be true and correct. 14 15 Mortgagor hereby mortgages, pledges and collaterally grants and assigns to Mortgagee as additional security for the Obligations and the other obligations all of such Leases now existing or hereafter made of all or any part of the Mortgaged Premises together with all rents, lease payments, other profits and security deposits due or held or hereafter to become due or held in connection therewith. This assignment is intended to grant unto Mortgagee all rights, powers, remedies and privileges afforded to a mortgagee under 46 O.S. Section 4A, as amended, and no additional duties or obligations (fiduciary or otherwise) except those expressly required of or imposed on mortgagees by the aforesaid statutory provision as a result of this Assignment or exercise or attempted exercise of its rights hereunder. 26. Subrogation. To the extent funds are advanced under the Loans hereby secured for the purpose of paying any indebtedness secured by any mortgage lien having priority over the lien of this Mortgage, Mortgagee shall be subrogated to any and all rights, superior titles, liens and equities owned or claimed by the holder of such prior mortgage. Except with respect to the priority of any mortgage to which Mortgagee is subrogated pursuant to the provisions hereof, the terms and provisions of this Mortgage shall govern the rights and remedies of Mortgagee and shall supersede the rights and remedies provided under any mortgage to which Mortgagee is subrogated. 27. Notices. All notices required hereunder or pursuant to the Credit Agreement or any other Loan Documents therein defined or described shall be forwarded by certified or registered mail, return receipt requested, by hand delivery or by courier (federal express or other similar reputable courier service) as follows: Mortgagor: XETA CORPORATION, an Oklahoma corporation 1814 W. Tacoma Broken Arrow, Oklahoma 74102 Attention: Mortgagee: BANK ONE, OKLAHOMA, N.A. 15 East Fifth Street Tulsa, Oklahoma 74103 Attention: Tim Koski, Corporate Banking Either party hereto may designate a new or different address for notice purposes to the other party by complying with the terms and provisions hereof. 28. Governing Law. The Mortgaged Premises are located in the State of Oklahoma, and the parties hereto agree that this Mortgage shall be governed by and construed according to the laws of the State of Oklahoma and applicable federal law. 15 16 29. Construction. Wherever used in this Mortgage, unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, the word "Mortgagor" shall mean any one, more than one or all of the "Mortgagor and/or any subsequent owner or owners of the Mortgaged Premises," the word "Mortgagee" shall mean "Mortgagee or any subsequent holder or holders of this Mortgage for themselves and as agent for the other Lenders," the phrase "Notes" shall mean "notes secured by this Mortgage", the word "person" shall mean "an individual, corporation, partnership or unincorporated association". The paragraph headings contained herein are included as a matter of convenience and are not intended to define, limit or modify the terms of this Mortgage. This Mortgage shall be binding on Mortgagor and all successors and assigns of each of Mortgagor and shall inure to the benefit of Mortgagee and all successors and assigns of Mortgagee. 30. Amendment. This Mortgage cannot be changed except by an agreement in writing signed by the party against whom enforcement of the change is sought. 31. Power of Sale. In addition to the option to foreclose this Mortgage, upon the occurrence of any default of any kind, Mortgagor hereby expressly grants to Mortgagee a power of sale and Mortgagee shall be empowered and entitled, at its option, to sell the Mortgaged Premises in accordance with the Oklahoma Power of Sale Mortgage Foreclosure Act, as the same may be amended from time to time. A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW MORTGAGEE TO TAKE THE MORTGAGED PREMISES AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE. IN WITNESS WHEREOF, Mortgagor has duly executed and delivered this instrument to Mortgagee in Tulsa, Oklahoma, by the undersigned duly authorized officer thereof pursuant to all necessary corporate acts of Mortgagor effective as of the date first above written. XETA CORPORATION, an Oklahoma corporation By: /s/ ROBERT B. WAGNER ------------------------------- Name: Robert B. Wagner Title: VP Finance "Mortgagor/Debtor" 16 17 ACKNOWLEDGMENT STATE OF OKLAHOMA ) ) ss. COUNTY OF TULSA ) On this 30th day of November, 1999, before me appeared Robert B. Wagner, to me personally known, who, being by me duly sworn, did say that he is VP Finance of Xeta Corporation, an Oklahoma corporation, and that said instrument was signed on behalf of said corporation, and he acknowledged said instrument to be his free act and deed and the free act and deed of the corporation. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the County and State aforesaid, the day and year first above written. /s/ DEBBIE L. HASKINS -------------------------------- Notary Public My Commission Expires: Oct. 23, 2002 - -------------------------- [SEAL] 17 EX-2.6 7 SUBSIDIARY GUARANTY 1 EXHIBIT 2.6 SUBSIDIARY GUARANTY THIS SUBSIDIARY GUARANTY (this "Guaranty") is made as of the 30th day of November, 1999, by U. S. TECHNOLOGIES SYSTEMS, INC., a Missouri corporation (the "Subsidiary Guarantor") in favor of the Agent, for the benefit of the Lenders and the Agent, under the Credit Agreement referred to below. RECITALS A. Xeta Corporation, an Oklahoma corporation (the "Principal"), and Bank One, Oklahoma, NA, a national banking association, as Agent (the "Agent"), and certain other Lenders from time to time party thereto have entered into a certain Credit Agreement dated as of November 30, 1999 (as same may be amended or modified from time to time, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for extensions of credit to be made by the Lenders to the Principal. B. It is a condition precedent to the Agent and the Lenders executing the Credit Agreement that the Subsidiary Guarantor execute and deliver this Guaranty whereby the Subsidiary Guarantor shall guarantee the payment when due, subject to Section 9 hereof, of all Guaranteed Obligations. C. In consideration of the financial and other support that the Principal has provided, and such financial and other support as the Principal may in the future provide, to the Subsidiary Guarantor, and in order to induce the Lenders and the Agent to enter into the Credit Agreement, and the Lenders and their Affiliates to enter into one or more Rate Management Transactions with the Principal, and because the Subsidiary Guarantor has determined that executing this Guaranty is in its interest and to its financial benefit, the Subsidiary Guarantor is willing to guarantee the obligations of the Principal under the Credit Agreement, any Note, any Rate Management Transaction, and the other Loan Documents. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION l.1. Selected Terms Used Herein. "Guaranteed Obligations" is defined in Section 3 below. SECTION 1.2. Terms in Credit Agreement. Other capitalized terms used herein but not defined herein shall have the meaning set forth in the Credit Agreement. SECTION 2.1. Representations and Warranties. The Subsidiary Guarantor represents and warrants (which representations and warranties shall be deemed to have been renewed upon each Borrowing Date under the Credit Agreement) that: 2 (a) It is a corporation, partnership or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted. (b) It has the power and authority and legal right to execute and deliver this Guaranty and to perform its obligations hereunder. The execution and delivery by it of this Guaranty and the performance of its obligations hereunder have been duly authorized by proper corporate proceedings, and this Guaranty constitutes a legal, valid and binding obligation of the Subsidiary Guarantor enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. (c) Neither the execution and delivery by it of this Guaranty, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on it or any of its subsidiaries or (ii) its articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which it or any of its subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Subsidiary Guarantor or a subsidiary thereof pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by it or any of its subsidiaries, is required to be obtained by it or any of its subsidiaries in connection with the execution and delivery of this Guaranty or the performance by it of its obligations hereunder or the legality, validity, binding effect or enforceability of this Guaranty. SECTION 2.2. Covenants. The Subsidiary Guarantor covenants that, so long as any Lender has any Commitment outstanding under the Credit Agreement, any Rate Management Transaction remains in effect or any of the Guaranteed Obligations shall remain unpaid, that it will, and, if necessary, will enable the Principal to, fully comply with those covenants and agreements set forth in the Credit Agreement. SECTION 3. The Guaranty. Subject to Section 9 hereof, the Subsidiary Guarantor hereby absolutely and unconditionally guarantees, as primary obligor and not as surety, the full and punctual payment (whether at stated maturity, upon acceleration or early termination or otherwise, and at all times thereafter) and performance of the Obligations and the Rate Management Obligations, including without limitation any such Obligations or Rate Management Obligations incurred or accrued during the pendency of any bankruptcy, insolvency, receivership or other -2- 3 similar proceeding, whether or not allowed or allowable in such proceeding (collectively, subject to the provisions of Section 9 hereof, being referred to collectively as the "Guaranteed Obligations"). Upon failure by the Principal to pay punctually any such amount, the Subsidiary Guarantor agrees that it shall forthwith on demand pay to the Agent for the benefit of the Lenders and the Agent and, if applicable, their Affiliates, the amount not so paid at the place and in the manner specified in the Credit Agreement, any Note, any Rate Management Transaction or the relevant Loan Document, as the case may be. This Guaranty is a guaranty of payment and not of collection. The Subsidiary Guarantor waives any right to require the Agent or any Lender to sue the Principal, any other guarantor, or any other person obligated for all or any part of the Guaranteed Obligations, or otherwise to enforce its payment against any collateral securing all or any part of the Guaranteed Obligations. SECTION 4. Guaranty Unconditional. Subject to Section 9 hereof, the obligations of the Subsidiary Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any of the Guaranteed Obligations, by operation of law or otherwise, or any obligation of any other guarantor of any of the Guaranteed Obligations, or any default, failure or delay, willful or otherwise, in the payment or performance of the Guaranteed Obligations; (ii) any modification or amendment of or supplement to the Credit Agreement, any Note, any Rate Management Transaction or any other Loan Document; (iii) any release, nonperfection or invalidity of any direct or indirect security for any obligation of the Principal under the Credit Agreement, any Note, the Security Agreement, any Rate Management Transaction, any other Loan Document, or any obligations of any other guarantor of any of the Guaranteed Obligations, or any action or failure to act by the Agent, any Lender or any Affiliate of any Lender with respect to any collateral securing all or any part of the Guaranteed Obligations; (iv) any change in the corporate existence, structure or ownership of the Principal or any other guarantor of any of the Guaranteed Obligations, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Principal, or any other guarantor of the Guaranteed Obligations, or its assets or any resulting release or discharge of any obligation of the Principal, or any other guarantor of any of the Guaranteed Obligations; (v) the existence of any claim, setoff or other rights which the Subsidiary Guarantor may have at any time against the Principal, any other guarantor of any of the Guaranteed Obligations, the Agent, any Lender or any other Person, whether in connection herewith or any unrelated transactions; (vi) any invalidity or unenforceability relating to or against the Principal, or any other -3- 4 guarantor of any of the Guaranteed Obligations, for any reason related to the Credit Agreement, any Rate Management Transaction, any other Loan Document, or any provision of applicable law or regulation purporting to prohibit the payment by the Principal, or any other guarantor of the Guaranteed Obligations, of the principal of or interest on any Note or any other amount payable by the Principal under the Credit Agreement, any Note, any Rate Management Transaction or any other Loan Document; or (vii) any other act or omission to act or delay of any kind by the Principal, any other guarantor of the Guaranteed Obligations, the Agent, any Lender or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Subsidiary Guarantor's obligations hereunder. SECTION 5. Discharge Only Upon Payment In Full: Reinstatement In Certain Circumstances. The Subsidiary Guarantor's obligations hereunder shall remain in full force and effect until all Guaranteed Obligations shall have been indefeasibly paid in full, the Commitments under the Credit Agreement shall have terminated or expired and all Rate Management Transactions have terminated or expired. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Principal or any other party under the Credit Agreement, any Rate Management Transaction or any other Loan Document is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Principal or otherwise, the Subsidiary Guarantor's obligations hereunder with respect to such payment shall be reinstated as though such payment had been due but not made at such time. SECTION 6. Waivers. The Subsidiary Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Principal, any other guarantor of any of the Guaranteed Obligations, or any other Person. SECTION 7. Subrogation. The Subsidiary Guarantor hereby agrees not to assert any right, claim or cause of action, including, without limitation, a claim for subrogation, reimbursement, indemnification or otherwise, against the Principal arising out of or by reason of this Guaranty or the obligations hereunder, including, without limitation, the payment or securing or purchasing of any of the Guaranteed Obligations by the Subsidiary Guarantor unless and until the Guaranteed Obligations are indefeasibly paid in full, any commitment to lend under the Credit Agreement and any other Loan Documents is terminated and all Rate Management Transactions have terminated or expired. SECTION 8. Stay of Acceleration. If acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Principal, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement, any Note, any Rate Management Transaction or any other Loan Document shall -4- 5 nonetheless be payable by the Subsidiary Guarantor hereunder forthwith on demand by the Agent made at the request of the Required Lenders. SECTION 9. Limitation on Obligations. (a) The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of the Subsidiary Guarantor under this Guaranty would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of the Subsidiary Guarantor's liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by the Subsidiary Guarantor, the Agent or any Lender, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being the relevant Subsidiary Guarantor's "Maximum Liability"). This Section 9(a) with respect to the Maximum Liability of the Subsidiary Guarantor is intended solely to preserve the rights of the Agent hereunder to the maximum extent not subject to avoidance under applicable law, and neither the Subsidiary Guarantor nor any other person or entity shall have any right or claim under this Section 9(a) with respect to the Maximum Liability, except to the extent necessary so that the obligations of the Subsidiary Guarantor hereunder shall not be rendered voidable under applicable law. (b) The Subsidiary Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the Maximum Liability of each Subsidiary Guarantor, and may exceed the aggregate Maximum Liability of any other guarantors, without impairing this Guaranty or affecting the rights and remedies of the Agent hereunder. Nothing in this Section 9(b) shall be construed to increase the Subsidiary Guarantor's obligations hereunder beyond its Maximum Liability. (c) In the event the Subsidiary Guarantor (a "Paying Subsidiary Guarantor") shall make any payment or payments under this Guaranty or shall suffer any loss as a result of any realization upon any collateral granted by it to secure its obligations under this Guaranty, any other subsidiary guarantor (each a "Non-Paying Subsidiary Guarantor") shall contribute to such Paying Subsidiary Guarantor an amount equal to such Non-Paying Subsidiary Guarantor's "Pro Rata Share" of such payment or payments made, or losses suffered, by such Paying Subsidiary Guarantor. For the purposes hereof, each Non-Paying Subsidiary Guarantor's "Pro Rata Share" with respect to any such payment or loss by a Paying Subsidiary Guarantor shall be determined as of the date on which such payment or loss was made by reference to the ratio of (i) such Non-Paying Subsidiary Guarantor's Maximum Liability as of such date (without giving effect to any right to receive, or obligation to make, any contribution hereunder) or, if such Non-Paying Subsidiary Guarantor's Maximum Liability has not been determined, the aggregate amount of all monies received by such Non-Paying Subsidiary Guarantor from the Principal after the date hereof (whether by loan, capital infusion or by other means) to (ii) the aggregate Maximum Liability of all subsidiary guarantors hereunder (including such Paying Subsidiary Guarantor) as of such date (without giving effect to any right to receive, or obligation to make, any contribution hereunder), or to the extent that a -5- 6 Maximum Liability has not been determined for any subsidiary guarantors, the aggregate amount of all monies received by such subsidiary guarantors from the Principal after the date hereof (whether by loan, capital infusion or by other means). Nothing in this Section 9 (c) shall affect the Subsidiary Guarantor's or any other guarantor's several liability for the entire amount of the Guaranteed Obligations (up to such guarantor's Maximum Liability). The Subsidiary Guarantor covenants and agrees that its right to receive any contribution under this Guaranty from a Non-Paying Subsidiary Guarantor shall be subordinate and junior in right of payment to all the Guaranteed Obligations. The provisions of this Section 9(c) are for the benefit of both the Agent and the Subsidiary Guarantor and may be enforced by any one, or more, or all of them in accordance with the terms hereof. SECTION 10. Application of Payments. All payments received by the Agent hereunder shall be applied by the Agent to payment of the Guaranteed Obligations in the following order unless a court of competent jurisdiction shall otherwise direct: (a) FIRST, to payment of all costs and expenses of the Agent incurred in connection with the collection and enforcement of the Guaranteed Obligations or of any security interest granted to the Agent in connection with any collateral securing the Guaranteed Obligations; (b) SECOND, to payment of that portion of the Guaranteed Obligations constituting accrued and unpaid interest and fees, pro rata among the Lenders and their Affiliates in accordance with the amount of such accrued and unpaid interest and fees owing to each of them; (c) THIRD, to payment of the principal of the Guaranteed Obligations and the net early termination payments and any other Rate Management Obligations then due and unpaid from the Borrower to any of the Lenders or their Affiliates, pro rata among the Lenders and their Affiliates in accordance with the amount of such principal and such net early termination payments and other Rate Management Obligations then due and unpaid owing to each of them; and (d) FOURTH, to payment of any Guaranteed Obligations (other than those listed above) pro rata among those parties to whom such Guaranteed Obligations are due in accordance with the amounts owing to each of them. SECTION 11. Notices. All notices, requests and other communications to any party hereunder shall be given or made by telecopier or other writing and telecopied, or mailed or delivered to the intended recipient at its address or telecopier number set forth on the signature pages hereof or such other address or telecopy number as such party may hereafter specify for such purpose by notice to the Agent in accordance with the provisions of Article XIII of the Credit Agreement. Except as otherwise provided in this Guaranty, all such communications shall be deemed to have been duly given when transmitted by telecopier, or personally delivered or, in the -6- 7 case of a mailed notice sent by certified mail return-receipt requested, on the date set forth on the receipt (provided, that any refusal to accept any such notice shall be deemed to be notice thereof as of the time of any such refusal), in each case given or addressed as aforesaid. SECTION 12. No Waivers. No failure or delay by the Agent or any Lenders in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in this Guaranty, the Credit Agreement, any Note, any Rate Management Transaction and the other Loan Documents shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 13. No Duty to Advise. The Subsidiary Guarantor assumes all responsibility for being and keeping itself informed of the Principal's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that the Subsidiary Guarantor assumes and incurs under this Guaranty, and agrees that neither the Agent nor any Lender has any duty to advise any of the Subsidiary Guarantors of information known to it regarding those circumstances or risks. SECTION 14. Successors and Assigns. This Guaranty is for the benefit of the Agent and the Lenders and their respective successors and permitted assigns and in the event of an assignment of any amounts payable under the Credit Agreement, any Note, any Rate Management Transaction, or the other Loan Documents, the rights hereunder, to the extent applicable to the indebtedness so assigned, shall be transferred with such indebtedness. This Guaranty shall be binding upon the Subsidiary Guarantor and its successors and permitted assigns. SECTION 15. Changes in Writing. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by the Subsidiary Guarantor and the Agent with the consent of the Required Lenders. SECTION 16. Costs of Enforcement. The Subsidiary Guarantor agrees to pay all costs and expenses including, without limitation, all court costs and attorneys' fees and expenses paid or incurred by the Agent or any Lender or any Affiliate of any Lender in endeavoring to collect all or any part of the Guaranteed Obligations from, or in prosecuting any action against, the Principal, the Subsidiary Guarantor or any other guarantor of all or any part of the Guaranteed Obligations. SECTION 17. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF OKLAHOMA. THE SUBSIDIARY GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA AND OF ANY OKLAHOMA STATE COURT SITTING IN TULSA, OKLAHOMA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER LOAN -7- 8 DOCUMENTS) OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE SUBSIDIARY GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE SUBSIDIARY GUARANTOR, AND THE AGENT AND THE LENDERS ACCEPTING THIS GUARANTY, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 18. Taxes. All payments required to be made by the Subsidiary Guarantor hereunder shall be made without setoff or counterclaim and free and clear of and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, duties or other charges of whatsoever nature imposed by any government or any political or taxing authority thereof (but excluding Excluded Taxes), provided, however, that if the Subsidiary Guarantor is required by law to make such deduction or withholding, the Subsidiary Guarantor shall forthwith (i) pay to the Agent or any Lender, as applicable, such additional amount as results in the net amount received by the Agent or any Lender, as applicable, equaling the full amount which would have been received by the Agent or any Lender, as applicable, had no such deduction or withholding been made, (ii) pay the full amount deducted to the relevant authority in accordance with applicable law, and (iii) furnish to the Agent or any Lender, as applicable, certified copies of official receipts evidencing payment of such withholding taxes within 30 days after such payment is made. IN WITNESS WHEREOF, the Subsidiary Guarantor has caused this Guaranty to be duly executed, under seal, by its authorized officer as of the day and year first above written. U. S. TECHNOLOGIES SYSTEMS, INC., a Missouri corporation By: /s/ JON A. WIESE ------------------------------- Name: Jon A. Wiese ----------------------------- Title: Vice President ---------------------------- 891 Bolger Court Fenton, Missouri 63026 Telephone: (314) 349-4440 FAX: (314) 349-1110 -8- EX-2.7 8 $12,650,000 TERM NOTE - BANK ONE, OKLAHOMA 1 EXHIBIT 2.7 TERM NOTE $12,650,000 November 30, 1999 Xeta Corporation, an Oklahoma corporation (the "Borrower"), promises to pay to the order of Bank One, Oklahoma, NA (the "Lender") the aggregate unpaid principal amount of the Term Loan made by the Lender to the undersigned pursuant to Section 2.1.2 of the Agreement (as hereinafter defined), in immediately available funds at the main office of Bank One, Oklahoma, N.A., Tulsa, Oklahoma, as Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The undersigned shall pay the principal of and accrued and unpaid interest on the Term Loan in full on the Term Loan Facility Maturity Date and prior to maturity shall make such payments, including mandatory prepayments, as are required to be made under the terms of Article II of the Agreement. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of the Term Loan and the date and amount of each principal payment hereunder. This Note is one of the Term Notes issued pursuant to, and is entitled to the benefits of, the Credit Agreement dated as of November 30, 1999 (which, as it may be amended or modified and in effect from time to time, is herein called the "Agreement"), among the Borrower, the lenders party thereto, including the Lender, and Bank One, Oklahoma, NA, as Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. This Note is secured pursuant to the Collateral Documents, all as more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement. XETA CORPORATION, an Oklahoma corporation By: /s/ ROBERT B. WAGNER ---------------------------------- Print Name: Robert B. Wagner -------------------------- Title: VP Finance ------------------------------- 2 SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO TERM NOTE OF XETA CORPORATION DATED NOVEMBER 30, 1999
Principal Maturity Principal Amount of of Interest Amount Unpaid Date Loan Period Paid Balance ---- --------- ----------- --------- -------
EX-2.8 9 $10,350,000 TERM NOTE - MERCANTILE BANK 1 EXHIBIT 2.8 TERM NOTE $10,350,000 November 30, 1999 Xeta Corporation, an Oklahoma corporation (the "Borrower"), promises to pay to the order of Mercantile Bank, N.A. (the "Lender") the aggregate unpaid principal amount of the Term Loan made by the Lender to the undersigned pursuant to Section 2.1.2 of the Agreement (as hereinafter defined), in immediately available funds at the main office of Bank One, Oklahoma, N.A., Tulsa, Oklahoma, as Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The undersigned shall pay the principal of and accrued and unpaid interest on the Term Loan in full on the Term Loan Facility Maturity Date and prior to maturity shall make such payments, including mandatory prepayments, as are required to be made under the terms of Article II of the Agreement. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of the Term Loan and the date and amount of each principal payment hereunder. This Note is one of the Term Notes issued pursuant to, and is entitled to the benefits of, the Credit Agreement dated as of November 30, 1999 (which, as it may be amended or modified and in effect from time to time, is herein called the "Agreement"), among the Borrower, the lenders party thereto, including the Lender, and Bank One, Oklahoma, NA, as Agent, to which Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. This Note is secured pursuant to the Collateral Documents, all as more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement. XETA CORPORATION, an Oklahoma corporation By: /s/ ROBERT B. WAGNER --------------------------- Print Name: Robert B. Wagner ------------------- Title: VP Finance ------------------------ 2 SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO TERM NOTE OF XETA CORPORATION DATED NOVEMBER 30, 1999
Principal Maturity Principal Amount of of Interest Amount Unpaid Date Loan Period Paid Balance ---- --------- ----------- --------- -------
EX-99.1 10 EMPLOYMENT AGREEMENT-11/30/99-MARK A. MARTIN 1 EXHIBIT 99.1 EXHIBIT "A" EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "AGREEMENT"), is entered into as of November 30 , 1999, by and between U. S. TECHNOLOGIES SYSTEMS, INC., a Missouri corporation ("USTI"), being a wholly-owned subsidiary of XETA CORPORATION, an Oklahoma corporation ("XETA") and MARK A. MARTIN, a resident of the State of Missouri ("MARTIN"). R E C I T A L S: A. Pursuant to a Stock Purchase Agreement dated effective as of August 1, 1999 (the "PURCHASE AGREEMENT"), Martin has sold to XETA and XETA has purchased from Martin all of his shares of common stock in USTI. B. All capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Purchase Agreement. C. The Purchase Agreement provides that, as a condition to either party's obligation to close, Martin and USTI shall have executed and delivered this Agreement. D. USTI is engaged in the business of distributing and servicing telephone systems to commercial customers (the "BUSINESS"). E. XETA and USTI (hereinafter referred to, collectively, as the "COMPANY") currently do business throughout the United States of America, Canada and Mexico and wish to avail themselves of the services of Martin for the continued management of the Business, and Martin wishes to accept such employment on the terms and conditions hereinafter set forth. F. Martin has been advised by counsel concerning the meaning and legal effect of this Agreement and its various provisions. AGREEMENT NOW, THEREFORE, in consideration of the foregoing premises, together with a portion of the Purchase Consideration paid by the Purchaser for the Shares and the goodwill associated therewith, and in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. Duties. Subject to the terms and conditions of this Agreement, USTI (the "EMPLOYER") and XETA hereby employ Martin, and Martin hereby accepts employment with the Employer and XETA as President of USTI in St. Louis, Missouri, where he will function as President of XETA's Commercial Channel Division, with duties commensurate with such position as shall be determined from time to time by the Company. It is agreed that the Company will not 2 require Martin to move his residence from St. Louis, Missouri during the term hereof. Martin hereby agrees to devote his full professional time and attention, and his best efforts, to the performance of such duties, to diligently comply with all specific reasonable instructions concerning the performance of such duties as shall be communicated to him by the Company, to the extent such instructions are not illegal or, in Martin's reasonable belief, unethical, and to make reports to the Company concerning all matters under his control or within his knowledge whenever reasonably requested by the Company. The Commercial Channel Division shall be comprised of those businesses currently engaged in by USTI and all other businesses outside the hospitality market, which are subsequently acquired by the Company. 2. Employment Term. Subject to the provisions respecting the termination of this Agreement, the term of this Agreement (the "TERM") shall be two (2) years, subject to extension for a period of one (1) additional year if performance targets for USTI mutually agreed to by the Company and Martin are met during the initial term. 3. Compensation. 3.1 The Employer agrees to pay Martin an initial annual base salary (the "BASE SALARY") during the Term equal to the gross amount of One Hundred Twenty Thousand Dollars ($120,000), less deductions and withholdings. Payments of Base Salary will be made in equal semi-monthly installments in accordance with USTI's procedures regarding the payment of executive compensation. On at least an annual basis Martin's performance for the previous twelve (12) month period shall be evaluated by the Compensation Committee of XETA's Board of Directors and by its President. Martin's Base Salary shall not be reduced during the Term. 3.2 In addition to the Base Salary, while Martin is employed by the Employer, he shall be entitled to participate in the Company's incentive compensation plan attached hereto as Exhibit "A"; provided, however, that all Incentive Compensation Plan methodology/algorithms shall be subject to review and revision upon subsequent acquisitions by the Company; provided further that such review and revision shall not have the effect of decreasing Martin's total compensation for future performance by him which is equivalent to his past performance, and that such review and revision shall not occur more frequently than every six (6) months. 4. Employee Benefits. 4.1 Martin may participate in all of the employee benefit plans and programs offered by the Employer to its employees to the extent that Martin meets the eligibility requirements for each individual plan or program. Such plans and programs currently include the following: (i) Medical and group term life insurance; (ii) 401(k) and discretionary profit sharing plans; (iii) Vacation days based on years of service; and -2- 3 (iv) National Holidays. Such benefits shall be governed by the terms of XETA's plan documents (where applicable). For purposes of determining which benefits Martin may be entitled to receive, Martin shall be credited by the Employer, to the extent that Employer is able to arrange for this, with the years of service he has had with the USTI prior to Closing. 4.2 The Employer shall reimburse Martin for all ordinary and necessary out-of-pocket business, travel and entertainment expenses, incurred on behalf of the Company by Martin, in the performance of his duties and responsibilities hereunder, subject to and in accordance with the Employer's customary policies and procedures for expense verification and reimbursement. 4.3 The Employer shall also provide Martin with the use of a Company-owned automobile of the make and model comparable to the automobile supplied to Martin by USTI prior to the Closing. The Employer shall be responsible for the payment of all automobile insurance premiums arising for coverage for use within the scope of Martin's employment, reasonable routine maintenance, and for reimbursement of other ordinary and necessary expenses arising from the business use of such automobile. 5. Restrictions on Competition and Solicitation. 5.1 As used herein, "GEOGRAPHIC AREA" shall mean the United States of America. 5.2 As used herein, "NON-COMPETITION PERIOD" shall mean the period commencing on the Closing Date and ending two (2) years thereafter; provided, however, that if Seller's employment with Purchaser and the Company shall be terminated for "cause" (as defined in the Employment Agreement) the Non-Competition Period shall not end until two (2) years after the last payment of compensation by the Company or the Purchaser pursuant to the Employment Agreement. 5.3 Martin shall not during the Non-Competition Period, either directly or indirectly, as a stockholder of any corporation, a member of any limited liability company, a partner of any partnership, or otherwise as an owner, investor, principal, agent, officer, director, associate, employee, consultant, creditor, co-venturer or in any other manner, engage within the Geographic Area in any business that competes in any manner with the Commercial Channel Division of the Company, nor have any other interest in or be associated with a business that competes in any manner with the Commercial Channel Division of the Company within the Geographic Area, nor shall Seller assist any person to whom Seller is related within the third degree, by blood or by marriage, to do anything that Seller would be prohibited from doing personally by reason of this Section 3.4; provided, however, that this provision shall not be deemed to prevent or limit Martin from owning capital stock or other securities of any corporation which are publicly owned or regularly traded in the over-the-counter market or on any securities exchange so long as such -3- 4 investment does not exceed, directly or indirectly, 5% of the issuer's outstanding securities of the same class. 5.4 During the Non-Competition Period, Martin shall not directly or indirectly solicit, request, or advise, any person who is or has been an employee of the Commercial Channel Division of the Company within eighteen (18) months prior to the Closing Date to terminate or change such person's relationship with the Commercial Channel Division of the Company or to work in any business venture or activity that is substantially competitive with any business conducted by the Commercial Channel Division of the Company within the Geographic Area during the Non-Competition Period. 5.5 During the Non-Competition Period, Martin shall not shall not directly or indirectly divert or attempt to divert from the Commercial Channel Division of the Company any business interest or expectancy whatsoever, nor directly or indirectly solicit, request, advise, or seek to induce, any person or entity who or which is or has been a customer of the Commercial Channel Division of the Company within eighteen (18) months prior to the Closing Date to terminate or change such person's relationship with the Commercial Channel Division of the Company or to purchase any product or service which is substantially competitive with any product or service provided by the Commercial Channel Division of the Company within the Geographic Area during the Non-Competition Period. 5.6 During the Non-Competition Period, Martin shall not request, advise, or seek to induce, any supplier or vendor of the Commercial Channel Division of the Company to terminate or change such supplier's or such vendor's relationship with the Commercial Channel Division of the Company. 5.7 The restrictive covenants contained within this Section 5 are essential elements of this Agreement, and but for Martin's agreement to comply with such covenants, the Company would not have entered into this Agreement. 5.8 The Company and Martin agree that the foregoing covenants are appropriate and reasonable when considered in light of the nature and extent of the business conducted by the Commercial Channel Division of the Company. 6. Confidentiality. For a period of five (5) years from and after the Closing Date (the "NON-DISCLOSURE PERIOD"), Martin shall not use or disclose to any third party, including but not limited to Lucent Technologies, Inc. ("LUCENT"), any confidential or proprietary information whatsoever of or concerning the Company, which information (collectively, the "CONFIDENTIAL INFORMATION") shall include but shall not be limited to: (i) all information that the Company considers or treats as confidential whether or not the Company has marked such information as confidential; (ii) all financial information of the Company including the nature, location, condition or value of its assets and any results of operations; (iii) all information concerning or related to the Company's TQM Labs repair procedures or purchase methods; (iv) all information concerning past -4- 5 contractual disputes with Lucent or any other party and the subject matter thereof; and (v) all information concerning previous allegations made by Lucent or any other party of breaches by the Company of any agreement, the subject matter thereof, and the disposition of any such allegation; provided, however, that for purposes of this Agreement the term "Confidential Information" shall not include information within the public domain by any means other than unauthorized disclosure. 6.1 None of the Confidential Information shall ever be disclosed by Martin during the Non-Disclosure Period, nor shall he authorize or permit any of his agents under his control to disclose any Confidential Information to any third party without the Company's express prior written consent; provided, however, that Martin may disclose Confidential Information to the extent required by court order, subpoena or other compulsory legal process so long as he notifies the Company prior to such disclosure and affords the Company a reasonable opportunity to object to such disclosure or a to seek other appropriate protection for such Confidential Information. 6.2 Upon termination of his employment with the Company, Martin shall promptly deliver to the Company any and all Company records and any manuals, books, blank forms, documents, correspondence, memoranda, notes, notebooks, plans, records, reports, information, computer disks, computer tapes, source codes, data, tables, calculations, and other documentation (and copies thereof), however recorded, relating to the business of the Company or which contain any Confidential Information which he may possess or have within his control, together with all keys, access cards, access codes, passwords, credit cards, personal computers, telephones and other electronic equipment or devices belonging to the Company. 7. Representations and Warranties. Specifically with regard to the covenants contained in Sections 5 and 6 hereof, but without any limitation thereto, Martin hereby acknowledges, represents and warrants to the Company that: 7.1 Martin has access to, and is knowledgeable concerning, the trade secrets of USTI, and following the Closing, will have access to, and become knowledgeable concerning the trade secrets of XETA. 7.2 The covenants contained in Sections 5 and 6 are essential to XETA's main business purpose for entering into the Purchase Agreement, and are made by Martin to protect the legitimate interests of the Company with respect to XETA's purchase of USTI, including all goodwill associated with its purchase of the Shares. 7.3 The Geographic Area, the Non-Competition Period, the Non-Disclosure Period, and the activities in which Martin has hereby agreed not to engage, are appropriate and reasonable in all respects in light of the nature of the business of USTI and XETA and their legitimate need to protect their respective customer bases and branch locations, and the investment by the XETA in the Shares and all goodwill associated therewith. -5- 6 7.4 If any portion of the covenants set forth in Section 5 or 6 of this Agreement is held by a court of competent jurisdiction to be unreasonable, arbitrary or against public policy, then such portion of such covenants shall be considered divisible both as to time and geographic area. The Company and Martin agree that, if any court of competent jurisdiction determines that either the Non-Competition Period, the Geographic Area, the Non-Disclosure Period, or the scope of the activities hereby restricted is unreasonable, arbitrary and/or against public policy, then a lesser period, geographic area or range of activities, which is determined to be reasonable, non-arbitrary and not against public policy, may be enforced against Martin. 7.5 The execution and delivery of this Agreement, the performance by Martin of the covenants and agreements contained herein, and the enforcement by the Company of the provisions contained herein, will cause no undue hardship on Martin. 8. Termination. 8.1 In the event of the death of Martin, his employment shall terminate automatically, without any liability to or upon the Company other than to pay Base Salary for services rendered prior to the date of Martin's death and incentive compensation that accrued during his employment and prior to his date of death. 8.2 In the event that Martin becomes disabled as the term "DISABILITY" is defined in 42 U.S.C. ss. 12101, et. seq., and if because of that disability Martin cannot be reasonably accommodated without causing undue hardship for the Employer, the Company may terminate Martin's employment hereunder notwithstanding any contrary other provision in this Agreement to the contrary. In the event Martin is terminated because of a Disability, Martin shall be entitled to receive only Base Salary for services rendered prior to the date of Disability, incentive compensation that accrued during his employment and prior to his date of Disability, and any disability benefits that may payable pursuant to the terms of any applicable disability policy held by the Employer. 8.3 Notwithstanding any other provision herein, this Agreement shall terminate without any liability to or upon the Company other than to pay Base Salary for services rendered prior to the date of termination if Martin is terminated for "cause." As used herein "CAUSE" shall mean: (i) any breach of any material term of this Agreement, (ii) Martin's repeated failure or refusal to perform any of duties hereunder or to comply with the Company's reasonable directives, (iii) Martin's misappropriation of any funds or property of the Company which are valued in excess of one hundred dollars ($100), (iv) Martin's breach of any fiduciary duty to the Company, (v) Martin's commission of an act of gross negligence, fraud, or of an act that involves a conflict of interest or self-dealing and has a material adverse effect on any aspect of the Company's business, or (vi) Martin's conviction of any felony; provided that the Martin shall not be terminated for cause prior to receiving notice of the Company's contention that such cause exists and being afforded a period of ten (10) days to cure such cause, unless the extension of such ten-day cure period would have a material adverse effect on the Company. -6- 7 8.4 The Company may terminate Martin's employment hereunder upon providing Martin at least thirty (30) days prior notice thereof. If his employment is terminated by the Company without cause, the Employer will continue to pay Martin's compensation and benefits as described in Sections 3 and 4 hereof for the balance of the Term of this Agreement. 8.5 The termination of Martin's employment shall not affect XETA's obligation to pay any Purchase Consideration otherwise due to him pursuant to the Purchase Agreement. 9. Remedies. 9.1 Martin acknowledges that any violation of Section 5 or 6 of this Agreement will result in irreparable injury to the Company for which there is no adequate remedy at law. Martin agrees that, in the event he breaches or threatens to breach Section 5 or 6 of this Agreement, the Company shall be entitled to injunctive relief, both temporary, preliminary and permanent, in addition to any other legal or equitable remedies which may be available to the Company. Neither XETA nor USTI shall be required to post a bond in order to obtain an injunction or any other equitable relief hereunder. 9.2 The provisions of Sections 5 and 6 hereof shall survive termination of this Agreement by Martin or the Company. 10. Assignment. This Agreement and all rights and benefits hereunder are personal to Martin, and neither it nor any right or interest of Martin herein may be voluntarily or involuntarily sold, transferred or assigned by Martin; provided, however, that the Employer may assign its rights, duties and obligations hereunder to XETA without the prior written consent of Martin. 11. Entire Agreement. Except as provided in the Non-Competition Agreement and the Confidentiality Agreement delivered by Martin pursuant to the Purchase Agreement, all dated of even date herewith, this Agreement represents the entire understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all of the negotiations, understandings and representations (if any) made by and between such parties. Except as otherwise provided herein, the terms or provisions hereof may be amended, supplemented, waived or changed only by a writing signed by the Company and Martin. 12. Severability. In the event any provision of this Agreement is held illegal or invalid, the remaining provisions of this Agreement shall not be affected thereby. 13. Waiver. The waiver of a breach of any provision of this Agreement by any party or the failure of any party otherwise to insist upon strict performance of any provision hereof shall not constitute a waiver of any subsequent breach or of any subsequent failure to perform. No course of dealing shall alter the obligations of Martin under this Agreement or otherwise affect the ability of the Company to strictly enforce the terms of this Agreement. 14. Notice. Any notice required by this Agreement may be waived, in writing, by the party entitled to receive such notice. Unless the parties are notified to the contrary, notice required -7- 8 under this Agreement shall be in writing and personally delivered or sent by certified mail, if to the Company at XETA's principal executive offices, at 1814 West Tacoma, Broken Arrow, OK 74012, Attn: Mr. Jon A. Wiese, President, with copy to Barber and Bartz, 110 West 7th Street, Suite 200, Tulsa, OK 74119-1018, Attn: Ron B. Barber, Esq., and if to Martin, at the last address filed by him in writing with the Company, with copy to Mr. Benjamin H. Hulsey, Esq., Thompson Coburn LLP, One Mercantile Center, St. Louis, MO 63101-1693. 15. Successors. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, personal representatives, successors and permitted assigns. This Agreement may be assigned by the Company to any successor or affiliate. 16. Jurisdiction and Venue. The parties agree that, in any dispute between them relating to this Agreement, exclusive jurisdiction shall be in the trial courts, Federal or State, sitting within Tulsa County, Oklahoma, and venue shall lie only in such courts, and any and all objections as to such jurisdiction and venue are hereby expressly waived by each party. 17. Governing Law. Except as otherwise provided in Section 16, this Agreement shall be construed, and the legal relations between the parties hereto determined, in accordance with the local laws of the State of Oklahoma applicable to agreements made and to be performed entirely within said State, without giving effect to its conflicts of laws provisions. 18. Attorneys' Fees. If any party hereto institutes litigation to enforce its rights or remedies under this Agreement, the party prevailing in such litigation shall be entitled to receive an award of the prevailing party's reasonable attorney fees and all costs incurred in connection with such litigation. The foregoing shall include reasonable attorney fees and costs (including paralegal fees) incurred at trial, on any appeal, and in any proceeding in bankruptcy. The agreement of the parties represented by this Agreement is in addition to, and not in lieu of, any other agreement or obligation of the parties contained in the Purchase Agreement or any other agreement contemplated thereby or executed and delivered in connection therewith. 19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together constitute but one and the same agreement. 20. Recitals. The recitals set forth at the beginning of this Agreement are true and correct and by are hereby incorporated by reference into the body of this Agreement. 21. Gender, Number. Words of gender may be read as masculine, feminine, or neuter, as required by context. Words of number may be read as singular or plural, as required by context. All terms such as "herein," "hereby" or "hereunder" refer to this Agreement as a whole. IN WITNESS WHEREOF, the parties have signed this Agreement as of the day and year first above written. -8- 9 "USTI" "Martin" U.S. TECHNOLOGIES SYSTEMS, INC., a Missouri corporation By /s/ Mark A. Martin /s/ Mark A. Martin ---------------------------------- ---------------------------- Printed Name: Mark A. Martin MARK A. MARTIN Title: President XETA CORPORATION, an Oklahoma corporation By /s/ Jon A. Wiese ---------------------------------- Jon A. Wiese, President -9- 10 EXHIBIT "A" INCENTIVE COMPENSATION PROGRAM 1. Subject to Paragraph 2 below, Martin's incentive compensation shall consist of: a. "Commission" equal to 0.5% of any positive Gross Profit of the Commercial Channel Division for each quarter of each fiscal year, payable thirty (30) days after the end of said quarter. b. "Base Bonus" equal to 0.5% of any positive difference between the Gross Profit of the Commercial Channel Division for that fiscal year and for its prior fiscal year (provided that, during the first fiscal year of this Agreement, Martin's Base Bonus shall be based on the positive difference between the Gross Profits of the Commercial Channel Division for that fiscal year and USTI's Gross Profit for the same twelve (12) month period in the year immediately preceding the Closing of the Purchase Agreement, payable sixty (60) days after the end of the fiscal year. c. "Extra Bonus" equal to 10% of any positive difference between the Gross Profit of the Commercial Channel Division for that fiscal year and the projected Gross Profit of the Commercial Channel Division under the Commercial Channel Plan approved by XETA's Board of Directors, payable sixty (60) days after the close of each fiscal year. Such Commercial Channel Plan shall provide for no more than 25% annual growth. All incentive compensation hereunder shall commence with the fiscal year and quarter beginning November 1, 1999. 2. As used herein, "Gross Profit" means "Revenue" less "Cost of Goods Sold," where: Revenue means and includes receipts from sales from all sources, including, new and used equipment, installations of equipment, repairs, consulting, maintenance, long distance, commissions for the sale of Lucent Technologies, Inc. maintenance contracts, leases and transportation, excluding only rebates for product purchases and co-op advertising rebates; and Cost of Goods Sold means and includes all direct equipment, parts, material and labor cost; average inventory cost of product sold as calculated by the Prelude(TM) Software on a basis consistent with past practices (including capitalized conversion cost of used equipment sold such as, refurb cost and repair cost of used equipment); installation, transportation, and warehouse cost; excluding only rebates for product purchases and co-op advertising rebates. No XETA corporate overhead shall be allocated to Cost of Goods Sold. -----END PRIVACY-ENHANCED MESSAGE-----