-----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, IYYeqb+JhlNZkSsXVc/vGpqMhx/fOElK72LeEHh+S1kx6M+5s9y2aLGIVdIyXovl eQBQ/pZEzwPY5g9x+OzDXA== 0000950112-96-002115.txt : 19960624 0000950112-96-002115.hdr.sgml : 19960624 ACCESSION NUMBER: 0000950112-96-002115 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960606 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960621 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLD COLOR PRESS INC /DE/ CENTRAL INDEX KEY: 0000780117 STANDARD INDUSTRIAL CLASSIFICATION: COMMERCIAL PRINTING [2750] IRS NUMBER: 371167902 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11802 FILM NUMBER: 96584136 BUSINESS ADDRESS: STREET 1: 101 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10178 BUSINESS PHONE: 2129862440 MAIL ADDRESS: STREET 1: 101 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10178 8-K 1 WORLD COLOR PRESS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): June 6, 1996 Commission file number 1-11802 World Color Press, Inc. (Exact name of registrant as specified in its charter) Delaware 37-1167902 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 340 Pemberwick Road, Greenwich, Connecticut 06831 (Address of principal executive offices) (Zip Code) 203-532-4200 (Registrant's telephone number, including area code) Page 1 of ____ Pages Exhibit Index on page ____ Item 2. Acquisition or Disposition of Assets. - ------------------------------------------------- On June 6, 1996, World Color Press, Inc., (along with its subsidiaries, "World Color" or the "Company") acquired from Ringier A.G. all of the issued and outstanding capital stock of Krueger Acquisition Corporation, including all of the issued and outstanding capital stock of Ringier Holdings, Inc., Ringier America, Inc., Krueger Ringier, Inc., Ringier Print U.S., Inc. and W.A. Krueger Co. Olathe (collectively, "Ringier America"), for approximately $128 million (the "Acquisition"). In addition, the Company assumed approximately $287 million of Ringier America's indebtedness, of which approximately $281 million was liquidated upon consummation of the Acquisition. The Acquisition was accounted for as a purchase. The Acquisition and liquidation of indebtedness were funded using proceeds from acquisition term loans under the Second Amended and Restated Credit Agreement dated as of June 6, 1996, as amended (the "Credit Agreement"), among World Color and the lenders and agents party thereto. The Credit Agreement provides for an additional $566 million of commitments, for aggregate total commitments of $975 million. The credit facility provides for varying semi-annual reductions in commitments and matures on December 31, 2002. All other significant financial provisions of the bank credit facility remain substantially unchanged. Ringier America, based in Chicago, Illinois, is a leading diversified commercial printer whose business includes the printing of catalogs, magazines and soft-cover books. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. - --------------------------------------------------------------------------- (a) Financial Statements of Business Acquired. ------------------------------------------ The following financial statements of Ringier America's consolidated reporting entity, Krueger Acquisition Corporation, are set forth in Annex A hereto: Years Ended December 31, 1995, 1994 and 1993: Report of Independent Auditors Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholder's Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (b) Pro Forma Financial Information. -------------------------------- The following pro forma financial information is set forth in Annex B hereto: Unaudited Pro Forma Combined Condensed Balance Sheet as of March 31, 1996 Unaudited Pro Forma Combined Condensed Statement of Operations for the three months ended March 31, 1996 Unaudited Pro Forma Combined Condensed Statement of Operations for the fiscal year ended December 31, 1995 Notes to Unaudited Pro Forma Combined Condensed Financial Statements (c) Exhibits. --------- The following exhibits are set forth in Annex C hereto: 10.1 Stock Purchase Agreement by and among Ringier A.G., Krueger Acquisition Corporation and World Color Press, Inc. dated April 24, 1996 10.2 Second Amended and Restated Credit Agreement dated June 6, 1996 10.3 First Amendment to Second Amended and Restated Credit Agreement, dated June 10, 1996 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WORLD COLOR PRESS, INC. Date: June 21, 1996 By: /S/ MARC L. REISCH --------------------------- Marc L. Reisch Executive Vice President, Chief Operating and Financial Officer ANNEX A Consolidated Financial Statements Krueger Acquisition Corporation Years ended December 31, 1995, 1994, and 1993 with Report of Independent Auditors Krueger Acquisition Corporation Consolidated Financial Statements Years ended December 31, 1995, 1994, and 1993 CONTENTS Report of Independent Auditors...............................................1 Consolidated Financial Statements Consolidated Balance Sheets..................................................2 Consolidated Statements of Operations........................................4 Consolidated Statements of Stockholder's Equity..............................5 Consolidated Statements of Cash Flows........................................6 Notes to Consolidated Financial Statements...................................7 Report of Independent Auditors The Board of Directors Krueger Acquisition Corporation We have audited the accompanying consolidated balance sheets of Krueger Acquisition Corporation as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Krueger Acquisition Corporation at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP February 2, 1996 1 Krueger Acquisition Corporation Consolidated Balance Sheets December 31, 1995 and 1994 (Dollars in Thousands)
1995 1994 ------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 14 $ 24 Receivables, less allowance for doubtful accounts of $1,950 and $1,998, respectively 72,466 65,758 Inventories: Materials and supplies 26,207 17,995 Work in process 13,384 17,369 ------------------------------------ Total inventories 39,591 35,364 Less: Progress billings 2,262 4,060 ------------------------------------ 37,329 31,304 Current portion of deferred income taxes - 235 Prepaid expenses 1,141 888 ------------------------------------ Total current assets 110,950 98,209 Property, plant, and equipment (at cost): Land 5,618 6,628 Buildings 103,665 107,233 Machinery and equipment 358,744 348,477 Construction in progress 4,724 2,809 ------------------------------------ 472,751 465,147 Less: Accumulated depreciation and amortization 198,857 161,623 ------------------------------------ 273,894 303,524 Excess of costs over net assets acquired, net of accumulated amortization of $26,218 and $22,269, respectively 130,986 134,935 Debt issuance costs, net of accumulated amortization of $15,285 and $9,772, respectively 2,699 7,454 Other assets 10,278 6,918 ==================================== Total assets $528,807 $551,040 ====================================
2
1995 1994 ------------------------------------ LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable $ 30,687 $ 25,393 Accrued liabilities 17,054 17,791 Income taxes payable 2,723 605 Current portion of long-term debt 19,557 35,796 Current portion of deferred income taxes 525 - ------------------------------------ Total current liabilities 70,546 79,585 Long-term debt 267,162 291,032 Deferred income taxes 70,835 78,920 Other long-term liabilities 6,748 4,441 Stockholder's equity: Common stock, no par, 3,000 shares authorized, 100 shares issued and outstanding 55,000 55,000 Additional contributed capital 97,760 97,760 Accumulated deficit (39,244) (55,698) ------------------------------------ Total Stockholder's equity 113,516 97,062 ------------------------------------ Total liabilities and Stockholder's equity $528,807 $551,040 ==================================== See accompanying notes.
3 Krueger Acquisition Corporation Consolidated Statements of Operations Years ended December 31, 1995, 1994, and 1993 (Dollars in Thousands)
1995 1994 1993 ------------------------------------------------------ Net sales $514,809 $462,421 $435,179 Cost of goods sold (403,257) (362,822) (340,200) Selling, general, and administrative expense (39,715) (33,495) (33,419) Depreciation and amortization (43,117) (39,067) (42,473) Income related to settled customer contract 31,481 8,366 7,998 Plant closure costs - - (2,750) ------------------------------------------------------ (454,608) (427,018) (410,844) ------------------------------------------------------ Operating income from continuing operations 60,201 35,403 24,335 Interest income 449 284 204 Interest expense (33,858) (34,092) (41,257) ------------------------------------------------------ Income (loss) before income taxes from continuing operations 26,792 1,595 (16,718) (Provision) benefit for income taxes (10,338) (1,535) 3,574 ------------------------------------------------------ Income (loss) from continuing operations 16,454 60 (13,144) DISCONTINUED OPERATIONS (NOTE 2) Loss from operations of discontinued segments (less applicable income taxes of $176) - - (283) Loss on disposal of discontinued segments (less applicable income taxes of $9,907) - - (16,304) ------------------------------------------------------ Loss from discontinued operations - - (16,587) ------------------------------------------------------ Net income (loss) $ 16,454 $ 60 $ (29,731) ====================================================== See accompanying notes.
4 Krueger Acquisition Corporation Consolidated Statements of Stockholder's Equity Years ended December 31, 1995, 1994, and 1993 (Dollars in Thousands)
ADDITIONAL TOTAL COMMON CONTRIBUTED ACCUMULATED STOCKHOLDER'S STOCK CAPITAL DEFICIT EQUITY ---------------------------------------------------------------- Balance at December 31, 1992 $55,000 $67,760 $(26,027) $ 96,733 Capital contribution - 10,000 - 10,000 Net loss - - (29,731) (29,731) ---------------------------------------------------------------- Balance at December 31, 1993 55,000 77,760 (55,758) 77,002 Capital contribution - 20,000 - 20,000 Net income - - 60 60 ---------------------------------------------------------------- Balance at December 31, 1994 55,000 97,760 (55,698) 97,062 Net income - - 16,454 16,454 ---------------------------------------------------------------- Balance at December 31, 1995 $55,000 $97,760 $(39,244) $113,516 ================================================================ See accompanying notes.
5 Krueger Acquisition Corporation Consolidated Statements of Cash Flows Years ended December 31, 1995, 1994, and 1993 (Dollars in Thousands)
1995 1994 1993 ------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $16,454 $ 60 $(29,731) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 43,117 39,067 48,218 Accelerated amortization of debt issuance costs and unamortized discount 4,533 - - Amortization of debt issuance costs 1,935 1,936 1,935 Amortization of discount on long-term debt 636 636 1,106 (Decrease) in deferred income taxes (7,325) (2,612) (1,447) Provision for losses on accounts receivable - - 900 Net (gain) loss on disposal of fixed assets (86) (185) 3,359 Loss on disposal of discontinued segments - - 16,304 Other changes in assets and liabilities: (Increase) decrease in receivables (6,708) (4,072) 12,403 (Increase) decrease in inventories (6,025) 3,045 3,144 (Increase) decrease in prepaid expenses (253) 155 (290) (Increase) in other assets, net of purchase of interest rate cap (3,360) (4,867) (1,106) Increase (decrease) in accounts payable, income taxes payable, and accrued liabilities 6,675 (4,750) (10,375) Increase (decrease) in other long-term liabilities 2,307 1,524 (24) ------------------------------------------- Total adjustments 35,446 29,877 74,127 ------------------------------------------- Net cash provided by operating activities 51,900 29,937 44,396 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (14,756) (29,209) (35,536) Payments made on reimbursable deposits - - (20,211) Refunds of reimbursable deposits - 7,801 12,410 Proceeds from sale of fixed assets 5,304 622 7,337 Proceeds from sale of discontinued segments - - 75,443 Costs of disposal of discontinued segments - - (15,988) ------------------------------------------- Net cash (used in) provided by investing activities (9,452) (20,786) 23,455 CASH FLOWS FROM FINANCING ACTIVITIES Capital contribution - 20,000 10,000 Proceeds from issuance of long-term debt - 8,890 2,350 Repayment of long-term debt (41,700) (37,999) (80,179) Purchase of interest rate cap - (945) - Payment of debt refinancing costs (758) - - ------------------------------------------- Net cash used in financing activities (42,458) (10,054) (67,829) ------------------------------------------- Net increase (decrease) in cash and cash equivalents (10) (903) 22 Cash and cash equivalents at beginning of year 24 927 905 ------------------------------------------- Cash and cash equivalents at end of year $ 14 $ 24 $ 927 =========================================== See accompanying notes.
6 Krueger Acquisition Corporation Notes to Consolidated Financial Statements Years ended December 31, 1995, 1994, and 1993 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of Krueger Acquisition Corporation (KAC) and its wholly owned subsidiaries, Ringier America, Inc. (RAI) and Krueger Ringier, Inc. (KRI) (collectively referred to as the Company). The Company is a wholly owned subsidiary of Ringier AG, a Switzerland-based publisher and printer. All intercompany transactions have been eliminated in the accompanying consolidated financial statements. NATURE OF OPERATIONS The Company is a commercial printer of magazines, catalogs, inserts, and mass-market paperback books utilizing rotogravure, offset, and flexographic printing processes. Print production occurs at six printing plants located throughout the United States. The Company provides a full range of print and print-related services including prepress, press, bindery, mail preparation, and distribution. All operations and substantially all customers are located in the United States. USE OF ESTIMATES The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. CASH EQUIVALENTS The Company's policy is to classify investments with remaining maturities at date of purchase of three months or less as cash equivalents, which consisted principally of money market accounts. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate fair value. 7 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORIES Inventories are stated at the lower of cost or market. The cost of materials and work-in-process inventories that are determined on the last in, first out (LIFO) method totaled $3,583,000 at December 31, 1995, and $6,726,000 at December 31, 1994; all other such inventories are determined on the first in, first out method. The cost of supplies inventories ($8,648,000 and $8,029,000 at December 31, 1995 and 1994, respectively) is determined on the average cost method. Inventories stated on the LIFO method were $1,472,000 and $213,000 below replacement cost at December 31, 1995 and 1994, respectively. DEPRECIATION AND AMORTIZATION Property, plant, and equipment are depreciated on the straight-line method over their estimated useful lives. Costs in excess of net assets acquired are amortized on the straight-line method over 40 years. Debt issuance costs are amortized on the straight-line method over the period that the related debt will be outstanding. In 1994, the Company extended the lives used to depreciate certain fixed assets. The effect of the change was to reduce depreciation expense in 1994 by approximately $4,800,000. 2. DISCONTINUED OPERATIONS In 1993, the Company sold two of its printing facilities which were engaged in printing "Special Interest Magazines" to an unrelated party and closed one of its printing facilities which was engaged in the printing of hardcover books. The Company has accounted for these transactions as discontinued operations in the accompanying Consolidated Statement of Operations. At December 31, 1994 and 1993, the remaining real property of the hardcover book printing facility had a book value of $5.0 million. The loss on disposal in 1993 includes sales proceeds from the discontinued segments of $80,443,000, including $5,000,000 of estimated future proceeds. By the terms of its credit agreement, these proceeds of sale required the Company to prepay $47,973,000 of its term debt in 1993. 8 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 3. DEBT Long-term debt consists of the following:
1995 1994 ------------------------------------ (In Thousands) Term notes: Maturity on December 31, 1998 $110,000 $110,000 Maturities through December 31, 1997 45,353 64,382 Maturity on December 31, 1998 20,000 20,000 Maturity on December 31, 1998 10,000 10,000 Maturities through December 31, 1997 - 10,350 ------------------------------------ 185,353 214,732 Revolving credit facility available through 1997 60,000 55,000 Promissory notes: 9.62%, due 1996 (refinanced through 1997) 24,000 36,000 9.67%, due 1996 (refinanced through 1997) 8,000 12,000 Less: Unamortized discount - (1,591) ------------------------------------ 32,000 46,409 Other 9,366 10,687 ------------------------------------ 286,719 326,828 Less: Installments due within one year 19,557 35,796 ------------------------------------ $267,162 $291,032 ====================================
On December 21, 1989, the Company entered into a credit agreement under which amounts previously borrowed included term loan facilities of $170,000,000, $110,000,000, $30,000,000, $20,000,000, and $10,000,000. The credit agreement also provides the Company with a revolving credit facility equal to 80% of eligible receivables and 50% of eligible inventory with a maximum availability of $80,000,000 at December 31, 1995 ($90,000,000 at December 31, 1994). The Company is required to pay a quarterly commitment fee of 1/2 of 1% per annum on the daily average unused amount of the revolving credit facility. Pursuant to amending the credit agreement in 1992, Ringier AG contributed $10,000,000 of additional capital in 1993 which was used to repay a portion of borrowings under the revolving credit facility and $20,000,000 of additional capital in 1994, which was used to repay a portion of the term notes. The amended credit agreement provides for interest on the term loan facilities, except for the $110,000,000 facility, and the revolving credit facility to be based upon the prime rate or the Euro-Rate, as selected by the Company, plus an applicable rate margin. The applicable rate margin varies from a minimum of 1 1/4% for the prime rate and 2 1/4% for the Euro-Rate to a maximum of 1 1/2% for the prime rate and 2 1/2% for the Euro-Rate. The applicable rate margin is determined by the ratio of consolidated total 9 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 3. DEBT (CONTINUED) indebtedness to adjusted consolidated net worth and the ratio of cash flow available for debt service to net interest expense of the Company. The Company is currently paying an applicable rate margin of 1 1/4% on the prime rate and 2 1/4% on the Euro-Rate option. On December 15, 1995, the credit agreement was further amended to permit an assignment of the $110,000,000 facility to another lender and a refinancing of the $24,000,000 and $8,000,000 promissory notes issued by RAI. The assignment of the $110,000,000 note was a noncash financing transaction and is not reflected on the accompanying consolidated statement of cash flows. The amended and restated $110,000,000 credit agreement provides for interest at the prime rate plus .50% or the Euro-Rate plus .65% through December 31, 1997, and the Euro-Rate plus 1.00% thereafter as selected by the Company. Interest prior to December 15, 1995, had been at the prime rate plus .50% or the Euro-Rate plus 1.50% as selected by the Company. The new $32,000,000 credit agreement provides for interest at the prime rate plus .50% or the Euro-Rate plus 1.20% as selected by the Company. Because of notification requirements, the RAI promissory notes were repaid and the term note issued on January 11, 1996. The $32,000,000 term note matures on December 31, 1997. Therefore, the $32,000,000 has been excluded from installments due within one year. In conjunction with these transactions, the Company was required to pay a fee of .40% of the loan amounts, a prepayment penalty of $342,000 on the RAI notes and various other expenses. The Company also accelerated the amortization of the original debt issuance costs and unamortized discount ($3,578,000 and $955,000, respectively). The credit agreements require the Company to maintain a minimum net worth (as defined), a debt service coverage ratio (as defined), a current ratio (as defined), and a leverage ratio (as defined) at varying and specified amounts or rates. The agreements limit future indebtedness, rentals, and capital expenditures and provide for additional mandatory principal repayment if excess cash flow (as defined) is realized. The term notes and revolving credit facility are collateralized by the assets of KAC and its wholly owned subsidiaries, except RAI. RAI's portion of the Company's consolidated total assets is approximately $124,000,000. The principal and interest on the $110,000,000 term note is guaranteed by Ringier AG. The interest on the new $32,000,000 note and on notes issued by KAC is also guaranteed by Ringier AG. The Company has agreed to pay Ringier AG a fee of $1,000,000 per annum for its guarantee of the $110,000,000 term note. The payment of the fee is contingent upon achieving a sufficient excess cash flow level. The fees for 1995, 1994, and 1993 will be paid based upon the Company achieving a sufficient excess cash flow level in a future period. The Company has included the fee in interest expense in all years. 10 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 3. DEBT (CONTINUED) INTEREST RATE CAP AGREEMENTS The Company enters into interest rate cap agreements to reduce the impact of increases in interest rates on its variable rate debt. Such agreements entitle the Company to receive from a bank the amount, if any, by which the Company's interest payments exceed the rates specified in the agreements. The Company is subject to the credit risk that the bank may fail to perform under such agreements. The cost of the agreements is amortized to interest expense over the term of the agreements, and the unamortized cost is included in other assets. Payments received as a result of the agreements, if any, are recorded as a reduction of interest expense. At December 31, 1995, the Company has one such interest rate cap agreement in effect. The agreement caps $150,000,000 of the term notes and borrowings under the revolving credit agreement at a rate of 7.00% for the Euro-Rate, plus the applicable rate margin, and expires on March 10, 1997. NOTE PAYABLE TO RINGIER AG At December 31, 1995 and 1994, other long-term debt includes a $5,000,000 demand note payable to Ringier AG. The note bears interest at 6.00% per annum. Ringier AG has informed the Company that it does not anticipate demanding repayment of the note in 1996. INTEREST Interest costs incurred and capitalized interest amounted to $33,980,000 and $122,000, respectively, for 1995, $35,589,000 and $1,497,000, respectively, for 1994, and $43,132,000 and $1,875,000, respectively, for 1993. Interest paid, including capitalized interest, was $26,907,000, $30,961,000, and $39,663,000 for 1995, 1994, and 1993, respectively. Aggregate debt maturities after 1996 are as follows (in thousands): YEAR AMOUNT -------------------------------------------------------------------- 1997 $120,400 1998 141,082 1999 5,680 ==================== $267,162 ==================== The carrying amount of the Company's long-term debt approximates fair value. 11 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 4. INCOME TAXES The provision (benefit) for income taxes is summarized as follows:
1995 1994 1993 ------------------------------------------------------ (In Thousands) Continuing operations: Current provision (benefit): Federal $14,932 $3,014 $(1,901) State 2,731 1,133 (347) ------------------------------------------------------ 17,663 4,147 (2,248) Deferred (benefit) provision: Federal (6,845) (1,643) (1,122) State (480) (969) (204) ------------------------------------------------------ (7,325) (2,612) (1,326) ====================================================== Total provision (benefit) $10,338 $1,535 $ (3,574) ====================================================== Discontinued operations: Current provision: Federal $ - $ - $ 8,714 State - - 1,589 ------------------------------------------------------ - - 10,303 Deferred (benefit): Federal - - (17,242) State - - (3,144) ------------------------------------------------------ - - (20,386) ====================================================== Total benefit $ - $ - $10,083 ======================================================
The reconciliation of the expected provision (benefit) for income taxes from continuing operations to amounts reported is as follows:
1995 1994 1993 ------------------------------------------------------ (In Thousands) Expected provision (benefit) computed at the federal statutory rate (35%) $ 9,377 $ 558 $ (5,851) Effect of amortization of excess of costs over net assets acquired 1,382 1,382 1,382 Effect of increase in federal statutory rate - - 1,281 Other, net (421) (405) (386) ====================================================== $10,338 $1,535 $ (3,574) ======================================================
12 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 4. INCOME TAXES (CONTINUED) The net deferred income tax liability relates principally to different carrying values for property, plant, and equipment, inventories, and certain accrued liabilities for financial accounting purposes rather than for income tax purposes. The significant components of the net deferred income tax liability at December 31, 1995 and 1994, are as follows: 1995 1994 --------------------------------- (In Thousands) Deferred income tax liabilities: Property, plant, and equipment $67,432 $72,579 Inventories 2,904 3,149 Other 4,829 6,437 --------------------------------- Total deferred income tax liabilities 75,165 82,165 Deferred income tax assets: Accrued liabilities (principally vacation pay, postretirement medical benefits, and workmen's compensation) 3,603 3,337 Other 202 143 --------------------------------- Total deferred income tax assets 3,805 3,480 ================================= Net deferred income tax liability $71,360 $78,685 ================================= Cash payments for income taxes totaled $15,866,000, $5,987,000, and $6,284,000 during 1995, 1994, and 1993, respectively. 13 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 5. RETIREMENT PLAN The Company maintains a combined, noncontributory, trusteed, defined-benefit retirement Plan, the Ringier America Employees Retirement Plan. The Plan covers substantially all nonunion employees and certain union employees who are not covered by union-sponsored retirement plans under the terms of a collective bargaining agreement. Benefits are based on age, years of service, compensation, and normal retirement at age 65. The policy of the Company is to fund pension costs in the minimum amounts required by the Employee Retirement Income Security Act of 1974. The Plan's assets are invested primarily in marketable securities. The following table sets forth the Plan's funded status at December 31, 1995 and 1994.
1995 1994 --------------------------------- Actuarial present value of benefit obligations: (In Thousands) Accumulated benefit obligations, including vested benefits of $42,934,000 and $34,767,000, respectively $47,143 $38,897 ================================= Projected benefit obligation $54,796 $48,337 Plan assets at fair value 47,243 38,900 --------------------------------- Plan assets less than projected benefit obligation (7,553) (9,437) Unrecognized net loss 11,927 11,219 ================================= Prepaid pension cost at December 31 $ 4,374 $ 1,782 ================================= FOR THE YEAR ENDED DECEMBER 31 1995 1994 1993 ------------------------------------------------- Net pension cost for the year included the (In Thousands) following components: Service cost-benefits earned during the year $ 2,210 $ 2,161 $ 3,464 Interest cost on projected benefit obligation 4,471 4,183 5,710 Actual return on Plan assets (8,828) 2,034 (5,086) Net amortization and deferral 5,432 (5,506) (655) ------------------------------------------------- $ 3,285 $ 2,872 $ 3,433 =================================================
In 1993, in connection with the disposal of the industry segments discussed in Note 2, the Company agreed to fully vest the affected employees in their accumulated plan benefits and, in accordance with the Plan's provisions, pay out such benefits in lump-sum payments to the employees. These transactions resulted in a settlement and a curtailment of the Plan as defined in Statement of Financial Accounting Standards No. 88 entitled "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits." The effect of these transactions was to 14 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 5. RETIREMENT PLAN (CONTINUED) reduce the projected benefit obligation by approximately $13,417,000, to increase the unrecognized net loss by approximately $5,432,000 and reduce the Plan assets by approximately $18,435,000 resulting in a net gain from the settlement and curtailment of approximately $414,000. This amount has been included in the loss on disposal of discontinued segments in the accompanying 1993 consolidated statement of operations. In determining the actuarial present value of the projected benefit obligation, weighted-average discount rates of 7.75%, 9%, and 8.25% were used for 1995, 1994, and 1993, respectively. The expected long-term rate of return on Plan assets was 9% for 1995 and 9.5% for 1994 and 1993. The rate of increase in future compensation levels was 3.5%, 4.8%, and 4.0% for 1995, 1994, and 1993, respectively. It is possible that the Company's assumptions may change in the near term and the changes may have a material effect on future pension expense and prepaid pension cost. The Company contributed $5,876,000 to the Plan during 1995. The charges to operations for retirement plans under collective bargaining agreements covering substantially all remaining employees (on a defined-contribution basis) were $600,000, $577,000, and $630,000 in 1995, 1994, and 1993, respectively. The Company's contributions to these plans are based on a percentage of each participant's base wages. 6. POSTRETIREMENT MEDICAL BENEFITS The Company sponsors a defined-benefit health care plan that provides postretirement medical benefits to full-time employees who have either 10 years of credited service under the Company-sponsored retirement plan and attained age 60, or a combination of years of credited service and age (must be at least 55) equal to 85 while in service with the Company. The plan is contributory, with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. Employees who retire after January 1, 1994, will only be reimbursed a portion of their Medigap premium after reaching age 65. The Company's policy is to fund the cost of medical benefits in amounts determined at the discretion of management. 15 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 6. POSTRETIREMENT MEDICAL BENEFITS (CONTINUED) The following table presents the plan's funded status reconciled with amounts recognized in the Company's consolidated balance sheets:
DECEMBER 31 1995 1994 --------------------------------- (In Thousands) Accumulated postretirement benefit obligation: Retirees $(4,891) $(5,598) Fully eligible active plan participants (567) (350) Other active plan participants (2,991) (3,155) --------------------------------- (8,449) (9,103) Plan assets at fair value - - --------------------------------- Accumulated postretirement benefit obligation in excess of plan assets (8,449) (9,103) Unrecognized prior service cost - - Unrecognized net (gain) (1,595) (916) Unrecognized transition obligation 7,973 8,442 ================================= Accrued postretirement benefit cost $(2,071) $(1,577) =================================
Net periodic postretirement benefit cost included the following components:
FOR THE YEAR ENDED DECEMBER 31 1995 1994 1993 ------------------------------------------------- (In Thousands) Service cost $ 291 $ 320 $ 296 Interest cost 787 749 723 Actual return on plan assets - - - Amortization of transition obligation over 20 years 469 469 469 ================================================= Net periodic postretirement benefit cost $ 1,547 $ 1,538 $ 1,488 =================================================
The weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) is 7% for retirees under 65 and 6% for retirees 65 and over for 1995. These rates are 1% less than the 1994 assumed rates and 2% less than the 1993 assumed rates and are assumed to decrease gradually to 6% for all retirees for 1998 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the 16 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 6. POSTRETIREMENT MEDICAL BENEFITS (CONTINUED) accumulated postretirement benefit obligation as of December 31, 1995, by $463,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for 1995 by $43,000. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 8%, 9% and 8% at December 31, 1995, 1994, and 1993, respectively. 7. CUSTOMER CONTRACT SETTLEMENT In January 1995, the Company received $31,481,000 from one of its customers as final settlement of the customer's future obligations under a printing services contract. The contract required the customer to pay an annual amount to the Company for depreciation and amortization of a plant built principally for the customer, net of any production for other customers, through 1999. In 1994 and 1993, the net amounts realized by the Company from this arrangement were $8,366,000 and $7,998,000, respectively. The $31,481,000, $8,366,000, and $7,998,000 have been reflected as income in the accompanying consolidated financial statements. The $8,366,000 and the $7,998,000 have been reclassified from net sales in the 1994 and 1993 consolidated statements of operations. 8. PLANT CLOSURE COSTS During 1993, the Company sold a printing plant closed in an earlier period. The sales proceeds were less than anticipated, requiring an additional $2,700,000 to be recorded as plant closing costs. 17 Krueger Acquisition Corporation Notes to Consolidated Financial Statements (continued) 9. COMMITMENTS The Company leases, under noncancelable operating leases, certain manufacturing equipment, office facilities, certain computer equipment, and other items. The following is a schedule by year of the future minimum rental payments required under operating leases with an original term in excess of one year: (In Thousands) YEAR ENDING DECEMBER 31 1996 $ 7,021 1997 6,703 1998 6,294 1999 5,833 2000 5,509 Thereafter 17,342 --------------------------- $48,702 =========================== Total rent expense for the Company was $7,005,000, $6,538,000, and $6,036,000 for the years ended December 31, 1995, 1994, and 1993, respectively. 10. ACCRUED LIABILITIES Accrued liabilities consist of the following at December 31, 1995 and 1994, respectively: 1995 1994 ------------------------------------ (In Thousands) Accrued vacation pay $ 5,966 $ 5,864 Accrued payroll 4,016 2,340 Accrued interest 2,899 4,882 Accrued real estate taxes 1,948 2,049 Accrued workmen's compensation 1,806 1,519 Other 419 1,137 ==================================== $17,054 $17,791 ==================================== 18 ANNEX B WORLD COLOR PRESS, INC. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) On June 6, 1996, World Color acquired all of the issued and outstanding capital stock of Ringier America for approximately $128,000 (the "Acquisition"). In addition, World Color assumed approximately $287,000 of Ringier America's indebtedness. World Color liquidated approximately $281,000 of this indebtedness upon consummation of the transaction. The Acquisition was accounted for as a purchase. The excess of cost over the book value of net assets acquired was $149,099 and is reflected as goodwill in the accompanying unaudited pro forma combined condensed balance sheet. The Company is in the process of assessing the operations of Ringier America and finalizing the assignment of fair value to assets acquired and liabilities assumed. Upon completion of this process, the Company will finalize the allocation of purchase price. Accordingly, the final asset and liability fair values may differ significantly from those set forth in the accompanying unaudited pro forma combined condensed balance sheet. The accompanying unaudited pro forma combined condensed balance sheet combines the historical consolidated balances of World Color and Ringier America as of March 31, 1996 and gives effect to the adjustments described in the notes hereto. The accompanying unaudited pro forma combined condensed statements of operations combine the historical consolidated operations of World Color and Ringier America for the three months ended March 31, 1996 and the fiscal year ended December 31, 1995 as if the Acquisition and liquidation of certain indebtedness of Ringier America had occurred at the beginning of the periods presented and give effect to the adjustments described in the notes hereto. Certain reclassifications have been made to the historical statements of operations of Ringier America to conform to the presentation of World Color. The unaudited pro forma combined condensed financial statements should be read in conjunction with the audited consolidated financial statements of World Color in its Annual Report on Form 10-K for the year ended December 31, 1995, and the unaudited condensed consolidated financial statements in its Quarterly Report on Form 10-Q for the three months ended March 31, 1996, filed with the Securities and Exchange Commission. The unaudited pro forma combined condensed financial statements do not reflect identified cost savings that will result from the combination of the two businesses, and are not necessarily indicative of the results that would have occurred had the Acquisition been consummated in accordance with the assumptions set forth in the notes hereto, or of World Color's and Ringier America's individual or combined future results. Due to the seasonal nature of the operations of both World Color and Ringier America, the unaudited pro forma combined condensed statement of operations for the three months ended March 31, 1996 is not necessarily indicative of full year results. WORLD COLOR PRESS, INC. UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET MARCH 31, 1996 (Dollars in thousands)
WORLD COLOR RINGIER PRO FORMA PRO FORMA PRESS, INC. AMERICA ADJUSTMENTS COMBINED ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,911 $ 14 $ - $ 10,925 Accounts receivable - net 216,479 54,729 - 271,208 Inventories 111,651 39,830 - 151,481 Deferred income taxes 29,354 - - 29,354 Other 7,600 1,712 - 9,312 ----------- ----------- ------------ ---------- Total current assets 375,995 96,285 - 472,280 ----------- ----------- ------------ ---------- NONCURRENT ASSETS: Property, plant and equipment, at cost 935,657 475,780 (208,801)(a) 1,202,636 Accumulated depreciation and amortization (459,479) (208,801) 208,801 (a) (459,479) ----------- ----------- ------------ ---------- Property, plant and equipment - net 476,178 266,979 - 743,157 Goodwill - net 249,261 129,998 19,101 (b) 398,360 Other 25,799 11,554 - 37,353 ----------- ----------- ------------ ---------- Total noncurrent assets 751,238 408,531 19,101 1,178,870 ----------- ----------- ------------ ---------- TOTAL ASSETS $ 1,127,233 $ 504,816 $ 19,101 $1,651,150 =========== =========== ============ ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 180,657 $ 31,691 $ - $ 212,348 Current maturities of long-term debt 41,959 19,777 (18,186)(c) 43,550 ----------- ----------- ------------ ---------- Total current liabilities 222,616 51,468 (18,186) 255,898 ----------- ----------- ------------ ---------- NONCURRENT LIABILITIES Long-term debt 425,650 267,815 146,336 (c) 839,801 Deferred income taxes 12,228 69,276 - 81,504 Other long-term liabilities 93,094 7,208 - 100,302 ----------- ----------- ------------ ---------- Total noncurrent liabilities 530,972 344,299 146,336 1,021,607 ----------- ----------- ------------ ---------- STOCKHOLDERS' EQUITY: Common stock 337 55,000 (55,000)(d) 337 Additional paid-in capital 583,756 97,760 (97,760)(d) 583,756 Accumulated deficit (210,448) (43,711) 43,711 (d) (210,448) ----------- ----------- ------------ ---------- Total stockholders' equity 373,645 109,049 (109,049)(d) 373,645 ----------- ----------- ------------ ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,127,233 $ 504,816 $ 19,101 $1,651,150 =========== =========== ============ ==========
See notes to unaudited pro forma combined condensed financial statements. WORLD COLOR PRESS, INC. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 (Dollars in thousands, except per share data)
WORLD COLOR RINGIER PRO FORMA PRO FORMA PRESS, INC. AMERICA ADJUSTMENTS COMBINED NET SALES $ 329,111 $ 110,332 $ - $ 439,443 COST OF SALES 276,825 101,965 - 378,790 ---------- --------- --------- --------- GROSS PROFIT 52,286 8,367 60,653 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 32,304 9,645 78 (e) 42,027 ---------- --------- --------- --------- OPERATING INCOME (LOSS) 19,982 (1,278) (78) 18,626 INTEREST EXPENSE 10,084 5,721 1,606 (f) 17,411 ---------- --------- --------- ----------- INCOME (LOSS) BEFORE INCOME TAXES 9,898 (6,999) (1,684) 1,215 INCOME TAX PROVISION (BENEFIT) 3,959 (2,701) (642) (g) 616 ---------- --------- --------- --------- NET INCOME (LOSS) $ 5,939 $ (4,298) $ (1,042) $ 599 ========== ========= ========= ========= Net income per common and common equivalent share $ 0.17 $ 0.02 Weighted average common and common equivalent shares outstanding 34,827,689 34,827,689
See notes to unaudited pro forma combined condensed financial statements. WORLD COLOR PRESS, INC. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 (Dollars in thousands, except per share data)
WORLD COLOR RINGIER PRO FORMA PRO FORMA PRESS, INC. AMERICA ADJUSTMENTS COMBINED NET SALES $1,295,582 $ 514,809 $ - $ 1,810,391 COST OF SALES 1,074,785 441,812 - 1,516,597 ----------- ---------- ----------- ---------- GROSS PROFIT 220,797 72,997 - 293,794 ----------- ---------- ----------- ---------- OTHER OPERATING EXPENSES: Selling, general and administrative expenses 125,539 44,277 311 (e) 170,127 Streamlining and other special items 40,900 (31,481) - 9,419 ----------- ---------- ----------- ---------- Total other operating expenses 166,439 12,796 311 179,546 ----------- ---------- ----------- ---------- OPERATING INCOME 54,358 60,201 (311) 114,248 INTEREST EXPENSE 37,897 33,409 (3,888) (f) 67,418 ----------- ---------- ----------- ---------- INCOME BEFORE INCOME TAXES 16,461 26,792 3,577 46,830 INCOME TAX PROVISION 6,584 10,338 1,555 (g) 18,477 ----------- ---------- ----------- ---------- NET INCOME $ 9,877 $ 16,454 $ 2,022 $ 28,353 ========== ========== =========== ========== Net income per common and common equivalent share $ 0.29 $ 0.82 Weighted average common and common equivalent shares outstanding 34,440,867 34,440,867
See notes to unaudited pro forma combined condensed financial statements. WORLD COLOR PRESS, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (IN THOUSANDS) The following adjustments are necessary to reflect the transaction, described in Item 2, as if the transaction was consummated on March 31, 1996 for the purpose of presenting the unaudited pro forma combined condensed balance sheet, or at the beginning of the three-month interim period ended March 31, 1996 and the fiscal year ended December 31, 1995, respectively, for the purpose of presenting unaudited pro forma combined condensed statements of operations. The Company is in the process of assessing the operations of Ringier America and finalizing the assignment of fair value to assets acquired and liabilities assumed. Upon completion of this process, the Company will finalize the allocation of purchase price. Accordingly, the final asset and liability fair values may differ significantly from those set forth in the accompanying unaudited pro forma combined condensed balance sheet. (a) Represents the elimination of Ringier's historical accumulated depreciation. (b) Represents the excess of cost over book value of net assets acquired in the Acquisition of $149,099, reduced by the elimination of Ringier America's historical excess of cost over fair value of net assets acquired of $129,998. (c) Represents $409,182 of borrowings by World Color to fund the Acquisition and the liquidation of Ringier America's indebtedness, reduced by Ringier America's liquidated indebtedness of $281,032 (including current portion of $18,186). (d) Represents the elimination of stockholders' equity of Ringier America. (e) Represents the amortization of excess cost over book value of net assets acquired, over a period of 35 years, of $1,065 and $4,260 for the three months ended March 31, 1996 and the fiscal year ended December 31, 1995, respectively, substantially offset by the elimination of Ringier's historical goodwill amortization. (f) Represents the increase (decrease) from the combined effect of additional interest expense on borrowings by World Color to fund the Acquisition and liquidation of Ringier America's indebtedness at an effective rate of 7.1%, along with the reduction of Ringier America's interest expense for liquidated indebtedness, as discussed above in note (c). A change in World Color's variable borrowing rate of 0.125% would result in a change in interest expense of $128 and $511 for the three months ended March 31, 1996 and the fiscal year ended December 31, 1995, respectively. (g) Represents the tax effect of the pro forma adjustment related to interest expense, as described in note (f), at an estimated marginal rate of 40%. ANNEX C EXHIBIT INDEX EXHIBIT NO. DESCRIPTION PAGE 10.1 Stock Purchase Agreement by and among Ringier A.G., Krueger Acquisition Corporation and World Color Press, Inc. dated April 24, 1996 10.2 Second Amended and Restated Credit Agreement dated June 6, 1996 10.3 First Amendment to Second Amended and Restated Credit Agreement, dated June 10, 1996 EX-10.1 2 EXHIBIT 10.1 EXECUTION COPY ================================================================================ STOCK PURCHASE AGREEMENT by and among RINGIER A.G. a corporation organized under the laws of Switzerland as Seller KRUEGER ACQUISITION CORPORATION a Delaware corporation as the Company and WORLD COLOR PRESS, INC. a Delaware corporation as Buyer Dated: April 24, 1996 ================================================================================ TABLE OF CONTENTS ----------------- Page ---- ARTICLE I -- DEFINITIONS . . . . . . . . . . . . . . . . . 1 1.1 Defined Terms. . . . . . . . . . . . . . . . . 1 1.2 Other Defined Terms . . . . . . . . . . . . . . 7 ARTICLE II -- PURCHASE AND SALE OF THE SHARES . . . . . . 9 2.1 Closing . . . . . . . . . . . . . . . . . . . . 9 2.2 Transfer of the Shares . . . . . . . . . . . . . 9 2.3 Consideration for the Shares . . . . . . . . . . 9 2.4 Deliveries at Closing . . . . . . . . . . . . . 9 ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . 10 3.1 Ownership of the Shares . . . . . . . . . . . . 10 3.2 Organization and Authorization of Seller . . . . . . . . . . . . . . . . . . . . . 10 3.3 Organization and Capitalization of the Company . . . . . . . . . . . . . . . . . . 11 3.4 Authorization . . . . . . . . . . . . . . . . . 11 3.5 Subsidiaries . . . . . . . . . . . . . . . . . . 12 3.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . 13 3.7 Title to Assets; Absence of Liens and Encumbrances, Leases. . . . . . . . . . . . 15 3.8 Contracts and Commitments . . . . . . . . . . . 17 3.9 Permits . . . . . . . . . . . . . . . . . . . . 20 3.10 No Conflict or Violation . . . . . . . . . . . . 20 3.11 Consents and Approvals . . . . . . . . . . . . . 20 3.12 Financial Statements, etc . . . . . . . . . . . 21 3.13 Undisclosed Liabilities . . . . . . . . . . . . 21 3.14 Corporate Records . . . . . . . . . . . . . . . 21 3.15 Litigation . . . . . . . . . . . . . . . . . . . 21 3.16 Labor Matters . . . . . . . . . . . . . . . . . 22 3.17 Compliance with Law . . . . . . . . . . . . . . 22 3.18 No Brokers . . . . . . . . . . . . . . . . . . . 22 3.19 Proprietary Rights . . . . . . . . . . . . . . . 23 3.20 Employee Plans . . . . . . . . . . . . . . . . . 23 3.21 Transactions with Certain Persons . . . . . . . 28 3.22 Tax Matters . . . . . . . . . . . . . . . . . . 28 3.23 Insurance . . . . . . . . . . . . . . . . . . . 30 3.24 Purchase Commitments and Outstanding Bids . . . . . . . . . . . . . . . . . . . . . . 30 3.25 Customers and Suppliers . . . . . . . . . . . . 31 3.26 Compliance with Environmental Laws . . . . . . . 31 3.27 Banking Relationships . . . . . . . . . . . . . 32 3.28 No Other Agreements to Sell the Assets or Stock of the Company . . . . . . . . . 33 ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . 33 4.1 Organization . . . . . . . . . . . . . . . . . . 33 4.2 Authorization . . . . . . . . . . . . . . . . . 33 4.3 Consents and Approvals . . . . . . . . . . . . . 33 4.4 No Brokers . . . . . . . . . . . . . . . . . . . 33 4.5 No Conflict or Violation . . . . . . . . . . . . 33 4.6 Litigation . . . . . . . . . . . . . . . . . . . 33 4.7 Investment Representation . . . . . . . . . . . 34 4.8 Securities and Exchange Commission Documents . . . . . . . . . . . . . . . . . . . 34 ARTICLE V -- COVENANTS OF SELLER, BUYER AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 34 5.1 Maintenance of Business Prior to Closing . . . . . . . . . . . . . . . . . . . . 34 5.2 Investigation by Buyer . . . . . . . . . . . . . 38 5.3 Environmental Investigation . . . . . . . . . . 38 5.4 Consents and Best Efforts . . . . . . . . . . . 39 5.5 Financial Statements, etc . . . . . . . . . . . 39 5.6 Notification of Certain Matters . . . . . . . . 39 5.7 No Solicitation; Notification . . . . . . . . . 40 5.8 Delivery of Funds for Contribution . . . . . . . 40 5.9 Performance Bonds, etc. . . . . . . . . . . . . 40 5.10 Corporate Name . . . . . . . . . . . . . . . . . 41 5.11 Tax Elections . . . . . . . . . . . . . . . . . 41 5.12 Payments under Nytko Employment Agreement . . . . . . . . . . . . . . . . . . . 41 5.13 Accountants' Opinions and Consents . . . . . . . 41 ARTICLE VI -- CONDITIONS TO SELLER'S AND THE COMPANY'S OBLIGATIONS . . . . . . . . . . . . . . . . . . 41 6.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . 41 6.2 No Proceedings or Litigation . . . . . . . . . . 42 6.3 Opinion of Counsel . . . . . . . . . . . . . . . 42 6.4 Closing Deliveries . . . . . . . . . . . . . . . 42 6.5 Consents . . . . . . . . . . . . . . . . . . . . 43 6.6 HSR Act . . . . . . . . . . . . . . . . . . . . 43 6.7 Delivery of Funds for Contribution . . . . . . . 43 ARTICLE VII -- CONDITIONS TO BUYER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . 43 7.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . 43 7.2 Consents . . . . . . . . . . . . . . . . . . . . 43 7.3 No Proceedings or Litigation . . . . . . . . . . 43 7.4 Opinions of Counsel . . . . . . . . . . . . . . 44 7.5 Closing Deliveries . . . . . . . . . . . . . . . 44 7.6 Material Changes . . . . . . . . . . . . . . . . 44 7.7 Financing . . . . . . . . . . . . . . . . . . . 45 7.8 HSR Act . . . . . . . . . . . . . . . . . . . . 45 7.9 Lender Releases . . . . . . . . . . . . . . . . 46 7.10 Escrow Agreement . . . . . . . . . . . . . . . . 46 7.11 Resignations . . . . . . . . . . . . . . . . . . 46 7.12 Agreement Not to Compete . . . . . . . . . . . . 46 ARTICLE VIII -- ACTIONS BY SELLER AND BUYER AFTER THE CLOSING . . . . . . . . . . . . . . . . . . . . 46 8.1 Books and Records . . . . . . . . . . . . . . . 46 8.2 Survival of Representations, etc . . . . . . . . 46 8.3 Further Assurances . . . . . . . . . . . . . . . 46 8.4 Litigation Support . . . . . . . . . . . . . . . 47 ARTICLE IX -- INDEMNIFICATION . . . . . . . . . . . . . . 47 9.1 General Indemnification . . . . . . . . . . . . 47 9.2 Limitations on Indemnity . . . . . . . . . . . . 54 9.3 Tax Indemnification . . . . . . . . . . . . . . 57 ARTICLE X -- MISCELLANEOUS . . . . . . . . . . . . . . . . 58 10.1 Termination . . . . . . . . . . . . . . . . . . 58 10.2 Assignment . . . . . . . . . . . . . . . . . . . 59 10.3 Notices; Transfer of Funds . . . . . . . . . . . 59 10.4 Choice of Law . . . . . . . . . . . . . . . . . 61 10.5 Entire Agreement; Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 61 10.6 Multiple Counterparts . . . . . . . . . . . . . 61 10.7 Invalidity . . . . . . . . . . . . . . . . . . . 61 10.8 Titles . . . . . . . . . . . . . . . . . . . . . 62 10.9 Publicity . . . . . . . . . . . . . . . . . . . 62 10.10 Confidential Information . . . . . . . . . . . . 62 10.11 Fees and Expenses . . . . . . . . . . . . . . . 62 10.12 Cumulative Remedies. . . . . . . . . . . . . . . 63 10.13 Representation of Counsel; Mutual Negotiation . . . . . . . . . . . . . . . . . . 63 10.14 Interpretive Provisions. . . . . . . . . . . . . 63 EXHIBITS Exhibit ------- Form of Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . A Form of Opinion of Latham & Watkins . . . . . . . . . . . . . . . . . B Form of Opinion of Fried, Frank, Harris, Shriver & Jacobson. . . . . C Form of Opinion of Nobel & Hug . . . . . . . . . . . . . . . . . . . D SCHEDULES Schedule 3.5(a) Capital Stock of Subsidiaries Schedule 3.5(b) Jurisdictions of Qualification - Subsidiaries Schedule 3.6 Absence of Certain Changes and Events Schedule 3.7(a) Permitted Encumbrances Schedule 3.7(b)(i) Owned Facilities Schedule 3.7(b)(ii) Leased Facilities Schedule 3.7(c) Personal Property Schedule 3.7(c)(ii) Leased Personal Property Schedule 3.8 Contracts and Commitments Schedule 3.8(b) Absence of Breaches or Defaults Schedule 3.9 Permits Schedule 3.10 No Conflict or Violation Schedule 3.12 Financial Statements Schedule 3.13 Undisclosed Liabilities Schedule 3.15 Litigation Schedule 3.16 Labor Matters Schedule 3.17 Compliance with Law Schedule 3.19 Proprietary Rights Schedule 3.20 Employee Plans Schedule 3.21 Transactions with Certain Persons Schedule 3.22 Tax Matters Schedule 3.23 Insurance Schedule 3.24 Purchase Commitments and Outstanding Bids Schedule 3.25 Customers and Suppliers Schedule 3.26 Compliance with Environmental Laws Schedule 3.27 Banking Relationships Schedule 5.8 Debt Instruments Schedule 9.1(a)(i)(d)(3) Environmental Matter Schedule 9.3 Tax Reserve Schedule 10.14(a) Knowledge STOCK PURCHASE AGREEMENT ------------------------ This Stock Purchase Agreement (this "Agreement"), dated April 24, --------- 1996, is by and among Ringier A.G., a corporation organized under the laws of Switzerland ("Seller"), Krueger Acquisition Corporation, a Delaware corporation ------ (the "Company"), and World Color Press, Inc., a Delaware corporation ("Buyer"). ------- ----- RECITALS A. The Company's authorized capital stock consists of 100 shares of common stock, no par value per share (the "Common Stock"), all of which shares ------------ (the "Shares") are currently issued and outstanding. ------ B. Seller owns all of the Shares. C. The Company owns, directly or indirectly, all of the issued and outstanding shares of capital stock of Ringier Holdings, Inc., a Delaware corporation, Ringier America, Inc., a Wisconsin corporation, Krueger Ringier, Inc., a Delaware corporation, Ringier Print U.S., Inc., a Delaware corporation and W.A. Krueger Co. Olathe, a Missouri corporation (collectively, the "Subsidiaries"). ------------ B. Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, all of the Shares, upon the terms and subject to the conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- 1.1 Defined Terms. As used herein, the terms below shall have the ------------- following meanings: "Affiliate" shall mean, with respect to any person or entity, any --------- person or entity which controls such person or entity, which such person or entity controls, or which is under common control with such person or entity. For purposes of the preceding sentence, the term "control" shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of a person or entity through voting securities, by contract or otherwise. "Ancillary Agreements" shall mean the Disclosure Schedule, any exhibit -------------------- to this Agreement (including, without limitation, the Escrow Agreement) and any certificate or other document executed at or prior to the Closing in connection with this Agreement, including, but not limited to, pursuant to Section 2.4 and/or Article VI or VII of this Agreement. "Assets" shall mean all of the Company's right, title and interest in ------ and to all properties, assets and rights of any kind, whether tangible or intangible, real or personal, owned by the Company and the Subsidiaries or in which the Company or any Subsidiary has any interest whatsoever. "Audited Financial Statements" shall mean the audited consolidated ---------------------------- balance sheets of the Company as of December 31 in each of 1993, 1994 and 1995 and the related statements of operations, changes in stockholders' equity and cash flows for each of the twelve month periods ending on such dates, in each case together with the related reports of Ernst & Young LLP. "Balance Sheet" shall mean the audited consolidated balance sheet of ------------- the Company dated the Balance Sheet Date, together with the notes thereto. "Balance Sheet Date" shall mean December 31, 1995. ------------------ "Benefit Arrangement" shall mean any employment, consulting, severance ------------------- or other similar contract, arrangement or policy (written or oral) and each plan, arrangement, program, agreement or commitment (written or oral) providing for insurance coverage (including, without limitation, any self-insured arrangements), workers' compensation, disability benefits, supplemental unem- ployment benefits, vacation benefits, retirement benefits, life, health or accident benefits (including, without limitation, any "voluntary employees' beneficiary association" as defined in Section 501(c)(9) of the Code providing for the same or other benefits) or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights, stock purchases or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan, (b) is entered into, maintained, contributed to or required to be contributed to, as the case may be, by the Company, any Subsidiary or any ERISA Affiliate or under which the Company, any Subsidiary or any ERISA Affiliate may incur any liability, and (c) covers any employee or former employee of the Company, any Subsidiary or any ERISA Affiliate (with respect to their relationship with such any entity). "Books and Records" shall mean all books, records, lists, ledgers, ----------------- files, reports, plans, drawings and operating records of the Company or the Subsidiaries including, without limitation, (a) all corporate books and records of the Company and the Subsidiaries, disk or tape files, printouts, runs or other computer-prepared information and the Company's and each Subsidiary's interest in all computer programs required to access, and the equipment containing, all such computer-based information, (b) all product, business and marketing plans, (c) all environmental control records and (d) all sales, maintenance and production records. "Books and Records" shall not include records of Seller that are not the property of the Company or any Subsidiary. 2 "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- "Commitment Letter" shall mean the commitment letter between Buyer and ----------------- Bankers Trust Company, substantially in the form previously delivered to Seller, or such other commitment letter entered into by Buyer that is in form and substance reasonably satisfactory to Seller. "Contract" shall mean any agreement, contract, lease, note, loan, -------- evidence of indebtedness, purchase order, letter of credit, franchise agreement, undertaking, covenant not to compete, employment agreement, license, instrument, obligation, commitment or purchase and sales order to which the Company or any Subsidiary is a party or which relates to the Company's or any Subsidiary's business or any of the Assets, whether oral or written, express or implied, and which pursuant to its terms has not expired, terminated or been fully performed by the parties thereto. "Employee Plans" shall mean all Benefit Arrangements, Multiemployer -------------- Plans, Pension Plans and Welfare Plans. "Encumbrance" shall mean any claim, lien, pledge, option, charge, ----------- easement, security interest, deed of trust, mortgage, right-of-way, encroachment, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof. "Environmental Claims" shall mean all written allegations, notices of -------------------- violation, liens, claims, demands, suits, or causes of action for damages, including personal injury and property damage but excluding consequential damages (except as to third parties) relating to Environmental Conditions or Environmental Laws. By way of example only, Environmental Claims include (i) damages to natural resources, (ii) claims for nuisance, (iii) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, responses or remedial actions under any Environmental Laws, (iv) requirements to implement "corrective action" pursuant to any order or permit issued pursuant to the Resource Conservation and Recovery Act, as amended, or similar provisions of applicable state law, (v) claims related to Environmental Laws or Environmental Conditions for restitution, contribution, or indemnity, (vi) fines, penalties or liens of any kind against property related to Environmental Laws or Environmental Conditions, (vii) claims related to Environmental Laws or Environmental Conditions for injunctive relief or other orders or notices of violation from federal, state or local agencies or courts, and (viii) with regard to any present or former employees, claims relating to exposure to or injury from Environmental Conditions. "Environmental Conditions" shall mean the state of the environment, ------------------------ including natural resources (e.g., flora and fauna), soil, surface water, ground water, drinking water supply, subsurface strata or ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping or threatened release of 3 Hazardous Substances by the Company or any Subsidiary, or by its agents, representatives, employees or independent contractors acting on behalf of the Company or any Subsidiary. With respect to Environmental Claims by third parties, Environmental Conditions also include the exposure of persons to Hazardous Substances at the work place or the exposure of persons or property to Hazardous Substances migrating from or otherwise emanating from or located on property owned or occupied by the Company or any Subsidiary. "Environmental Laws" shall mean all applicable federal, state, ------------------ district, local and foreign laws, all rules or regulations promulgated thereunder, and all orders, consent orders, judgments, notices, permits or demand letters issued, promulgated or entered pursuant thereto, relating to pollution or protection of the environment (including, without limitation, ambient air, surface water, ground water, land surface, or subsurface strata), including, without limitation, (i) laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, industrial materials, wastes or other substances into the environment and (ii) laws relating to the identification, generation, manufacture, processing, distribution, use, treatment, storage, disposal, recovery, transport or other handling of pollutants, contaminants, chemicals, industrial materials, wastes or other substances, in each case as in effect on the Closing Date. By way of example only, Environmental Laws include the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous Materials Transportation Act, as amended, the Resource Conservation and Recovery Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as amended, the Atomic Energy Act of 1954, as amended, the Occupational Safety and Health Act, as amended, and all analogous laws promulgated or issued by any state or other governmental authority. "Environmental Reports" shall mean (i) the seven draft reports --------------------- prepared by ICF Kaiser Engineers, Inc. in connection with their Phase I investigations of the Facilities performed in March 1996 and (ii) the Tenera Report prepared in May 1989. "ERISA" shall mean the Employee Retirement Income Security Act of ----- 1974, as amended. "ERISA Affiliate" shall mean any entity which is (or at any relevant --------------- time was) a member of a "controlled group of corporations" with, under "common control" with, or a member of an "affiliated service group" with, or otherwise required to be aggregated with, the Company or any Subsidiary as set forth in Section 414(b), (c), (m) or (o) of the Code. "Equity Securities" shall mean (i) shares of capital stock or other ----------------- equity securities, (ii) subscriptions, calls, warrants, options or commitments of any kind or character relating to, or entitling any person or entity to purchase or otherwise acquire, any capital stock or other equity securities and (iii) securities convertible into or exercisable or exchangeable for shares of capital stock or other equity securities. "Escrow Agreement" shall mean the escrow agreement, dated as of the ---------------- Closing Date, between Seller and a trust company or commercial bank selected by Seller and acceptable 4 to Buyer, as escrow agent (the "Escrow Agent"), substantially in the form of ------------ Exhibit A hereto. - ------- - "Facilities" shall mean all plants, offices, manufacturing facilities, ---------- stores, warehouses, administration buildings and all real property owned or leased by the Company or any Subsidiary on the Closing Date. "Financial Statements" shall mean the Audited Financial Statements and -------------------- the Interim Financial Statements. "Fixtures and Equipment" shall mean all of the furniture, fixtures, ---------------------- furnishings, machinery, equipment, spare parts, supplies, appliances, vehicles and other tangible personal property owned by the Company and the Subsidiaries. "Former Properties" shall mean all plants, offices, manufacturing ----------------- facilities, stores, warehouses, administration buildings and all real property owned, leased or operated by the Company or any Subsidiary prior to the Closing Date but not owned, leased or operated by the Company or any Subsidiary on or after the Closing Date. "GAAP" shall mean generally accepted accounting principles in the ---- United States of America, as in effect from time to time, consistently applied. "Hazardous Substances" shall mean all pollutants, contaminants, -------------------- chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or otherwise hazardous substances or materials (whether solids, liquids or gases) subject to regulation, control or remediation under Environmental Laws. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act ------- of 1976, as amended, and the rules and regulations promulgated thereunder. "Interim Balance Sheet" shall mean each unaudited consolidated balance --------------------- sheet of the Company dated each Interim Balance Sheet Date. "Interim Balance Sheet Date" shall initially mean February 3, 1996 and -------------------------- March 2, 1996, and from and after the date of Seller's delivery to Buyer of subsequent Interim Financial Statements pursuant to Section 5.5, the Interim Balance Sheet Date shall also mean the date of the latest such monthly balance sheet so delivered to Buyer. "Interim Financial Statements" shall mean each Interim Balance Sheet ---------------------------- and the related unaudited consolidated statements of operations, changes in stockholders' equity and cash flows for the month ended on such Interim Balance Sheet Date. "Leases" shall mean all of the leases or subleases for personal or ------ real property to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound, including, without limitation, those Leases listed on parts (b)(ii) and (c)(ii) of Schedule 5 3.7. "Material Adverse Effect" or "Material Adverse Change" shall mean (a) ----------------------- ----------------------- any material adverse effect on or change with respect to (i) the business, operations, assets, liabilities, condition (financial or otherwise) or results of operations of the Company and the Subsidiaries, taken as a whole, or (ii) the right or ability of the Company or any Subsidiary to consummate any of the transactions contemplated hereby or (b) the occurrence of any event or development that is reasonably likely to constitute a "Material Adverse Effect" or "Material Adverse Change." "Multiemployer Plan" shall mean any "multiemployer plan," as defined ------------------ in Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company, any Subsidiary or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or, after September 25, 1980, maintained, administered, contributed to or was required to contribute to, or under which the Company, any Subsidiary or any ERISA Affiliate may incur any liability and (b) covers any employee or former employee of the Company, any Subsidiary or any ERISA Affiliate (with respect to their relationship with any such entity). "National Geographic Loan Agreement" shall mean Subordinated ---------------------------------- Collateralized Loan Agreement V (Revolving Credit Loan), dated August 30, 1986, by and among Krueger Ringier, Inc. and National Geographic Society. "PBGC" shall mean the Pension Benefit Guaranty Corporation. ---- "Pension Plan" shall mean any "employee pension benefit plan" as ------------ defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (a) which the Company, any Subsidiary or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or, within the five years prior to the Closing Date, maintained, administered, contributed to or was required to contribute to, or under which the Company, any Subsidiary or any ERISA Affiliate may incur any liability (including, without limitation, any contingent liability) and (b) which covers any employee or former employee of the Company, any Subsidiary or any ERISA Affiliate (with respect to their relationship with any such entity). "Permits" shall mean all licenses, permits, franchises, approvals, ------- authorizations, consents or orders of, or filings with, or notifications to, any governmental authority, whether foreign, federal, state or local, relating to the operation of the business of the Company or any Subsidiary. "Permitted Encumbrances" shall mean (a) liens for Taxes or ---------------------- governmental charges or claims (i) not yet due and payable, (ii) due and payable but as to which no interest, fines, penalties or other charges have accrued or have been imposed, levied or assessed or (iii) being contested in good faith, if a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor, (b) statutory liens of landlords, liens of carriers, warehousepersons, mechanics and materialpersons and other liens imposed by law incurred in the ordinary course of business for sums (i) not yet due and payable, (ii) due and payable but as to which no interest, fines, penalties or other charges have accrued or have been imposed, levied or assessed or (iii) being contested in good faith, if a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor, (c) liens 6 incurred or deposits made in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations, in each case in the ordinary course of business, consistent with past practice, (d) purchase money liens incurred in the ordinary course of business, consistent with past practice, (e) easements, rights-of-way, restrictions and other charges or encumbrances, in each case, which do not materially interfere with the ordinary conduct of business of the Company or any Subsidiary and do not materially detract from the value of the property upon which such encumbrance exists and (f) the encumbrances set forth on Schedule 3.7(a). "Personnel" shall mean all directors, officers and employees of the --------- Company and the Subsidiaries. "Returns" shall mean any and all returns, reports, declarations and ------- information statements with respect to taxes required to be filed by or on behalf of the Company or any Subsidiary with any governmental authority or Tax authority or agency, whether domestic or foreign, including consolidated, combined and unitary returns and including all amendments thereof. "Securities Act" shall mean the Securities Act of 1933, as amended. -------------- "Swiss Bank Credit Agreement" shall mean the Credit Agreement, dated --------------------------- December 21, 1989, by and among the Company, Ringier America, Inc., Krueger Ringier, Inc., the lenders thereunder and Swiss Bank Corporation, New York Branch, as agent, as amended. "Tax(es)" shall mean all taxes, estimated taxes, withholding taxes, ------- assessments, levies, imposts, fees and other charges, however denominated, including any interest, penalties, additions to tax or additional amounts that may become payable in respect thereof, imposed by any foreign, federal, state or local government or taxing authority, which taxes shall include, without limitation, all income taxes, payroll and employee withholding taxes, unemployment insurance, social security, sales and use taxes, value-added taxes, excise taxes, franchise taxes, gross receipts taxes, occupation taxes, real and personal property taxes, stamp taxes, transfer taxes, workers' compensation and other obligations of the same or of a similar nature. "Value-Added" shall mean gross sales less the cost of materials, ----------- outside purchases and freight, calculated in a manner consistent with the past practices of the Company. "Welfare Plan" shall mean any "employee welfare benefit plan" as ------------ defined in Section 3(1) of ERISA, (a) which the Company, any Subsidiary or any ERISA Affiliate maintains, administers, contributes to or is required to contribute to, or under which the Company, any Subsidiary or any ERISA Affiliate may incur any liability and (b) which covers any employee or former employee of the Company, any Subsidiary or any ERISA Affiliate (with respect to their relationship with any such entity). 1.2 Other Defined Terms. In addition to the terms defined in the Recitals ------------------- to this Agreement and Section 1.1, the following terms shall have the meanings defined for such terms 7 in the Sections set forth below: Term Section ---- ------- "Act" . . . . . . . . . . . . . . . . . 5.13 "Actions" . . . . . . . . . . . . . . . 3.15 "Buyer Claim" . . . . . . . . . . . . . 9.1(a)(i) "Buyer Claim Notice" . . . . . . . . . . 9.1(a)(ii) "Buyer Deductible" . . . . . . . . . . . 9.2(c)(ii) "Buyer Party" . . . . . . . . . . . . . 9.1(a)(i) "Capital Expenditure Plan" . . . . . . . 3.6(d) "Closing" . . . . . . . . . . . . . . . 2.1 "Closing Date" . . . . . . . . . . . . . 2.1 "Common Stock" . . . . . . . . . . . . . Recitals "Confidentiality Agreement . . . . . . . 5.2 "Disclosure Schedule" . . . . . . . . . Article III Preamble "Debt Instruments" . . . . . . . . . . . 5.8 "Environmental Notice" . . . . . . . . . 9.1(c)(i) "Escrow Agent" . . . . . . . . . . . . . 1.1 "Exchange Act" . . . . . . . . . . . . . 5.13 "Income Taxes" . . . . . . . . . . . . . 9.3(a) "Indemnified Party" . . . . . . . . . . 9.1(c)(ii) "Indemnified Environmental Matter . . . 9.1(c)(ii) "Indemnifying Party" . . . . . . . . . . 9.1(c)(ii) "Laws" . . . . . . . . . . . . . . . . . 3.17 "Leased Property" . . . . . . . . . . . 3.7(b) "Losses" . . . . . . . . . . . . . . . . 9.1(a)(i) "Nytko" . . . . . . . . . . . . . . . . 5.12 "Nytko Agreement" . . . . . . . . . . . 5.12 "Nytko Guarantee" . . . . . . . . . . . 5.12 "Seller Performance Bonds" . . . . . . . 5.9 "Proposed Acquisition Transaction" . . . 5.7(a) "Proprietary Rights" . . . . . . . . . . 3.19 "Purchase Price" . . . . . . . . . . . . 2.3 "RAI Sales Commission Plan" . . . . . . 3.6(c)(iii) "SEC" . . . . . . . . . . . . . . . . . 4.8 "SEC Documents" . . . . . . . . . . . . 4.8 "Seller Claim" . . . . . . . . . . . . . 9.1(b)(i) "Seller Claim Notice" . . . . . . . . . 9.1(b)(ii) "Seller Deductible" . . . . . . . . . . 9.2(c)(i)(B) "Seller Party" . . . . . . . . . . . . . 9.1(b)(i) "Shares" . . . . . . . . . . . . . . . . Recitals "Subsidiaries" . . . . . . . . . . . . . Recitals "Third-Party Claim" . . . . . . . . . . 9.1(c)(ii) 8 ARTICLE II PURCHASE AND SALE OF THE SHARES ------------------------------- 2.1 Closing. Upon the terms and conditions set forth herein, and subject ------- to Section 10.1, the closing of the transactions contemplated herein (the "Closing") shall be held at 10:00 a.m. on the date which is the fifth business ------- day after termination or expiration of the applicable waiting period (including any extension thereof) under the HSR Act (such date, the "Closing Date"), or ------------ such other date as mutually agreed by the parties hereto, at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022. 2.2 Transfer of the Shares. Upon the terms and conditions contained ---------------------- herein, at the Closing Seller shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase and accept from Seller, all of the Shares. 2.3 Consideration for the Shares. Upon the terms and conditions contained ---------------------------- herein, as consideration for the purchase of the Shares, at the Closing Buyer shall pay to Seller $128,150,000 (the "Purchase Price"). -------------- 2.4 Deliveries at Closing. To effect the sale and purchase of the Shares --------------------- referred to in Section 2.2 and the delivery of the Purchase Price referred to in Section 2.3, Seller and Buyer shall, on the Closing Date, cause the following to occur: (a) Share Certificates; Transfer Taxes. Seller shall deliver to ---------------------------------- Buyer stock certificates evidencing the Shares, free and clear of any and all Encumbrances of any and every nature whatsoever (other than those granted in connection with the Debt Instruments set forth on part (a) of Schedule 5.8), duly endorsed in blank or accompanied by stock powers duly executed in blank, in proper form for transfer. Upon the repayment of such Debt Instruments in full in accordance with Section 5.8 and the release of all Encumbrances granted in connection therewith, the Shares shall be free and clear of any and all Encumbrances (other than those created or suffered by Buyer). Buyer and Seller shall each bear half the cost of any applicable documentary, stamp, sales, excise, transfer or other similar taxes payable in respect of the sale of the Shares. (b) Purchase Price. Buyer shall, against delivery of such -------------- certificates evidencing the Shares, deliver to Seller the Purchase Price by (i) transferring by wire transfer immediately available funds in the aggregate amount of $125,150,000 to Seller's bank account designated by Seller to Buyer at least one day prior to the Closing Date and (ii) transferring to the escrow agent under the Escrow Agreement, in accordance therewith, an aggregate amount of $3,000,000. (c) Intercompany Accounts. (i) The Company shall pay Seller --------------------- $3,000,000, representing payment in full of the intercompany account from the Company and the Subsidiaries to Seller relating to a guarantee fee under certain of the Debt Instruments and (ii) all intercompany accounts from Seller to the Company or any Subsidiary shall be repaid. 9 (d) Certificates of Amendment. Buyer and Seller shall cause each ------------------------- Subsidiary, if applicable, to amend its certificate or articles of incorporation to eliminate the word "Ringier" from its name. (e) Other Documents. Each of Seller, the Company and Buyer shall --------------- deliver all other documents, certificates, opinions of counsel and other items required to be delivered on its part pursuant to Articles VI and VII hereof. All such documents and instruments delivered to any party pursuant hereto shall be in form and substance, and shall be executed in a manner, reasonably satisfactory to such party and its counsel. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY -------------------------------------------------------- As an inducement to Buyer to enter into this Agreement, Seller and the Company hereby make the following representations and warranties to Buyer as of the date hereof. Such representations and warranties contain exceptions set forth in a written disclosure schedule (the "Disclosure Schedule") attached ------------------- hereto, which is numbered to correspond to the various sections of this Agreement and which sets forth certain exceptions to the representations and warranties contained in this Article III and certain other information called for by this Agreement. Unless otherwise specified, (1) each reference in this Agreement to any numbered schedule is a reference to that numbered schedule which is included in the Disclosure Schedule and (2) no disclosure made in any particular numbered schedule of the Disclosure Schedule with respect to any representation and warranty herein shall be deemed to have been disclosed in any other numbered schedule of the Disclosure Schedule (and, therefore, no such disclosure shall be deemed to modify any such other representation and warranty herein) unless, and only to the extent that, it is apparent on the face of such disclosure that such disclosure contains information which also modifies another representation and warranty herein. 3.1 Ownership of the Shares. Seller owns of record and beneficially all ----------------------- of the Shares, free and clear of any and all Encumbrances other than those granted in connection with the Debt Instruments. 3.2 Organization and Authorization of Seller. Seller is duly organized ---------------------------------------- and validly existing as a corporation under the laws of Switzerland. Seller has all necessary corporate power and authority to, and has taken all corporate action on its part necessary to, execute and deliver this Agreement and each Ancillary Agreement to which it is or will be a party, consummate the trans- actions contemplated hereby and thereby and perform its obligations hereunder and thereunder, and no other corporate proceedings on the part of Seller are necessary to authorize this Agreement or any such Ancillary Agreement and the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by Seller and is a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as the enforceability thereof may be limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors' rights generally or (b) general principles of equity, whether considered in a proceeding at law or in equity. Each Ancillary Agreement which has been or shall be executed and delivered by Seller in connection with the transactions contemplated hereby has been (or will be) duly authorized, executed and delivered by Seller and is (or will be when authorized, executed and delivered) a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as the enforceability thereof may be limited by (i) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors' rights generally or (ii) general principles of equity, whether 10 considered in a proceeding at law or in equity. 3.3 Organization and Capitalization of the Company ---------------------------------------------- (a) Organization. The Company is duly organized, validly existing ------------ and in good standing under the laws of the State of Delaware and has all necessary corporate power and authority to conduct its business as it is pre- sently being conducted and to own and lease its Assets. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is necessary under applicable law as a result of the conduct of its business or the ownership of its properties except where the failure to be so qualified and in good standing would not have a Material Adverse Effect. The Company has delivered or made available to Buyer true, correct and complete copies of the certificate of incorporation and bylaws of the Company (in each case, as amended to date). The Company is not in default under or in violation of any provision of its certificate of incorporation or bylaws. (b) Capitalization. The Company's authorized capital stock consists -------------- solely of 100 shares of Common Stock, all of which 100 shares are issued and outstanding. All of the Shares have been duly authorized and validly issued and are fully paid and non-assessable, were issued and sold in compliance with the federal and applicable state securities laws and were not issued in violation of any preemptive or other similar rights. Except as set forth in this Section 3.3(b), there are no (i) outstanding Equity Securities of the Company or (ii) commitments or obligations of any kind or character for (A) the issuance of Equity Securities of the Company or (B) the repurchase, redemption or other acquisition of any Equity Securities of the Company. (c) Voting Trusts, Proxies, Etc. There are no shareholder ---------------------------- agreements, voting trusts, proxies or other agreements or understandings with respect to or concerning the purchase, sale or voting of the Equity Securities of the Company. 3.4 Authorization. The Company has all necessary corporate power and ------------- authority to, and has taken all corporate action necessary on the part of the Company to, execute and deliver this Agreement and each Ancillary Agreement to which it is or will be a party, consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or any such Ancillary Agreement and the transactions contemplated hereby or thereby. This Agreement has been duly executed and delivered by the Company and is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in 11 effect which affect the enforcement of creditors' rights generally or (b) general principles of equity, whether considered in a proceeding at law or in equity. Each Ancillary Agreement which has been or shall be executed and delivered by the Company in connection with the transactions contemplated hereby has been (or will be) duly authorized, executed and delivered by the Company and is (or will be when authorized, executed and delivered) a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by (i) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors' rights generally or (ii) general principles of equity, whether considered in a proceeding at law or in equity. 3.5 Subsidiaries ------------ (a) Ownership; Capitalization. Ringier America, Inc., Krueger ------------------------- Ringier, Inc., Ringier Holdings, Inc., Ringier Print U.S., Inc. and W.A. Krueger Co. Olathe are the Company's only subsidiaries, and the Company has no investments in (whether through the acquisition of an equity interest, the making of a loan or advance or otherwise) any other person. The Company is the beneficial owner of all of the outstanding shares of capital stock of each of the Subsidiaries, in each case, free and clear of any and all Encumbrances other than those granted in connection with the Debt Instruments. The authorized, issued and outstanding capital stock, and the record ownership of all such shares of capital stock, of each Subsidiary (other than W.A. Krueger Co. Olathe) is as set forth on part (a) of Schedule 3.5. All of the shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable, were issued and sold in compliance with the federal and applicable state securities laws and were not issued in violation of any preemptive or other similar rights. Except as set forth in this Section 3.5(a), there are no (i) outstanding Equity Securities of any Subsidiary or (ii) commitments or obligations of any kind or character for (A) the issuance of Equity Securities by any Subsidiary or (B) the repurchase, redemption or other acquisition of any Equity Securities of any Subsidiary. There are no shareholder agreements, voting trusts, proxies or other agreements or understandings with respect to or concerning the purchase, sale or voting of the Equity Securities of any Subsidiary. (b) Organization. Each Subsidiary is duly organized, validly ------------ existing and in good standing under the laws of its respective state of incorporation and has all necessary corporate power and authority to conduct its business as it is presently being conducted and to own and lease its Assets. Each Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is necessary under applicable law as a result of the conduct of its business or the ownership of its properties except where the failure to be so qualified and in good standing would not have a Material Adverse Effect. Each jurisdiction in which each Subsidiary is qualified to do business as a foreign corporation is listed on part (b) of Schedule 3.5. The Company has delivered or made available to Buyer true, correct and complete copies of each Subsidiary's certificate or articles of incorporation and bylaws (in each case, as amended to date). No Subsidiary is in default under or in violation of any provision of its certificate or articles of incorporation or bylaws. (c) Authorization. Each Subsidiary has all necessary corporate power ------------- and 12 authority to, and has taken all corporate action (if any) necessary on its part to, consummate the transactions contemplated hereby, and no other corporate proceedings on the part of any Subsidiary are necessary to authorize the transactions contemplated hereby. 3.6 Absence of Certain Changes or Events. Since the Balance Sheet Date, ------------------------------------ there has been no Material Adverse Change. Except, with respect to the period of time between the date of this Agreement and the Closing Date, as permitted pursuant to Section 5.1, and except for the repayment of the Debt Instruments on the Closing Date in accordance with the provisions hereof, since the Balance Sheet Date, the Company and the Subsidiaries have been operated in the ordinary course of business, consistent with past practice. Without limiting the generality of the foregoing, except, with respect to the period of time between the date of this Agreement and the Closing Date, as permitted pursuant to Section 5.1, and except for the repayment of the Debt Instruments on the Closing Date in accordance with the provisions hereof, since the Balance Sheet Date neither the Company nor any Subsidiary has: (a) sold, assigned, leased or transferred any of the Assets, material singly or in the aggregate, other than Assets sold or disposed of in the ordinary course of business, consistent with past practice, to persons who are not Affiliates of the Company or any Subsidiary; (b) canceled, terminated, amended, modified or waived any material term of any Contract to which it is a party or by which it or any of the Assets is bound, which Contract provided for, during the fiscal year ended December 31, 1995, aggregate annual Value-Added in excess of $800,000 to the Company and the Subsidiaries; (c) (i) increased the compensation payable or to become payable to any of its directors or officers, (ii) increased the base compensation payable or to become payable to any of the Personnel (other than directors or officers), except for normal periodic increases in such base compensation in the ordinary course of business, consistent with past practice, (iii) increased the sales commission rate payable or to become payable to any of the Personnel (other than directors or officers), other than in accordance with the Ringier America, Inc. Sales Incentive Compensation Plan, a copy of which has been delivered or made available to Buyer (the "RAI Sales Commission Plan") (iv) granted, made or ------------------------- accrued any loan, bonus, fee, incentive compensation (excluding sales commissions), service award or other like benefit, contingently or otherwise, to or for the benefit of any of the Personnel, except pursuant to the Employee Plans described on Schedule 3.20, (v) adopted, amended or caused or suffered any addition to or modification of any Employee Plan (other than any Employee Plan referred to in clause (vii) of this paragraph), other than (A) contributions made in the ordinary course of business, consistent with past practice or (B) the extension of coverage to any of the Personnel who became eligible after the date of this Agreement, (vi) granted any additional stock options or performance unit grants or other interest under any Employee Plan, (vii) entered into any new (A) employment or (B) consulting agreement providing for annual payments of $100,000 or more over the life of such consulting agreement, or caused or suffered any written or oral termination, cancellation or amendment of any such employment or consulting agreement to which it is a party (except with respect to any employee at will without a written agreement), (viii) entered into any collective bargaining agreement or caused or suffered any termination or 13 amendment of any collective bargaining agreement to which it is a party or (ix) with respect to any stockholder, any other Affiliate or any Affiliate of any stockholder, granted, made or accrued any payment or distribution or other like benefit, contingently or otherwise, or otherwise transferred Assets, including, but not limited to, any payment of principal of or interest on any debt owed to any such stockholder or Affiliate, other than (A) any transactions involving less than $100,000 in the aggregate, (B) any transactions between or among Seller and any of its subsidiaries, in the ordinary course of business and on an arms' length basis and (C) any transactions among the Company and the Subsidiaries; (d) made any capital expenditure or commitment to make any capital expenditure except in accordance with the Company's 1995 and 1996 capital expenditure plans (collectively, the "Capital Expenditure Plan"), true, correct ------------------------ and complete copies of which have been delivered to Buyer; (e) executed any Lease for real property or any Lease for personal property involving annual payments in excess of $120,000, or incurred any liability therefor; (f) made any payments or given any other consideration to customers or suppliers, other than (i) payments under, and in accordance with the terms of, Contracts in effect on the date hereof, (ii) signing bonuses to customers in the ordinary course of business, consistent with past practice, not to exceed $50,000 individually and $200,000 in the aggregate and (iii) other payments in the ordinary course of business, consistent with past practice, not to exceed $100,000 individually and, together with those payments set forth in clause (ii), $500,000 in the aggregate; (g) changed its accounting methods, principles or practices, including, without limitation, any change in the application or interpretation of GAAP; (h) suffered any damage, destruction or casualty loss (whether or not covered by insurance) affecting its physical properties that exceeded $100,000 in any one instance; (i) (i) issued or sold, or entered into any agreement obligating it to issue or sell, (ii) declared, set aside for payment or paid dividends or distributions in respect of, or (iii) directly or indirectly redeemed, purchased or otherwise acquired, or split, combined, reclassified or otherwise adjusted, any Equity Securities; (j) (i) incurred any indebtedness for borrowed money or entered into any commitment to borrow money, except pursuant to the Tranche C of the Swiss Bank Credit Agreement for working capital purposes or the National Geographic Loan Agreement for capital expenditures or working capital purposes, in each case, in the ordinary course of business, consistent with past practice, or (ii) incurred any obligations for any performance bonds, payment bonds, bid bonds, surety bonds, letters of credit, guarantees or similar instruments, other than any such obligations that are not material either individually or in the aggregate, in the ordinary course of business, consistent with past practice; (k) paid, discharged or satisfied any liability other than (i) the repayment of 14 the Debt Instruments on the Closing Date in accordance with provisions hereof and (ii) any such payment, discharge or satisfaction in the ordinary course of business, consistent with past practice, of (A) liabilities reflected or reserved against on the Balance Sheet or on any Interim Balance Sheet or incurred subsequent thereto in the ordinary course of business, consistent with past practice, or (B) liabilities under, and in accordance with the terms of, any Contracts, Permits and other commitments set forth on the Disclosure Schedule or under Contracts, Permits and other commitments which are not required to be disclosed on the Disclosure Schedule; (l) except as provided in Section 2.4(d), changed or amended its certificate or articles of incorporation or bylaws; (m) (i) acquired (by merger, consolidation, acquisition of stock, other securities or assets or otherwise), (ii) made a capital investment (whether through the acquisition of an equity interest, the making of a loan or advance or otherwise) in or (iii) guaranteed indebtedness for borrowed money of, (A) any person or (B) any portion of the assets of any person that constitutes a division or operating unit of such person; (n) mortgaged or pledged, or otherwise made or suffered any Encumbrance (other than any Permitted Encumbrance) on, any material Asset or group of Assets that are material in the aggregate; (o) revalued any of the Assets, including, without limitation, any write-off of notes or accounts receivable or any increase in any reserve, involving in excess of $100,000 individually or $500,000 in the aggregate (such amounts to be calculated without netting any decrease); (p) canceled, waived or released any right or claim (or series of related rights or claims), other than as set forth in (o), involving in excess of $100,000 individually or $500,000 in the aggregate; or (q) entered into any Contract to do any of the foregoing. 3.7 Title to Assets; Absence of Liens and Encumbrances; Leases. ----------------------------------------------------------- (a) General. The Company and the Subsidiaries own or lease all ------- Assets, necessary for the conduct of the business of the Company and the Subsidiaries as presently conducted, and the Assets in the aggregate are in such operating condition and repair as is necessary for the conduct of the business of the Company and the Subsidiaries as presently conducted. (b) Real Property ------------- (i) Owned Real Property. Part (b)(i) of Schedule 3.7 hereto ------------------- sets forth all Facilities owned by the Company and the Subsidiaries. With respect to each parcel of owned real property (A) either the Company or a Subsidiary has good and marketable title to such parcel of real property, free and clear of any and all Encumbrances other 15 than Permitted Encumbrances, (B) there are no leases, subleases, licenses, options, rights, concessions or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of such parcel of real property, (C) there are no outstanding options or rights of first refusal in favor of any other party to purchase any such parcel of real property or any portion thereof or interest therein, (D) there are no parties (other than the Company and the Subsidiaries) who are in possession of or who are using any such parcel of real property, (E) each such parcel of real property abuts on or has direct, permanent vehicular access to a public road and (F) there is no (1) pending or, to the best knowledge of the Company and Seller, threatened condemnation proceeding relating to such parcel of real property, (2) pending or, to the best knowledge of the Company and Seller, threatened Action relating to such parcel of real property or (3) to the best knowledge of the Company and Seller, other matter that is reasonably likely to affect the current use, occupancy or value of such parcel of real property in any material respect. The Company does not hold any option, right of first refusal or similar right to purchase any additional parcel of real property or any portion thereof or interest therein. No representation or warranty is made in this Section 3.7(a)(i) with respect to the matters covered in Section 3.26 (Compliance with Environmental Laws). (ii) Leased Real Property. Part (b)(ii) of Schedule 3.7 sets -------------------- forth all leases pursuant to which Facilities are leased by the Company or any Subsidiary (as lessee), true and correct copies of which have been delivered or made available to Buyer. Such leases constitute all leases, subleases or other occupancy agreements pursuant to which the Company or any Subsidiary occupies or uses Facilities. The Company or a Subsidiary has good and valid leasehold title to, and enjoys peaceful and undisturbed possession of, all leased property described in such leases (the "Leased ------ Property"), free and clear of any and all Encumbrances other than any -------- Permitted Encumbrances which would not permit the termination of the lease therefor by the lessor. With respect to each such parcel of Leased Property (A) there are no pending or, to the best knowledge of the Company and Seller, threatened condemnation proceedings relating to, or any pending or, to the best knowledge of the Company and Seller, threatened Actions relating to, such Leased Property, (B) none of the Company, any Subsidiary or Seller or, to the best knowledge of each of them, any third party has entered into any sublease, license, option, right, concession or other agreement or arrangement, written or oral, granting to any person (other than the Company or any Subsidiary) the right to use or occupy such Leased Property or any portion thereof or interest therein and (C) none of the Company, any Subsidiary or Seller has received written notice of any pending or, to the best knowledge of the Company and Seller, threatened special assessment relating to such Leased Property or otherwise has any knowledge of any pending or threatened special assessment relating thereto. (c) Personal Property. Part (c) of Schedule 3.7 identifies all ----------------- Fixtures and Equipment, vehicles and other similar tangible personal property Assets with a book value of at least $50,000 owned or leased by the Company or any Subsidiary as of December 31, 1995. (i) Owned Personal Property. Each of the Company and each ----------------------- 16 Subsidiary has good and marketable title to all such personal property owned by it, free and clear of any and all Encumbrances other than Permitted Encumbrances. With respect to each such item of personal property (A) there are no leases, subleases, licenses, options, rights, concessions or other agreements, written or oral, granting to any party or parties the right of use of any portion of such item of personal property, (B) there are no outstanding options or rights of first refusal in favor of any other party to purchase any such item of personal property or any portion thereof or interest therein and (C) there are no parties (other than the Company and the Subsidiaries) who are in possession of or who are using any such item of personal property; (ii) Leased Personal Property. Each of the Company and each ------------------------ Subsidiary has good and valid leasehold title to all of such Fixtures and Equipment, vehicles and other tangible personal property Assets leased by it from third parties, free and clear of any and all Encumbrances other than Permitted Encumbrances which would not permit the termination of the lease therefor by the lessor. Part (ii) of schedule 3.7(c) sets forth all Leases for personal property involving annual payments in excess of $120,000, true and correct copies of which have been delivered or made available to Buyer. With respect to each such Lease (A) there has been no material default under any such Lease by the Company or any Subsidiary or, to the best knowledge of the Company and Seller, by any other party, (B) the execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby will not cause a material default under any such Lease, (C) such Lease is a valid and binding obligation of the Company and/or the Subsidiary party thereto, is in full force and effect with respect to the Company and/or the Subsidiary party thereto and is enforceable against the Company and/or the Subsidiary party thereto in accordance with its terms, except as the enforceability thereof may be limited by (1) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors' rights generally or (2) general principles of equity, whether considered in a proceeding at law or in equity, (D) no action has been taken by the Company or any Subsidiary and no event has occurred which, with notice or lapse of time or both, would permit termination, modification or acceleration by a party thereto other than the Company or any Subsidiary, without the consent of the Company or any Subsidiary, under any such Lease that is material to the Company and its Subsidiaries, taken as a whole, (E) no party has repudiated in writing any term thereof or threatened in writing to terminate, cancel or not renew any such Lease that is material to the Company and its Subsidiaries, taken as a whole, (F) neither the Company nor any Subsidiary has assigned, transferred, conveyed, mortgaged or encumbered any interest therein or in any leased property subject thereto (or any portion thereof) and (G) there are no pending or, to the best knowledge of the Company and Seller, threatened condemnation proceedings or actions relating to the leased property subject thereto (or any portion thereof). 3.8 Contracts and Commitments ------------------------- (a) Schedule 3.8 sets forth a complete and accurate list of all Contracts in the following categories as of the date hereof (except to the extent that any such category specifies 17 a different date, in which case such corresponding list is made as of such specified date): (i) each Contract (or group of related Contracts) for the furnishing of services by the Company and/or any Subsidiary which provided for, during the fiscal year ended December 31, 1995, aggregate Value-Added of more than $800,000 to the Company and the Subsidiaries; (ii) each Contract (or group of related Contracts) concerning a partnership or joint venture with, or any other investment in (whether through the acquisition of an equity interest, the making of a loan or advance or otherwise), any other person; (iii) each Contract (or group of related Contracts) (A) under which the Company or any Subsidiary has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness for borrowed money, (B) constituting a capitalized lease obligation, (C) under which the Company or any Subsidiary has granted (or may grant) a security interest or lien on any Assets that are material singly or in the aggregate or (D) under which the Company or any Subsidiary has incurred any obligations for any performance bonds, payment bonds, bid bonds, surety bonds, letters of credit, guarantees or similar instruments; (iv) each Contract (or group of related Contracts) concerning confidentiality regarding the Proprietary Rights; (v) other than those Contracts set forth on Schedules 3.16 and 3.20, each Contract (or group of related Contracts) with any stockholder, director, officer or sales representative, any other Affiliate of the Company or any Subsidiary or, to the best knowledge of the Company and Seller, any member of any such person's immediate family, including, without limitation, (A) Contracts to employ or terminate such officers or sales representatives and other Contracts with present or former stockholders, directors or officers or other corporate Personnel or sales Personnel of the Company or any Subsidiary (except with respect to any employee at will without a written agreement) or (B) Contracts that will result in the payment by Buyer, the Company or any Subsidiary of, or the creation of any commitment or obligation (absolute or contingent) of Buyer, the Company or any Subsidiary to pay, any severance, termination, "golden parachute" or other similar payments to any present or former officers or sales representatives following termination of employment or otherwise as a result of the consummation of the transactions contemplated hereby; (vi) each Contract (or group of related Contracts), other than any Contract set forth on Schedule 3.8 pursuant to any other clause of this Section 3.8, the consequences of a default or termination under which would have a Material Adverse Effect; 18 (vii) each Contract (or group of related Contracts), including, without limitation, open purchase orders, for the purchase or sale of raw materials, commodities, supplies, products or other property providing for payments in excess of $1,000,000 over the life of such Contract (or group of related contracts), except for open purchase orders for the purchase of paper and ink that are cancelable on not more than 30 days' notice by the Company or any Subsidiary without material penalty or material increased cost; (viii) each distribution, franchise, license, commission, consulting agency or advertising Contract related to the Assets or the business involving annual payments in excess of $100,000, except for such Contracts that are cancelable on not more than 30 days' notice by the Company or any Subsidiary without penalty or increased cost; (ix) each Contract (or group of related Contracts) containing covenants restraining or limiting the freedom of the Company, any Subsidiary or any officer, director, stockholder or Affiliate thereof to engage in any line of business or compete with any person including, without limitation, by restraining or limiting the right to solicit customers; (x) each option with respect to any real property or any material personal property, whether the Company or a Subsidiary is the grantor or grantee thereunder; (xi) each Contract (or group of related Contracts) with the United States, state or local government or any agency or department thereof; and (xii) each other Contract (or group of related Contracts) not entered into in the ordinary course of business, consistent with past practice, except for such Contracts involving annual payments of less than $100,000 individually and $250,000 in the aggregate and except for such Contracts that are cancelable on not more than 30 days' notice by the Company or any Subsidiary without material penalty or material increased cost. The Company has delivered or made available to Buyer a true and correct copy of each written Contract listed in Schedule 3.8. (b) Absence of Breaches or Defaults in General. With respect to each ------------------------------------------ Contract set forth on or described in Schedule 3.8, (i) there has been no material default under any such Contract by the Company or any Subsidiary or, to the best knowledge of the Company and Seller, by any other party, (ii) the execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby will not cause a material default under any such Contract; (iii) such Contract is a valid and binding obligation of the Company and/or the Subsidiary party thereto, is in full force and effect with respect to the Company and/or the Subsidiary party thereto and is enforceable against the Company and/or the Subsidiary party thereto in accordance with its terms, except as the enforceability thereof may be limited by (A) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of 19 creditors' rights generally or (B) general principles of equity, whether considered in a proceeding at law or in equity; (iv) no action has been taken by the Company or any Subsidiary and no event has occurred which, with notice or lapse of time or both, would permit termination, modification or acceleration by a party thereto other than the Company or any Subsidiary (without the consent of the Company or any Subsidiary) under any such Contract that is material to the Company and its Subsidiaries, taken as a whole; and (v) no party has repudiated in writing any term thereof or threatened in writing to terminate, cancel or not renew any such Contract that is material to the Company and its Subsidiaries, taken as a whole. 3.9 Permits. The Company and the Subsidiaries have all material Permits ------- required to own and lease their properties, the Assets and the Facilities and to conduct their business as currently being conducted. All such Permits are valid and in full force and effect and are listed on Schedule 3.9. Neither the Company nor any Subsidiary has violated any such Permits in any material respect, and each is in compliance with all such Permits in all material respects. None of the Company, any Subsidiary or Seller has received any written notice to the effect that, or otherwise has any knowledge that, (a) the Company or any Subsidiary is not currently in compliance with, or is in violation of, any such Permits in any material respect or (b) any currently existing circumstances are likely to result in a failure of the Company or any Subsidiary to comply with, or in a violation by the Company or any Subsidiary of, any such Permits in any material respect. No representation or warranty is made in this Section 3.9 with respect to the matters covered in Section 3.26 (Compliance with Environmental Laws). 3.10 No Conflict or Violation. Neither the execution, delivery and ------------------------ performance of this Agreement and the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby, by the Company or Seller will result in (a) a violation of or a conflict with any provision of the certificate or articles of incorporation or bylaws of the Company or any Subsidiary, (b) a breach of, or a default under, or the creation of any right of any party to accelerate, terminate or cancel pursuant to (including, without limitation, by reason of the failure to obtain a consent or approval under any such Contract), any term or provision of any Contract, Encumbrance or Permit to which the Company, any Subsidiary or Seller is a party or by which any of the Assets are bound, which breach, default or creation of any such right would have a Material Adverse Effect, (c) a material violation by the Company, any Subsidiary or Seller of any statute, rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or award applicable to the Company, any Subsidiary or Seller or (d) an imposition of any Encumbrance (other than Permitted Encumbrances and Encumbrances created or suffered by Buyer) on the business of the Company or any Subsidiary or on any of the Assets. 3.11 Governmental Consents and Approvals. No consent, waiver, agreement, ----------------------------------- approval or authorization of, or declaration, filing, notice or registration to or with, any federal, state, local or foreign governmental or regulatory authority or body is required to be made or obtained by the Company, any Subsidiary or Seller in connection with the execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby other than (a) filings required in connection with or in compliance with the provisions of the HSR Act or (b) those set forth on Schedule 3.11. 20 3.12 Financial Statements, etc. The Company has heretofore delivered to ------------------------- Buyer the Financial Statements. The Financial Statements (a) are in accordance with the books and records of the Company, (b) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby (except, with respect to the Interim Financial Statements, for the absence of footnotes thereto) and (c) present fairly and accurately in accordance with GAAP (except, with respect to the Interim Financial Statements, as set forth on Schedule 3.12) the Assets, liabilities (including, without limitation, all reserves) and financial condition of the Company and the Subsidiaries as of the respective dates thereof and the results of operations, stockholders' equity and cash flows for the periods covered thereby (except, with respect to the Interim Financial Statements, subject to normal year-end adjustments and the presentation of general, selling and administrative expenses therein). 3.13 Undisclosed Liabilities. Neither the Company nor any Subsidiary has ----------------------- any liabilities, obligations or commitments of any nature (whether known or unknown, absolute or contingent, liquidated or unliquidated, due or to become due, accrued or unaccrued, matured or unmatured) other than (a) liabilities which are reflected and reserved against on the Balance Sheet (in each case including, without limitation, in the notes thereto) which have not been paid or discharged since the date thereof, (b) liabilities arising under any Contracts, Permits, and other commitments disclosed in the Disclosure Schedule (and under those Contracts, Permits and other commitments which are not required to be disclosed on the Disclosure Schedule), (c) liabilities incurred since the Balance Sheet Date in the ordinary course of business, consistent with past practice (none of which relates to any breach of Contract, breach of warranty, tort, infringement or violation of law), (d) liabilities specifically disclosed elsewhere on the Disclosure Schedule, (e) liabilities which would have been disclosed in the Disclosure Schedule with respect to another representation or warranty but which were not so disclosed because the terms of such representation or warranty did not require such disclosure and (f) other liabilities and obligations which, individually or in the aggregate, do not exceed $150,000. None of the liabilities described in clause (c) of the preceding sentence would have, individually or in the aggregate, a Material Adverse Effect. 3.14 Corporate Records. The corporate records of the Company have been ----------------- delivered or made available to Buyer. 3.15 Litigation. There is no outstanding order, writ, injunction, judgment ---------- or decree by any court or governmental authority or any action, claim, suit, litigation, proceeding, labor dispute (other than immaterial grievances) or any arbitration in any court or before any governmental authority or any audit or investigation by any governmental authority (collectively, "Actions") pending ------- or, to the best knowledge of the Company and Seller, threatened (a) against (i) the Company, any Subsidiary or the Assets (including, without limitation, relating to the transactions contemplated hereby), (ii) any director, officer or stockholder of the Company or any Subsidiary in their capacity as such or (iii) any Employee Plan (other than a Multiemployer Plan) of the Company or any Subsidiary or (b) in which the Company or any Subsidiary is a plaintiff (including, without limitation, any derivative suits brought by or on behalf of the Company or any Subsidiary) where the amount disputed with respect to any such Action exceeds $50,000, and neither the Company nor Seller has knowledge of any event or development that is likely to result in any such Action. No representation or warranty is made in this Section 21 3.15 with respect to the matters covered in Section 3.26 (Compliance with Environmental Laws). 3.16 Labor Matters. Neither the Company nor any Subsidiary is a party to ------------- any labor agreement with respect to any of its employees with any labor organization, union, group or association and there are no employee unions (nor any other similar labor or employee organizations) under local statutes, custom or practice. In the past five years, neither the Company nor any Subsidiary has been approached by organized labor or its representatives making an effort to cause the Company or any Subsidiary to conform to demands of organized labor relating to any of its employees or to enter into a binding agreement with organized labor that would cover any of the employees of the Company or any Subsidiary. There is no labor strike, slow-down or other work stoppage or labor disturbance pending or, to the best knowledge of the Company and Seller, threatened against the Company or any Subsidiary nor is any material grievance currently being asserted, and in the past five years neither the Company nor any Subsidiary has experienced a strike, slow-down or other work stoppage or other labor disturbance or difficulty. The Company and each Subsidiary is in compliance in all material respects with all applicable laws respecting employment practices, employee documentation, terms and conditions of employment and wages and hours and is not and has not engaged in any unfair labor practice. There is no unfair labor practice charge or complaint against the Company or any Subsidiary pending before the National Labor Relations Board or any other domestic or foreign governmental agency arising out of the conduct of its business, and there are no facts or information which would give rise thereto. 3.17 Compliance with Law. Each of the Company and each Subsidiary has not ------------------- violated and is in compliance with (a) all applicable laws, statutes, ordinances, regulations, rules and orders of every federal, state, local or foreign government and every federal, state, local or foreign court or other governmental agency, department, authority or instrumentality and (b) every judgment, decision, decree or order of any court or governmental agency, depart- ment, authority or instrumentality (collectively, "Laws"), relating to the ---- Assets, business or operations of the Company and the Subsidiaries, except to the extent that any such violation or failure to comply is likely to result in losses, liabilities, obligations, damages, costs or expenses (including, without limitation, fines and penalties) of less than $100,000 singly or $500,000 in the aggregate. None of the Company, any Subsidiary or Seller has received any written notice to the effect that, or otherwise has any knowledge that, any currently existing circumstances are reasonably likely to result in a failure of the Company or any Subsidiary to comply with, or a violation by the Company or any Subsidiary of, any Laws, which such failure to comply or violation would be reasonably likely to result in losses, liabilities, obligations, damages, costs or expenses (including, without limitation, fines and penalties) in excess of $100,000 singly or $500,000 in the aggregate. No representation or warranty is made in this Section 3.17 with respect to compliance with Laws relating to the matters covered in Sections 3.15 (Labor Matters), 3.20 (Employee Plans), 3.22 (Tax Matters) and 3.26 (Compliance with Environmental Laws). 3.18 No Brokers. Other than Allen & Company Incorporated, none of Seller, ---------- the Company, any Subsidiary or any of their respective officers, directors, employees, stockholders or other Affiliates has employed or made any agreement with any broker, finder or similar agent or any person or firm to pay any finder's fee, brokerage fee or commission or similar payment 22 in connection with the transactions contemplated hereby. 3.19 Proprietary Rights. Schedule 3.19 lists all federal, state and ------------------ foreign registrations of patents, trademarks, trade names or other trade rights and copyrights and all pending applications for any such registrations that are owned by the Company or either of its Subsidiaries or in which the Company or either of its Subsidiaries has any interest, or that are being used in connection with, or relate to, the business of the Company and its Subsidiaries (collectively, the "Proprietary Rights"). The Company has delivered or made ------------------ available to Buyer true, correct and complete copies of each registration, application and other document relating to the Proprietary Rights set forth on Schedule 3.19. The Company and each Subsidiary owns, or possesses adequate and enforceable licenses or other rights to use, all Proprietary Rights used in or necessary for its business as it is currently conducted, except where the failure to own or possess such licenses or other rights would not, individually or in the aggregate, have a Material Adverse Effect, and such ownership and licenses will not cease to be valid and in full force and effect in any material respect by reason of the execution, delivery and performance of this Agreement and the Ancillary Agreements or the consummation of the transactions contemplated hereby and thereby. No other firm, corporation, association or person (a) has notified the Company or any Subsidiary that it is claiming any ownership of or right to use such Proprietary Rights or (b) to the best knowledge of the Company and Seller, has interfered with, infringed upon or otherwise come into conflict with any such Proprietary Rights in any material respect. The conduct of the business of the Company and the Subsidiaries as currently conducted does not conflict with, interfere with, infringe upon or otherwise violate the rights of any third party in or to valid patents, trademarks, trade names or copyrights in any material respect, and neither the Company nor any Subsidiary has received any written notice of any such conflict, infringement or violation. 3.20 Employee Plans -------------- (a) Disclosure; Delivery of Copies of Relevant Documents and Other -------------------------------------------------------------- Information. Schedule 3.20 contains a complete list of Employee Plans. True - ----------- and complete copies of each of the following documents have been delivered or made available by Seller and the Company to Buyer: (i) each Employee Plan (and, if applicable, related trust agreements) which covers or has covered employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary) and all amendments thereto, all summary plan descriptions, summary of material modifications (as defined in ERISA), annuity contracts or other funding instruments, the number of and a general description of the level of employees covered by each Benefit Arrangement and a complete description of any Employee Plan which is not in writing, (ii) the most recent determination letter issued by the Internal Revenue Service and any opinion letter issued by the Department of Labor with respect to each Pension Plan and each voluntary employees' beneficiary association as defined under Section 501(c)(9) of the Code (other than a Multiemployer Plan) which covers or has covered employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary), (iii) for the three most recent plan years, Annual Reports on Form 5500 Series required to be filed with any governmental agency for each Pension Plan or Welfare Plan which covers or has covered employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary), (iv) all actuarial reports prepared for the last three plan years for 23 each Pension Plan which covers or has covered employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary), and (v) a description setting forth the amount of any liability of the Company or any Subsidiary as of the Closing Date for payments more than thirty (30) calendar days past due with respect to each Welfare Plan which covers or has covered employees or former employees of the Company or any Subsidiary. (b) Representations. Seller and the Company represent and warrant as --------------- follows: (i) Pension Plans ------------- (A) No "accumulated funding deficiency" (for which an excise tax is due or would be due in the absence of a waiver) as defined in Section 412 of the Code or as defined in Section 302(a)(2) of ERISA, whichever may apply, has been incurred with respect to any Pension Plan with respect to any plan year, whether or not waived. None of the Company, any Subsidiary or any ERISA Affiliate has failed to pay when due any "required installment," within the meaning of Section 412(m) of the Code and Section 302(e) of ERISA, whichever may apply, with respect to any Pension Plan. None of the Company, any Subsidiary or any ERISA Affiliate is subject to any lien imposed under Section 412(n) of the Code or Section 302(f) of ERISA, whichever may apply, with respect to any Pension Plan. None of the Company, any Subsidiary or any ERISA Affiliate has any liability for unpaid contributions with respect to any Pension Plan that is not reflected on the Balance Sheet. (B) None of the Company, any Subsidiary or any ERISA Affiliate is required to provide security to a Pension Plan which covers or has covered employees or former employees of the Company or any Subsidiary under Section 401(a)(29) of the Code. (C) The Company, a Subsidiary or an ERISA Affiliate has paid all premiums (and interest charges and penalties for late payment, if applicable) due the PBGC with respect to each Pension Plan for each plan year thereof for which such premiums are required. None of the Company, any Subsidiary or any ERISA Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Section 4069 of ERISA. There has been no "reportable event" (as defined in Section 4043(b) of ERISA and the PBGC regulations under such Section) with respect to any Pension Plan, other than those events to which the PBGC has waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such events. No filing has been made by the Company, any Subsidiary or any ERISA Affiliate with the PBGC, and no proceeding has been commenced by the PBGC, to terminate any Pension Plan. To the best knowledge of the Company and Seller and except for the transactions contemplated by this Agreement, no condition exists and no event has occurred that could constitute grounds for the termination of any Pension Plan by the PBGC. None of the Company, any Subsidiary or any 24 ERISA Affiliate has, at any time, (1) ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA, (2) withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA, or (3) ceased making contributions on or before the Closing Date to any Pension Plan subject to Section 4064(a) of ERISA to which the Company, any Subsidiary or any ERISA Affiliate made contributions during the six years prior to the Closing Date. (D) Each Pension Plan and each related trust agreement, annuity contract or other funding instrument which covers or has covered employees or former employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary) has received a favorable determination letter from the Internal Revenue Service relating to such Pension Plan's qualified status and each related trust's tax-exempt status under the provisions of Code Sections 401(a) and 501(a), respectively, and to the knowledge of the Company, no event or condition exists or has occurred that could adversely affect such qualified and tax-exempt status. (E) Each Pension Plan and each related trust agreement, annuity contract or other funding instrument which covers or has covered employees or former employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary) currently complies in all material respects and has been maintained in compliance in all material respects with its terms and, both as to form and in operation, with the requirements prescribed by any and all statutes, orders, rules and regulations which are applicable to such plans, including, without limitation, ERISA and the Code. (ii) Multiemployer Plans ------------------- (A) None of the Company, any Subsidiary or any ERISA Affiliate has, at any time, withdrawn from a Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and 4205 of ERISA, respectively, so as to result in a liability, contingent or otherwise (including without limitation the obligations pursuant to an agreement entered into in accordance with Section 4204 of ERISA), of the Company, any Subsidiary or any ERISA Affiliate. None of the Company, any Subsidiary or any ERISA Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Section 4212(c) of ERISA. (B) All contributions required to be made by the Company, any Subsidiary or any ERISA Affiliate to each Multiemployer Plan have been made when due. (C) To the best of the Company's knowledge, with respect to each Multiemployer Plan: (1) no such Multiemployer Plan has been terminated or, since the first date of the Company or any ERISA Affiliate's participation in, 25 or contribution to, such Multiemployer Plan, has been in reorganization under ERISA so as to result, directly or indirectly, in any liability, contingent or otherwise, of the Company, any Subsidiary or any ERISA Affiliate under Title IV of ERISA; (2) no proceeding has been initiated by any person (including the PBGC) to terminate any Multiemployer Plan; (3) the Company, all Subsidiaries and the ERISA Affiliates have no reason to believe that any Multiemployer Plan will be terminated or will be reorganized under ERISA; and (4) the Company, the Subsidiaries and the ERISA Affiliates do not expect to withdraw from any Multiemployer Plan. (iii) Welfare Plans ------------- (A) Each Welfare Plan which covers or has covered employees or former employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary) has been maintained in compliance in all material respects with its terms and, both as to form and operation, with the requirements prescribed by any and all statutes, orders, rules and regulations which are applicable to such Welfare Plan, including, without limitation, ERISA and the Code. (B) Except as required by Section 4980B of the Code or Part 6 of Title 1, Subtitle B of ERISA or under any Employee Plan, none of the Company, any Subsidiary, any ERISA Affiliate or any Welfare Plan has any present or future obligation to make any payment to, or with respect to any present or former employee of the Company, any Subsidiary or any ERISA Affiliate pursuant to, any retiree medical benefit plan, or other retiree Welfare Plan, and no condition exists which would prevent the Company or any Subsidiary from amending or terminating any such retiree medical benefit plan or other retiree Welfare Plan. (C) Each Welfare Plan which covers or has covered employees or former employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary) and which is a "group health plan," as defined in Section 607(1) of ERISA, presently complies in all material respects with and has been operated in compliance in all material respects with provisions of Part 6 of Title I, Subtitle B of ERISA and Sections 162(k) and 4980B of the Code at all times. (D) None of the Company, any Subsidiary or any ERISA Affiliate has maintained or contributed to or had any obligation to maintain or contribute to any Welfare Plan that is a "multiemployer plan," as defined in Section 3(37) of ERISA. (E) The insurance policies or other funding instruments, if any, for each Welfare Plan provide coverage for each employee, consultant, independent contractor or retiree of the Company or any Subsidiary (and, if 26 applicable, their respective dependents) who has been advised by the Company or any Subsidiary, whether through an Employee Plan or otherwise, that he or she is covered by such Welfare Plan. (iv) Benefit Arrangements. Each Benefit Arrangement which covers -------------------- or has covered employees or former employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary) has been maintained in compliance in all material respects with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations which are applicable to such Benefit Arrangement, including, without limitation, the Code. Except as provided by law or in any employment agreement set forth on Schedule 3.20, the employment of all persons presently employed or retained by the Company or any Subsidiary is terminable at will. (v) Unrelated Business Taxable Income. No Employee Plan (or --------------------------------- trust or other funding vehicle pursuant thereto) has incurred any liability under Code Section 511. (vi) Deductibility of Payments. There is no contract, agreement, ------------------------- plan or arrangement covering any employee or former employee of the Company or any Subsidiary (with respect to its relationship with the Company or any Subsidiary) that, individually or collectively, requires the payment by the Company or any Subsidiary of any amount (i) that is not deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an "excess parachute payment" pursuant to Section 280G of the Code. (vii) Fiduciary Duties and Prohibited Transactions. None of -------------------------------------------- the Company, any Subsidiary or any plan fiduciary of any Welfare Plan or Pension Plan which covers or has covered employees or former employees of the Company or any Subsidiary has engaged in, or has any liability in respect of, any transaction in violation of Sections 404 or 406 of ERISA, any "prohibited transaction," as defined in Section 4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code, or any violation of the provisions of Part 4 of Title I, Subtitle B of ERISA. Neither the Company nor any Subsidiary has been assessed any civil penalty under Section 502(l) of ERISA. (viii) Litigation. There is no action, order, writ, ---------- injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral action, governmental audit or investigation relating to or seeking benefits under any Employee Plan that is pending (other than routine claims for benefits), anticipated or threatened against the Company, any Subsidiary or any Employee Plan. (ix) No Amendments. None of the Company, any Subsidiary or any ------------- ERISA Affiliate has announced to employees, former employees or directors an intention to create, or otherwise created, a legally binding commitment to adopt any additional Employee Plans which are intended to cover employees or former employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary) or to amend or modify any existing Employee Plan which covers or has 27 covered employees or former employees of the Company or any Subsidiary (with respect to their relationship with the Company or any Subsidiary). (x) Insurance Contracts. None of the Company, any Subsidiary or ------------------- any Employee Plan (other than a Multiemployer Plan) holds as an asset of any Employee Plan any interest in any annuity contract, guaranteed investment contract or any other investment or insurance contract issued by an insurance company that is the subject of bankruptcy, conservatorship or rehabilitation proceedings. (xi) No Acceleration or Creation of Rights. Neither the ------------------------------------- execution and delivery of this Agreement or other related agreements by Seller or the Company nor the consummation of the transactions contemplated hereby or the related transactions will result in the acceleration or creation of any rights of any person to benefits under any Employee Plan (including, without limitation, the acceleration of the vesting or exercisability of any stock options, the acceleration of the vesting of any restricted stock, the acceleration of the accrual or vesting of any benefits under any Pension Plan or the acceleration or creation of any rights under any severance, parachute or change in control agreement). 3.21 Transactions with Certain Persons. (a) No stockholder, director, --------------------------------- officer or sales representative of the Company or any Subsidiary nor, to the best knowledge of the Company and Seller, any member of any such person's immediate family is currently, or within the last three years has been, a party to any transaction with the Company or any Subsidiary, including, without limitation, any Contract (i) providing for the furnishing of services by, (ii) providing for the rental of real or personal property from, or (iii) otherwise requiring payments to (other than for dividends or distributions to any stockholder of the Company or any Subsidiary in his or her capacity as such or for services as officers, directors or employees of the Company or any Subsidiary), any such person or any corporation, partnership, trust or other entity in which, to the best knowledge of the Company and Seller, any such person has an interest as a stockholder, officer, director, trustee or partner, other than (x) any transactions involving less than $100,000 in the aggregate, (y) any transactions between or among Seller and any of its subsidiaries, in the ordinary course of business and on an arms' length basis and (z) any transactions among the Company and the Subsidiaries. 3.22 Tax Matters ----------- (a) Filing of Tax Returns. Each of the Company and each Subsidiary --------------------- has timely filed with the appropriate taxing authorities all Returns in respect of Taxes required to be filed, taking into account any extensions of due dates. Neither the Company nor any Subsidiary has requested any extension of time within which to file Returns in respect of any Taxes. The Company has delivered or made available to Buyer complete and accurate copies of the federal, state and local income tax Returns for the years 1990, 1991, 1992, 1993 and 1994. (b) Payment of Taxes. All substantial Taxes for which the Company or ---------------- any Subsidiary is or may be liable, other than income Taxes, in respect of periods (or portions 28 thereof) ending on or before the Closing Date, have been timely paid, or a reserve adequate in accordance with GAAP has been established therefor on the books and records of the Company. All income Taxes for which the Company or any Subsidiary is or may be liable in respect of periods (or portions thereof) ending on or before the Balance Sheet Date have been timely paid, or a reserve adequate in all respects (as of the Balance Sheet Date) has been established therefor, as set forth in the Financial Statements. Since January 1, 1990, there has been (i) no transaction which gave rise to a substantial amount of income or gain, the recognition, reporting or accrual of which is deferred under Code Section 453 using the installment method of accounting (or similar provisions of state or local statutes or regulations) or under the consolidated return regulations (including, without limitation, deferral under Regulation Sec. 1.1502-13) or similar provisions of state or local statutes or regulations and (ii) no written agreement with any taxing authority which has the effect of deferring Taxes that would otherwise be attributable to periods (or portions thereof) before the Closing to periods (or portion thereof) after the Closing. For the purposes of this Section 3.22 (including, without limitation, subsections (b) and (c)), the term "substantial" shall refer to any individual item involving an amount in excess of $20,000. (c) Audits, Investigations or Claims. No substantial deficiencies -------------------------------- for Taxes have been claimed, proposed or assessed in writing by any taxing or other governmental authority against the Company or any Subsidiary which have not been paid or reserved on the Financial Statements. There are no pending or, to the best knowledge of the Company and Seller, threatened audits, investigations or claims for or relating to any substantial liability in respect of Taxes that in the reasonable judgment of Seller, the Company or their counsel are likely to result in a substantial additional amount of Taxes, and there are no other discussions with any taxing or other governmental authorities with respect to Taxes that in the reasonable judgment of the Company or its counsel is likely to result in an additional substantial liability for Taxes to the Company or any Subsidiary. Audits of federal, state, and local returns for income Taxes by the relevant taxing or other governmental authorities have been completed for the periods set forth on Schedule 3.22(c) and none of the Company, any Subsidiary or Seller has been notified in writing that any taxing or other governmental authority intends to audit a return for income Taxes for any other period. No extension of a statute of limitations relating to income Taxes is in effect with respect to Company or any Subsidiary. No power of attorney has been executed by the Company or any Subsidiary with respect to any matters relating to income Tax which is currently in force. (d) Safe Harbor Lease Property. None of the Assets is property that -------------------------- is required to be treated as being owned by any other person pursuant to the so- called safe harbor lease provisions of former Section 168(f)(8) of the Code. (e) Security for Tax-Exempt Obligations. None of the Assets directly ----------------------------------- or indirectly secures any debt the interest on which is tax-exempt under Section 103(a) of the Code. (f) Tax-Exempt Use Property. None of the Assets is "tax-exempt use ----------------------- property" within the meaning of Section 168(h) of the Code. (g) Tax Election. Neither the Company nor any Subsidiary has ------------ consented at 29 any time to have the provisions of Section 341(f)(2) of the Code (or similar provisions under state or local law) apply to any disposition of the Assets. Neither the Company nor any Subsidiary has agreed to make, or is required to make, any adjustment under Section 481(a) of the Code (or similar provisions under state or local law) by reason of a change in accounting method or otherwise. (h) Tax Sharing Agreements. There are no tax sharing agreements or ---------------------- similar arrangements (whether written or unwritten) with respect to or involving the Company or any Subsidiary. (i) Partnerships. Neither the Company nor any Subsidiary is a member ------------ of any entity which (i) is properly classified as a partnership for U.S. federal income tax purposes but (ii) does not (A) report as such or (B) otherwise pass through all of its income to its members each year. (j) Affiliated Group. The Company has not been a member of an ---------------- affiliated group that has filed a consolidated return or any group that has filed a combined, consolidated or unitary state or local return, other than the affiliated group for U.S. federal income tax purposes of which it is the common parent and any combined, consolidated or unitary groups for state or local purposes of which it is the common parent. 3.23 Insurance. Schedule 3.23 contains a complete and accurate list of all --------- policies or binders for business interruption, fire, liability, title, worker's compensation, product liability, errors and omissions and other forms of insurance (showing as to each policy or binder the carrier and the amount of coverage) currently maintained by the Company and each Subsidiary. Such insurance provides, and during its term has provided, coverage to the extent and in the manner as may be or may have been required by law and by any and all material Contracts to which the Company or any Subsidiary is or has been a party. Neither the Company nor any Subsidiary is in material default under any of such policies or binders, and since January 1, 1993 neither the Company nor any Subsidiary has failed to give any notice or to present any material claim under any such policy or binder in a due and timely fashion. Since January 1, 1993 no insurer has refused, denied or disputed coverage of any material claim made thereunder. No insurer has advised the Company or any Subsidiary in writing that it intends to reduce coverage or increase any premium in any material respect or fail to renew any existing policy or binder. To the best knowledge of the Company and Seller, all such policies and binders are in full force and effect. 3.24 Purchase Commitments and Outstanding Bids. As of the date of this ----------------------------------------- Agreement, there are no material claims, individually or in the aggregate, against the Company or any Subsidiary for "make goods" or other compensation or penalties by reason of production or distribution errors, alleged undershipments or otherwise. No outstanding purchase order or commitment of the Company or any Subsidiary presently is materially in excess of the current requirements of the business of the Company or such Subsidiary. There are no outstanding bids or proposals which individually or in the aggregate would, in the Company's reasonable judgment, if accepted, have a Material Adverse Effect, or would, if accepted, reasonably be expected to result in a negative marginal contribution (calculated in a manner consistent with the 30 Company's past practice) to the Company or such Subsidiary. 3.25 Customers and Suppliers. Schedule 3.25 sets forth a true and correct ----------------------- list of (a) the 50 largest customers of the Company and the Subsidiaries, on a consolidated basis, in terms of Value-Added during each of the fiscal years ended December 31, 1994 and December 31, 1995, setting forth (i) the total sales to each such customer during such period, (ii) the Value-Added attributable to each such customer during such period and (iii) the contribution margin attributable to each such customer during such period and (b) the 25 largest suppliers of the Company and the Subsidiaries, on a consolidated basis, in terms of purchases during each of the fiscal years ended December 31, 1994 and December 31, 1995, setting forth the total purchases from each such supplier during such period. Neither Seller, the Company nor any Subsidiary has received (y) notice from any such supplier or customer set forth in items 1 through 20 on the column in Schedule 3.25 relating to the fiscal year ended December 31, 1995, or (z) written notice from any such supplier or customer set forth in items 21 through 50 on the column in Schedule 3.25 relating to the fiscal year ended December 31, 1995, of such customer's or supplier's intention to cease, materially reduce or otherwise materially alter its business with the Company or any Subsidiary, other than ordinary monthly non-permanent fluctuations in the page requirements of any such customers. During each of the fiscal years ended December 31, 1994 and December 31, 1995 (A) no customer accounted for more than five percent of the Value-Added of the Company and the Subsidiaries on a consolidated basis and (B) there was no supplier from whom the Company and the Subsidiaries purchased more than five percent of the goods or services purchased by them on a consolidated basis. 3.26 Compliance with Environmental Laws. Except to the extent identified ---------------------------------- in the Environmental Reports or in any schedule attached hereto, and except to the extent any of the following relates to a Former Property or off-site facility or location covered by Section 9.1(a)(i)(E): (a) The Company and the Subsidiaries are currently in material compliance with all Environmental Laws, including, without limitation, all Permits required thereunder to conduct their business as currently being conducted. None of the Company, any Subsidiary or Seller has received any written notice to the effect that, or otherwise has knowledge that, (i) the Company or any Subsidiary is not currently in compliance with, or is in violation of, any such Environmental Laws or Permits or (ii) any currently existing circumstances are likely to result in a violation by the Company or any Subsidiary of any such Environmental Laws or Permits, except for any noncompliance or violation of any such Environmental Laws or Permits under this clause (ii) that would not have a Material Adverse Effect. In addition, the Company and each Subsidiary at all times during the previous five years has been in material compliance with all Environmental Laws. (b) There are no existing Environmental Claims against the Company or any Subsidiary, nor has any of them received any notification of any allegation of any actual, or potential responsibility for, or any inquiry or investigation regarding, any disposal, release or threatened release at any location of any Hazardous Substance generated or transported by the Company or any Subsidiary. 31 (c) (i) No underground tank or other underground storage receptacle for Hazardous Substances is currently located on the Facilities and there have been no releases of any Hazardous Substances from any such underground tank or related piping and (ii) there have been no releases of Hazardous Substances in quantities exceeding the reportable quantities as defined under applicable federal or state law by the Company or any Subsidiary on, upon or into the Facilities other than those authorized by Environmental Laws including, without limitation, the Permits required thereunder. (d) There are no PCBs or asbestos-containing materials located at or on the Facilities. (e) There are no consent decrees, consent orders, judgments, judicial or administrative orders or agreements with (other than Permits) or liens by, any governmental authority relating to any Environmental Law which regulate, obligate or bind the Company or any Subsidiary. (f) True and correct copies of the Environmental Reports have been delivered or made available to Buyer and a list of all such Environmental Reports is set forth on Schedule 3.26. (g) The Company and each Subsidiary have submitted on a timely basis all applications for operating permits required pursuant to Title V of the Clean Air Act, and to the best knowledge of the Company and Seller based on the operations of the Company as of the date hereof, no additional capital expenditures would be required within the next 24 months by the Company or any Subsidiary in order to comply with the specific regulations in the form proposed in the Federal Register as of the date hereof pursuant to the Clean Air Act if such proposed regulations were to be enacted, except for such additional capital expenditures that will not have a Material Adverse Effect. 3.27 Banking Relationships. Schedule 3.27 sets forth a complete and --------------------- accurate description in all material respects of all arrangements that the Company and each Subsidiary has with any banks, savings and loan associations or other financial institutions providing for any accounts, including, without limitation, checking accounts, cash contribution accounts, safe deposit boxes, borrowing arrangements, certificates of deposit or otherwise, indicating in each case account numbers, if applicable, and the person or persons authorized to act or sign on behalf of the Company or such Subsidiary in respect of any of the foregoing. No person holds any power of attorney or similar authority from the Company or any Subsidiary with respect to any such accounts. 3.28 No Other Agreements to Sell the Assets or Stock of the Company. Other -------------------------------------------------------------- than sales of inventory or product in the ordinary course of business, consistent with past practice, neither the Company nor any Subsidiary has any legal obligation, absolute or contingent, to any other person or firm to (a) sell or effect a sale of any or all of the Assets, (b) sell or effect a sale of any capital stock of the Company or any Subsidiary, (c) effect any merger, consolidation or other reorganization of the Company or any Subsidiary or (d) enter into any Contract or cause the entering into a Contract with respect to any of the foregoing. 32 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- As an inducement to Seller to enter into this Agreement, Buyer hereby makes the following representations and warranties as of the date hereof and as of the Closing Date to Seller: 4.1 Organization. Buyer is duly organized, validly existing and in good ------------ standing under the laws of the State of Delaware. 4.2 Authorization. Buyer has all necessary corporate power and authority ------------- to, and has taken all corporate action necessary on its part to, execute and deliver this Agreement, consummate the transactions contemplated hereby and perform its obligations hereunder, and no other corporate proceedings on the part of Buyer are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and is a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as the enforceability thereof may be limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors rights generally or (b) general principles of equity, whether considered in a proceeding at law or in equity. Each Ancillary Agreement which has been or shall be executed and delivered by Buyer in connection with the transactions contemplated hereby has been (or will be) duly authorized, executed and delivered by Buyer, and is (or will be when authorized, executed and delivered) a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as the enforceability thereof may be limited by (i) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors rights generally or (ii) general principles of equity, whether considered in a proceeding at law or in equity. 4.3 Governmental Consents and Approvals. No consent, waiver, agreement, ----------------------------------- approval or authorization of, or declaration, filing, notice or registration to or with, any federal, state, local or foreign governmental or regulatory authority or body is required to be made or obtained by Buyer in connection with the execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby other than filings required in connection with or in compliance with the provisions of the HSR Act. 4.4 No Brokers. Other than S.G. Warburg & Co., Inc., none of Buyer or any ---------- of its officers, directors, employees, stockholders or other Affiliates has employed or made any agreement with any broker, finder or similar agent or any person or firm to pay any finder's fee, brokerage fee or commission or similar payment in connection with the transactions contemplated hereby. 4.5 No Conflict or Violation. Neither the execution, delivery and ------------------------ performance of this Agreement and the Ancillary Agreements, nor the consummation of the transactions 33 contemplated hereby or thereby, by Buyer will result in (a) a violation of or a conflict with any provision of the certificate of incorporation or bylaws of Buyer, (b) a breach of, or a default under, or the creation of any right of any party to accelerate, terminate or cancel pursuant to (including, without limitation, by reason of the failure to obtain a consent or approval under any such Contract), any term or provision of any contract, encumbrance or permit to which Buyer is a party or by which its assets are bound, which breach, default or creation of any such right would have a material adverse effect on (i) the business, operations, assets, liabilities, condition (financial or otherwise) or results of operations of Buyer and its subsidiaries, taken as a whole or (ii) the right or ability of Buyer to consummate any of the transactions contemplated hereby. 4.6 Litigation. There is no Action pending or, to the best knowledge of ---------- Buyer, threatened (a) against Buyer or any of its Affiliates with respect to which there is a reasonable likelihood of a determination which would have a material adverse effect on the ability of Buyer to consummate the transactions contemplated hereby or (b) which seeks to enjoin or prevent, or questions the validity or legality of, the consummation of the transactions contemplated hereby. 4.7 Investment Representation. Buyer is acquiring the Shares for its own ------------------------- account for investment purposes and with no present intention of distributing or reselling such shares or any part thereof in any transaction which would constitute a "distribution" within the meaning of the Securities Act. 4.8 Securities and Exchange Commission Documents. Buyer has furnished to -------------------------------------------- Seller a true and complete copy of each statement, report and registration statement filed by Buyer with the Securities and Exchange Commission (the "SEC") --- since January 1, 1995 (the "SEC Documents"), which are all of the documents ------------- (other than preliminary material) that Buyer was required to file with the SEC during such period. As of their respective filing dates, none of the SEC Documents contained any untrue statement of a material fact or omitted or failed to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading in any material respect, except to the extent corrected by a subsequently filed SEC Document. ARTICLE V COVENANTS OF SELLER, THE COMPANY AND BUYER ------------------------------------------ Each of Seller, the Company and Buyer covenant and agree with each other that from the date hereof through the Closing: 5.1 Maintenance of Business Prior to Closing ---------------------------------------- (a) Except as set forth in this Section 5.1(a), the Company shall, and shall cause each Subsidiary to, operate its business in the ordinary course, consistent with past practice (including, without limitation, the fulfillment of its obligations under, and in accordance with the terms of, the Contracts, Permits and other commitments set forth on the Disclosure Schedule or under Contracts, Permits and other commitments which are not required to be 34 disclosed on the Disclosure Schedule), and shall not, and shall cause each Subsidiary not to, take any action inconsistent therewith or with the consummation of the transactions contemplated hereby. Without limiting the generality of the foregoing, the Company shall, and shall cause each Subsidiary to, (y) maintain the Assets in the aggregate in at least their current state of repair, excepting normal wear and tear and except for normal retirements, abandonments and scrappings of Assets and (z) use its reasonable best efforts to (I) maintain the insurance covering the Assets in effect on the date hereof; (II) maintain the current business organization of the Company and the Subsidiaries; (III) keep available the services of the current Personnel; and (IV) preserve its current business relationships with customers, suppliers, distributors and others having business dealings with the Company and the Subsidiaries. Prior to the Closing, without the prior written consent of Buyer, which consent shall not be unreasonably withheld, neither the Company nor any Subsidiary shall: (i) sell, assign, lease or transfer any of the Assets, material singly or in the aggregate, other Assets sold or disposed of in the ordinary course of business, consistent with past practice, to persons who are not Affiliates of the Company or any Subsidiary; (ii) cancel, terminate, amend, modify or waive any material term of any Contract to which it is a party or by which it or any of the Assets is bound, which Contract provided for, during the fiscal year ended December 31, 1995, aggregate Value-Added in excess of $800,000 to the Company and the Subsidiaries; (iii) (A) increase the compensation payable or to become pay- able to any of its directors or officers, (B) increase the base compensation payable or to become payable to any of the Personnel (other than directors or officers), except for normal periodic increases in such base compensation in the ordinary course of business, consistent with past practice, (C) increase the sales commission rate payable or to become payable to any of the Personnel (other than directors or officers), other than in accordance with the RAI Sales Commission Plan, (D) grant, make or accrue any loan, bonus, fee, incentive compensation (excluding sales commissions), service award or other like benefit, contingently or otherwise, to or for the benefit of any of the Personnel, except pursuant to the Employee Plans described on Schedule 3.20, (E) adopt, amend or cause or suffer any addition to or modification of any Employee Plan (other than any Employee Plan referred to in clause (G) of this paragraph), other than (1) contributions made in the ordinary course of business, consistent with past practice or (2) the extension of coverage to any of the Personnel who became eligible after the date of this Agreement, (F) grant any additional stock options or performance unit grants or other interest under any Employee Plan, (G) enter into any new (1) employment or (2) consulting agreement providing for annual payments of $100,000 or more over the life of such consulting agreement, or cause or suffer any written or oral termination, cancellation or amendment of any such employment or consulting agreement to which it is a party (except with respect to any employee at will without a written agreement), (H) enter into any collective bargaining agreement or cause or suffer any termination or amendment of any collective bargaining agreement to which it is a party or (I) with respect to any stockholder, any other Affiliate or any Affiliate of any stockholder, grant, 35 make or accrue any payment or distribution or other like benefit, contingently or otherwise, or otherwise transfer Assets, including, but not limited to, any payment of principal of or interest on any debt owed to any such stockholder or Affiliate, other than (x) any transactions involving less than $100,000 in the aggregate, (y) any transactions between or among Seller and any of its subsidiaries, in the ordinary course of business and on an arms' length basis and (z) any transactions among the Company and the Subsidiaries; (iv) except in accordance with the Capital Expenditure Plan, make any capital expenditure or commitment to make any capital expenditure; (v) execute any Lease for real property or any Lease for personal property involving annual payments in excess of $120,000, or incur any liability therefor; (vi) make any payments or give any other consideration to customers or suppliers, other than (A) payments under, and in accordance with the terms of, Contracts in effect on the date hereof, (B) signing bonuses to customers in the ordinary course of business, consistent with past practice, not to exceed $50,000 individually and $200,000 in the aggregate and (C) other payments in the ordinary course of business, consistent with past practice, not to exceed $100,000 individually and, together with those payments set forth in clause (B), not to exceed $500,000 in the aggregate; (vii) change its accounting methods, principles or practices, including, without limitation, any change in the application or interpretation of GAAP; (viii) (A) issue or sell, or enter into any agreement obligating it to issue or sell, (B) declare, set aside for payment or pay any dividend or distribution in respect of, or (C) directly or indirectly redeem, purchase or otherwise acquire, or split, combine, reclassify or otherwise adjust, any Equity Securities; (ix) (A) incur any indebtedness for borrowed money or enter into any commitment to borrow money, except pursuant to the Tranche C of the Swiss Bank Credit Agreement for working capital purposes or the National Geographic Loan Agreement for capital expenditures or working capital purposes, in each case, in the ordinary course of business, consistent with past practice or (B) incur any obligations for any performance bonds, payment bonds, bid bonds, surety bonds, letters of credit, guarantees or similar instruments, other than any such obligations that are not material either individually or in the aggregate, in the ordinary course of business, consistent with past practice; (x) pay, discharge or satisfy any liability other than (A) the repayment of the Debt Instruments on the Closing Date in accordance with provisions hereof and (B) any such payment, discharge or satisfaction in the ordinary course of business, consistent with past practice, of (1) liabilities reflected or reserved against on the Balance Sheet or on any Interim Balance Sheet or incurred subsequent thereto in the ordinary course of business, consistent with past practice or (2) liabilities under, and in accordance 36 with the terms of, any Contracts, Permits and other commitments set forth on the Disclosure Schedule or under Contracts, Permits and other commitments which are not required to be disclosed on the Disclosure Schedule; (xi) change or amend its certificate or articles of incorporation or bylaws; (xii) (A) acquire (by merger, consolidation, acquisition of stock, other securities or assets or otherwise), (B) make any capital investment in (whether through the acquisition of an equity interest, the making of a loan or advance or otherwise) or (C) guarantee indebtedness for borrowed money of, (1) any person or (2) any portion of the assets of any person that constitutes a division or operating unit of such person; (xiii) mortgage, pledge or otherwise make or suffer any Encumbrance (other than Permitted Encumbrances) on any material Asset or group of Assets that are material in the aggregate; (xiv) accelerate payments on any indebtedness, other than in connection with the repayment of the Debt Instruments on the Closing Date in accordance with the provisions hereof; (xv) revalue any of the Assets, including, without limitation, any write-off of notes or accounts receivable or any increase in any reserve, involving in excess of $100,000 individually or $500,000 in the aggregate (such amounts to be calculated without netting any decrease); (xvi) cancel, waive or release any right or claim (or series of related rights or claims), other than as set forth in (xv), involving in excess of $100,000 individually or $500,000 in the aggregate; (xvii) except as otherwise provided in this Section 5.1, enter into any material transaction other than in the ordinary course of the Company's business, consistent with past practice; or (xviii) except as otherwise provided in this Section 5.1, enter into any Contract with respect to any of the foregoing. In addition, the Company and Seller shall not knowingly engage in any practice, or take, or fail or omit to take, any action or enter into any transaction that would (y) impair or prevent the Company or Seller from consummating the transactions contemplated by this Agreement or (z) cause or result in any of the representations and warranties set forth in Article III to be untrue at any time after the date hereof through the Closing Date. (b) Buyer shall not knowingly engage in any practice, or take, or fail or omit to take, any action or enter into any transaction that would (i) impair or prevent Buyer from consummating the transactions contemplated by this Agreement or (ii) cause or result in any of 37 Buyer's representations and warranties set forth in Article IV to be untrue at any time after the date hereof through the Closing Date. 5.2 Investigation by Buyer. The Company shall, and shall cause the ---------------------- Subsidiaries to, allow Buyer, its counsel, accountants and other representatives and the financial institutions (and their counsel and representatives) providing or proposed to provide financing in connection with this Agreement and the transactions contemplated hereby (subject to their entering into a confidentiality agreement in form and substance reasonably satisfactory to Seller), during regular business hours upon reasonable notice, to make such reasonable inspection of the Assets, business and operations of the Company and the Subsidiaries and to inspect and make copies of Contracts, Books and Records and all other documents and information reasonably requested by Buyer and related to the operations and business of the Company and the Subsidiaries, including, without limitation, historical financial information concerning the business of the Company and the Subsidiaries. The Company shall furnish to Buyer promptly upon request (a) all additional documents and information with respect to the affairs of the Company and the Subsidiaries relating to their business and (b) access during regular business hours to the Personnel and to the Company's accountants and counsel as Buyer, or its counsel or accountants, may from time to time reasonably request and the Company shall instruct its Personnel, accountants and counsel to cooperate with Buyer, and to provide such documents and information as Buyer and its representatives may reasonably request. Notwithstanding the foregoing, Seller shall not be obligated to provide Buyer with any information (i) which would violate any law, rule or regulation or term of any Contract or (ii) if the provision thereof would adversely affect the ability of Seller or any of its Affiliates (including the Company and the Subsidiaries) to assert attorney-client, attorney work product or other similar legal privilege, provided that, with respect to all information not provided because of any such privilege under this clause (ii), Seller shall provide to Buyer a reasonable summary thereof to the extent consistent with such privilege. Any disclosure whatsoever during such investigation by Buyer, its counsel, accountants and other representatives and the financial institutions (and their counsel and representatives) providing or proposed to provide financing to Buyer in connection with this Agreement, shall not constitute an enlargement of, or additional, representations or warranties of Seller or the Company beyond those specifically set forth in this Agreement. All such information and access shall be subject to the terms and conditions of the letter agreement dated January 19, 1996 between Buyer and Seller (the "Confidentiality Agreement"). ------------------------- 5.3 Environmental Investigation. Buyer shall have the right, at its sole --------------------------- cost and expense, to (a) inspect records, reports, permits, applications, monitoring results, studies, correspondence data and any other information or documents relevant to Environmental Conditions at the Facilities, (b) inspect all buildings and equipment at the Facilities including, without limitation, the visual inspection of the physical plants for asbestos-containing construction materials, and (c) if, other than by the performance of any tests of the soil surface or subsurface waters and air quality at, in, on, beneath or about the Facilities, Buyer shall become aware of any Environmental Conditions at the Facilities which is not disclosed in any of the Environmental Reports or any Schedule hereto, Buyer may conduct such tests of the soil surface or subsurface waters and air quality at, in, on, beneath or about the Facilities as may be recommended by an environmental consultant reasonably acceptable to Seller engaged by Buyer based on its professional judgment, in a manner consistent with good engineering practice; 38 provided that in each case, such tests and inspections shall be conducted only (i) during regular business hours and upon reasonable notice and (ii) in a manner that will not unduly disrupt or interfere with the operation of the business of the Company and the Subsidiaries. 5.4 Consents and Best Efforts. Each of the parties hereto covenants and ------------------------- agrees, upon the terms and conditions contained herein, to cooperate with the other parties and to pursue diligently and in good faith and use all of its commercially reasonable efforts to consummate the transactions contemplated hereby, including, without limitation, (a) to obtain at the earliest practicable date all consents, approvals, Permits, authorizations, exemptions and waivers from third parties, including, without limitation, pursuant to the HSR Act, and (b) to defend and cooperate with each other in any defending of legal proceedings, whether judicial or administrative and whether brought derivatively or on behalf of third parties, challenging this Agreement or the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, nothing contained herein shall require Buyer to enter into any agreement or other arrangement for the financing of the transactions contemplated hereby on terms that are not satisfactory to Buyer, in its sole discretion. Buyer acknowledges that, for purposes of the foregoing, the terms and conditions of the Commitment Letter are satisfactory to Buyer, subject to negotiation and execution of definitive documentation. 5.5 Financial Statements, etc. The Company has delivered to Buyer Interim ------------------------- Financial Statements relating to the fiscal months of January and February. After the date hereof, within 20 days after the end of each fiscal month, the Company shall provide Buyer with the Interim Financial Statements relating to such fiscal month. Such Interim Financial Statements shall (a) be in accordance with the books and records of the Company, (b) be prepared in accordance with GAAP consistently applied throughout the periods covered thereby (except for the absence of footnotes) and (c) present fairly and accurately, in accordance with GAAP except to the extent set forth on Schedule 3.12 (subject to normal year-end adjustments and the presentation of general, selling and administrative expenses therein), the Assets, liabilities (including, without limitation, all reserves) and financial condition of the Company and the Subsidiaries as of the respective dates thereof and the results of operations, stockholders' equity and cash flows for the periods covered thereby. 5.6 Notification of Certain Matters. Seller and the Company shall give ------------------------------- prompt notice to Buyer if any of Edward Nytko, LaVerne Schmidt, Jeffrey Danek, Ronald Covelli and Michael Conroy becomes aware of, (a) the occurrence, or failure to occur, of any event, which occurrence or failure would be likely to cause any representation or warranty contained in this Agreement or in any exhibit or schedule hereto to be untrue or inaccurate in any material respect, (b) any Material Adverse Change and (c) any failure of Seller, the Company, any Subsidiary or any of their respective Affiliates, stockholders or representatives to comply with, perform or satisfy, in any material respect, any covenant, condition or agreement to be complied with, performed by or satisfied by it under this Agreement or any exhibit or schedule hereto; provided that, subject to Section 9.2(e), such disclosure shall not be deemed to cure, or to relieve Seller of any liability or obligation with respect to, any breach of or failure to satisfy any representation, warranty, covenant, condition or agreement hereunder. 39 5.7 No Solicitation; Notification ----------------------------- (a) No Solicitation. Each of Seller and the Company shall not, and --------------- shall cause their representatives (including, without limitation, investment bankers, attorneys and accountants) and the Subsidiaries not to, directly or indirectly, enter into, solicit, initiate, participate in or continue any discussions or negotiations with, or encourage or respond to any inquiries or proposals by, or provide any information to, or otherwise cooperate in any other way with, any corporation, partnership, person or other entity or group, other than Buyer and its representatives, concerning any sale of all or any portion of the Assets (other than as expressly permitted by this Agreement) or the business of, or of any shares of capital stock of, the Company or any Subsidiary, or any merger, consolidation, liquidation, dissolution or similar transaction involving the Company or any Subsidiary (each such transaction being referred to herein as a "Proposed Acquisition Transaction"). The Company hereby represents that it is -------------------------------- not now engaged in discussions or negotiations with any party other than Buyer with respect to any of the foregoing. The Company agrees not to, and agrees to cause each Subsidiary not to, release any third party from, or waive any provision of, any confidentiality or standstill agreement to which the Company or any Subsidiary is a party. (b) Notification. Seller and the Company will (i) immediately notify ------------ Buyer (orally and in writing) if any written offer is made, any discussions or negotiations are sought to be initiated, any inquiry, proposal or contact is made or any information is requested with respect to any Proposed Acquisition Transaction and (ii) keep Buyer informed of the status of any such offer. 5.8 Delivery of Funds for Contribution. At the Closing, Buyer shall ---------------------------------- contribute to the capital of the Company and the Subsidiaries, as applicable, funds adequate to repay all amounts due under certain outstanding indebtedness of the Company and the Subsidiaries, including, without limitation, promissory notes, security agreements and other documentation related thereto (collectively, the "Debt Instruments"), as set forth on Schedule 5.8, and Buyer, ---------------- Seller and the Company shall cause the Company and each Subsidiary, as applicable, immediately upon receipt of such funds, to repay such Debt Instruments. 5.9 Performance Bonds, etc. Buyer shall use its reasonable best efforts ----------------------- to deliver to Seller replacement (or, if the beneficiary thereof will not permit replacement, back-up) performance bonds, payment bonds, bid bonds, letters of credit, guarantees and similar instruments, to replace (or, to the extent required as described above, to collateralize) all performance bonds, payment bonds, bid bonds, letters of credit, guarantees and similar instruments with respect to the Company or any Subsidiary, or portions thereof, remaining outstanding on the Closing Date, with respect to which Seller or any Affiliate of Seller (other than the Company and the Subsidiaries) would (or will, to the extent required as described above) have any liability after the Closing (each, a "Seller Performance Bond"). In the event Buyer is unable to obtain a replacement or back-up performance bond, bid bond, letter of credit, guarantee or similar instrument with respect to any Seller Performance Bond, then Buyer shall indemnify Seller and its Affiliates and hold them harmless against any and all losses incurred or suffered by them arising out of or resulting from such Seller Performance Bond after the Closing. 40 5.10 Corporate Name. Subsequent to the Closing, Buyer will not use, and -------------- will cause the Company and the Subsidiaries to cease use of as soon as practicable (and in any event not later than six months after the Closing Date), all Proprietary Rights incorporating the name "Ringier" in connection with the sale of any products or services or otherwise in the conduct of the business of the Company and the Subsidiaries. Buyer shall indemnify Seller and its Affiliates and hold them harmless against any and all Losses incurred or suffered by any of them arising out of or resulting from the use of the name "Ringier" by Buyer in the conduct of the business of the Company and/or the Subsidiaries after the Closing. 5.11 Tax Elections. No new elections with respect to material Taxes, or ------------- changes in current elections with respect to material Taxes, except to the extent required by law, affecting the Company or the Subsidiaries shall have been made after the date of this Agreement without the prior written consent of Buyer, which consent shall not be unreasonably withheld. 5.12 Payments under Nytko Employment Agreement. The parties hereto hereby ----------------------------------------- acknowledge that pursuant to the terms of (a) the Employment Agreement, dated January 8, 1990, among Edward C. Nytko ("Nytko"), Krueger Ringier, Inc., Ringier ----- America, Inc. and Seller, as amended on April 22, 1996 (the "Nytko Agreement"), --------------- Nytko is entitled to certain payments from the Company, and that Seller has guaranteed such payments pursuant to a guarantee (the "Nytko Guarantee"). The --------------- parties hereto agree that (i) the Company shall continue to make all payments owed to Nytko pursuant to the terms of the Nytko Agreement and (ii) Seller shall reimburse the Company for all amounts in excess of $5,400,000 paid by the Company to Nytko under the Nytko Agreement. Buyer and the Company shall indemnify and hold Seller harmless with respect to any and all amounts due and payable to Nytko by Seller, pursuant to this Section 5.12 and the Nytko Guarantee, up to $5,400,000, and Seller will indemnify and hold Buyer harmless with respect to any and all amounts due and payable to Nytko over $5,400,000. The amount of any indemnification payment pursuant to this Section 5.12 shall be calculated giving effect to actual Tax savings, if any, to the indemnified party resulting from such payments to Nytko. Each party seeking indemnification under this Section 5.12 shall provide to the other party such information and documentation as the indemnifying party shall reasonably request as necessary to verify the amount of any indemnification payment requested to be made by such indemnifying party. 5.13 Accountants' Opinions and Consents. From the date of this Agreement, ---------------------------------- Seller shall use its reasonable best efforts to cause Ernst & Young to provide Buyer, at Buyer's expense, with all opinions and consents (including reports) with respect to the financial statements of the Company and the Subsidiaries necessary for the completion of Buyer's filings with the Securities Exchange Commission under the Securities Act of 1933, as amended (the "Act"), and the --- Securities Exchange Act of 1934, as amended (the "Exchange Act"), until such ------------ time as such financial statements, opinions and consents are no longer required to be included in such filings by the Act, the Exchange Act or the rules and regulations promulgated thereunder. 41 ARTICLE VI CONDITIONS TO SELLER'S AND THE COMPANY'S OBLIGATIONS ---------------------------------------------------- The obligations of Seller and the Company to consummate the transactions contemplated hereby on the Closing Date are subject, in the discretion of Seller, to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by Seller in accordance with Section 10.5: 6.1 Representations, Warranties and Covenants. All representations and ----------------------------------------- warranties of Buyer contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date (except to the extent that any such representations and warranties were made as of a specified date and as to such representations and warranties the same shall continue on the Closing Date to have been true in all material respects as of such specified date) and Buyer shall have performed in all material respects all obligations arising under the agreements and covenants required hereby to be performed by it prior to or at the Closing Date. 6.2 No Proceedings or Litigation. No Actions by any governmental ---------------------------- authority or any other entity or person shall have been instituted or threatened for the purpose of enjoining or preventing, or which question the validity or legality of, the transactions contemplated hereby and which could reasonably be expected to damage Seller materially if the transactions contemplated hereby are consummated, except for any Action by any person other than a governmental authority the basis of which represents a breach by Seller of any representation and warranty contained herein. 6.3 Opinion of Counsel. Buyer shall have delivered to the Company and ------------------ Seller an opinion of Latham & Watkins, counsel to Buyer, dated as of the Closing Date, substantially with respect to the matters set forth in Exhibit B hereto. ------- - 6.4 Closing Deliveries. Seller and the Company shall have received, at or ------------------ prior to Closing, the following: (a) a certificate executed by the Secretary or an Assistant Secretary of Buyer certifying as of the Closing Date (i) a true and correct copy of the certificate of incorporation of Buyer, (ii) a true and correct copy of the bylaws of Buyer, (iii) a true and correct copy of the resolutions of the board of directors of Buyer authorizing the execution, delivery and performance of this Agreement by Buyer and the consummation of the transactions contemplated hereby and (iv) incumbency matters; (b) a certificate executed by the Chief Financial Officer and any Vice President of Buyer certifying that, as of the Closing Date, the conditions set forth in Sections 6.1 and 6.2 have been satisfied; (c) a copy of the certificate of incorporation of Buyer and all amendments thereto, certified as of a recent date by the Secretary of State of the State of Delaware; and 42 (d) a certificate of the Secretary of State of the State of Delaware certifying as of a recent date the good standing of Buyer in such State. 6.5 Consents. All consents, approvals, waivers and Permits (other than -------- consents or filings that may need to made with respect to transfer of environmental or similar Permits) from governmental and regulatory authorities (other than those required under the HSR Act) required to consummate the transactions set forth herein or contemplated hereby hereto shall have been obtained. 6.6 HSR Act. All filings to be made under the HSR Act with respect to ------- this Agreement and the transactions contemplated hereby shall have been made and the applicable waiting period, including all extensions thereof, under the HSR Act shall have expired or been terminated. 6.7 Delivery of Funds for Contribution. At the Closing, (i) Buyer shall ---------------------------------- have contributed to the capital of the Company and the Subsidiaries, as applicable, funds adequate to repay the Debt Instruments, (ii) the outstanding principal amount of, and accrued unpaid interest on, the Debt Instruments shall have been repaid and (iii) all guarantees granted by Seller in favor of the lenders under the Debt Instruments shall have been released. ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS --------------------------------- The obligations of Buyer to consummate the transactions contemplated hereby are subject, in the discretion of to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by Buyer in accordance with Section 10.5: 7.1 Representations, Warranties and Covenants. ----------------------------------------- (a) All representations and warranties of Seller and the Company contained in this Agreement and in any Ancillary Agreement shall be true and correct at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date (except as set forth in clause (b) below), except where the untruth or incorrectness of such representations and warranties would not, singly or in the aggregate, have a Material Adverse Effect. For purposes of this Section 7.1(a), the representations and warranties of Seller and the Company contained in this Agreement shall be deemed to have been made without any qualification as to knowledge or materiality and, accordingly, all references in such representations and warranties to "material," "Material Adverse Effect," "in all material respects," "Material Adverse Change," "knowledge," "best knowledge" and similar terms and phrases (including, without limitation, references to the dollar thresholds therein) shall be deemed to be deleted therefrom; provided that the foregoing clause shall not apply solely for the purpose of determining the truth and correctness of the lists set forth in certain informational representations and warranties that require disclosure of lists of items of a material nature or above a specified threshold. 43 (b) For purposes of the foregoing clause (a): (i) to the extent that any such representations and warranties were made as of a specified date, such representations and warranties shall continue on the Closing Date to have been true in all material respects as of such specified date; and (ii) the lists required to be provided pursuant to the representations and warranties set forth in Sections 3.7(c), 3.8, 3.9, 3.19 and 3.27 shall be updated as of the Closing Date (or as of a date no later than five business days prior to the Closing Date), and such representations and warranties shall be modified by such updates. (c) Seller and the Company shall have performed in all material respects all obligations arising under the agreements and covenants required hereby to be performed by them prior to or at the Closing Date. 7.2 Consents. All consents, approvals, waivers and Permits (other than -------- consents or filings that may need to made with respect to transfer of environmental or similar Permits) from governmental and regulatory authorities (other than those required under the HSR Act) required to consummation the transactions set forth herein or contemplated hereby shall have been obtained. 7.3 No Proceedings or Litigation. No Actions by any governmental ---------------------------- authority or any other entity or person shall have been instituted or threatened for the purpose of enjoining or preventing, or which question the validity or legality of, the transactions contemplated hereby and which could reasonably be expected to damage Buyer materially if the transactions contemplated hereby are consummated, except for any Action by any person other than a governmental authority the basis of which represents a breach by Buyer of any representation and warranty contained herein. 7.4 Opinions of Counsel. Seller shall have delivered to Buyer (i) an ------------------- opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel for Seller and the Company, dated as of the Closing Date and (ii) an opinion of Nobel & Hug, special Swiss counsel for Seller, each dated as of the Closing Date, substantially with respect to the matters set forth in Exhibits C and D attached -------- - - hereto. 7.5 Closing Deliveries. Buyer shall have received, at or prior to the ------------------ Closing, the following: (a) a certificate executed by the Secretary of Seller certifying as of the Closing Date (i) a true and correct copy of the Grundungsurkunde or Statuten of Seller, (ii) a true and correct copy of the bylaws of Seller, (iii) a true and correct copy of the resolutions of the board of directors of Seller authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by Seller and (iv) incumbency matters; (b) a certificate executed by the Secretary of the Company certifying as of the 44 Closing Date (i) a true and correct copy of the certificate or articles of incorporation of the Company and each Subsidiary, (ii) a true and correct copy of the bylaws of the Company and each Subsidiary, (iii) a true and correct copy of the resolutions of the board of directors of the Company and the Subsidiaries authorizing the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby and (iv) incumbency matters; (c) a certificate executed by the Chief Financial Officer and any Vice President of Seller and by the President and the Chief Financial Officer of the Company certifying that, as of the Closing Date, all of the representations and warranties set forth in Article III are true and correct in all material respects as of such date (except as set forth in Sections 7.1(b)(i) and (ii) and except as set forth on a schedule to such certificate); (d) a certificate executed by the Chief Financial Officer and any Vice President of Seller and by the President and the Chief Financial Officer of the Company certifying that, as of the Closing Date, the conditions set forth in Sections 7.1, 7.2, 7.3 and 7.6 have been satisfied; (e) a statement prepared in accordance with Treasury Regulation Sec.Sec. 1.1445-2(c)(3) and 1.897-2(h) certifying that the Shares are not a U.S. real property interest as defined therein; (f) a copy of the certificate or articles of incorporation of the Company and each Subsidiary and all amendments thereto, each certified as of a recent date by the appropriate Secretary of State; (g) a certificate of the appropriate Secretary of State certifying the good standing of the Company and each Subsidiary in the relevant state of its incorporation and all other states where it is qualified to do business; (h) physical possession of all original minute books, corporate seals and stock records of the Company and the Subsidiaries; and (i) physical possession of all Books and Records (other than those covered by clause (g) above), Permits, policies, Contracts, plans or other instruments of the Company and the Subsidiaries that are in the possession of Seller, all such materials to be deemed delivered to Buyer if they are present at any of the Facilities. 7.6 Material Changes. Since the Balance Sheet Date, there shall not have ---------------- been any Material Adverse Change. 7.7 Financing. Buyer shall have obtained and consummated financing and --------- received proceeds thereof on terms and conditions satisfactory to Buyer, sufficient to enable it to consummate the transactions contemplated hereby and to provide working capital for its operations after the Closing, all as determined by Buyer in its sole discretion. Buyer acknowledges that, for purposes of the foregoing, the terms and conditions of the Commitment 45 Letter are satisfactory to Buyer, subject to negotiation and execution of definitive documentation. 7.8 HSR Act. All filings to be made under the HSR Act with respect to ------- this Agreement and the transactions contemplated hereby shall have been made and the applicable waiting period, including all extensions thereof, under the HSR Act shall have expired or been terminated. 7.9 Lender Releases. Upon receipt of the funds with respect to the Debt --------------- Instruments as provided in Section 5.8, the lenders described therein shall (a) cancel, terminate, extinguish and deliver to the Company and Buyer all Debt Instruments, and shall release all Encumbrances in connection therewith (and shall, if necessary or advisable, reconvey all Assets or property that are the subject of such Encumbrances) and (b) deliver to the Company and Buyer an acknowledgement of payment and release and other evidence satisfactory to Buyer of such termination, cancellation and extinguishment of all Debt Instruments and related Encumbrances. 7.10 Escrow Agreement. At the Closing, Seller and the Escrow Agent shall ---------------- enter into the Escrow Agreement with Buyer and Buyer shall make the deposit into escrow thereunder required thereby. 7.11 Resignations of Directors of the Company and the Subsidiaries. Each ------------------------------------------------------------- member of the board of directors of the Company and each Subsidiary shall have tendered resignations from the applicable board of directors. ARTICLE VIII ACTIONS BY SELLER AND BUYER --------------------------- AFTER THE CLOSING ----------------- 8.1 Books and Records. Seller and Buyer agree that each will cooperate ----------------- with and make available to the other party, during normal business hours, all Books and Records and Personnel (without any disruption of employment) retained and remaining in existence after the Closing Date that are reasonably requested in connection with any Tax inquiry, audit, investigation or dispute, any litigation or investigation or any other matter requiring any such Books and Records or Personnel for any reasonable business purpose. The party requesting access to any such Books and Records or Personnel shall bear all of the out-of-pocket costs and expenses (including without limitation, attorneys' fees, but excluding reimbursement for salaries and employee benefits and other normal overhead expenses) reasonably incurred in connection with providing access to such Books and Records and Personnel. 8.2 Survival of Representations, etc. The representations and warranties -------------------------------- of Seller contained herein and in any Ancillary Agreement shall survive the Closing until the eighteen month anniversary of the Closing Date, without regard to any investigation made by Buyer, unless Buyer notifies Seller in writing prior to such date of any specific claim or claims for alleged breach of any such representation or warranty, in which case such representation or warranty shall survive with respect to such claim until the final resolution by settlement, 46 arbitration, litigation or otherwise of any such claim, so long as there is a factual basis for the claim being made and such claim is made in good faith; provided that (i) the representations and warranties contained in Sections 3.1 (Ownership of the Shares), 3.2 (Organization and Authorization of Seller), 3.3 (Organization and Capitalization of the Company), 3.4 (Authorization) and 3.5 (Subsidiaries) shall survive indefinitely, (ii) the representations and warranties contained in Section 3.22 (Tax Matters) shall survive through the applicable statutes of limitations, including all extensions thereof, and (iii) the representations and warranties contained in 3.26 (Compliance with Environmental Laws) shall survive until the third anniversary of the Closing Date. All representations and warranties of Buyer shall survive until the eighteen month anniversary of the Closing Date. 8.3 Further Assurances ------------------ Following the Closing, each of Seller and Buyer shall, at the request and expense of the other, execute such documents, instruments or conveyances and take such actions as may be requested by the other party or its counsel and otherwise cooperate in a reasonable manner with the other party, its Affiliates and their respective representatives in connection with any action that may be necessary or advisable to carry out the provisions hereof or transactions contemplated hereby. 8.4 Litigation Support. In the event and for so long as any party hereto ------------------ is actively contesting or defending against any charge, complaint, action, suit, proceeding, hearing, investigation, claim or demand in connection with (a) any transaction contemplated under this Agreement or (b) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act or transaction involving the Company or any Subsidiary, each of the other parties will cooperate with such party and its counsel in the contest or defense, make available its personnel and provide such testimony and access to its books and records during regular business hours as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending party (unless the contesting or defending party is entitled to indemnification hereunder). The covenant contained in this Section 8.4 shall not be lieu of or otherwise limit the indemnification obligations of the parties pursuant to Article IX. ARTICLE IX INDEMNIFICATION --------------- 9.1 General Indemnification. ----------------------- (a) By Seller --------- (i) Indemnification. Subject to the limitations set forth in --------------- Section 9.2, if the Closing shall occur, Seller shall indemnify, save and hold Buyer, the Company, the Subsidiaries and each of their respective Affiliates, directors, stockholders, officers, employees, successors, transferees and assignees, and their respective representatives 47 (each, a "Buyer Party"), harmless from and against any and all costs, ----------- losses, charges, liabilities, obligations, actual damages (or, in the case of damages incurred by a third party claimant, punitive or consequential damages), lawsuits, actions, judgments, deficiencies, demands, fees, claims, settlements and expenses (whether arising out of third-party claims or otherwise), including, without limitation, interest, penalties, reasonable attorneys' fees and expenses, all amounts paid in the investigation, defense or settlement of any of the foregoing and costs of enforcing this indemnity (collectively, "Losses") incurred in connection ------ with, arising out of, resulting from or relating to: (A) any untruth or inaccuracy of any representation or warranty of or by the Company or Seller in or pursuant to this Agreement or any Ancillary Agreement (other than the representations and warranties contained in Sections 3.1, 3.3(b) and 3.5(a)); (B) the nonfulfillment, nonperformance or other breach of any covenant or agreement made by the Company or the Seller in or pursuant to this Agreement or any Ancillary Agreement; (C) any untruth or inaccuracy of any representation of or by the Company or Seller in or pursuant to Sections 3.1, 3.3(b) and 3.5(a); (D) Environmental Claims relating to: (1) (y) remediation and investigation currently being performed in connection with the six removed and one inactive underground storage tanks formerly in use at the Brookfield Facility and (z) the removal of one 500-gallon diesel tank at the Augusta Facility; (2) the disposal, or arrangement for the disposal, from any of the Facilities, at any offsite facility or location of Hazardous Substances by the Company or any Subsidiary at any time prior to the Closing Date, except to the extent, based on any applicable statutory and common law principles of contribution and equitable allocation, Buyer disposed of, or arranged for the disposal of, Hazardous Substances at any such offsite facility or location after the Closing Date; and (3) the matter set forth on Schedule 9.1(a)(i)(D)(3) as specifically pending as of the Closing Date; and (E) Environmental Claims relating to: (1) the Former Properties; and (2) the disposal, or arrangement for the disposal, from any of the Former Properties, at any offsite facility or location of Hazardous Substances (including, without limitation, the Lenz Oil Superfund Site in 48 Lemont, Illinois) by the Company or any Subsidiary at any time prior to the Closing Date (each, a "Buyer Claim"). ----------- Except with respect to any claims by a Buyer Party for indemnification pursuant to Section 9.1(a)(i)(A) with respect to breaches of the representations and warranties contained in Section 3.26 (Compliance with Environmental Laws) or Section 9.1(a)(i)(D) or (E), which claims shall be governed exclusively by the procedures set forth in Section 9.1(c) and the limitations set forth in Section 9.2, the indemnity provided for in this Section 9.1(a) is not limited to matters asserted by third parties against any Buyer Party, but includes Buyer Claims incurred or sustained by any Buyer Party in the absence of third party claims. (ii) Claim Procedure. Promptly after receipt by any party hereto --------------- of notice of the commencement of any Action, or the assertion by any third party of any Buyer Claim, with respect to which any Buyer Party is entitled to indemnification under this Section 9.1(a), the party receiving such notice shall use its best efforts to notify (the "Buyer Claim Notice") each ------------------ other party hereto in writing of the commencement of such Action or the assertion of such Buyer Claim; provided that the failure to give such notice promptly shall not relieve Seller of any liability that it may have to the indemnified Buyer Party except to the extent that Seller is prejudiced thereby. Seller shall have the option, and shall notify each indemnified Buyer Party in writing within 30 business days after the date of the Buyer Claim Notice (unless, in the reasonable judgment of the indemnified Buyer Party or Parties, the nature of such Action or Buyer Claim requires a response within a shorter period of time, in which case the Buyer Claim Notice shall state the time for response and the basis for the shorter response period) of its election either (A) to participate (at its own expense) in the defense of such Action or Buyer Claim (in which case the defense of such Action or Buyer Claim shall be controlled by the indemnified Buyer Party or Parties) or (B) to take charge of and control the defense of such Action or Buyer Claim (at its own expense). If Seller fails to notify each indemnified Buyer Party of its election within the applicable response period (as determined in accordance with the immediately preceding sentence), then Seller shall be deemed to have elected not to assume the defense of such Action or Buyer Claim. Seller's failure to respond shall not relieve Seller of its indemnification obligations under this Section 9.1(a). If Seller elects to assume the defense of any Action or Buyer Claim in accordance with this Section 9.1(a)(ii), then the indemnified Buyer Party or Parties shall be entitled to participate (at their own expense) in such defense. If Seller elects not to assume the defense of any Action or Buyer Claim, Seller may nonetheless participate (at its own expense) in the defense thereof. (iii) Settlement of Buyer Claims. If Seller elects (or is -------------------------- deemed to have elected) not to assume the defense of an Action or Buyer Claim in accordance with Section 9.1(a)(ii), then the indemnified Buyer Party or Parties may settle such Action or Buyer Claim without the written consent of Seller and Seller agrees to indemnify and hold each indemnified Buyer Party harmless from and against any such Action or Buyer Claim by reason of such settlement; provided that at least ten days prior to any such settlement, the indemnified Buyer Party or Parties deliver to Seller written notice of its 49 or their intention to settle such Action or Buyer Claim (which notice shall set forth in reasonable detail the terms of such proposed settlement); provided further that Buyer shall not enter into such proposed settlement if Seller reasonably opposes such settlement and begins to directly pay all of the expenses (including, without limitation, attorneys' fees) in connection with such Action or assertion, as and when incurred. Except as set forth in the immediately preceding sentence, Seller shall not be liable for any settlement of any Action Buyer Claim effected without its written consent, but if settled with its written consent (which consent shall not be unreasonably withheld or delayed), Seller agrees to indemnify and hold each indemnified Buyer Party harmless from and against any such Action or Buyer Claim by reason of such settlement. (iv) Each indemnified Buyer Party shall provide to Seller such information and documentation as Seller shall reasonably request as necessary to verify any Losses giving rise to a claim for indemnification by such indemnified Buyer Party hereunder. (v) Notwithstanding anything set forth in Section 9.1(a)(i)- (iv), any claims by a Buyer Party for indemnification pursuant to Section 9.1(a)(i)(A) with respect to breaches of the representations and warranties contained in Section 3.26 (Compliance with Environmental Laws) or Section 9.1(a)(i)(D) or (E) shall be governed exclusively by the procedures set forth in Section 9.1(c) and the limitations set forth in Section 9.2. (b) By Buyer -------- (i) Subject to the limitations set forth in Section 9.2, if the Closing shall occur, Buyer shall indemnify, save and hold Seller and its subsidiaries, Affiliates, directors, stockholders, officers, employees, successors, transferees, assignees and representatives (each, a "Seller ------ Party"), harmless from and against any and all Losses incurred in ----- connection with, arising out of, resulting from or relating to (1) any untruth or inaccuracy of any representation or warranty of Buyer in or pursuant to this Agreement or any Ancillary Agreement, (2) the nonfulfillment, nonperformance or other breach of any covenant or agreement made by Buyer in or pursuant to this Agreement or any Ancillary Agreement or (3) any Environmental Condition arising out of, resulting from or relating to the operation or ownership of the business (including, without limitation, the disposal, or arrangement for disposal, of Hazardous Substances) of the Company and/or the Subsidiaries on or after the Closing Date or prior to the Closing Date except to the extent that such Losses are indemnified by Seller pursuant to Section 9.1(a)(i)(A) with respect to breaches of the representations and warranties contained in Section 3.26 (Compliance with Environmental Laws) or Section 9.1(a)(i)(D) or (E), or elsewhere in this Agreement (each, a "Seller Claim"). The indemnity ------------ provided for in this Section 9.1(b) is not limited to matters asserted by third parties against any Seller Party, but includes Seller Claims incurred or sustained by any Seller Party in the absence of third-party claims. (ii) Claim Procedure. Promptly after receipt by any party hereto --------------- of notice of the commencement of any Action, or the assertion by any third party of any 50 Seller Claim, with respect to which any Seller Party is entitled to indemnification under this Section 9.1(b), the party receiving such notice shall use its best efforts to notify (the "Seller Claim Notice") each other ------------------- party hereto in writing of the commencement of such Action or the assertion of such Seller Claim; provided that the failure to give such notice promptly shall not relieve Buyer of any liability that it may have to the indemnified Seller Party except to the extent that Buyer is prejudiced thereby. Buyer shall have the option, and shall notify each indemnified Seller Party in writing within 30 days after the date of the Seller Claim Notice (unless, in the reasonable judgment of the indemnified Seller Party or Parties, the nature of such Action or Seller Claim requires a response within a shorter period of time, in which case the Seller Claim Notice shall state the time for response and the basis for the shorter response period) of its election either (A) to participate (at its own expense) in the defense of such Action or Seller Claim (in which case the defense of such Action or Seller Claim shall be controlled by the indemnified Seller Party or Parties) or (B) to take charge of and control the defense of such Action or Seller Claim (at its own expense). If Buyer fails to notify each indemnified Seller Party of its election within the applicable response period (as determined in accordance with the immediately preceding sentence), then Buyer shall be deemed to have elected not to assume the defense of such Action or Seller Claim. Buyer's failure to respond shall not relieve Buyer of its indemnification obligations under this Section 9.1(b). If Buyer elects to assume the defense of any Action or Seller Claim in accordance with this Section 9.1(a)(ii), then the indemnified Seller Party or Parties shall be entitled to participate (at their own expense) in such defense. If Buyer elects not to assume the defense of any Action or Seller Claim, Buyer may nonetheless participate (at its own expense) in the defense thereof. (iii) Settlement of Seller Claims. If Buyer elects (or is --------------------------- deemed to have elected) not to assume to defense of an Action or Seller Claim in accordance with Section 9.1(b)(ii), then the indemnified Seller Party or Parties may settle such Action or Seller Claim without the written consent of Buyer and Buyer agrees to indemnify and hold each indemnified Seller Party harmless from and against any such Action or Seller Claim by reason of such settlement; provided that at least ten days prior to any such settlement, the indemnified Seller Party or Parties deliver to Buyer written notice of its or their intention to settle such Action or Seller Claim (which notice shall set forth in reasonable detail the terms of such proposed settlement); provided further that in the case of any Action or any third-party assertion of a Seller Claim, Seller shall not enter into such proposed settlement if Buyer opposes such settlement and begins to directly pay all of the expenses (including, without limitation, attorneys' fees) in connection with such Action, as incurred. Except as set forth in the immediately preceding sentence, Buyer shall not be liable for any settlement of any Action or Seller Claim effected without its written consent, but if settled with its written consent (which consent shall not be unreasonably withheld or delayed), Buyer agrees to indemnify and hold each indemnified Seller Party harmless from and against any such Action or Seller Claim by reason of such settlement. (iv) Each indemnified Seller Party shall provide to Buyer such information and documentation as Buyer shall reasonably request as necessary to verify any Losses giving rise to a claim for indemnification by such indemnified Seller Party 51 hereunder. (v) Notwithstanding anything set forth in Section 9.1(b)(i)- (iv), any claims by a Seller Party for indemnification pursuant to Section 9.1(b)(i) relating to any Environmental Condition shall be governed exclusively by the procedures set forth in Section 9.1(c) and the limitations set forth in Section 9.2. (c) Environmental Claims Procedures. ------------------------------- (i) Subject to the terms and conditions set forth in this Section 9.1(c), in the event that a written notice asserting a claim for indemnification with respect to any Environmental Condition describing the nature of the claim in reasonable detail ("Environmental Notice") shall have been given by the party seeking to be indemnified to the party from whom indemnification is sought prior to the expiration of the applicable survival period of the right to indemnification for such claim, then such right to indemnification shall survive, to the extent of such claim only, until such claim is resolved, whether or not the Losses resulting from such breach have been finally determined at the time the notice is given, but only if (y) in the case of a claim made by reason of a written third-party claim relating to (A) the disposal, or arrangement for the disposal, of Hazardous Substances at any offsite facility or location or (B) Environmental Conditions at, on, under or about the Former Properties, the Environmental Notice is accompanied by a copy of the written notice of the third-party claimant and (z) in the case of any claim made other than by reason of a third-party claim relating to Environmental Conditions at, on, under or about the Facilities, some expenses shall have been incurred in good faith at or prior to the date of such notice in connection with a violation of Environmental Laws and such Environmental Notice is accompanied by available test results, if any, setting forth the basis for the claim as to which the Environmental Notice relates. (ii) If any Buyer Party seeking indemnification under Section 9.1(a)(i)(A) with respect to breaches of the representations and warranties contained in Section 3.26 (Compliance with Environmental Laws) or under Section 9.1(a)(i)(D) or (E), or any Seller Party seeking indemnification under Section 9.1(b)(i) (in each case, an "Indemnified Party") receives written notice of any claim made by a third party (a "Third-Party Claim") or has knowledge of any other claim for indemnification other than a Third- Party Claim, which is to be the basis for a claim for indemnification hereunder, the Indemnified Party shall promptly give the other party (the "Indemnifying Party") an Environmental Notice; provided that failure of the Indemnified Party to give the Indemnifying Party prompt notice as provided herein shall not relieve the Indemnifying Party of any of its obligations hereunder unless and only to the extent that the Indemnifying Party shall have been prejudiced thereby. (iii) Upon receiving an Environmental Notice from the Indemnified Party pursuant to Section 9.1(c)(ii), the Indemnifying Party may, but shall not be required to, diligently and to conclusion plan, implement and control any action (including, without limitation, the defense of all Third-Party Claims) taken with respect 52 to any Environmental Condition to which the Environmental Notice relates (an "Indemnified Environmental Matter"), including the compromise or settlement of any Third-Party Claim, and the Indemnifying Party shall pay all Losses; provided that in such case, the Indemnified Party shall have no obligation to pay any additional Losses of the Indemnified Party thereafter incurred defending or otherwise responding to such Indemnified Environmental Matter; provided further that should the Indemnifying Party fail to complete or diligently pursue completion of such actions, the Indemnified Party shall have the right (but not the obligation) to complete such actions and to be indemnified therefor in accordance with the provisions of this Agreement. No compromise or settlement in respect of any Indemnified Environmental Matter may be effected by the Indemnifying Party without the Indemnifying Party's prior written consent (which consent shall not be unreasonably withheld), unless the sole relief is monetary damages that are paid in full by the Indemnifying Party. The Indemnifying Party shall give notice to the Indemnified Party as to its intention to assume the planning, implementation or control of any Indemnified Environmental Matter within 30 days after the date of receipt of the Indemnified Party's notice in respect of such Indemnified Environmental Matter. If the Indemnifying Party does not, within 30 days after the Indemnified Party's notice is given, give notice to the Indemnified Party of its assumption of the planning, implementation or control of the Indemnified Environmental Matter, the Indemnifying Party shall be deemed to have waived its rights to plan, implement or control thereof. If the Indemnified Party assumes the planning, implementation or control of any Indemnified Environmental Matter because of the failure of the Indemnifying Party to do so in accordance with this Section 9.1(c)(iii), no compromise or settlement in respect of any Indemnified Environmental Matter may be effected by the Indemnified Party without the Indemnifying Party's prior written consent (which consent shall not be unreasonably withheld). (iv) Notwithstanding anything to the contrary contained in Section 9.1(c)(iii), any actions taken by the Indemnifying Party or Indemnified Party with respect to the planning, implementation or control of any Indemnified Environmental Matter shall be conducted in a commercially reasonable manner. In the event of a disagreement between the Indemnifying Party and the Indemnified Party concerning whether any investigative, remedial or compliance-related action taken with respect to any Indemnified Environmental Matter is commercially reasonable, the parties shall each in good faith attempt to resolve such disagreement on a reasonable basis with the assistance of their respective environmental consultants; any remaining disagreements shall promptly be referred to an independent consultant having expertise in the matter at issue, mutually acceptable to the parties (or, if the parties cannot so agree, the American Arbitration Association shall select such a consultant who shall be independent from each of the parties and whose fees and expenses shall be paid equally by the parties), who shall evaluate the facts and circumstances at issue and shall recommend a course of action which the independent consultant believes in its good faith judgment should be taken (but shall not itself perform such action). Such recommendation shall be final and binding upon the parties. The parties agree to act as promptly as practicable in implementing the foregoing procedures, and further agree that, in the event of exigent circumstances that require any actions by the Indemnifying Party or the Indemnified Party, as the case may 53 be, before the foregoing procedures can be implemented, each of the Indemnifying Party and the Indemnified Party, as the case may be, may undertake such actions at its own expense and shall be entitled to indemnification hereunder to the extent that its actions are subsequently ratified by such procedure. (v) For purposes of this Section 9.1(c), "commercially reasonable manner" shall be determined from the perspective of a reasonable business person acting (without regard to the availability of indemnification hereunder) to achieve compliance with Environmental Law or avoid or mitigate a loss or liability or potential loss or liability with respect to Environmental Law. (vi) Notwithstanding anything to the contrary contained in this Section 9.1(c), Buyer may not seek, and is not entitled to, indemnification from Seller pursuant to this Section 9.1 for any Losses resulting from the disclosure to any governmental authority of any Environmental Condition unless Buyer believes, in its good faith business judgment (exercised without regard to the availability of indemnification hereunder), and after consultation with counsel, that such disclosure is required under any Environmental Law. Buyer agrees to consult with Seller prior to any such disclosure, except in the event that such advance consultation is prohibited or rendered impracticable by exigent circumstances, in which case Buyer shall promptly thereafter notify Seller of such disclosure. 9.2 Limitations on Indemnity ------------------------ (a) General. The respective indemnification obligations of Seller ------- and Buyer with respect to any breach of any representation, warranty, covenant or agreement pursuant to Section 9.1 shall be limited to claims for Losses made prior to the last date of survival thereof referred to in Section 8.2, subject to the terms set forth in such Section. (b) Maximum Liability ----------------- (i) Seller Liability. The maximum aggregate amount of Losses ---------------- for which Seller shall be liable pursuant to Sections 9.1(a)(i)(A), (B) and (D) hereof to all Buyer Parties hereunder shall be $43,000,000. The indemnification obligations of Seller with respect to Buyer Claims pursuant to Sections 9.1(a)(i)(C) and (E) shall not be limited as to any dollar amount. (ii) Buyer Liability. The maximum aggregate amount of Losses for --------------- which Buyer shall be liable pursuant to Section 9.1(b) to all Seller Parties hereunder shall be $43,000,000. (c) Deductibles ----------- (i) Seller Deductibles. ------------------ (A) No Buyer Party shall seek, or be entitled to, indemnification 54 from Seller pursuant to Section 9.1(a)(i)(D) until the aggregate amount of Losses incurred by all Buyer Parties in connection with matters addressed in such Section exceeds $200,000. Once such aggregate amount of Losses exceeds $200,000, such portion of such aggregate Losses, if any, then outstanding that exceeds $200,000, together with all Losses resulting from future Buyer Claims pursuant to Section 9.1(a)(i)(D), shall be considered in the calculation of the Seller Deductible as set forth in Section 9.2(c)(i)(B) below. (B) No Buyer Party shall seek, or be entitled to, indemnification from Seller pursuant to Section 9.1(a)(i)(A), (B) or (D) (subject to Section 9.2(c)(i)(A) above) until the aggregate amount of Losses incurred by all Buyer Parties under such Sections (but for the operation of this Section 9.2(c)(i)) exceeds $4,300,000 (the "Seller Deductible"). Once such aggregate amount of Losses exceeds ----------------- the Seller Deductible, such portion of such aggregate Losses, if any, then outstanding that exceeds the Seller Deductible, together with all future Losses resulting from Buyer Claims, shall be fully reimbursable, subject to the limitations set forth in Section 9.2(b)(i). Claims made pursuant to Section 9.1(a)(i)(C) or (E) are not subject to the Seller Deductible. (ii) Buyer Deductible. No Seller Party shall seek, or be ---------------- entitled to, indemnification from Buyer pursuant to Section 9.1(b) until the aggregate amount of Losses incurred by all Seller Parties under such Section (but for the operation of this Section 9.2(c)(ii)) exceeds $4,300,000 (the "Buyer Deductible"). Once such aggregate amount of Losses ---------------- exceed the Buyer Deductible, such portion of such aggregate Losses, if any, then outstanding that exceeds the Buyer Deductible, together with all future Losses resulting from Seller Claims, shall be fully reimbursable, subject to Section 9.2(b)(ii). (d) Insurance Proceeds. To the extent that any Buyer Claim or Seller ------------------ Claim is covered by insurance held by such indemnified Buyer Party or Seller Party, such indemnified party shall be entitled to indemnification pursuant to this Agreement only with respect to the amount of the Losses that are in excess of the cash proceeds received from such insurance. If such indemnified party receives such cash insurance proceeds prior to the time such claim is paid, then the amount payable by the indemnifying party pursuant to such claim shall be reduced by the amount of such proceeds. If such indemnified party receives such cash insurance proceeds after such claim has been paid, then upon the receipt by the indemnified party of any cash proceeds pursuant to such insurance in excess of the amount of Losses incurred by such indemnified party with respect to such claim, such indemnified party must repay any portion of such excess amount which was previously paid by the indemnifying party to such indemnified party in satisfaction of such claim. (e) Pre-Closing Disclosure. An indemnified party shall not be ---------------------- entitled to indemnification pursuant to Section 9.1(a) or (b) for any untruth or inaccuracy of any representation or warranty made to it, or for the nonfulfillment, nonperformance or other breach of any covenant or agreement for its benefit, if 55 (i) such untruth, inaccuracy, nonfulfillment, nonperformance or other breach was made known to such indemnified party by appearing either on the Disclosure Schedule or in any certificate delivered at Closing pursuant to this Agreement (provided that, with respect to any such item disclosed by Seller or the Company pursuant to Section 7.5(c), if (A) the failure to disclose such item on the Disclosure Schedule as of the date hereof constituted a breach of any representation or warranty set forth in Article III when such representation or warranty was made on the date hereof and (B) all such items, in the aggregate, do not constitute a Material Adverse Effect, then Buyer shall be entitled to indemnification with respect to such item pursuant to Section 9.1(a)); and (ii) such indemnified party consummates the transactions contemplated hereby. Notwithstanding the foregoing, nothing contained in this Section 9.2(e) shall prevent Buyer from seeking indemnification against Seller for any breach by Seller of any covenant contained herein (including, without limitation, the provisions of Section 5.1). (f) Calculation of Losses. The amount of any Losses under Section --------------------- 9.1(a) or (b) shall be calculated giving effect to (i) actual Tax savings, if any, to the indemnified party resulting from the payments (or adjustments) giving rise to such indemnity payments and (ii) the actual additional Taxes, if any, payable by such indemnified party as a result of the receipt of such payments, in each case subject to the limitations on indemnification contained in Section 9.2(b). In either case, the amount shall be reasonably determined by the indemnified party taking into account actual Tax savings and actual additional Taxes realized or incurred or to be realized or incurred during the taxable period in which such indemnity payment accrues and prior periods; provided that such amount shall be further adjusted if actual Tax savings and actual additional Taxes are incurred in any subsequent periods. All such calculations shall be subject to the reasonable review of the indemnifying party. Upon request by the indemnifying party, the indemnified party shall provide a certificate prepared by an independent accounting firm regarding actual Tax savings and/or actual additional Taxes incurred or realized in any given year. If an indemnity payment is made prior to the filing of relevant Tax returns, the amount shall be determined on an estimated basis. Proper adjustments shall be made if the actual Tax savings or actual additional Taxes differ from the estimated amount. Any indemnity payment made pursuant to Section 9.1(a) or (b) shall, to the extent permitted by law, be treated by Buyer, Seller and the Company as an adjustment to the Purchase Price. (g) Subrogation. Upon making payment for an indemnification claim ----------- pursuant to this Article IX, so long as all indemnified parties shall have been paid in full for all Losses due under Section 9.1 and 9.2 with respect to such indemnification claim, the indemnifying party shall be subrogated, to the extent of such payment, to any rights which the indemnified party may have against any other parties with respect to the subject matter underlying such indemnification claim. (h) Post-Closing Liability. Seller acknowledges and agrees that, ---------------------- after the Closing, neither the Company nor any Subsidiary shall have any obligation or liability to indemnify Seller on account of any Buyer Claim, and Seller shall not have any right of 56 contribution against the Company or any Subsidiary with respect to any Buyer Claim. 9.3 Tax Matters ----------- (a) Buyer shall cause the Company to prepare and file all Returns that are not filed as of the Closing Date. Any such Returns (i) in respect of income Taxes for periods which begin before the Balance Sheet Date and (ii) in respect of Taxes other than income Taxes for periods which begin before the Closing Date, shall in all cases be prepared in a manner consistent with the Company's or relevant Subsidiaries' prior practice (including elections), except as otherwise required by law. Subject to the foregoing, Buyer shall cause the Company to reasonably determine the contents of such Returns. At the request of Seller, Buyer shall provide Seller with copies of such Returns at least ten days prior to the filing thereof for Seller's reasonable review and reasonable consent. (b) Seller and Buyer agree to give prompt notice to each other of any proposed adjustment to Taxes for periods or portions thereof ending on or prior to the Closing Date. (c) Seller and Buyer agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance (including access to books and records) relating to the Company and the Subsidiaries as is reasonably necessary for the preparation of any Return, claim for refund or audit, and the prosecution or defense of any claim, suit or proceeding relating to any proposed adjustment. Buyer shall execute or cause to be executed and deliver or cause to be delivered any powers of attorney and other documents reasonably necessary to enable Seller (or its advisors) to take all actions in connection with Audits which Seller has the right to control (or jointly control) pursuant to Section 9.3(d) hereof. (d) Seller shall have the right (directly or through its advisors) to control the conduct of any audit or other proceeding (an "Audit") involving Taxes for which Seller may be obligated to indemnify Buyer or the Company provided that it notifies the Company or Buyer in writing of its intent to assume such control (it being understood that it may assume control after the commencement of any Audit). In the event that an Audit is under the control of Seller, Seller shall keep Buyer advised of the progress of the Audit and shall allow Buyer to participate in (but not control) the Audit at its own expense. Notwithstanding the foregoing (x) Seller shall not settle any Audit which settlement has an adverse affect on the Company's liability for Tax with respect to periods ending after the Closing Date (or in the case of income Taxes, periods ending after the Balance Sheet date) without Buyer's consent, which consent shall not be unreasonably withheld and (y) in the event that it is reasonably likely that such Audit will involve Taxes for which Seller is obligated to indemnify Buyer or the Company in excess of the maximum liability of Seller under Section 9.2(b) hereof, Buyer and Seller shall jointly control such Audit (it being understood that Buyer may assume such joint control after the commencement of the Audit in the event that such reasonable likelihood is established only after commencement of the Audit) and neither party shall settle such Audit without the consent of the other, which consent shall not be unreasonably withheld. In the event that Buyer controls any Audit for which Seller may be obligated to indemnify Buyer or the Company, (a) Buyer shall keep Seller fully advised of the progress of the Audit and shall allow Seller to participate in the Audit and (b) Buyer and the Company shall not settle such Audit without Seller's consent, which 57 consent shall not be unreasonably withheld. Notwithstanding anything to the contrary, if any Audit involves a period that begins before and ends after the Closing Date (or in the case of income Taxes, the Balance Sheet Date), Buyer and Seller shall jointly control such Audit and neither party shall settle such Audit without the consent of the other party, which consent shall not be unreasonably withheld. (e) Seller and Buyer agree that, as of the Balance Sheet Date, the unallocated Tax reserve is as set forth on Schedule 9.3(e). ARTICLE X MISCELLANEOUS ------------- 10.1 Termination ----------- (a) Termination. This Agreement may be terminated as follows: ----------- (i) By mutual written consent of Buyer and Seller at any time; (ii) By Buyer or Seller if the Closing shall not have occurred on or before July 31, 1996; (iii) By Buyer, if any event occurs which renders impossible in compliance with one or more of the conditions set forth Article VII hereof, which condition or conditions are not waived by Buyer; (iv) By Seller, if any event occurs which renders impossible compliance with one or more of the conditions set forth in Article VI hereof, which condition or conditions are not waived by Seller; and (v) By Seller on or after May 8, 1996, if by 5:00 p.m. New York City time on such date Buyer has not entered into the Commitment Letter and provided Seller with a copy thereof. (b) Procedure Upon Termination. In the event of termination of this -------------------------- Agreement pursuant to Section 10.1: (i) Each party shall redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, to the party furnishing the same; (ii) All information received by any party with respect to the business of any other party or its Affiliates shall be subject to the terms of the Confidentiality Agreement; and 58 (iii) All obligations of the parties hereto under this Agreement shall terminate, except for the obligations under this Section 10.1 and Sections 10.4, 10.9 and 10.11, and there shall be no liability of any party hereto to any other party and each party hereto shall bear its own fees, costs and expenses incurred by it or on its behalf in connection with the negotiation, preparation, execution and performance of this Agreement, provided that termination of this Agreement by Buyer or Seller pursuant to clause (iii) or (iv) of Section 10.1(a), respectively, by reason of intentional or knowing breaches of this Agreement shall not relieve the defaulting or breaching party (whether or not it is the terminating party) of liability for damages actually incurred by the other party. 10.2 Assignment. Neither this Agreement nor any of the rights or ---------- obligations hereunder may be assigned by any party without the prior written consent of all other parties to this Agreement. Without limiting the generality of the foregoing, the Company and Seller agree to the assignment by Buyer of its rights pursuant to this Agreement (a) to any Affiliate or subsidiary of Buyer, any partnership controlled by Buyer or any successor in interest to Buyer or (b) to any lender as collateral security, so long as (i) in the case of an assignment described in clause (a) (A) the representations and warranties of Buyer made herein (other than in Section 4.9) are equally true of such assignee and (B) such assignee shall execute a counterpart of this Agreement agreeing to be bound by the provisions hereof as "Buyer" and agreeing to be jointly and severally liable with the assignor and any other assignee for all of the obligations of the assignor hereunder and (ii) in the case of an assignment described in either clause (a) or (b), if such assignment has any adverse consequences to Seller (including, without limitation, any adverse tax consequences or any adverse effect on the ability of Buyer to consummate the transactions contemplated hereby), Buyer shall indemnify and hold Seller harmless against such adverse consequences, but no such assignment of this Agreement or any of the rights or obligations hereunder shall relieve Buyer of its obligations under this Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation hereunder. 10.3 Notices; Transfer of Funds. All notices, requests, demands and other -------------------------- communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received, if personally delivered; when transmitted, if transmitted by telecopy, upon receipt of telephonic or electronic confirmation; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (e.g., Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: If to the Company, addressed to: Krueger Acquisition Corporation c/o Ringier America, Inc. One Pierce Place Suite 800 Itasca, Illinois 60143-1272 Attention: Chief Financial Officer Telecopy: (708) 285-6642 59 With a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004 Attention: Paul Reinstein Telecopy: (212) 859-4000 If to Seller, addressed to: Ringier A.G. Dufourstrasse 23 CH-8008 Zurich, Switzerland Attention: Martin Werfeli Telecopy: 011-41-6274-63215 With a copy to: Mandelbaum & Schweiger 516 Fifth Avenue New York, New York 10036 Attention: Gerard Mandelbaum Telecopy: (212) 302-3412 And a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004 Attention: Paul Reinstein Telecopy: (212) 859-4000 60 If to Buyer, addressed to: World Color Press, Inc. 101 Park Avenue New York, NY 10178 Attention: General Counsel Telecopy: (212) 697-0219 With a copy to: Latham & Watkins 885 Third Avenue Suite 1000 New York, NY 10022 Attention: Steven Della Rocca Telecopy: (212) 751-4864 or to such other place and with such other copies as either party may designate as to itself by written notice to the others. 10.4 Choice of Law. This Agreement shall be construed, interpreted and the ------------- rights of the parties determined in accordance with the internal laws of the State of New York (without reference to its choice of law provisions). Seller hereby designates CT Corporation as its agent for service of process, which agent may be substituted at any time upon ten days' notice to Buyer, but which agent shall in no event be located outside the State of New York, and Seller irrevocably consents to the service of any and all process in any action or proceeding arising out of or relating to this Agreement by the delivery of such process to such agent. The parties hereto irrevocably submit to the non- exclusive jurisdiction of the United States District Court for the Southern District of New York (or, if subject matter jurisdiction in that court is not available, in the Supreme Court of the State of New York, New York County) over any dispute arising out of or relating to this Agreement or any agreement or instrument contemplated hereby or entered into in connection herewith or any of the transactions contemplated hereby or thereby. Each party hereby irrevocably agrees that all claims in respect of such dispute or proceeding may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum in connection therewith. The parties hereto waive the right to a jury trial in connection with any suit, action or proceeding seeking enforcement of such party's rights under this Agreement. 10.5 Entire Agreement; Amendments and Waivers. This Agreement, the ---------------------------------------- Ancillary Agreements and the Confidentiality Agreement constitute the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties and, except as set forth in Article III of this Agreement or in the Ancillary Agreements, none of Seller, the Company or any Subsidiary is making any other representation or warranty to Buyer; provided that the forms 61 of agreements and opinions attached hereto as Exhibits shall be superseded by the copies of such agreements and opinions executed and delivered by the respective parties thereto, the execution and delivery of such agreements and opinions by the parties thereto to be conclusive evidence of such parties' approval of any change or modification therein. No amendment, modification or alteration of the terms or provisions of this Agreement shall be binding unless the same shall be in writing and duly executed by the parties hereto, except that any of the terms or provisions of this Agreement may be waived in writing at any time by the party which is entitled to the benefits of such waived terms or provisions. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 10.6 Multiple Counterparts. This Agreement may be executed in one or more --------------------- counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.7 Invalidity. In the event that any one or more of the provisions ---------- contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 10.8 Titles. The titles, captions or headings of the Articles and Sections ------ herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 10.9 Publicity. No party shall issue any press release or make any public --------- statement regarding the transactions contemplated hereby, without the prior approval of the other party, and the parties hereto shall issue a mutually acceptable press release as soon as practicable after the execution and delivery of this Agreement; provided that nothing herein shall be deemed to prohibit any party from making any disclosure which its counsel deems necessary in order to fulfill such party's disclosure obligations imposed by law; and provided further that each such party shall, to the extent reasonably practicable, afford the other parties the opportunity to review such proposed legally required disclosure. 10.10 Confidential Information. The parties acknowledge that the ------------------------ transaction described herein is of a confidential nature and shall not be disclosed except to consultants, advisors, lenders or other financial sources and Affiliates, or as required by law, until such time as the parties make a public announcement regarding the transaction as provided in Section 10.9. In connection with the negotiation of this Agreement, the preparation for the consummation of the transactions contemplated hereby, and the performance of obligations hereunder, each party acknowledges that it will have access to confidential information relating to the other party. Each party shall treat such information as confidential, preserve the confidentiality thereof and not disclose such information, except in accordance with the terms and conditions of the Confidentiality Agreement. Notwithstanding the foregoing, Buyer may disclose this Agreement and the information and data in Buyer possession in connection herewith to the lenders under 62 the Credit Agreement, dated as of March 6, 1995, among Printing Holdings, L.P., Buyer, the lenders party thereto and Bankers Trust Company, as Agent, as the same may be modified or amended, or any successor agreement thereto, subject to the lenders agreeing to be bound by the terms of the Confidentiality Agreement. 10.11 Fees and Expenses ----------------- (a) The Company and Seller. Subject to Section 10.1(b)(iii), ---------------------- concurrently with the Closing, Seller shall pay all of the fees, costs and expenses incurred by Seller, and Seller shall pay or reimburse all out-of-pocket fees, costs and expenses (other than normal overhead expenses and reimbursement for salaries and employee benefits) incurred by the Company, in each case incident to or in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, including, without limitation, legal, investment banking and accounting expenses. (b) Buyer. Subject to Section 10.1(b)(iii), Buyer shall pay all of ----- the fees, costs and expenses incurred by it incident to or in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby. 10.12 Remedies. The rights and remedies of each party hereto set forth -------- herein and in the Escrow Agreement are cumulative of each other. Such rights and remedies are the exclusive rights and remedies of each party, except with respect to every other right or remedy such party may otherwise have at law or in equity with respect to any claim under federal, state, local or foreign law for fraud or any other similar claim the basis of which is the intentional misrepresentation of one person or entity by another. The exercise of one or more of such rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of such other rights or remedies. 10.13 Representation of Counsel; Mutual Negotiation. Each party has --------------------------------------------- been represented by counsel of its choice in negotiating this Agreement. This Agreement shall therefore be deemed to have been negotiated and prepared at the joint request, direction and construction of the parties, at arm's length, with the advice and participation of counsel, and will be interpreted in accordance with its terms without favor to any party. 10.14 Interpretive Provisions ----------------------- (a) Whenever used in this Agreement, "to the best knowledge of the Company," "to the best knowledge of Seller" or " to the best knowledge of the Company and Seller" shall mean the actual knowledge of those persons listed on Schedule 10.14(a), after due and diligent inquiry and "to the best knowledge of Buyer" shall mean the actual knowledge of those persons listed on Schedule 10.14(a). (b) The words "hereof," "herein," "hereby" and "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular Article, Section or 63 other subdivision hereof. (c) Accounting terms used but not otherwise defined herein shall have the meanings given to such terms under GAAP. 64 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on their respective behalf, by their respective officers thereunto duly authorized, all as of the day and year first above written. BUYER: WORLD COLOR PRESS, INC. By: ----------------------------------- Name: ---------------------------- Title: --------------------------- COMPANY: KRUEGER ACQUISITION CORPORATION By: ----------------------------------- Name: ---------------------------- Title: --------------------------- SELLER: RINGIER A.G. By: ----------------------------------- Name: ---------------------------- Title: --------------------------- EX-10.2 3 EXHIBIT 10.2 EXECUTION ================================================================================ SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JUNE 6, 1996 among WORLD COLOR PRESS, INC., THE LENDERS PARTY HERETO, BANKERS TRUST COMPANY, as Administrative Agent, BA SECURITIES, INC., as Syndication Agent, and CITIBANK, N.A., as Documentation Agent ================================================================================ WORLD COLOR PRESS, INC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JUNE 6, 1996 TABLE OF CONTENTS ----------------- Page ---- SECTION 1. DEFINITIONS . . . . . . . . . . . . . . 2 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Accounting Terms and Financial Information . . . . . . . . . . . 37 1.3 Other Definitional Provisions . . . . . . . . . . . . . . . . . . 38 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS; NOTES . . . . . 39 2.1 Commitments; Loans . . . . . . . . . . . . . . . . . . . . . . . 39 2.2 Interest on the Loans . . . . . . . . . . . . . . . . . . . . . . 49 2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 2.4 Prepayments and Payments; Reductions in Commitments; Cash Collateralization of Standby Letters of Credit . . . . . . . . . 57 2.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 65 2.6 Special Provisions Governing Eurodollar Rate Loans . . . . . . . 66 2.7 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . 69 2.8 Increased Costs; Taxes; Capital Adequacy. . . . . . . . . . . . . 76 2.9 Lenders' Obligation to Mitigate . . . . . . . . . . . . . . . . . 80 2.10 Replacement of a Lender . . . . . . . . . . . . . . . . . . . . . 80 SECTION 3. CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND TO LOANS AND LETTERS OF CREDIT . . . . . . . . . 81 3.1 Conditions to Effectiveness . . . . . . . . . . . . . . . . . . . 82 3.2 Conditions to All Letters of Credit . . . . . . . . . . . . . . . 87 3.3 Conditions to All Acquisition Term Loans . . . . . . . . . . . . 87 3.4 Conditions to All Loans and Letters of Credit . . . . . . . . . . 88 SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 89 4.1 Organization, Powers, Good Standing and Subsidiaries . . . . . . 89 4.2 Authorization of Borrowing, etc. . . . . . . . . . . . . . . . . 90 (i) Page ---- 4.3 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . 92 4.4 No Material Adverse Change; No Stock Payments . . . . . . . . . . 93 4.5 Title to Properties; Liens . . . . . . . . . . . . . . . . . . . 93 4.6 Litigation; Adverse Facts . . . . . . . . . . . . . . . . . . . . 93 4.7 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . 94 4.8 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 4.9 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . 94 4.10 Securities Activities . . . . . . . . . . . . . . . . . . . . . . 95 4.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . 95 4.12 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 4.13 Environmental Protection . . . . . . . . . . . . . . . . . . . . 96 4.14 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 4.15 Patents, Trademarks, etc. . . . . . . . . . . . . . . . . . . . . 98 4.16 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 99 4.17 Employment and Labor Agreements . . . . . . . . . . . . . . . . . 99 SECTION 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . 100 5.1 Financial Statements and Other Reports . . . . . . . . . . . . . 100 5.2 Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . . 106 5.3 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . 106 5.4 Maintenance of Properties; Insurance . . . . . . . . . . . . . . 107 5.5 Inspection; Lender Meeting; Appraisals . . . . . . . . . . . . . 107 5.6 Equal Security for Loans and Notes; No Further Negative Pledges . 108 5.7 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . 109 5.8 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 109 5.9 Maintenance of Leasehold Property; Excluded Collateral . . . . . 110 5.10 Environmental Disclosure and Inspection . . . . . . . . . . . . . 111 5.11 Hazardous Materials; Remedial Action . . . . . . . . . . . . . . 113 5.12 Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . 113 5.13 Deposit Accounts and Cash Management Systems . . . . . . . . . . 114 5.14 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 114 5.15 Fiscal Periods . . . . . . . . . . . . . . . . . . . . . . . . . 115 SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . 115 6.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 115 6.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 6.3 Investments; Joint Ventures . . . . . . . . . . . . . . . . . . . 120 6.4 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . 121 (ii) Page ---- 6.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . . . 122 6.6 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . 123 6.7 Restriction on Fundamental Changes . . . . . . . . . . . . . . . 128 6.8 Special Restrictions on Leases . . . . . . . . . . . . . . . . . 131 6.9 Limitation on Net Consolidated Capital Expenditures . . . . . . . 132 6.10 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . 132 6.11 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 133 6.12 Other Indebtedness; Amendments and Waivers of Certain Documents . 133 6.13 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 133 SECTION 7. EVENTS OF DEFAULT . . . . . . . . . . . . . 134 7.1 Failure to Make Payments When Due . . . . . . . . . . . . . . . . 134 7.2 Default in Other Agreements . . . . . . . . . . . . . . . . . . . 134 7.3 Breach of Certain Covenants . . . . . . . . . . . . . . . . . . . 135 7.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . 135 7.5 Other Defaults under Agreement or Loan Documents . . . . . . . . 135 7.6 Involuntary Bankruptcy; Appointment of Receiver, etc. . . . . . . 135 7.7 Voluntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . 136 7.8 Judgments and Attachments . . . . . . . . . . . . . . . . . . . . 136 7.9 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 7.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 7.11 Invalidity of Guaranty . . . . . . . . . . . . . . . . . . . . . 137 7.12 Failure of Security . . . . . . . . . . . . . . . . . . . . . . . 137 7.13 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . 138 7.14 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 138 SECTION 8. ADMINISTRATIVE AGENT . . . . . . . . . . . . 139 8.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 8.2 Powers; General Immunity . . . . . . . . . . . . . . . . . . . . 139 8.3 Representations and Warranties; No Responsibility for Appraisal of Creditworthiness . . . . . . . . . . . . . . . . . . . . . . . 141 8.4 Indemnification of Administrative Agent . . . . . . . . . . . . . 141 8.5 Registered Persons Treated as Owner . . . . . . . . . . . . . . . 142 8.6 Successor Administrative Agent . . . . . . . . . . . . . . . . . 142 8.7 Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . 143 8.8 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . 143 (iii) Page ---- SECTION 9. MISCELLANEOUS . . . . . . . . . . . . . . 144 9.1 Representations of Lenders . . . . . . . . . . . . . . . . . . . 144 9.2 Assignments and Participations in Loans and Notes . . . . . . . . 144 9.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 9.4 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 9.5 Set Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 9.6 Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . . . . 149 9.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 149 9.8 Independence of Covenants . . . . . . . . . . . . . . . . . . . . 151 9.9 Change in Accounting Principles . . . . . . . . . . . . . . . . . 151 9.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 9.11 Survival of Warranties and Certain Agreements . . . . . . . . . . 152 9.12 Failure or Indulgence Not Waiver; Remedies Cumulative . . . . . . 152 9.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 152 9.14 Obligations Several; Independent Nature of Lenders' Rights . . . 152 9.15 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 9.16 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . 153 9.17 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 153 9.18 Consent to Jurisdiction and Service of Process . . . . . . . . . 153 9.19 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . 154 9.20 Marshalling; Payments Set Aside . . . . . . . . . . . . . . . . . 155 9.21 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 155 (iv) EXHIBITS: I Form of Notice of Borrowing II Form of Notice of Conversion/Continuation III Form of Notice of Issuance of Letter of Credit IV Form of Compliance Certificate V Form of Existing Term Note VI Form of Tranche A Acquisition Term Note VII Form of Tranche B Acquisition Term Note VIII Form of Tranche C Acquisition Term Note IX Form of Revolving Note X Form of Swing Line Note XI Form of Intercompany Note XII Form of Guaranty XIII Form of Security Agreement XIV Form of Intercreditor Agreement XV Form of Trademark Agreement XVI Form of Patent Agreement XVII Form of Acquisition Compliance Certificate XVIII Form of Assignment Agreement XIX Form of Opinion of Latham & Watkins XX Form of Confidentiality Agreement XXI Form of Opinion of Counsel to Agent XXII Form of Departing Lender Consent XXIII Form of Cost Adjustment Certificate XXIV Form of Pricing Certificate (v) SCHEDULES: 1.1A/2.1 Pro Rata Shares and Commitments 1.1B Excluded Collateral 1.1C Fiscal Quarters and Fiscal Years 1.1D Existing Letters of Credit 1.1E Identified Target Subsidiaries 1.1F Inactive Subsidiaries 1.1G Management Stock Agreements 4.1 Loan Parties 4.2B Conflicts 4.2G Deposit Accounts 4.7 Tax Sharing Agreements 4.11 ERISA Matters 4.15 Intellectual Property 4.17 Employment and Labor Agreements 5.10 Environmental Matters 6.1 Existing Indebtedness 6.1A Promissory Notes 6.2 Liens 6.3 Investments 6.4 Contingent Obligations 6.5 Management Agreement (vi) WORLD COLOR PRESS, INC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JUNE 6, 1996 This SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 6, 1996, is entered into by and among WORLD COLOR PRESS, INC., a Delaware corporation ("Company"), THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (individually referred to herein as a "Lender" and collectively as "Lenders"), BANKERS TRUST COMPANY, as administrative agent for Lenders ("Administrative Agent"), BA SECURITIES, INC., as syndication agent ("Syndication Agent") and CITIBANK, N.A., as documentation agent ("Documentation Agent"). R E C I T A L S - - - - - - - - WHEREAS, Company is party to the Existing Credit Agreement, pursuant to which the lenders thereunder have extended to Company certain credit facilities to be used, among other things, to finance certain acquisitions and for the general corporate purposes of Company and its Subsidiaries (such terms and other capitalized terms being used herein as defined in Section 1 of this Agreement); WHEREAS, Company, Bankers, as agent, and the lenders party thereto desire to amend and restate the Existing Credit Agreement to, among other things, modify, continue and increase the credit facilities provided thereunder and provide additional acquisition loan facilities, the proceeds of which will be used to finance certain additional Acquisitions, including the Identified Acquisition; WHEREAS, the Guarantors under the Existing Credit Agreement will continue to guaranty the obligations of Company hereunder and under the other Loan Documents and all New Subsidiaries (including each Identified Target Subsidiary) will guaranty such obligations of the Company; and WHEREAS, Company and the Guarantors under the Existing Credit Agreement will continue to grant security interests in their respective Collateral in favor of Collateral Agent to secure their respective obligations under the Loan Documents and all New Subsidiaries (including each Identified Target Subsidiary) will grant security interests in their respective Collateral to secure their respective obligations under the Loan Documents. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders and Agents agree as follows: 1 SECTION 1. DEFINITIONS 1.1 Certain Defined Terms --------------------- The following terms used in this Agreement shall have the following meanings: "Acquisition" means, from and after the Closing Date, any acquisition by Company or any of its Subsidiaries of (i) an equity interest in, or all or substantially all of the assets of, or any smaller portion that constitutes an operating unit or division of, any Person as permitted pursuant to subsection 6.7(v), including, but not limited to the Identified Acquisition, or (ii) any contract or agreement for prepress service, printing and prepress services, binding and finishing services or distribution services or related assets that in each case has an identifiable stream of revenues associated therewith. "Acquisition Commitment Termination Date" means the Acquisition Commitment Termination Date then in effect, which shall be the earliest of (i) June 30, 1998, (ii) the date as of which the Obligations shall have become immediately due and payable pursuant to Section 7, and (iii) the date on which all of the Obligations are paid in full (including, without limitation, the repayment, expiration, termination or cash collateralization of Letters of Credit pursuant to this Agreement) and all Commitments are reduced to zero. "Acquisition Compliance Certificate" means a certificate substantially in the form of Exhibit XVII annexed hereto. "Acquisition EBITDA" means the sum of Consolidated EBITDA as calculated for the applicable Target for the four Fiscal Quarter period preceding the date the Acquisition of such Target occurs and based on the financial statements of such Target delivered pursuant to subsection 5.1(xviii), it being understood that Acquisition EBITDA shall not take into account any income, expenses or other items relating to assets not acquired in the applicable Acquisition. "Acquisition Term Loan" or "Acquisition Term Loans" means one or more of the Tranche A Acquisition Term Loans, Tranche B Acquisition Term Loans or Tranche C Acquisition Term Loans or any combination thereof. "Actual Consolidated Capital Expenditures" means, with respect to any Fiscal Year, cash payments actually made by Company or any of its Subsidiaries in such Fiscal Year in respect of Consolidated Capital Expenditures other than payments made in respect of Committed Consolidated Capital Expenditures incurred in any previous Fiscal Year. "Additional Subordinated Indebtedness" has the meaning assigned to that term in subsection 6.1(x). 2 "Additional Subordinated Indebtedness Refinancing" means (i) the issuance by Company of $200,000,000 or more of Additional Subordinated Indebtedness before June 30, 1998 pursuant to and in accordance with the provisions of subsection 6.1(x) and (ii) the prepayment of all Tranche C Acquisition Term Loans then outstanding with the proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) thereof, in each case pursuant to subsection 2.4A(ii)(c). "Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date, the rate per annum obtained by dividing (i) the Eurodollar Rate for that date by (ii) a percentage equal to 100% minus the stated maximum rate of all reserves required to be maintained against "Eurocurrency liabilities" as specified in Regulation D (or against any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Rate Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). "Administrative Agent" has the meaning assigned to that term in the introduction to this Agreement, and includes any successor Administrative Agent under subsection 8.6. "Affected Lender" has the meaning assigned to that term in subsection 2.6C. "Affiliate" means, as applied to any Person, (i) any other Person directly or indirectly controlling, controlled by, or under common control with, that Person, (ii) any other Person that, directly or indirectly, owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, 10% or more of the stock having ordinary voting power in the election of directors of such Person or (iii) each of such Person's directors and officers appointed by the board of directors of such Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "Agents" means, collectively, Administrative Agent, Collateral Agent, Syndication Agent and Documentation Agent. "Agreement" means the Existing Credit Agreement, as amended and restated in its entirety by this Second Amended and Restated Credit Agreement dated as of June 6, 1996, as it may be further amended, restated, supplemented or otherwise modified from time to time. "Applicable Eurodollar Rate Margin" has the meaning assigned to that term in subsection 2.2A(ii). "Applicable Margin" has the meaning assigned to that term in subsection 2.2A(i). "Applicable Swing Line Margin" has the meaning assigned to that term in subsection 2.2A(iii). 3 "Asset Sale" means the sale, transfer or other disposition by Company or any of its Subsidiaries to any Person (including in a sale-leaseback transaction) of (i) any of the capital stock of any Subsidiary of Company; (ii) substantially all of the assets of Company; (iii) any other assets of Company or any of its Subsidiaries (other than the sale of inventory in the ordinary course of business); provided that (t) any sale, transfer or other disposition of assets by Company to any wholly-owned Subsidiary of Company which is a party to the Guaranty, the Security Agreement and other applicable Loan Documents, (u) any sale, transfer or other disposition of assets by any Subsidiary of Company to Company or any wholly-owned Subsidiary of Company which is a party to the Guaranty, the Security Agreement and other applicable Loan Documents, (v) any sale, transfer or other disposition of assets by Company or any of its Subsidiaries to any of Company's non-wholly-owned Subsidiaries in one or a series of related transactions in an amount up to $75,000,000 during any Fiscal Year (up to a maximum of $125,000,000 in the aggregate during the term of the this Agreement)(provided that at the time of any such sale or transfer described in this clause (v) no Potential Event of Default or Event of Default has occurred and is continuing); (w) any sale of residential homes by Company or any of its Subsidiaries after purchase from new hires or employees of Company or such Subsidiary in order to facilitate employee transfers or hiring; (x) any sale, transfer or other disposition of assets to an IDB Lessor in connection with an Other IDB Sale-Leaseback Transaction; (y) any sale, transfer or other disposition of Receivables Assets in connection with a Permitted Receivables Transaction; or (z) any other sale, transfer or other disposition of assets in one or a related series of transactions for less than $15,000,000 (up to a maximum of $75,000,000 during the term of this Agreement) shall not be deemed to be an "Asset Sale" within the meaning of clause (iii) of this definition. "Assignment Agreement" means an Assignment and Assumption Agreement between an assigning Lender and its assignee, substantially in the form of Exhibit XVIII annexed hereto. "Bankers" means Bankers Trust Company. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy" as now and hereafter in effect, or any successor statute. "Benefitted Subsidiary" means, with respect to any Letter of Credit, the Person for whose benefit such Letter of Credit was issued, which shall be Company or one of its Subsidiaries as specified by Company in the request for issuance of such Letter of Credit made pursuant to subsection 2.7B. "Business Day" means (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close and (ii) with respect to all notices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the applicable interbank Eurodollar market. 4 "Capital Lease" means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Cash" means money, currency or a positive balance in a Deposit Account. "Cash Equivalents" means (i) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof, (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc., (iv) certificates of deposit (whether or not Eurodollar in nature) or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any Lender or commercial banks organized under the laws of the United States of America or any state thereof or the District of Columbia or Canada, each having combined capital and surplus of not less than $250,000,000 (each such commercial bank herein called a "Cash Equivalent Lender"), (v) Eurodollar time deposits having a maturity of less than one year purchased directly from any Lender or Cash Equivalent Lender (whether such deposit is with such Lender or Cash Equivalent Lender or any other Lender or Cash Equivalent Lender hereunder) and (vi) repurchase agree- ments and reverse repurchase agreements with any Lender or Cash Equivalent Lender relating to marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; provided that the terms of such agreements comply with the guidelines set forth in the Federal Financial Institutions Examination Council Supervisory Policy - Repurchase Agreements of Depositary Institutions With Securities Dealers and Others as adopted by the Comptroller of the Currency on October 31, 1985. "Cash Proceeds" means, with respect to any Asset Sale, cash payments (including, in the case of any Asset Sale, any cash received by way of deferred payment pursuant to a note receivable or otherwise (other than the portion of such deferred payment constituting interest, which shall be deemed not to constitute Cash Proceeds) or any Intercompany Note assumed in connection with such Asset Sale but, in each case, only as and when so received) received from such Asset Sale. "Change of Control" means and is deemed to have occurred if (a) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted Company's Board of Directors (together with any new directors whose election by Company's Board of Directors or whose nomination for election by Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so 5 approved) cease for any reason to constitute a majority of the directors then in office and/or; (b) any person, entity or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) shall at any time have acquired direct or indirect beneficial ownership of a percentage of the outstanding stock entitled to vote in the election of directors (other than stock having such power only by reason of the happening of a contingency that has not occurred) of Company that exceeds the percentage of such stock then beneficially owned by KKR and its Affiliates. "Closing Date" means the date on or before July 31, 1996 on which the conditions set forth in subsection 3.1 are satisfied; provided that if the Closing Date does not occur on or prior to July 31, 1996, the obligations of Lenders to make Loans and issue Letters of Credit pursuant to the terms of this Agreement shall not become effective and the Existing Credit Agreement shall continue in full force and effect. "Collateral" means, collectively: (i) all of the capital stock or other equity interests of each Subsidiary of Company, including, without limitation, the capital stock or other equity interests of each Loan Party (other than Company), (ii) the Intercompany Notes, (iii) any other collateral pledged in accordance with the terms of the Security Agreement, (iv) all collateral in which a Lien is granted pursuant to the terms of the Trademark and Patent Agreements and (v) any property or interest provided in sub- stitution for or in addition to any of the foregoing in accordance with the provisions hereof and the Collateral Documents. "Collateral Agent" means Bankers or any successor Collateral Agent appointed pursuant to the terms of the Intercreditor Agreement. "Collateral Documents" means the Security Agreement, the Trademark and Patent Agreements, the Intercreditor Agreement, and all other instruments or documents delivered by Company or any of its Subsidiaries in order to grant or perfect Liens to Collateral Agent on any of its respective assets. "Commercial Letter of Credit" means any letter of credit payable on sight or similar instrument issued pursuant to subsection 2.7 for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by Company or any Benefitted Subsidiary in the ordinary course of its businesses. "Commitment" or "Commitments" means the Tranche A Commitments, Tranche B Commitments, Tranche C Commitments and the Revolving Loan Commitments of Lenders and the Swing Line Loan Commitment of Bankers. "Commitment Termination Date" means the Commitment Termination Date then in effect, which shall be the earliest of (i) December 29, 2002, (ii) the date as of which the Obligations shall have become immediately due and payable pursuant to Section 7, and (iii) the date on which all of the Obligations are paid in full (including, without limitation, the repayment, expiration, termination or cash collateralization of Letters of Credit pursuant to this Agreement) and all Commitments are reduced to zero. 6 "Committed Consolidated Capital Expenditures" means, with respect to any Fiscal Year, any amounts committed for by Company or any of its Subsidiaries in such Fiscal Year, and not actually paid for in such Fiscal Year, in respect of specifically identified goods or services for Consolidated Capital Expenditures so long as Company or such Subsidiary enters into a purchase order, contract or similar document for such commitments on or prior to April 15th of the following Fiscal Year. "Committed Printing Equipment Proceeds" means any Proceeds of Sales of Printing Equipment that have been applied to purchase Replacement Printing Equipment (or to offset expenditures for the purchase of Replacement Printing Equipment previously made during the Fiscal Year in which such Printing Equipment was sold) or that have been committed to purchase Replacement Printing Equipment pursuant to a purchase order that has not been cancelled, revoked or otherwise terminated. "Company" has the meaning assigned to that term in the introduction to this Agreement. "Compliance Certificate" means a certificate substantially in the form annexed as Exhibit IV hereto delivered to Lenders by Company pursuant to subsection 5.1(iii). "Confidentiality Agreement" means a Confidentiality Agreement between a potential assignee Lender and Company substantially in the form of Exhibit XX annexed hereto. "Consolidated Capital Expenditures" means, for any period, the aggregate of all expenditures (whether in cash or accrued as liabilities and including that portion of Capital Leases originally incurred during such period which is capitalized on the consolidated balance sheet of Company and its Subsidiaries and including any assets acquired during such period) by Company and its Subsidiaries during such period that, in conformity with GAAP, are included in the property, plant or equipment reflected in the consolidated balance sheet of Company and its Subsidiaries and the Net Lease Value of all equipment leased during such period by Company or any of its Subsidiaries under an Operating Lease, other than renewals or extensions of any then existing Operating Lease or Capital Lease, as the case may be, covering the same assets as such respective Operating Lease or Capital Lease; provided that "Consolidated Capital Expenditures" shall not include expenditures to acquire equipment or other property pursuant to an Acquisition consummated on or prior to the Acquisition Commitment Termination Date financed all or in part with the proceeds of Acquisition Term Loans made in connection with such Acquisition. "Consolidated Cash Capital Expenditures" means, for any period, Consolidated Capital Expenditures made in cash during such period, but excluding, however, the amount thereof not actually paid at the end of such period but including the unpaid amount thereof at the beginning of such period to the extent paid during such period. "Consolidated Cash Flow Available for Fixed Charges" means, for any period, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv) depreciation expense, (v) amortization 7 expense (including Capital Lease amortization), (vi) operating lease payments and (vii) other non-cash items reducing Consolidated Net Income, but excluding any component of items (ii) through (vii) not deducted in calculating Consolidated Net Income, minus non-cash items increasing Consolidated Net Income, other than items excluded from the calculation thereof, all as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP; it being understood and agreed that for purposes of calculating Consolidated Cash Flow Available for Fixed Charges for the four Fiscal Quarter period ending on the last day of each of the four Fiscal Quarters following the Closing Date, Consolidated Cash Flow Available for Fixed Charges shall include Acquisition EBITDA for the Identified Target Subsidiaries and for Shea Communications Company for such period to the extent not otherwise taken into account in the calculation of Consolidated Cash Flow Available for Fixed Charges. "Consolidated Cash Interest Expense" means for any period, total interest expense (including that attributable to Capital Leases in accordance with GAAP) of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries, including, without limitation, all capitalized interest, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs and benefits under Interest Rate Agreements, but excluding, however, interest expense not payable in cash (including amortization of discount), all as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. "Consolidated Current Assets" means, as at any date of determination, the total assets of Company and its Subsidiaries on a consolidated basis which may properly be classified as current assets in conformity with GAAP, but excluding Cash and Cash Equivalents except to the extent that Cash and Cash Equivalents exceed the sum of (i) the aggregate principal amount of all outstanding Term Loans, Revolving Loans and Swing Line Loans and (ii) the aggregate amount of all drawings under Standby Letters of Credit and Commercial Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Company. "Consolidated Current Liabilities" means, as at any date of determination, the total liabilities of Company and its Subsidiaries on a consolidated basis which may properly be classified as current liabilities in conformity with GAAP other than any Obligations. "Consolidated EBITDA" means, for any period, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) provisions for taxes based on income, (iii) Consolidated Interest Expense, (iv) depreciation expense, (v) amortization expense, (vi) other non-cash items reducing Consolidated Net Income and (vii) other cash streamlining and cash restructuring charges reducing Consolidated Net Income and incurred as a result of the termination of employees or the consolidation of operations in connection with the Identified Acquisition and the acquisition of Shea Communications Company in an aggregate amount for the period commencing on the Closing Date and continuing through and including December 31, 1997 not to exceed $20,000,000, but excluding any component of items (ii) through (vii) not deducted in calculating Consolidated Net Income, minus non-cash items increasing Consolidated Net Income, other than items excluded from the calculation thereof, all as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP; it being understood and agreed that 8 for purposes of calculating the Leverage Ratio, Consolidated EBITDA shall be calculated for the four Fiscal Quarter period ending on the last day of the most recent Fiscal Quarter and shall include (a) Acquisition EBITDA for such period of each Target acquired during or after such period to the extent not otherwise taken into account in the calculation of Consolidated EBITDA and (b) in the event Company elects to submit an Initial Cost Adjustment Certificate pursuant to subsection 5.1(xviii) for a particular Acquisition, for purposes solely of the calculation of the Leverage Ratio under subsections 2.1B, 2.2A, 2.3A and 2.3B in connection with such Acquisition and during the period from the date of such Acquisition through the day immediately prior to the last day of the fourth full Fiscal Quarter occurring after the date of such Acquisition (the "Cost Synergy Period"), Consolidated EBITDA shall be increased by the amount of estimated cost reduction synergies set forth on such Initial Cost Adjustment Certificate as such amount may be reduced as set forth on a subsequent Cost Adjustment Certificate delivered pursuant to subsection 5.1(iii), it being understood that, during the Cost Synergy Period for a particular Acquisition, all actual cost synergies of the types set forth on the applicable Cost Reduction Certificate for such Acquisition shall be disregarded in connection with the calculation for the Leverage Ratio under subsections 2.1B, 2.2A, 2.3A and 2.3B. "Consolidated Excess Cash Flow" means, for any Fiscal Year, Consolidated Net Income for such Fiscal Year, plus to the extent deducted in calculating Consolidated Net Income (a) amortization expense (including, without limitation, Capital Lease amortization), (b) depreciation expense, and (c) other non-cash items reducing Consolidated Net Income, plus decreases in Consolidated Working Capital during such Fiscal Year, minus Net Consolidated Capital Expenditures for such Fiscal Year (except to the extent of any such Consolidated Capital Expenditures financed during such Fiscal Year from the proceeds of Indebtedness incurred for such purpose) and plus the proceeds of Indebtedness incurred during such Fiscal Year pursuant to subsection 6.1(viii) and not applied to make Consolidated Capital Expenditures during such Fiscal Year, minus principal payments of Term Loans actually made during such Fiscal Year or in respect of any other Indebtedness for borrowed money, including, without limitation, Capitalized Leases (other than principal payments required to be made with the proceeds of equity contributions to Company, sales of assets and payments of revolving loans or similar facilities (including the Revolving Loans, Swing Line Loans and Tranche B Acquisition Term Loans) to the extent that commitments to lend (including the Revolving Loan Commitments and the Tranche B Commitments) under any such facility are not permanently reduced in connection with such payment and other than principal payments of Loans or other Indebtedness that constitutes a refinancing of such Indebtedness including, but not limited to, the payment of Tranche C Acquisition Term Loans with the proceeds of Additional Subordinated Indebtedness), minus increases in Consolidated Working Capital during such Fiscal Year, minus other non-cash items increasing Consolidated Net Income. The amount of Consolidated Excess Cash Flow so determined shall be adjusted as necessary to avoid a double addition or subtraction on account of a single item or transaction. "Consolidated Fixed Charges" means, for any period, the sum of the amounts for such period of (i) Consolidated Cash Interest Expense, (ii) provisions for taxes based on income for such period less deferred tax expense for such period, (iii) operating lease payments and (iv) 9 scheduled principal payments of all Indebtedness, all as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. "Consolidated Interest Expense" means, for any period, Consolidated Cash Interest Expense plus interest expense for such period not payable in cash (including amortization of discount) and any non-cash interest component of Capital Leases of Company and its Subsidiaries, all as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. "Consolidated Net Income" means, for any period, the net income (or loss) of Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided that there shall be excluded (i) the income (or loss) of any Person which becomes a Subsidiary of Company to the extent that such income (or loss) is accrued prior to the date it becomes a Subsidiary of Company or is merged into or consolidated with any Subsidiary of Company or that Person's assets are acquired by Company or any of its Subsidiaries, (ii) the income (or loss) of any Person in which any other Person (other than Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Company or any of its Subsidiaries or the amount of any capital calls or contributions or other funding of such losses actually required from Company or any of its Subsidiaries during such period, (iii) the income of any of Company's Subsidiaries to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary except to the extent of the amount of dividends or other distributions actually paid to Company or any of its Subsidiaries that is not subject to the restriction described in this clause (iii), and (iv) any after-tax gains or losses attributable to asset sales outside the ordinary course of business. "Consolidated Total Indebtedness" means, as at any date of determination, the total of all items of Indebtedness and all Contingent Obligations of Company and its Subsidiaries on a consolidated basis; provided that there shall be excluded from Consolidated Total Indebtedness the face amount of Standby Letters of Credit. "Consolidated Working Capital" means, as of the end of any Fiscal Year, the Consolidated Current Assets minus the Consolidated Current Liabilities (excluding current tax liabilities and the current portion of Indebtedness for borrowed money having a maturity of longer than one year). "Contingent Obligation" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, or (ii) with respect to any letter of credit issued for the 10 account of or for which that Person is otherwise liable for reimbursement thereof or (iii) under Currency Agreements or interest rate swap agreements, interest rate collar agreements or other similar arrangements providing interest rate protection. Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, and (b) any liability of such Person for the obligations of another through any agreement (contingent or otherwise) (1) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), (2) to maintain the solvency or any balance sheet item, level of income or financial condition of another, or (3) to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, if in the case of any agreement described under subclauses (1), (2) or (3) of this sentence the primary purpose or intent thereof is as described in clause (i) of the preceding sentence. The amount of any Contingent Obligation, as at any time of determination, shall be equal to the amount of the obligation so guaranteed or otherwise supported at such time of determination which amount shall be deemed to be the amount of such obligation guarantied, as reasonably estimated by Company, if such amount cannot be specifically determined at the time of determination. "Contractual Obligation" means, as applied to any Person, any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Cost Adjustment Certificate" means an Officer's Certificate delivered by Company pursuant to subsection 5.1(iii) or 5.1(xviii) substantially in the form of Exhibit XXIII annexed hereto. "Covered Tax" means any Tax that is not an Excluded Tax. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect Company or any of its Subsidiaries against fluctuations in currency values. "Date of Determination" means, for purposes of determining the applicable Leverage Ratio on any Pricing Certificate Delivery Date, the last day of the most recently completed Fiscal Quarter. "Departing Lender" means each "Lender" party to, and as defined in, the Existing Credit Agreement and which will not be a Lender hereunder on the Closing Date. "Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. 11 "Deposit Letter" has the meaning assigned to that term in subsec- tion 3.1K(iv). "Disqualified Stock" means, with respect to any Person, any capital stock of such Person that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable (other than for another class of capital stock of such Person that is not Disqualified Stock), pursuant to a sinking fund obligation or otherwise, or is exchangeable for Indebtedness of such Person, or is redeemable at the option of the holder thereof (other than for another class of capital stock of such Person that is not Disqualified Stock), in whole or in part, on or prior to the last day of the 2003 Fiscal Year; provided that any capital stock that has a liquidation preference shall not by virtue of such liquidation preference alone be deemed to be Disqualified Stock. "Documentation Agent" has the meaning set forth in the introduction to this Agreement, it being understood and agreed that Documentation Agent shall have no obligations or duties as an agent under this Agreement or the other Loan Documents for or on behalf of any party to this Agreement or any other Loan Document. "Dollars" and the sign "$" mean the lawful money of the United States of America. "Dyersburg IDB" means The Industrial Development Board of Dyer County, Tennessee. "Eligible Assignee" has the meaning assigned to that term in subsection 9.2A. "Employee Benefit Plan" means any Pension Plan, any employee welfare benefit plan or any other employee benefit plan which is described in Section 3(3) of ERISA and which is maintained for employees of any Loan Party or any ERISA Affiliates of any Loan Party. "Environmental Claim" means any allegation, notice of violation, claim, demand, liability, investigation, administrative proceedings, whether pending or threatened, or judgments or orders by any governmental authority or any Person relating to any Hazardous Materials or any Environmental Laws. "Environmental Laws" means all federal, state or local laws, rules, regulations, plans, decrees, demand letters or orders relating to environmental matters, pollution, waste disposal, industrial hygiene, land use or the protection of human or animal health or welfare, including, without limitation, those relating to any Release or threatened Release of Hazardous Materials and to the generation, use, storage, transportation, or disposal of Hazardous Materials, in any manner applicable to Company or any of its Subsidiaries or any of their respective properties. "Equity Securities" means any stock, shares, partnership interests, voting trust certificates, or in general any instruments commonly known as "equity securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or convertible into, or any right to subscribe to, purchase or acquire, any of the foregoing. 12 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "ERISA Affiliate" means, as applied to any Person, (i) any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. ERISA Affiliates shall include each Unrestricted Subsidiary to the extent such Unrestricted Subsidiary otherwise qualifies as an ERISA Affiliate. "ERISA Event" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan that is subject to the provision for notice within 30 days to the PBGC or which is described in 29 C.F.R. Section 2615.12 or 2615.15; (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by a Loan Party or any of its ERISA Affiliates from any Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA resulting in liability pursuant to Section 4062(e) or Section 4063 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which could reasonably constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on a Loan Party or any of its ERISA Affiliates pursuant to Sections 4064 or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal by a Loan Party or any of its ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by a Loan Party or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Sections 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Sections 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on a Loan Party or any of its ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Sections 409, 502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against a Loan Party or any of its ERISA Affiliates in connection with any such plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan to qualify under Section 401(a) of the Internal Revenue Code, or of the failure of 13 any trust forming part of any Pension Plan to fail to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a lien pursuant to Sections 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA. "Estimated Net Cash Proceeds" means, with respect to any Asset Sale, an amount equal to the amount estimated in good faith by Company to be the Net Cash Proceeds of Sale of such Asset Sale. "Eurodollar Rate" means, for any Interest Rate Determination Date, the arithmetic average (rounded upwards to the nearest 1/16 of 1%) of the offered quotation, if any, to first class banks in the Eurodollar market by each of the Reference Lenders for U.S. dollar deposits of amounts in immediately available funds comparable to the principal amount of the Eurodollar Loan of that Reference Lender for which the Eurodollar Rate is being determined with maturities comparable to the Interest Period for which such Eurodollar Rate will apply as of approximately 10:00 A.M. (New York time) two Business Days prior to the commencement of such Interest Period. If any Reference Lender fails to provide its offered quotation to Administrative Agent, the Eurodollar Rate shall be determined on the basis of the offered quotation(s) of the other Reference Lender(s). "Eurodollar Rate Loans" means Loans bearing interest at rates determined by reference to the Adjusted Eurodollar Rate as provided in subsection 2.2A. "Event of Default" means each of the events set forth in Section 7. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "Excluded Collateral" means (i) the real or personal property owned by Company or any of its Subsidiaries which is designated as Excluded Collateral on Schedule 1.1B annexed hereto and in or pursuant to subsection 5.9B hereof and (ii) "Excluded Collateral" under and as defined in the Security Agreement. Any property designated as Excluded Collateral may be redesignated by Administrative Agent and Requisite Lenders as Collateral pursuant to subsection 5.9B. "Excluded Tax" means any of the following taxes, levies, imposts, duties, deductions, withholdings or charges, and all liabilities with respect thereto: (i) Taxes imposed on the net income of a Lender, Administrative Agent or Tax Transferee (including without limitation branch profits taxes, minimum taxes and taxes computed under alternative methods, at least one of which is based on net income (collectively referred to as "net income taxes") by (A) the jurisdiction under the laws of which such Lender, Administrative Agent or Tax Transferee is organized or any political subdivision thereof or (B) the jurisdiction of such Lender's, Tax Transferee's or Administrative Agent's applicable lending office or any political subdivision thereof or (C) any jurisdiction in which such Lender, Administrative Agent or Tax Transferee is doing business, (ii) any Taxes to the extent that they are in effect and would apply to a payment to such Lender or Administrative Agent, as applicable, as of the Closing Date, or as of the date such Person 14 becomes a Lender, in the case of any assignee pursuant to subsection 9.2, (iii) any Taxes that are in effect and would apply to a payment to a Tax Transferee as of the date of acquisition of the Loans by such Tax Transferee or the date of the change of lending office of such Tax Transferee, as the case may be (provided however that a Person shall not be considered a Tax Transferee for purposes of this clause (iii) as a result of a change of its lending office or the taking of any other steps pursuant to subsection 2.9), (iv) any Taxes to the extent of the net amount of any credit or other Tax benefit which, in the reasonable good faith judgment of such Lender, Tax Transferee or Administrative Agent, as the case may be, is available to such Lender, Tax Transferee or Administrative Agent, as applicable, as a result thereof and is allocable to the transactions contemplated by this Agreement or (v) any Taxes that would not have been imposed but for the failure by Administrative Agent or such Lender or Tax Transferee, as applicable, to provide and keep current any certification or other documentation required to qualify for an exemption from or reduced rate of any Tax. "Existing Credit Agreement" means that certain Amended and Restated Credit Agreement dated as of March 6, 1995 by and among Company, the lenders named therein and Bankers, as agent, as amended by that certain First Amendment dated as of July 2, 1995, and that certain Second Amendment dated as of November 15, 1995, and as such agreement may have otherwise been amended, restated, supplemented or otherwise modified from time to time prior to the date hereof. "Existing Indebtedness" means that Indebtedness of Company and its Subsidiaries set forth in Schedule 6.1 annexed hereto and any refinancings thereof permitted under subsection 6.1(vi). "Existing Letters of Credit" means the letters of credit issued pursuant to subsection 2.7A of the Existing Credit Agreement listed on Schedule 1.1D annexed hereto which will, as of the Closing Date, be deemed outstanding as Letters of Credit issued pursuant to subsection 2.7A and 2.7L of this Agreement. "Existing Term Loan" or "Existing Term Loans" means the Loan or Loans maintained by a Lender or Lenders pursuant to subsection 2.1A(i). "Existing Term Loan Exposure" means, with respect to any Lender as of any date of determination the outstanding principal amount of the Existing Term Loan of that Lender. "Existing Term Note" means a promissory note issued by Company to a Lender pursuant to subsection 2.1F and substantially in the form of Exhibit V annexed hereto. "Facilities" means any and all real property (including, without limitation, all buildings, fixtures or other improvements located thereon) now or heretofore owned, leased, operated or used by Company or any of its Subsidiaries. "Federal Funds Effective Rate" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight federal funds 15 transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three federal funds brokers of recognized standing selected by Administrative Agent. "Fiscal Quarter" means a fiscal quarter of Company as set forth on Schedule 1.1C annexed hereto. "Fiscal Year" means a fiscal year of Company as set forth on Schedule 1.1C annexed hereto. "Funding Date" means the date of the funding of a Loan or the issuance of any Letter of Credit. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination, as applied in accordance with the modifications contained in subsection 1.2. "GECC Leveraged Lease" means that Participation Agreement dated as of April 30, 1990 among Company, as Lessee, General Electric Capital Corporation, as Owner Participant, and The Connecticut National Bank, as Owner Trustee, and the documents relating to such participation agreement as such documents may be amended, supplemented or otherwise modified from time to time. "Guarantor" means each Loan Party (other than Company) under the Guaranty and any other Subsidiary which becomes a party thereto in accordance with the requirements of subsection 5.8. "Guaranty" means the Amended and Restated Guaranty by and among each Loan Party (other than Company) and any other Subsidiary of Company that becomes a party thereto, substantially in the form of Exhibit XII annexed hereto, as such Guaranty may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "Hazardous Materials" means (a) any chemical, material or substance (i) that exhibits the properties of ignitability, corrosivity, reactivity or EP toxicity, (ii) that is from time to time regulated or governed by any Environmental Law, or (iii) that constitutes any oil, petroleum or petroleum derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil and (b) asbestos in any form which is or could reasonably be expected to become friable. 16 "IDB Lessor" means any governmental authority or other public non- profit entity of the State of Tennessee or of any municipality or subdivision thereof to whom Company sells or otherwise transfers assets or equipment pursuant to an Other IDB Sale-Leaseback Transaction. "Identified Acquisition" means the Acquisition by Company of the Identified Target Subsidiaries and the Inactive Identified Target Subsidiaries pursuant to the Identified Acquisition Agreement, copies of financial and certain other information for which have been distributed to Administrative Agent and Lenders prior to the Closing Date. "Identified Acquisition Agreement" means the Stock Purchase Agreement dated April 24, 1996 by and among Ringier A.G., as seller, Krueger Acquisition Corporation and Company, as buyer, as such agreement may have been amended, restated, supplemented or otherwise modified prior to the Closing Date. "Identified Target Subsidiaries" means, collectively, each of the Persons set forth on Schedule 1.1E annexed hereto. "Inactive Identified Target Subsidiaries" means, collectively, each of the Persons set forth on Schedule 1.1F annexed hereto which are acquired by Company in connection with the Identified Acquisition. "Inactive Subsidiaries" means each of Company's Subsidiaries listed on Schedule 1.1F annexed hereto. "Indebtedness" means, as applied to any Person, (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to Capital Leases which is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services which purchase price is (y) due more than six months from the date of incurrence of the obligation in respect thereof, or (z) evidenced by a note or similar written instrument, but excluding trade payables incurred in the ordinary course of business, and (v) all indebtedness secured by any Lien on any property or asset owned by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person but only to the extent of the fair market value of any such property or assets; provided that, notwithstanding anything in this Agreement to the contrary, for purposes of the definitions of "Consolidated Cash Interest Expense", "Consolidated Fixed Charges" and "Consolidated Total Indebtedness", the term "Indebtedness" shall include (i) all Indebtedness of any Receivables SPC and (ii) the amount of any sale or similar transaction of Receivables Assets by a Receivables SPC in the event and to the extent that such a sale or similar transaction is not characterized as indebtedness under GAAP or Financial Accounting Standards Board Section 79. "Initial Cost Adjustment Certificate" has the meaning assigned to that term in subsection 2.2A. 17 "Intercompany Indebtedness" means any Indebtedness of Company or any of its Subsidiaries which is owing to Company or any other Subsidiary of Company. "Intercompany Note" means any intercompany promissory note substantially in the form of Exhibit XI annexed hereto issued by Company or any of its Subsidiaries in respect of Intercompany Indebtedness. "Intercreditor Agreement" means the Amended and Restated Intercreditor Agreement among Collateral Agent, for the benefit of Lenders, the Interest Rate Exchangers (as defined therein) and the Future Credit Parties (as defined therein), substantially in the form of Exhibit XIV annexed hereto, as such agreement may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "Interest Payment Date" means, with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period of four months, five months, six months, nine months or twelve months, "Interest Payment Date" shall also include each three month anniversary of the commencement of that Interest Period. "Interest Period" means any interest period applicable to a Eurodollar Rate Loan as determined pursuant to subsection 2.2B. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect Company or any of its Subsidiaries against fluctuations in interest rates entered into by Company or any such Subsidiary and any Lender. "Interest Rate Determination Date" means each date for calculating the Eurodollar Rate for purposes of determining the interest rate in respect of an Interest Period. The Interest Rate Determination Date shall be the second Business Day prior to the first day of the related Interest Period for a Eurodollar Rate Loan. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter. "Investment" means, as applied to any Person, any direct or indirect purchase or other acquisition by that Person of, or of a beneficial interest in, stock or other Securities of any other Person (other than a Subsidiary of such Person (or a Person who becomes a Subsidiary of such Person by virtue of such purchase or other acquisition) but including an Unrestricted Subsidiary), or any direct or indirect loan, advance (other than advances to employees for moving and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by that Person to any other Person (other than a Subsidiary of such Person but including an Unrestricted Subsidiary), including all indebtedness and accounts receivable from that other Person which are not current assets or did not arise from sales to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such 18 Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "Issuing Lender" means, with respect to any Standby Letter of Credit or any Commercial Letter of Credit (including, without limitation, any Existing Letter of Credit), the Lender which agrees or is otherwise obligated to issue such Letter of Credit, determined as provided in subsection 2.7C. "Joint Venture" means a joint venture, partnership, limited liability company or other similar arrangement, whether in corporate, partnership, limited liability company or other legal form; provided that, as to any such arrangement in corporate form, such corporation shall not, as to any Person of which such corporation is a Subsidiary, be considered to be a Joint Venture to which such Person is a party. "KKR" means Kohlberg Kravis Roberts & Co., L.P., a New York limited partnership. "Lender" and "Lenders" have the meaning assigned to those terms in the introduction to this Agreement and shall include Bankers in its individual capacity and the successors and permitted assigns of the foregoing. "Letter of Credit" or "Letters of Credit" means Commercial Letters of Credit or Standby Letters of Credit issued, or deemed issued, by Issuing Lenders for the account of Company pursuant to subsection 2.7A, including the Existing Letters of Credit. "Letter of Credit Facility" has the meaning assigned to that term in subsection 2.7. "Letter of Credit Usage" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under all Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Company. "Leverage Ratio" means, as measured for the most recently completed four Fiscal Quarter period, the ratio of (x) Consolidated Total Indebtedness as of such date to (y) Consolidated EBITDA for the four Fiscal Quarter period ending the last day of the most recently completed Fiscal Quarter. "Lien" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "Loan" or "Loans" means one or more of the Term Loans, the Revolving Loans or the Swing Line Loans or any combination thereof. 19 "Loan Documents" means this Agreement, the Guaranty, the Collateral Documents, any applications, reimbursement agreements and other documents or certificates executed in favor of an Issuing Lender relating to the Letters of Credit and any Notes issued by Company. "Loan Parties" means Company and any Subsidiary of Company which is or becomes a party to a Loan Document, collectively, including, as of the Closing Date, each Identified Target Subsidiary. "Management Stock Agreements" means collectively, the agreements as described in Schedule 1.1G annexed hereto. "Margin Stock" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Material Adverse Effect" means (i) a material adverse effect upon the business, operations, properties, assets, condition or prospects (financial or otherwise) with respect to Company, individually, or Company and its Subsidiaries, taken as a whole, or (ii) the impairment of the ability of any Loan Party to perform, or of Collateral Agent or Lenders to enforce, monetary Obligations or the material impairment of the ability of any Loan Party to perform, or of Collateral Agent or Lenders to enforce (other than an inability to enforce due solely to any action or any omission to act on the part of Administrative Agent, Collateral Agent or Lenders) any non-monetary Obligations, including, without limitation, the obligations of any Loan Party to perform, or of Collateral Agent or Lenders to enforce, the Guaranty or any Collateral Document. "Material Subsidiary" means each Subsidiary of Company now existing or hereafter acquired or formed by Company or any of its Subsidiaries that either (i) for the most recent Fiscal Year, accounted for more than 5% of the consolidated revenues of Company and its Subsidiaries, taken as a whole, or (ii) as at the end of such Fiscal Year, was the owner of more than 5% of the consolidated assets of Company and its Subsidiaries, taken as a whole. "Miscellaneous Operating Leases" means all Operating Leases entered into in the ordinary course of business the lease payments for which are reflected on the income statement of Company and its Subsidiaries as part of the sales, general and administrative expenses in accordance with GAAP, including, without limitation, Operating Leases in respect of office furniture, office equipment, automobiles and office space; provided however that in no event shall this definition include an Operating Lease with respect to any assets with a fair market value in excess of $500,000 used in the prepress, printing and press, binding and finishing and/or mailing and distribution services and similar operations of the businesses of Company and its Subsidiaries. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is maintained for employees of any Loan Party or any ERISA Affiliate of any Loan Party. 20 "Net Additional Debt Proceeds" has the meaning assigned to that term in subsection 2.4A(ii)(c). "Net Cash Proceeds of Sale" means Cash Proceeds received by Company or any of its Subsidiaries from an Asset Sale, net of costs of sale, taxes paid or payable as a result thereof, any amounts applied to the repayment of Indebtedness secured by a Lien (permitted under subsection 6.2) on the assets disposed of and excluding to the extent provided herein any Proceeds of Sales of Printing Equipment received by Company and its Subsidiaries (up to a maximum of $75,000,000 in the aggregate for any Fiscal Year); provided however that, to the extent such Proceeds of Sales of Printing Equipment have not become (or do not remain) Committed Printing Equipment Proceeds in accordance with the definition thereof on or prior to April 15th of the Fiscal Year immediately following the Fiscal Year in which Company or any of its Subsidiaries received such Proceeds of Sales of Printing Equipment, such Unused Proceeds of Sales of Printing Equipment shall be payable by Company to Administrative Agent for application to the Obligations in the order and manner provided by subsection 2.4A(ii)(e). "Net Consolidated Capital Expenditures" means, with respect to any Fiscal Year,the sum of Actual Consolidated Capital Expenditures and Committed Consolidated Capital Expenditures for such Fiscal Year minus Consolidated Capital Expenditures for such Fiscal Year that constitute Replacement Printing Equipment purchased with Proceeds of Sales of Printing Equipment received by Company or any of its Subsidiaries during such Fiscal Year. "Net Equity Contribution Amount" means an amount equal to the sum of (i) the amount of cash proceeds (net of any transaction costs of such sale, issuance or contribution) received by Company in connection with the issuance or sale of Equity Securities of Company or any equity contributions to Company after the Closing Date (other than in respect of any Disqualified Stock) minus (ii) the amount of any such cash proceeds that are included in any Restricted Junior Payment made to the holders of the Senior Subordinated Notes under subsection 6.5(iii) minus (iii) the amount of any such cash proceeds that are applied as a voluntary prepayment of the Tranche B Acquisition Term Loans to the extent that the Tranche B Commitments are not reduced as provided in subsection 2.1A(ii)(c) minus (iv) the amount of Restricted Junior Payments made by Company under subsection 6.5(v) other than Restricted Junior Payments made as permitted under subsections 6.5(v)(a) or (b). "Net Lease Value" means, with respect to any Operating Lease as of the date such Operating Lease is entered into, the present value of the lease payments to be made pursuant thereto through the end of term of such Operating Lease (discounted at a rate equal to the bid-side yield of a United States Treasury bond selected by Company and maturing not more than five years from such date), minus transaction costs incurred in connection with the lease of the equipment subject thereto. "New Subsidiary" has the meaning assigned to that term in subsection 5.8. "1995 Term Loans" means the Acquisition Term Loans and Existing Term Loans, in each case under and as defined in the Existing Credit Agreement. 21 "Notes" means any Existing Term Note, Tranche A Acquisition Term Note, Tranche B Acquisition Term Note, Tranche C Acquisition Term Note, Revolving Note or Swing Line Note or any combination thereof. "Notice of Borrowing" means a notice substantially in the form of Exhibit I annexed hereto with respect to a proposed borrowing. "Notice of Conversion/Continuation" means a notice substantially in the form of Exhibit II annexed hereto with respect to a proposed conversion or continuation. "Notice of Issuance of Letter of Credit" means a notice in the form of Exhibit III annexed hereto, with appropriate insertions and deletions, with respect to the proposed issuance or amendment of a Letter of Credit. "Obligations" means all obligations of every nature of each Loan Party from time to time owed to Agents, Collateral Agent or Lenders or any of them under the Loan Documents, whether for principal, interest, reimbursement of amounts drawn under Letters of Credit, fees, expenses, indemnification or otherwise. "Officers' Certificate" means, with respect to any corporation, a certificate executed on behalf of such corporation by its chairman of the board (if an officer) or its president or one of its vice presidents and by its chief financial officer, controller or treasurer, and with respect to any partnership, a certificate executed on behalf of such partnership by a general partner of such partnership and with respect to any limited liability company or entity, a certificate executed on behalf of such limited liability company or entity by its manager or by a person having primary management responsibility with respect to such entity. "Operating Lease" means, as applied to any Person, any lease of any property (whether real, personal or mixed) which is not a Capital Lease, other than any such lease under which that Person is the lessor. "Other IDB Sale-Leaseback Transaction" means the sale, transfer or other disposition by the Company of Facilities, equipment or other assets to an IDB Lessor and the subsequent lease back by Company from such IDB Lessor of such Facilities, equipment and assets in exchange for certain tax benefits, it being understood and agreed that "Other IDB Sale-Leaseback Transaction" shall not include the Covington, Tennessee, and Dyersburg, Tennessee, facilities that have been sold by Company and leased back as of the Closing Date. "Patent Agreement" means the Amended and Restated Patent and License Security Agreement by Company (individually and as successor in interest to the Alden Printing Company) the Subsidiaries of Company party thereto in favor of Collateral Agent for the benefit of Secured Parties substantially in the form of Exhibit XVI annexed hereto, as such agreement may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. 22 "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "Pension Plan" means any employee plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA and which is maintained for employees of any Loan Party or any ERISA Affiliate of any Loan Party. "Permitted Encumbrances" means the following types of Liens (other than any Lien imposed pursuant to Sections 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA): (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not at the time required by subsection 5.3; (ii) Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) attachment or judgment Liens, unless the judgment it secures shall not, within 30 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 30 days after the expiration of any such stay; (v) leases or subleases granted to others not interfering with the ordinary conduct of the business of Company or any of its Subsidiaries; (vi) easements, rights-of-way, restrictions, other similar charges or encumbrances, in each case which do not interfere with the ordinary conduct of the business of Company or any of its Subsidiaries; (vii) Liens (excluding Liens securing Indebtedness) set forth on the title insurance policies that Collateral Agent may approve; and (ix) any interest or title of a lessor under any lease permitted under this Agreement and any interest of any Person party to a definitive agreement to acquire, or holding an option to acquire, any property of Company or any of its Subsidiaries permitted to be sold hereunder (subject, however, to the Liens of the Collateral Agent on such property); provided that during any period in which any such option is in effect, such option shall be taken into account to the extent applicable towards the limitations 23 set forth in the definition of Asset Sale and the provisions of subsections 6.7(iii) and 6.7(iv). "Permitted Receivables Transaction" has the meaning assigned to that term in subsection 6.10. "Person" means and includes natural persons, corporations, limited liability companies, limited partnerships, limited liability partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof. "Potential Event of Default" means a condition or event which, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "Pricing Certificate" means an Officers' Certificate substantially in the form of Exhibit XXIV annexed hereto and delivered by Company pursuant to subsection 2.2A demonstrating the appropriate Leverage Ratio. "Pricing Certificate Delivery Date" means the date of delivery to Administrative Agent of a Pricing Certificate demonstrating the Leverage Ratio as of the most recent Date of Determination, which delivery shall occur (i) on any date from the last day of the preceding Fiscal Quarter to the date of delivery of the financial statements for such Fiscal Quarter (or Fiscal Year which ends on such last day of such Fiscal Quarter) required pursuant to subsection 5.1(i) or 5.1(ii), as applicable, and (ii) the date on which any Substantial Acquisition is consummated. "Pricing Period" means, with respect to any Date of Determination, the period commencing on the day immediately after such Date of Determination and ending on the next Date of Determination. "Prime Rate" means the rate which Bankers announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bankers may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "Prime Rate Loans" means Loans to be maintained or made, as the case may be, by Lenders pursuant to subsection 2.1A and bearing interest at rates determined by reference to the Reference Rate as provided in subsection 2.2A. "Printing Equipment" means any web or sheetfed offset press, rotogravure press, flexographic press and any other kind of printing press, any pre-press equipment, any binding machines, and any equipment related to the foregoing owned and used by Company and its Subsidiaries in connection with its printing and production business or its distribution business. 24 "Proceeds of Sales of Printing Equipment" means the proceeds of any sale of Printing Equipment by Company or any of its Subsidiaries intended by Company to be used to acquire (or applied to offset expenditures previously made for the acquisition of) Replacement Printing Equipment. "Pro Rata Share" means, (i) with respect to all payments, computations and other matters relating to Existing Term Loan of any Lender, the percentage obtained by dividing (x) the Existing Term Loan Exposure of that Lender by (y) the -------- -- aggregate Existing Term Loan Exposure of all Lenders; (ii) with respect to all payments, computations and other matters relating to the Tranche A Commitment or the Tranche A Acquisition Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche -------- A Exposure of that Lender by (y) the aggregate Tranche A Exposure of all -- Lenders; (iii) with respect to all payments, computations and other matters relating to the Tranche B Commitment or the Tranche B Acquisition Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche -------- B Exposure of that Lender by (y) the aggregate Tranche B Exposure of all -- Lenders; (iv) with respect to all payments, computations and other matters relating to the Tranche C Commitment or the Tranche C Acquisition Term Loan of any Lender, the percentage obtained by dividing (x) the Tranche -------- C Exposure of that Lender by (y) the aggregate Tranche C Exposure of all -- Lenders; (v) with respect to all payments, computations and other matters relating to the Revolving Loan Commitment or the Revolving Loans of any Lender or any Letters of Credit issued or participations therein purchased by any Lender or any participations in any Swing Line Loans purchased by any Lender, the percentage obtained by dividing (x) the -------- Revolving Loan Exposure of that Lender by (y) the aggregate Revolving -- Loan Exposure of all Lenders; (vi) for all other purposes with respect to each Lender, the percentage obtained by dividing (x) the sum of the Existing Term Loan -------- Exposure, Tranche A Exposure, Tranche B Exposure, Tranche C Exposure and Revolving Loan Exposure of that Lender by (y) the sum of the aggregate -- Existing Term Loan Exposure, Tranche A Exposure, Tranche B Exposure, Tranche C Exposure and Revolving Loan Exposure of all Lenders; The initial Pro Rata Share of each Lender for purposes of each of clauses (i), (ii), (iii), (iv) and (v) of the preceding sentence is set forth opposite the name of that Lender in Schedule 1.1A annexed hereto; provided that Schedule 1.1A shall be amended and each Lender's Pro Rata Share shall be adjusted from time to time to give effect to the addition or removal of any Lender as provided herein or by assignment pursuant to subsection 9.2. 25 "Receivables Assets" means any accounts receivable arising in connection with the sale of inventory or services of Company or any of its Subsidiaries in the ordinary course of business and any related contract rights (including, without limitation, rights under printing contracts and security interests) and any proceeds of the foregoing. "Receivables Proceeds" means the amount of the purchase price received by Company or any of its Subsidiaries upon the consummation of any Permitted Receivables Transaction pursuant to subsection 6.10 and any additional purchase price received by Company or any of its Subsidiaries to the extent such additional purchase price represents an increase in such Permitted Receivables Transaction facility to an amount greater than the previously greatest amount of such Receivables Transaction facility. "Receivables SPC" means an Unrestricted Subsidiary of Company formed for the sole purpose of purchasing Receivables Assets from Company or any of its Subsidiaries pursuant to a Permitted Receivables Transaction and engaging in activities incidental thereto. "Reference Lenders" means Bankers, Bank of America NT & SA and Citibank, N.A. "Reference Rate" means, as at any date of determination, the rate per annum that is the higher of: (i) the Prime Rate; and (ii) the sum of (x) the Federal Funds Effective Rate plus (y) 1/2 of 1%. "Refinancing Indebtedness" has the meaning assigned to that term in subsection 6.1(vi). "Refunded Swing Line Loans" has the meaning assigned to that term in subsection 2.1A(iv). "Register" has the meaning assigned to that term in subsection 2.1D. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as in effect from time to time. "Release" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, dumping, discharge, dispersal, leaching, or migration into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials) of any Hazardous Material, including the movement of any Hazardous Material through the air, soil, surface water, groundwater or property. "Replaced Lender" has the meaning assigned to such term in subsection 2.10. "Replacement Lender" has the meaning assigned to such term in subsection 2.10. "Replacement Printing Equipment" means Printing Equipment acquired by Company or any of its Subsidiaries to replace Printing Equipment it has sold or otherwise disposed of or 26 will dispose of during the then-current Fiscal Year (or, to the extent such Replacement Printing Equipment is purchased on or prior to (or pursuant to a purchase order entered into on or prior to) April 15th of the Fiscal Year immediately succeeding the Fiscal Year in which the Printing Equipment to be replaced was sold, the immediately prior Fiscal Year), it being understood and agreed that any such Printing Equipment so acquired need not serve the same function as the Printing Equipment that it replaces. "Requisite Lenders" means Lenders having or holding more than 50% of the sum of (i) the aggregate Existing Term Loan Exposure of all Lenders, (ii) the aggregate Tranche A Exposure of all Lenders, (iii) the aggregate Tranche B Exposure of all Lenders, (iv) the aggregate Tranche C Exposure of all Lenders and (v) the aggregate Revolving Loan Exposure of all Lenders. "Restricted Junior Payment" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend or distribution payable solely in shares of capital stock (other than Disqualified Stock) or in options, warrants or other rights to purchase capital stock (other than Disqualified Stock), (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company, or of any warrants, options or other rights to acquire any such shares of stock, now or hereafter outstanding, or (iii) any payment or prepayment of principal of, premium, if any, or interest on, redemption, purchase, retirement, defeasance, sinking fund or similar payment with respect to any Subordinated Indebtedness. "Revolving Loan Commitment" or "Revolving Loan Commitments" means the commitment or the commitments of a Lender or Lenders to maintain or make Revolving Loans, participate in Swing Line Loans and issue or participate in Letters of Credit as set forth in subsections 2.1A(iii), 2.1A(iv) and 2.7A. "Revolving Loan Exposure" means, with respect to any Lender as of any date of determination prior to the termination of the Revolving Loan Commitments, that Lender's Revolving Loan Commitment and thereafter, the sum of (i) the aggregate outstanding principal amount of the Revolving Loans of that Lender, (ii) in the event that Lender is an Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (in each case net of any participations purchased by other Lenders in such Letters of Credit or any unreimbursed drawings thereunder), (iii) the aggregate amount of all participations purchased by that Lender in any outstanding Letters of Credit or any unreimbursed drawings under any Letters of Credit, (iv) in the case of Swing Line Lender, the aggregate outstanding principal amount of all Swing Line Loans (net of any partici- pations therein purchased by other Lenders), and (v) the aggregate amount of all participations purchased by that Lender in any outstanding Swing Line Loans. "Revolving Loans" means the Loans Lenders have agreed to maintain or make pursuant to subsection 2.1A(iii). 27 "Revolving Note" means a promissory note issued by Company to Lenders pursuant to subsection 2.1F and substantially in the form of Exhibit IX annexed hereto. "Scheduled Existing Term Loan Repayment Amount" means, with respect to the principal payments on Existing Term Loans required pursuant to subsection 2.1E(i), for the last day of each of the Fiscal Quarters set forth below, (i) if the Additional Subordinated Indebtedness Refinancing did not occur, the correlative amount set forth opposite thereto under Scheduled Existing Term Repayment Amount I and (ii) if the Additional Subordinated Indebtedness Refinancing occurred, the correlative amount set forth opposite thereto under Scheduled Existing Term Repayment Amount II, in each case as adjusted by the operation of the succeeding sentence: Scheduled Existing Scheduled Term Existing Term Repayment Repayment Date Amount I Amount II Second Fiscal Quarter, 1998 $ 15,000,000 $ 0 Fourth Fiscal Quarter, 1998 $ 15,000,000 $ 0 Second Fiscal Quarter, 1999 $ 10,000,000 $ 10,000,000 Fourth Fiscal Quarter, 1999 $ 10,000,000 $ 10,000,000 Second Fiscal Quarter, 2000 $ 10,000,000 $ 10,000,000 Fourth Fiscal Quarter, 2000 $ 10,000,000 $ 10,000,000 Second Fiscal Quarter, 2001 $ 10,000,000 $ 10,000,000 Fourth Fiscal Quarter, 2001 $ 10,000,000 $ 10,000,000 Second Fiscal Quarter, 2002 $ 17,500,000 $ 32,500,000 Fourth Fiscal Quarter, 2002 $ 17,500,000 $ 32,500,000 TOTAL $125,000,000 $125,000,000 On any date that any amounts in respect of Existing Term Loans are prepaid pursuant to subsections 2.4A(i) or 2.4A(ii), the Scheduled Existing Term Repayment Amount I and Scheduled Existing Term Repayment Amount II set forth above shall each be reduced by the amount of such prepayment, such reduction to be effected by reducing each amount set forth above that corresponds to the scheduled principal installment or installments of the Scheduled Existing Term Repayment Amount required to be reduced as provided in sub- section 2.4A(iii). The Scheduled Existing Term Repayment Amount for the last day of the fourth Fiscal Quarter of the 2002 Fiscal Year shall be an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under the Existing Term Loans. 28 "Scheduled Tranche A Repayment Amount" means, with respect to the principal payments on Tranche A Acquisition Term Loans required pursuant to subsection 2.1E(ii), for the last day of each Fiscal Quarter set forth below, (i) if the Additional Subordinated Indebtedness Refinancing did not occur, the correlative amount set forth opposite such Fiscal Quarter under Scheduled Tranche A Repayment Amount I and (ii) if the Additional Subordinated Indebtedness Refinancing occurred, the correlative amount set forth opposite thereto under Scheduled Tranche A Repayment Amount II, in each case as adjusted by the operation of the succeeding sentence: Scheduled Scheduled Tranche A Tranche A Repayment Repayment Fiscal Year Amount I Amount II Second Fiscal Quarter, 1998 $ 12,500,000 $ 0 Fourth Fiscal Quarter, 1998 $ 12,500,000 $ 0 Second Fiscal Quarter, 1999 $ 17,500,000 $ 17,500,000 Fourth Fiscal Quarter, 1999 $ 17,500,000 $ 17,500,000 Second Fiscal Quarter, 2000 $ 25,000,000 $ 25,000,000 Fourth Fiscal Quarter, 2000 $ 25,000,000 $ 25,000,000 Second Fiscal Quarter, 2001 $ 30,000,000 $ 30,000,000 Fourth Fiscal Quarter, 2001 $ 30,000,000 $ 30,000,000 Second Fiscal Quarter, 2002 $ 65,000,000 $ 77,500,000 Fourth Fiscal Quarter, 2002 $ 65,000,000 $ 77,500,000 TOTAL $300,000,000 $300,000,000 On any date that any amounts in respect of Tranche A Acquisition Term Loans are prepaid pursuant to subsections 2.4A(i) or 2.4A(ii), the Scheduled Tranche A Repayment Amount I and Scheduled Tranche A Repayment Amount II set forth above shall each be reduced by the amount of such prepayment, such reduction to be effected by reducing the amounts set forth above that correspond to scheduled principal installment or installments of the Scheduled Tranche A Repayment Amount required to be reduced as provided in subsection 2.4A(iii). The Scheduled Tranche A Repayment Amount for the last day of the fourth Fiscal Quarter of the 2002 Fiscal Year shall be an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under the Tranche A Acquisition Term Loans. 29 "Scheduled Tranche B Repayment Amount" means, with respect to the principal payments on Tranche B Acquisition Term Loans required pursuant to subsection 2.1E(ii), for the last day of each Fiscal Quarter set forth below, an amount equal to the Tranche B Acquisition Term Loan Amount multiplied by the correlative percentage set forth opposite such Fiscal Quarter under Percentage Amortization, as adjusted by the operation of the succeeding sentence: Percentage Fiscal Year Amortization Second Fiscal Quarter, 1999 12.50% Fourth Fiscal Quarter, 1999 12.50% Second Fiscal Quarter, 2000 12.50% Fourth Fiscal Quarter, 2000 12.50% Second Fiscal Quarter, 2001 12.50% Fourth Fiscal Quarter, 2001 12.50% Second Fiscal Quarter, 2002 12.50% Fourth Fiscal Quarter, 2002 12.50% TOTAL 100.00% On any date occurring after the Acquisition Commitment Termination Date that any amounts in respect of Tranche B Acquisition Term Loans are prepaid pursuant to subsections 2.4A(i) or 2.4A(ii), the Scheduled Tranche B Repayment Amount set forth above shall be reduced by the amount of such prepayment, such reduction to be effected by reducing the amounts calculated as set forth above that correspond to scheduled principal installment or installments of the Scheduled Tranche B Repayment Amount required to be reduced as provided in subsection 2.4A(iii). The Scheduled Tranche B Repayment Amount for the last day of the fourth Fiscal Quarter of the 2002 Fiscal Year shall be an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under the Tranche B Acquisition Term Loans. "Scheduled Tranche C Repayment Amount" means, with respect to the principal payments on Tranche C Acquisition Term Loans required pursuant to subsection 2.1E(ii), for the last day of each Fiscal Quarter set forth below, the correlative amount set forth below opposite such Fiscal Quarter under Scheduled Tranche C Repayment Amount, as adjusted by the operation of the succeeding sentence: 30 Scheduled Tranche C Fiscal Year Repayment Amount Second Fiscal Quarter, 1998 $ 7,500,000 Fourth Fiscal Quarter, 1998 $ 7,500,000 Second Fiscal Quarter, 1999 $ 12,500,000 Fourth Fiscal Quarter, 1999 $ 12,500,000 Second Fiscal Quarter, 2000 $ 15,000,000 Fourth Fiscal Quarter, 2000 $ 15,000,000 Second Fiscal Quarter, 2001 $ 17,500,000 Fourth Fiscal Quarter, 2001 $ 17,500,000 Second Fiscal Quarter, 2002 $ 47,500,000 Fourth Fiscal Quarter, 2002 $ 47,500,000 TOTAL $200,000,000 On any date that any amounts in respect of Tranche C Acquisition Term Loans are prepaid pursuant to subsections 2.4A(i) or 2.4A(ii), the Scheduled Tranche C Repayment Amount set forth above shall be reduced by the amount of such prepayment, such reduction to be effected by reducing the amounts set forth above that correspond to scheduled principal installment or installments of the Scheduled Tranche C Repayment Amount required to be reduced as provided in subsection 2.4A(iii). The Scheduled Tranche C Repayment Amount for the last day of the fourth Fiscal Quarter of the 2002 Fiscal Year shall be an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under the Tranche C Acquisition Term Loans. "Secured Parties" means Agents, Collateral Agent, Lenders, the Interest Rate Exchangers (as defined in the Intercreditor Agreement) and the Future Credit Parties (as defined in the Intercreditor Agreement). "Securities" means any stock, shares, voting trust certificates, partnership interests, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended from time to time, and any successor statute. 31 "Security Agreement" means the Second Amended and Restated Security Agreement by and among each Loan Party and Collateral Agent substantially in the form of Exhibit XIII annexed hereto, pursuant to which such Loan Party will pledge and grant a security interest in the Collateral described therein to Collateral Agent for the benefit of Secured Parties, as such Second Amended and Restated Security Agreement may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "Senior Subordinated Notes" means the senior subordinated notes issued by Company on May 10, 1993 pursuant to the Senior Subordinated Note Indenture. "Senior Subordinated Note Indenture" means the Indenture dated as of May 10, 1993 and filed by Company with the Securities and Exchange Commission in connection with the registration of the Senior Subordinated Notes, as such Indenture may have been or may in the future be amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions of subsection 6.12. "Solvent" means, with respect to any Person, that as of the date of determination, the then fair saleable value of the property of such Person is (i) greater than the total amount of liabilities (including anticipated Contingent Obligations and other contingent liabilities only to the extent of the probable liability with respect to such Contingent Obligations and other contingent liabilities) of such Person and (ii) greater than the amount that will be required to pay the probable liabilities of such Person's then existing debts as they become absolute and matured. "Standby Letter of Credit" means any standby letter of credit or similar instrument issued for the purpose of supporting (i) workers' compensation liabilities of Company or any of its Subsidiaries, (ii) the obligations of third party insurers of Company or any of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring third party insurers, (iii) Indebtedness of Company or any of its Subsidiaries in respect of industrial revenue or development bonds or similar project financings, (iv) obligations with respect to Capital or Operating Leases of Company or any of its Subsidiaries, or (v) performance, payment, deposit or surety obligations of Company or any of its Subsidiaries in any case if required by law or governmental rule or regulation or in accordance with custom and practice in the industry. "Subordinated Indebtedness" means the Indebtedness evidenced by the Senior Subordinated Notes, the Additional Subordinated Indebtedness and any other Indebtedness of Company incurred with the consent of Administrative Agent and Requisite Lenders in their sole discretion that is subordinate in right and time of payment to the Obligations. "Subsequent Cost Reduction Certificate" has the meaning assigned to that term in subsection 2.2A. "Subsidiary" means any corporation, partnership, limited liability company, limited liability partnership, association or other business entity of which more than 50% of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or 32 controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof. For the purposes of this Agreement and any other Loan Document, (i) a wholly-owned Subsidiary is a Subsidiary of which 100% of the shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned, directly or indirectly, by any Person or one or more of the other wholly-owned Subsidiaries of that Person or a combination thereof and (ii) all references to any Subsidiary or Subsidiaries of Company or any other Loan Party shall be deemed to exclude any such Subsidiary that is an Unrestricted Subsidiary unless expressly indicated otherwise. "Substantial Acquisition" means an Acquisition (other than the Identified Acquisition) the purchase price of which is greater than $25,000,000 or the cost adjustment synergies in respect of which are greater than $5,000,000 as demonstrated in the Cost Adjustment Certificate delivered pursuant to subsection 5.1(xviii). "Swing Line Lender" means Bankers and includes any successor Swing Line Lender under subsection 8.6. "Swing Line Loan Commitment" means the commitment of Bankers to make or maintain Swing Line Loans pursuant to subsection 2.1A(iv). "Swing Line Loans" means the Swing Line Loans Bankers has agreed to make or maintain pursuant to subsection 2.1A(iv). "Swing Line Note" means a promissory note issued by Company to Bankers pursuant to subsection 2.1F and substantially in the form of Exhibit X hereto. "Syndication Agent" has the meaning assigned to that term in the introduction to this Agreement, it being understood and agreed that Syndication Agent shall have no obligations or duties as agents under this Agreement or the other Loan Documents for or on behalf of any party to this Agreement or any other Loan Document. "Target" means the Person an equity interest in which is to be acquired, or the Person whose assets are to be acquired, in any Acquisition, including, with respect to the Identified Acquisition, each Identified Target Subsidiary and Inactive Identified Target Subsidiary. "Target Amount" has the meaning assigned that term in subsection 6.9. "Tax" or "Taxes" means any present or future tax, levy, impost, duty, charge, governmental fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided that "Tax on the overall net income" of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person's principal office (and/or, in the case of a Lender, its lending office) is located on all or part of the net income, profits or gains of that Person (whether 33 worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise). "Tax Transferee" means any Person who acquires any interest in the Loans (whether or not by operation of law) or the office to which a Lender or Agent has transferred its Loans for purposes of determining where the Loans are made, accounted for or booked. "Term Loan" or "Term Loans" means one or more of the Existing Term Loans or the Acquisition Term Loans. "Total Utilization of Revolving Loan Commitments" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans and Swing Line Loans plus (ii) the Letter of Credit Usage. "Trademark Agreement" means the Amended and Restated Trademark and License Security Agreement by Company (individually and as successor in interest to the Alden Printing Company) and the Subsidiaries of Company party thereto in favor of Collateral Agent for the benefit of Secured Parties, as such agreement may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "Trademark and Patent Agreements" means the Trademark Agreement and the Patent Agreement, collectively. "Tranche A Acquisition Term Loan" or "Tranche A Acquisition Term Loans" means the Loan or Loans made or maintained by a Lender or Lenders pursuant to subsection 2.1A(ii)(a). "Tranche A Acquisition Term Note" means a promissory note issued by Company to a Lender pursuant to subsection 2.1F and substantially in the form of Exhibit VI annexed hereto. "Tranche A Commitments" or "Tranche A Commitment" means the commitment or commitments of a Lender or Lenders to make Tranche A Acquisition Term Loans as set forth in subsection 2.1A(ii)(a). "Tranche A Exposure" means with respect to any Lender as of any date of determination (i) prior to the funding of the Tranche A Acquisition Term Loans, that Lender's Tranche A Commitment and (ii) after the funding of the Tranche A Acquisition Term Loans, the aggregate outstanding principal amount of the Tranche A Acquisition Term Loans of that Lender. "Tranche B Acquisition Term Loan" or "Tranche B Acquisition Term Loans" means the Loan or Loans made or maintained by a Lender or Lenders pursuant to subsection 2.1A(ii)(b). 34 "Tranche B Acquisition Term Loan Amount" means the aggregate principal amount of Tranche B Acquisition Term Loans outstanding on the Acquisition Commitment Termination Date. "Tranche B Acquisition Term Note" means a promissory note issued by Company to a Lender pursuant to subsection 2.1F and substantially in the form of Exhibit VII annexed hereto. "Tranche B Commitments" or "Tranche B Commitments" means the commitment or commitments of a Lender or Lenders to make Tranche B Acquisition Term Loans as set forth in subsection 2.1A(ii)(b). "Tranche B Exposure" means, with respect to any Lender (i) as of any date of determination prior to the termination of the Tranche B Commitments, that Lender's Tranche B Commitment and (ii) as of any date of determination from and after the termination of the Tranche B Commitments, the aggregate outstanding principal amount of the Tranche B Acquisition Term Loans of that Lender. "Tranche C Acquisition Term Loan" or "Tranche C Acquisition Term Loans" means the Loan or Loans made or maintained by a Lender or Lenders pursuant to subsection 2.1A(ii)(c). "Tranche C Acquisition Term Note" means a promissory note issued by Company to a Lender pursuant to subsection 2.1F and substantially in the form of Exhibit VIII annexed hereto. "Tranche C Commitments" or "Tranche C Commitments" means the commitment or commitments of a Lender or Lenders to make Tranche C Acquisition Term Loans as set forth in subsection 2.1A(ii)(c). "Tranche C Exposure" means with respect to any Lender as of any date of determination (i) prior to the funding of the Tranche C Acquisition Term Loans, that Lender's Tranche C Commitment and (ii) after the funding of the Tranche C Acquisition Term Loans, the aggregate outstanding principal amount of the Tranche C Acquisition Term Loans of that Lender. "Unrestricted Subsidiary" means a Subsidiary of Company organized or acquired by Company or any of its Subsidiaries subsequent to the Closing Date and designated by Company as an Unrestricted Subsidiary in a notice delivered pursuant to subsection 5.1(xvi) (but not re-designated a Subsidiary of Company in a notice to such effect delivered pursuant to subsection 5.2) and also means any Subsidiary of any Unrestricted Subsidiary. "Unused Proceeds of Sales of Printing Equipment" means, as of any date of determination, Proceeds of Sales of Printing Equipment that have not become (or do not remain) Committed Printing Equipment Proceeds as of such date in accordance with the definition thereof. 35 1.2 Accounting Terms and Financial Information ------------------------------------------ A. For purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP and all financial statements and certificates and reports as to financial matters required to be delivered to Lenders hereunder shall (unless otherwise disclosed to Lenders in writing at the time of delivery thereof in the manner described in subsection 1.2B) be prepared in accordance with GAAP applied on a basis consistent with GAAP as applied in the preparation of the latest financial statements furnished to Lenders hereunder (or, prior to the delivery of the first financial statements under subsection 5.1, GAAP as applied in the preparation of the audited financial statements of Company and its Subsidiaries as at the end of the 1995 Fiscal Year referred to in subsection 4.3). All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with GAAP as applied in the preparation of the latest annual or quarterly financial statements furnished to the Lenders pursuant to subsection 5.1 (or, prior to the delivery of the first financial statements under subsection 5.1, GAAP as applied in the preparation of the audited financial statements of Company and its Subsidiaries as at the end of the 1995 Fiscal Year referred to in subsection 4.3) unless (i) Company shall have objected to determining such compliance on such basis at the time of delivery of such financial statements or (ii) Requisite Lenders shall so object in writing within 30 days after delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with GAAP as applied in the preparation of the latest financial statements as to which such objection shall not have been made (or, if objection is made in respect of the first financial statements delivered under subsection 5.1, used in the preparation of the audited financial statements of Company and its Subsidiaries as at the end of the 1995 Fiscal Year referred to in subsection 4.3). Except in connection with the preparation of the financial statements and other information required to be delivered by Company to the Lenders pursuant to subsection 5.1, calculations made with respect to the definitions, covenants and other provisions of this Agreement shall give effect to adjustments in component amounts required or permitted by Accounting Principles Board Opinions Nos. 16 and 17 as a result of any Acquisition (other than the Identified Acquisition). B. Company shall deliver to Lenders at the same time as the delivery of any annual or quarterly financial statement under subsection 5.1, (i) a description in reasonable detail of any variation between the application of accounting principles employed in the preparation of such statement and the application of accounting principles employed in the preparation of the next preceding annual or quarterly financial statements as to which no objection has been made in accordance with the last sentence of subsection 1.2A (which variation materially affects the presentation of the consolidated financial position or results of operations of the Company and its Subsidiaries) and (ii) reasonable estimates of the difference between such statements arising as a consequence thereof. 36 1.3 Other Definitional Provisions ----------------------------- Any reference in this Agreement (i) to a Section, a Schedule or an Exhibit is a reference to a section hereof, a schedule hereto or an exhibit hereto, respectively; and (ii) to a subsection or a clause is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears. In this Agreement the singular includes the plural and the plural the singular; "hereof," "herein," "hereto," "hereunder" and the like mean and refer to this Agreement as a whole and not merely to the specific section, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; references to "writing" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; references to agreements and other contractual instruments shall be deemed to include all subsequent amendments, supplements, assignments, and other modifications thereto, but only to the extent such modifications are not prohibited by the terms of this Agreement, and references to Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS; NOTES 2.1 Commitments; Loans ------------------ A. Commitments. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, each Lender hereby severally agrees to make or maintain, as the case may be, the Loans described in this subsection 2.1A. (i) Existing Term Loans. The 1995 Term Loans were made pursuant to the ------------------- Existing Credit Agreement, in each case for the purposes described in subsection 2.5A. As of the date of this Agreement, there are outstanding $276,780,000 in principal amount of 1995 Term Loans, $125,000,000 of which are to be continued and maintained hereunder as Existing Term Loans. Each Lender severally agrees to maintain and continue as Existing Term Loans hereunder its Pro Rata Share of the principal amount of 1995 Term Loans outstanding on the Closing Date as equals such Lender's Pro Rata Share of the Existing Term Loans, after giving effect to subsection 2.1G. The amount of each Lender's Existing Term Loans is set forth opposite its name on Schedule 2.1 annexed hereto and, as of the Closing Date, the aggregate outstanding principal amount of the Existing Term Loans shall be $125,000,000. Any Existing Term Loans repaid or prepaid may not be reborrowed. 37 (ii) Acquisition Term Loans. ---------------------- (a) Tranche A Acquisition Term Loans. Each Lender severally -------------------------------- agrees (i) to maintain and continue as Tranche A Acquisition Term Loans hereunder its Pro Rata Share of $151,780,000 in principal amount of 1995 Term Loans which are outstanding on the Closing Date and are not continued hereunder as Existing Term Loans pursuant to subsection 2.1A(i), after giving effect to subsection 2.1G, and (ii) to lend to Company on the Closing Date an aggregate amount not exceeding its Pro Rata Share of the remaining aggregate Tranche A Commitments to be used for the purposes identified in subsection 2.5B. Each Lender's commitment to maintain and make to Company Tranche A Acquisition Term Loans pursuant to this subsection 2.1A(ii)(a) is herein called its "Tranche A Commitment" and such commitments of all Lenders in the aggregate are herein called the "Tranche A Commitments." The original amount of each Lender's Tranche A Commitment and Pro Rata Share is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original amount of the Tranche A Commitments is $300,000,000. Each Lender's Tranche A Commitment shall expire immediately and without further action on July 31, 1996 if the conditions set forth in subsection 3.1 are not satisfied on or before that date. Company may make only one borrowing under the Tranche A Commitments. Amounts borrowed under this subsection 2.1A(ii)(a) and subsequently repaid or prepaid may not be reborrowed. (b) Tranche B Acquisition Term Loans. Each Lender severally -------------------------------- agrees, subject to the limitations set forth below with respect to the maximum amount of Tranche B Acquisition Term Loans permitted to be outstanding from time to time, to lend to Company from time to time during the period from the Closing Date to but excluding the Acquisition Commitment Termination Date an aggregate amount not exceeding its Pro Rata Share of the aggregate Tranche B Commitments to be used for the purposes identified in subsection 2.5C. Each Lender's commitment to make Tranche B Acquisition Term Loans to Company pursuant to this subsection 2.1A(ii)(b) is herein called its "Tranche B Commitment" and such commitments of all Lenders in the aggregate are herein called the "Tranche B Commitments." The original amount of each Lender's Tranche B Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original amount of the Tranche B Commitments is $100,000,000; provided that the amount of the Tranche B Commitments shall be automatically and permanently reduced from time to time by the amount of any reductions to the Tranche B Commitments made pursuant to subsections 2.4C or 2.4D or the succeeding paragraph of this subsection 2.1A(ii)(b). Each Lender's Tranche B Commitment shall expire on the Acquisition Commitment Termination Date; provided that each Lender's Tranche B Commitment shall expire immediately and without further action on July 31, 1996 if the conditions set forth in subsection 3.1 are not satisfied on or before that date. Anything contained in this Agreement to the contrary notwith- standing, the Tranche B Acquisition Term Loans and the Tranche B Commitments shall be subject to the following limitations: 38 1. subject to clause 2 of this paragraph, the Tranche B Commitments shall be irrevocably and permanently reduced upon any voluntary or mandatory prepayment of Tranche B Acquisition Term Loans as provided in subsection 2.4; 2. the Tranche B Commitments shall not be reduced upon a voluntary prepayment of the Tranche B Acquisition Term Loans with the proceeds of equity contributions to Company of cash or sales of equity securities of Company for cash to and received by Company unless and to the extent Company has delivered written notice to Administrative Agent to the contrary prior to the making of such prepayment; provided that Company shall not be entitled to have this clause 2 apply to avoid a reduction of the Tranche B Commitments otherwise required under clause 1 above with respect to more than $100,000,000 of such prepayments; and 3. at any date of determination, the aggregate principal amount of all outstanding Tranche B Acquisition Term Loans shall not exceed the aggregate Tranche B Commitments. (c) Tranche C Acquisition Term Loans. Each Lender severally -------------------------------- agrees to lend to Company on the Closing Date an aggregate amount not exceeding its Pro Rata Share of the aggregate Tranche C Commitments to be used for the purposes identified in subsection 2.5D. Each Lender's commitment to make Tranche C Acquisition Term Loans to Company pursuant to this subsection 2.1A(iv) is herein called its "Tranche C Commitment" and such commitments of all Lenders in the aggregate are herein called the "Tranche C Commitments." The original amount of each Lender's Tranche C Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original amount of the Tranche C Commitments is $200,000,000. Each Lender's Tranche C Commitment shall expire immediately and without further action on July 31, 1996 if the conditions set forth in subsection 3.1 are not satisfied on or before that date. Company may make only one borrowing under the Tranche C Commitments. Amounts borrowed under this subsection 2.1A(ii)(c) and subsequently repaid or prepaid may not be reborrowed. (iii) Revolving Loans. Each Lender severally agrees, subject to the --------------- limitations set forth below with respect to the maximum amount of Revolving Loans permitted to be outstanding from time to time, (i) to maintain and continue as Revolving Loans hereunder its Pro Rata Share of the principal amount of outstanding Revolving Loans as defined in and which are outstanding under the Existing Credit Agreement as of the Closing Date after giving effect to subsection 2.1G and (ii) to lend to Company from time to time during the period from the Closing Date to but excluding the Commitment Termination Date an aggregate amount not exceeding its Pro Rata Share of the aggregate Revolving Loan Commitments to be used for the purposes identified in subsection 2.5E. Each Lender's commitment to maintain and make to Company Revolving Loans pursuant to this subsection 2.1A(iii) is herein called its "Revolving Loan Commitment" and such commitments of all Lenders in the aggregate are herein called the "Revolving Loan Commitments." The original amount of each Lender's Revolving Loan Commitment is set forth opposite its name on Schedule 2.1 annexed hereto and the aggregate original amount of the 39 Revolving Loan Commitments is $250,000,000; provided that the amount of the Revolving Loan Commitments shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsections 2.4C or 2.4D. Each Lender's Revolving Loan Commitment shall expire on the Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Loan Commitments shall be paid in full no later than that date; provided that each Lender's Revolving Loan Commitment shall expire immediately and without further action on July 31, 1996 if the conditions set forth in subsection 3.1 are not satisfied on or before that date. Amounts borrowed under this subsection 2.1A(iii) may be repaid and reborrowed to but excluding the Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be subject to the following limitations: (a) The amount otherwise available for borrowing under the Revolving Loan Commitments as of the time of determination (other than to repay the Swing Line Loans and accrued and unpaid interest thereon and to reimburse any Issuing Lender for the amount of any drawings under any Letters of Credit honored by such Issuing Lender and not theretofore reimbursed by Company) shall be reduced by an amount equal to the sum of (1) the principal amount of all Swing Line Loans then outstanding plus (2) the Letter of Credit Usage as of such time of determination; and (b) The Total Utilization of Revolving Loan Commitments shall not exceed the aggregate Revolving Loan Commitments. (iv) Swing Line Loans. Bankers hereby agrees, subject to the ---------------- limitations set forth below with respect to the maximum amount of Swing Line Loans permitted to be outstanding from time to time, (i) to maintain and continue as Swing Line Loans hereunder the Swing Line Loans as defined in and which are outstanding under the Existing Credit Agreement and (ii) to make a portion of the Revolving Loan Commitments available to Company from time to time during the period from the Closing Date through but excluding the Commitment Termination Date in an aggregate principal amount of up to $25,000,000 by making Swing Line Loans to Company, notwithstanding the fact that such Swing Line Loans, when aggregated with Bankers' outstanding Revolving Loans may exceed Bankers' Revolving Loan Commitment. Bankers' commitment to make and maintain Swing Line Loans to Company pursuant to this subsection 2.1A(iv) is herein called its "Swing Line Loan Commitment." In no event shall (a) the aggregate principal amount of Swing Line Loans outstanding at any time exceed the Swing Line Loan Commitment, (b) the aggregate principal amount of Revolving Loans and Swing Line Loans outstanding at any time exceed the aggregate Revolving Loan Commitments reduced by the aggregate Letter of Credit Usage at such time or (c) the Swing Line Loan Commitment exceed the aggregate Revolving Loan Commitments. Any reduction of the Revolving Loan Commitments made pursuant to subsection 2.4C or 2.4D which reduces the Revolving Loan Commitment below the then current amount of the Swing Line Loan Commitment shall result in an automatic corresponding reduction of the Swing Line Loan 40 Commitment to the amount of the Revolving Loan Commitments, as so reduced, without any further action on the part of Bankers. Bankers' Swing Line Loan Commitment shall expire on the Commitment Termination Date and Swing Line Loans shall be paid (x) on the last Business Day of each calendar month, to the extent that the aggregate principal amount of Swing Line Loans outstanding on the third to last Business Day of such calendar month exceeds $6,000,000, in an amount equal to the largest multiple of $500,000 less than or equal to such outstanding principal amount of Swing Line Loans in excess of $6,000,000 and (y) in full no later than the Commitment Termination Date. Amounts borrowed by Company under this subsection 2.1A(iv) may be repaid and, to but excluding the Commitment Termination Date, reborrowed. All Swing Line Loans shall be made as Prime Rate Loans and shall not be entitled to be converted into Eurodollar Rate Loans. Swing Line Loans made on any Funding Date may be in any amount. Bankers, at any time in its sole and absolute discretion may on five Business Days' notice, require each Lender, including Bankers, and each Lender hereby agrees, subject to this subsection 2.1A(iv), to make a Revolving Loan (which shall initially be funded as a Prime Rate Loan) in an amount equal to such Lender's Pro Rata Share of the amount of the Swing Line Loans ("Refunded Swing Line Loans") outstanding on the date notice is given which Bankers requests Lenders to pay; provided however that the obligation of each Lender to make any such Revolving Loan is subject to the condition that (i) Bankers believed in good faith that all conditions under Section 3.4 to the making of such Swing Line Loan were satisfied at the time such Swing Line Loan was made, or (ii) such Lender had actual knowledge, by receipt of the statements required pursuant to subsection 5.1 or otherwise, that any such condition had not been satisfied and failed to notify Bankers and Administrative Agent in writing that it had no obligation to make Revolving Loans until such condition was satisfied (which notice shall be effective as of the date of receipt by Bankers and Administrative Agent), or (iii) the satisfaction of any such condition not satisfied has been waived by Requisite Lenders. In the case of Revolving Loans made by Lenders other than Bankers under the immediately preceding sentence, each such Lender shall make the amount of its Revolving Loan available to Administrative Agent, in same day funds, at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York, not later than 1:00 P.M. (New York time) on the Business Day next succeeding the fifth Business Day after the date such notice is given. The proceeds of such Revolving Loans shall be immediately delivered to Bankers (and not to Company) and applied to repay the Refunded Swing Line Loans. On the day such Revolving Loans are made, Bankers' Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by Bankers and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans and shall be due as a Revolving Loan made by Bankers. Company authorizes Administrative Agent and Bankers to charge Company's accounts with Administrative Agent and Bankers (up to the amount available in each such account) in order to immediately pay Bankers the amount of such Refunded Swing Line Loans to the extent amounts received from Lenders, including amounts deemed to be received from Bankers, are not sufficient to repay in full such Refunded Swing Line Loans. If any portion 41 of any amount paid (or deemed to be paid) to Bankers should be recovered from Bankers by or on behalf of Company in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders proportionately in accordance with their respective Pro Rata Shares; provided however that in the case of amounts recovered from Bankers in respect of amounts charged against Company's accounts, the loss of the amount so recovered shall be shared ratably by all Lenders whose Revolving Loans made pursuant to this paragraph were less than each such respective Lender's Pro Rata Share of the Refunded Swing Line Loan. Subject to the proviso contained in the first sentence of this paragraph, each Lender's obligation to make the Revolving Loans referred to in this paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Bankers, Company or any other Person for any reason whatsoever; (ii) the occurrence or continuance of an Event of Default or a Potential Event of Default; (iii) any adverse change in the condition (financial or otherwise) of Company or any of its Subsidiaries; (iv) the acceleration or maturity of any Loans or the termination of the Revolving Loan Commitments after the making of any Swing Line Loan; (v) any breach of this Agreement by any Loan Party, Administrative Agent or any other Lender; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. In the event that Company or any of its Subsidiaries has filed for protection under the Bankruptcy Code or otherwise if Bankers requests and, in any event, subject to satisfaction of the conditions set forth in the proviso to the first sentence of the preceding paragraph, each Lender shall acquire without recourse or warranty an undivided participation interest equal to such Lender's Pro Rata Share of any Swing Line Loan otherwise required to be repaid by such Lender pursuant to the preceding paragraph by paying to Bankers on the date on which such Lender would otherwise have been required to make a Revolving Loan in respect of such Swing Line Loan pursuant to the preceding paragraph, in immediately available funds, an amount equal to such Lender's Pro Rata Share of such Swing Line Loan, and no Revolving Loans shall be made by such Lender pursuant to the preceding paragraph. If such amount is not in fact made available to Bankers by that Lender on the date when Revolving Loans would otherwise be required to be made pursuant to the preceding paragraph, Bankers shall be entitled to recover such amount on demand from that Lender together with interest accrued from such date at the customary rate set by Bankers for the correction of errors among banks for three Business Days and thereafter at the rate of interest then applicable to Prime Rate Loans. From and after the date on which any Lender purchases an undivided participation interest in a Swing Line Loan pursuant to this paragraph, Bankers shall promptly distribute to such Lender such Lender's Pro Rata Share of all payments of principal and interest in respect of such Swing Line Loan. A copy of each notice given by Bankers to Lenders pursuant to the second preceding paragraph shall be promptly delivered by Bankers to Company. Upon the making of a Revolving Loan by a Lender pursuant to this subsection 2.1A(iv), the amount so funded shall become due under such Lender's Revolving Note and shall no longer be owed under the Swing Line Note. Notwithstanding anything herein to the contrary, Bankers shall not be obligated to make any Swing Line Loans if it has elected after the occurrence of a Potential Event of Default or 42 Event of Default not to make Swing Line Loans and has notified Company in writing or by telephone (promptly confirmed in writing) of such election. Bankers shall promptly give notice to Lenders of such election not to make Swing Line Loans. B. Borrowing Mechanics. Acquisition Term Loans and Revolving Loans made on any Funding Date shall be in an aggregate minimum amount of $2,000,000 and integral multiples of $500,000 in excess of that amount. Swing Line Loans made on any date shall not be subject to an aggregate minimum amount. Whenever Company desires that Lenders make an Acquisition Term Loan or a Revolving Loan under subsection 2.1A(ii) or 2.1A(iii), as the case may be, it shall deliver to Administrative Agent a Notice of Borrowing no later than 12:00 Noon (New York time) at least three Business Days in advance of the proposed Funding Date in the case of a Eurodollar Rate Loan and at least one Business Day in advance of the proposed Funding Date in the case of a Prime Rate Loan. Whenever Company desires that Bankers make a Swing Line Loan under subsection 2.1A(iv), it shall deliver to Administrative Agent a Notice of Borrowing no later than 12:00 Noon (New York time) on the proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount and type of Loans requested, (iii) in the case of Loans made on the Closing Date, that such Loans shall be Prime Rate Loans, (iv) in the case of Revolving Loans not made on the Closing Date, whether such Loans shall be Prime Rate Loans or Eurodollar Rate Loans, (v) in the case of Loans requested to be made during the first 90 days following the Closing Date as Eurodollar Rate Loans, that the initial Interest Period applicable to such Loans shall be one month unless Administrative Agent permits otherwise, in its sole discretion; (vi) in the case of any Loans requested to be made as Eurodollar Rate Loans, the initial Interest Period applicable thereto; (vii) in the case of Revolving Loans and Swing Line Loans, that the amount of the proposed borrowing will not cause the Total Utilization of Revolving Loan Commitments to exceed the aggregate Revolving Loan Commitments; (viii) in the case of Swing Line Loans, that the amount of the proposed borrowing will not cause the aggregate principal amount of Swing Line Loans outstanding to exceed the Swing Line Loan Commitment then in effect; (ix) in the case of Tranche B Acquisition Term Loans, that the amount of the proposed borrowing will not cause the aggregate principal amount of Tranche B Acquisition Term Loans outstanding to exceed the Tranche B Commitments then in effect, and (x) in the case of any Acquisition Term Loans, that (a) as of the last day of the Fiscal Quarter immediately preceding the applicable scheduled Funding Date in respect of such Acquisition the Leverage Ratio for the most recently completed four Fiscal Quarters is equal to or less than 4.50:1.00 (it being understood and agreed that Company shall not be required to comply with the Leverage Ratio requirement of this clause (a) as a condition to the making of Acquisition Term Loans hereunder in connection with the Identified Acquisition) and (b) no Event of Default or Potential Event of Default has occurred or is continuing or would be caused by the consummation of the Acquisition. Term Loans and Revolving Loans may be continued as or converted into Prime Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of delivering the above described Notice of Borrowing, Company may give Administrative Agent telephonic notice by the required time of the proposed borrowing under this subsection 2.1B; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Administrative Agent on or before the applicable Funding Date. 43 Neither Administrative Agent nor any Lender shall incur any liability to any Loan Party in acting upon any telephonic notice referred to above which Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B and, upon funding of Loans by Lenders in accordance with this Agreement pursuant to any telephonic notice, Company shall have effected Loans hereunder. Except as provided in subsection 2.6B, 2.6C and 2.6G, a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing in accordance therewith. C. Disbursement of Funds. All Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares of the Commitments for the particular types of Loans requested, it being understood that no Lender shall be responsible for any default by any other Lender of that other Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender to make the particular type of Loan requested be increased or decreased as a result of the default by any other Lender of that other Lender's obligation to make a Loan requested hereunder. Promptly after receipt by Administrative Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof), Administrative Agent shall notify each Lender or Bankers, as the case may be, of the proposed borrowing. Each Lender shall make the amount of its Loans available to Administrative Agent, in same day funds, at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York not later than 3:00 p.m. (New York time) on the Funding Date. Except with respect to the repayment of Refunded Swing Line Loans, as provided in sub- section 2.1A(iv), or the reimbursement of an Issuing Lender for a drawing on a Letter of Credit, as provided in subsection 2.7D, upon satisfaction or waiver of the conditions precedent specified in subsections 3.1 and 3.4 in the case of the initial Revolving Loans and Swing Line Loans on the initial Funding Date (and/or subsection 3.1 and 3.4 in the case of any initial Acquisition Term Loans on the initial Funding Date) and subsection 3.4 in the case of Revolving Loans and Swing Line Loans on any subsequent Funding Date (and subsection 3.3 and 3.4 in the case of Acquisition Term Loans on any subsequent Funding Date), Administrative Agent shall make the proceeds of such Loans available to Company on the Funding Date by causing an amount of same day funds equal to the proceeds of all such Loans received by Administrative Agent at its office located at the address set forth in the preceding sentence to be credited to the account of Company at such office of Administrative Agent. Unless Administrative Agent shall have been notified by any Lender prior to a Funding Date that such Lender does not intend to make available to Administrative Agent such Lender's Loan requested on such Funding Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Funding Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corre- sponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Prime Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, 44 for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the rate payable under this Agreement for Prime Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. D. Register. (i) Administrative Agent shall maintain, at its address referred to in subsection 9.10, a register for the recordation of the names and addresses of Lenders and the Commitments and Loans of each Lender from time to time (the "Register"). Company, Administrative Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. (ii) Administrative Agent shall record in the Register the Commitments and the Loans from time to time of each Lender and each repayment or prepayment in respect of the principal amount of the Loans of each Lender. Any such recordation in accordance with the terms of this Agreement shall be conclusive and binding on Company and each Lender, absent manifest error; provided that failure to make any such recordation, or any error in such recordation, shall not affect Company's Obligations in respect of the applicable Loans. (iii) Each Lender shall record on its internal records (including, without limitation, any Note described in subsection 2.1F) the amount of the Loan made by it and each payment in respect thereof. Any such recordation in accordance with the terms of this Agreement shall be conclusive and binding on Company, absent manifest error; provided that failure to make any such recordation, or any error in such recordation, shall not affect Company's Obligations in respect of the applicable Loans; provided further that in the event of any inconsistency between the Register and any Lender's records, the recordations in the Register shall govern. (iv) Company, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any such Commitment or Loan shall be effective, in each case unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by Administrative Agent and recorded in the Register as provided in subsection 9.2B(ii). Prior to such recordation, all amounts owed with respect to the applicable 45 Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. E. Scheduled Payments of Term Loans. (i) Company shall make principal payments in the aggregate amount of the Scheduled Existing Term Repayment Amount on the last day of each Fiscal Quarter of each Fiscal Year set forth in the definition of Scheduled Existing Term Repayment Amount; provided that the Existing Term Loans and all other amounts owed hereunder with respect to the Existing Term Loans shall be paid in full no later than December 29, 2002. (ii) Company shall make principal payments (a) in the aggregate amount of the Scheduled Tranche A Repayment Amount on the last day of each Fiscal Quarter of each Fiscal Year set forth in the definition of Scheduled Tranche A Repayment Amount, (b) in the aggregate amount of the Scheduled Tranche B Repayment Amount on the last day of each Fiscal Quarter of each Fiscal Year set forth in the definition of Scheduled Tranche B Repayment Amount and (c) in the aggregate amount of the Scheduled Tranche C Repayment Amount on the last day of each Fiscal Quarter of each Fiscal Year set forth in the definition of Scheduled Tranche C Repayment Amount; provided that the Acquisition Term Loans and all other amounts owed hereunder with respect to the Acquisition Term Loans shall be paid in full no later than December 29, 2002. F. Note Option. Any Lender may, by notice to Administrative Agent and Company, request that all or part of the principal amount of Company's Loans from such Lender hereunder be evidenced by an Existing Term Note, a Tranche A Acquisition Term Note, Tranche B Acquisition Term Note, Tranche C Acquisition Term Note, Revolving Note and/or Swing Line Note, as applicable. Within three Business Days of Company's receipt of such notice, Company shall execute and deliver to Administrative Agent for delivery to the appropriate Lender a Note or Notes, payable to the notifying Lender or, if so specified in such notice, any Person who is an assignee of such Lender pursuant to subsection 9.2 hereof. G. Reallocation of Pro Rata Shares. On the Closing Date, each Lender, without executing an Assignment Agreement, shall be deemed to have automatically purchased assignments pro rata from each Departing Lender in all such Departing Lenders' rights and obligations under this Agreement and the other Loan Documents, including with respect to Revolving Loan Commitments, the commitments of Lenders to purchase participations in the Letters of Credit and to make Refunded Swing Line Loans, outstanding Revolving Loans and participations in Existing Letters of Credit and including with respect to the outstanding 1995 Term Loans (collectively, except set forth below, the "Assigned Rights and Obligations") so that, after giving effect to such assignments, each Lender shall have its respective Pro Rata Share as set forth in Schedule 1.1A (as adjusted as required under the definition of Pro Rata Share) 46 of the Assigned Rights and Obligations. Each such purchase hereunder shall be at par for a purchase price equal to the principal amount of Loans and unreimbursed drawings with respect to Letters of Credit to be purchased and without recourse, representation or warranty, except that, as provided in the Departing Lender Consent, each Departing Lender shall be deemed to represent and warrant to each Purchasing Lender that the Assigned Rights and Obligations of such Departing Lender are not subject to any Liens created by that Departing Lender. Administrative Agent shall calculate the net amount to be paid or received by each Lender in connection with the assignments effected hereunder on the Closing Date. Each Lender required to make a payment shall make the net amount of its required payment available to Administrative Agent, in same day funds, at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York, not later than 12:00 p.m. (New York time) on the Closing Date. Administrative Agent shall distribute on the Closing Date the proceeds of such amounts to the Departing Lenders entitled to receive payments, pro rata in proportion to the amount each Departing Lender is entitled to receive. 2.2 Interest on the Loans --------------------- A. Rate of Interest. Subject to the provisions of subsections 2.2E and 2.8, each Term Loan and Revolving Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Reference Rate or the Adjusted Eurodollar Rate, as the case may be. The applicable basis for determining the rate of interest with respect to Loans shall be selected by Company initially at the time a Notice of Borrowing is given pursuant to subsection 2.1B. The basis for determining the interest rate with respect to any Loan may be changed from time to time pursuant to subsection 2.2D. If on any day a Term Loan or Revolving Loan is outstanding with respect to which notice has not been delivered to Administrative Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest then, for that day, that Loan shall bear interest determined by reference to the Reference Rate. Each Swing Line Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Reference Rate. Subject to the provisions of subsections 2.2E and 2.8, Term Loans, Revolving Loans and Swing Line Loans shall bear interest through maturity as follows: (i) if a Prime Rate Loan (other than a Swing Line Loan), then at a rate per annum equal to the sum of the Reference Rate plus the Applicable Margin; "Applicable Margin" means (a) for the period from and including the Closing Date through and including December 29, 1996, 1/8% and (b) for each portion of each subsequent Pricing Period (1) occurring prior to the Additional Subordinated Indebtedness Refinancing, the Applicable Margin I set forth below corresponding to the Leverage Ratio as of the Date of Determination occurring on the day before the commencement of such Pricing Period, and (2) occurring from and after the Additional Subordinated Indebtedness Refinancing, the Applicable Margin II set forth below corresponding to the Leverage Ratio as of the 47 Date of Determination occurring on the day before the commencement of such Pricing Period, as follows: Leverage Ratio Applicable Applicable Margin I Margin II Less than 2.25:1.00 0% 0% 2.25:1.00 - 2.49:1.00 0% 0% 2.50:1.00 - 2.99:1.00 0% 0% 3.00:1.00 - 3.49:1.00 0% 0% 3.50:1.00 - 3.99:1.00 1/8% 0% 4.00:1.00 - 4.49:1.00 3/8% 1/4% 4.50:1.00 and higher 5/8% 1/2% (ii) if a Eurodollar Rate Loan, then at a rate per annum equal to the sum of the Adjusted Eurodollar Rate plus the Applicable Eurodollar Rate Margin; "Applicable Eurodollar Rate Margin" means (a) for the period from and including the Closing Date through and including December 29, 1996, 1- 1/8%, and (b) for each portion of each subsequent Pricing Period (1) occurring prior to the occurrence of the Additional Subordinated Indebtedness Refinancing, the Applicable Eurodollar Rate Margin I set forth below corresponding to the Leverage Ratio as of the Date of Determination occurring on the day before the commencement of such Pricing Period, and (2) occurring from and after the Additional Subordinated Indebtedness Refinancing, the Applicable Eurodollar Rate Margin II set forth below corresponding to the Leverage Ratio as of the Date of Determination occurring on the day before the commencement of such Pricing Period, in each case as follows: 48 Leverage Ratio Applicable Applicable Eurodollar Eurodollar Rate Margin I Rate Margin II Less than 2.25:1.00 3/8% 1/4% 2.25:1.00 - 2.49:1.00 5/8% 1/2% 2.50:1.00 - 2.99:1.00 3/4% 5/8% 3.00:1.00 - 3.49:1.00 1% 7/8% 3.50:1.00 - 3.99:1.00 1-1/8% 1% 4.00:1.00 - 4.49:1.00 1-3/8% 1-1/4% 4.50:1.00 and higher 1-5/8% 1-1/2% (iii) if a Swing Line Loan, then at a rate per annum equal to the sum of the Reference Rate plus the Applicable Swing Line Margin; "Applicable Swing Line Margin" means (a) for the period from and including the Closing Date through and including December 29, 1996, 0%, and (b) for each portion of each subsequent Pricing Period (1) occurring prior to the Additional Subordinated Indebtedness Refinancing, the Applicable Swing Line Margin I set forth below corresponding to the Leverage Ratio as of the Date of Determination occurring on the day before the commencement of such Pricing Period, and (2) occurring from and after the Additional Subordinated Indebtedness Refinancing, the Applicable Swing Line Margin II set forth below corresponding to the Leverage Ratio as of the Date of Determination occurring on the day before the commencement of such Pricing Period, in each case as follows: Leverage Ratio Applicable Applicable Swing Line Swing Line Margin I Margin II Less than 2.25:1.00 0% 0% 2.25:1.00 - 2.49:1.00 0% 0% 2.50:1.00 - 2.99:1.00 0% 0% 3.00:1.00 - 3.49:1.00 0% 0% 3.50:1.00 - 3.99:1.00 0% 0% 4.00:1.00 - 4.49:1.00 0% 0% 4.50:1.00 and higher 1/4% 1/8% Notwithstanding anything in the foregoing to the contrary, if at any time from the Closing Date through December 29, 1996 Company consummates a Substantial Acquisition and the 49 Leverage Ratio as of the date of consummation would cause an increase in either the Applicable Margin, Applicable Eurodollar Margin or Applicable Swing Line Margin then in effect as demonstrated by a Pricing Certificate delivered by Company on the date of such Substantial Acquisition, then Administrative Agent shall recalculate the Applicable Margin, Applicable Eurodollar Margin or Applicable Swing Line Margin and give effect to any such increase as of such date of consummation. On each Pricing Certificate Delivery Date, Company shall deliver a Pricing Certificate demonstrating the calculation of the Leverage Ratio as of the most recent Date of Determination. Notwithstanding that the Pricing Certificate for a Pricing Period may be delivered after the relevant Date of Determination, adjustments to the amount of accrued interest (and the amount of letter of credit fees payable under subsection 2.7F(ii)) shall be made to reflect retroactive application of the applicable interest rate margin set forth in such Pricing Certificate to the first day of such Pricing Period; provided that no such adjustment shall be made with respect to Eurodollar Rate Loans for which Interest Payment Dates have occurred during the period from the first day of such Pricing Period to and including the Pricing Certificate Delivery Date with respect to such Pricing Period. Notwithstanding anything in the foregoing to the contrary, if any Pricing Certificate delivered by Company demonstrating the appropriate Leverage Ratio shall prove to have incorrectly understated the Leverage Ratio (as determined by reference to a subsequent Compliance Certificate or subsequent publicly filed financial statements of Company), such Pricing Certificate shall no longer be in effect, and Administrative Agent shall calculate the difference between the amount of interest (and the amount of commitment fees payable under subsections 2.3A and 2.3B and the amount of letter of credit fees payable under subsection 2.7F(ii)) actually paid by Company on the basis of such incorrect Pricing Certificate and the amount of interest (and the amount of commitment fees payable under subsections 2.3A and 2.3B and the amount of letter of credit fees payable under subsection 2.7F(ii)) which would have been due had such incorrect Pricing Certificate not been delivered. Administrative Agent shall notify Company of the amount of such difference, if any, in a statement setting forth the method of calculation of such amount (which calculation, in the absence of demonstrable error, shall be deemed correct) and Company shall pay such amount to Administrative Agent for the account of Lenders within three Business Days of such notice. Notwithstanding anything in the foregoing to the contrary, if Company delivers a Cost Adjustment Certificate in respect of an Acquisition pursuant to subsection 5.1(xviii) (an "Initial Cost Adjustment Certificate"), then upon the delivery of the related Cost Adjustment Certificate pursuant to subsection 5.1(iii) (a "Subsequent Cost Adjustment Certificate") for the first four full Fiscal Quarters following such Acquisition (or, in the event Company determines that it shall not realize the cost reduction synergies set forth in the Initial Cost Reduction Certificate, the next complete Fiscal Quarter following such determination), to the extent such Subsequent Cost Adjustment Certificate indicates that the actual cost reduction synergies of the type set forth in the Initial Cost Adjustment Certificate for the period covered thereby are less than the cost reduction synergies estimated by Company in the Initial Cost Adjustment Certificate for such period, the Administrative Agent shall calculate the difference between the amount of interest 50 (and the amount of commitment fees payable under subsections 2.3A and 2.3B and the amount of letter of credit fees payable under subsection 2.7F(ii)) actually paid by Company on the basis of the Initial Cost Adjustment Certificate and the amount of interest (and the amount of commitment fees payable under subsections 2.3A and 2.3B and the amount of letter of credit fees payable under subsection 2.7F(ii)) which would have been due had the actual cost reduction synergies contained in the Subsequent Cost Adjustment Certificate been substituted for the estimated cost reduction synergies contained in the Initial Cost Reduction Certificate. Administrative Agent shall notify Company of the amount of such difference, if any, in a statement setting forth the method of calculation of such amount (which calculation, in the absence of demonstrable error, shall be deemed correct) and Company shall pay such amount to Administrative Agent for the account of Lenders within three Business Days of such notice. B. Interest Periods. In connection with each Eurodollar Rate Loan, Company may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an "Interest Period") to be applicable to such Loan, which Interest Period shall be at Company's option either a one, two, three, four, five, six or nine month period or, if permitted under clause (ix) of this subsection 2.2B, a twelve month period; provided that: (i) the initial Interest Period for any Eurodollar Rate Loan shall commence on the Funding Date of such Loan, in the case of a Loan initially made as a Eurodollar Rate Loan, or on the date specified in the applicable Notice of Conversion/Continuation, in the case of a Loan converted to a Eurodollar Rate Loan; (ii) in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, in the case of a Eurodollar Rate Loan, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) any Interest Period for a Eurodollar Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month; (v) no Interest Period for any Term Loan shall extend beyond a date on which Company is required to make a scheduled payment of principal of any Term Loan unless the aggregate principal amount of Term Loans that are Prime Rate Loans plus the aggregate principal amount of Term Loans that are Eurodollar Rate Loans with Interest 51 Periods expiring on or before such date equals or exceeds the principal amount required to be paid on the Term Loans on such date; (vi) there shall be no more than twenty Interest Periods relating to Eurodollar Rate Loans or any combination thereof outstanding at any time; (vii) in the event Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of Conversion/Continuation, Company shall be deemed to have selected an Interest Period of one month; (viii) no Interest Period with respect to any Term Loans shall extend beyond December 29, 2002 and no Interest Period with respect to Revolving Loans shall extend beyond the Commitment Termination Date; and (ix) no Eurodollar Rate Loan shall have an Interest Period of twelve months unless Company shall have obtained the prior consent of all Lenders. C. Interest Payments. Subject to the provisions of subsection 2.2E, interest shall be payable on the Loans as follows: (i) interest on each Prime Rate Loan (other than a Swing Line Loan) shall be payable in arrears on and to the last day of each Fiscal Quarter, upon any prepayment of any such Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity); provided that in the event any Revolving Loans that are Prime Rate Loans are prepaid pursuant to subsection 2.4A(i), interest accrued on such Revolving Loans through the date of such prepayment shall be payable on the last day of the then current Fiscal Quarter (or, if earlier, at final maturity); (ii) interest on each Eurodollar Rate Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity); and (iii) interest on each Swing Line Loan shall be payable in arrears on and to the last day of each Fiscal Quarter and upon termination of the Swing Line Commitment. D. Conversion or Continuation. Subject to the provisions of subsection 2.6, Company shall have the option (i) to convert at any time all or any part of outstanding Term Loans or Revolving Loans (but not Swing Line Loans) equal to $2,000,000 and integral multiples of $500,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of such Loans equal to $2,000,000 and integral multiples of $500,000 in excess of that amount as a Eurodollar Rate Loan and the succeeding Interest Period(s) of such continued Loan shall commence on the most recent Interest Payment Date thereof; provided 52 however that a Eurodollar Rate Loan may only be converted into a Loan bearing interest determined by reference to an alternative basis on the expiration date of an Interest Period applicable thereto; provided further that Swing Line Loans shall only bear interest as Prime Rate Loans and Company shall not have any right to convert outstanding Swing Line Loans which are Prime Rate Loans into Swing Line Loans bearing interest at a rate determined by reference to any other basis; and provided still further that no Loan may be made as or converted into a Prime Rate Loan during the period from December 24 of any year to and including January 7 of the immediately succeeding year for the purpose of investing in securities bearing interest at a rate determined by reference to any other basis for the purpose of arbitrage or speculation; provided still further that (y) no Loan may be made as a Eurodollar Rate Loan on the Closing Date and (z) no Loan may be made as a Eurodollar Rate Loan with an applicable Interest Period of other than one month during the first 90 days following the Closing Date unless Administrative Agent so permits in its sole discretion. Company shall deliver a Notice of Conversion/Continuation to Administrative Agent no later than 12:00 Noon (New York time) at least one Business Day in advance of the proposed conversion/continuation date (in the case of a conversion to a Prime Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount of the Loan to be converted/continued, (iii) the nature of the proposed conversion/continuation, (iv) in the case of a conversion to, or continuation of, a Eurodollar Rate Loan, the requested Interest Period and (v) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no Potential Event of Default or Event of Default has occurred and is continuing. In lieu of delivering the above-described Notice of Conversion/ Continuation, Company may give Administrative Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2D; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to Administrative Agent on or before the proposed conversion/continuation date. Neither Administrative Agent nor any Lender shall incur any liability to any Loan Party in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of Company or for otherwise acting in good faith under this subsection 2.2D and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Loans in accordance with this Agreement pursuant to any such telephonic notice, Company shall have effected a conversion or continuation, as the case may be, hereunder. Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date and Company shall be bound to effect conversion or continuation in accordance therewith. E. Post-Maturity Interest. Any principal payments on the Loans not paid when due and, to the extent permitted by applicable law, any interest payments on the Loans or any fees 53 or other amounts owed hereunder not paid when due, in each case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Prime Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender. F. Computation of Interest. Interest on the Loans shall be computed on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Prime Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Prime Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Prime Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Prime Rate Loan to such Eurodollar Rate Loan shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. 2.3 Fees ---- A. Acquisition Commitment Fees. Company agrees to pay to Administrative Agent, for distribution to each Lender in proportion to that Lender's Pro Rata Share, commitment fees for the period from and including the Closing Date to and excluding the date the Tranche B Commitments expire, equal to the average of the daily excess of the Tranche B Commitments over the aggregate principal amount of Tranche B Acquisition Term Loans outstanding multiplied by 3/8 of 1% per annum, such commitment fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable quarterly in arrears on the last day of each Fiscal Quarter, commencing on the first such date to occur after the Closing Date, and on the date the Tranche B Commitments expire; provided however that such per annum percentage shall be reduced to 1/4 of 1% per annum for each day during any Pricing Period in which the Leverage Ratio as of the last day of the most recently ended Fiscal Quarter is equal to or less than 4.50:1.00. B. Revolving Loan Commitment Fees. Company agrees to pay to Administrative Agent, for distribution to each Lender in proportion to that Lender's Pro Rata Share, commitment fees for the period from and including the Closing Date to and excluding the date the Revolving Loan Commitments expire, equal to the average of the daily excess of the Revolving Loan Commitments over the aggregate principal amount of Revolving Loans outstanding multiplied by 3/8 of 1% per annum, such commitment fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable quarterly in arrears on the last day of each Fiscal Quarter, commencing on the first such date to occur after the Closing Date, and on the date the Revolving Loan Commitments expire; provided however that such per annum percentage shall be reduced to 1/4 of 1% per annum for each day during any Pricing Period in 54 which the Leverage Ratio as of the last day of the most recently ended Fiscal Quarter is equal to or less than 4.50:1.00. Reductions in the amounts available for borrowing under the Revolving Loan Commitments arising from the operation of the limitation set forth in the second paragraph of subsection 2.1A(iii), including reductions as a result of the making of Swing Line Loans or the issuance of Letters of Credit, shall not constitute usages of Revolving Loan Commitments for purposes of this subsection 2.3B and shall not reduce the amount of the commitment fees that are payable under this subsection 2.3B. C. Other Fees. Company agrees to pay to Administrative Agent such fees in the amounts and at the times set forth in that certain letter agreement dated April 30, 1996 by and among Company and Bankers. 2.4 Prepayments and Payments; Reductions in Commitments; Cash Collateralization --------------------------------------------------------------------------- of Standby Letters of Credit ---------------------------- A. Prepayments. (i) Voluntary Prepayments. --------------------- (a) Company may, upon written or telephonic notice to Administrative Agent on or prior to 12:00 Noon (New York time) on the date of prepayment, which notice, if telephonic shall be promptly confirmed in writing, at any time and from time to time prepay any Swing Line Loan in whole or in part in any aggregate amount. Company may, with respect to Prime Rate Loans, upon not less than one Business Day's, and with respect to Eurodollar Rate Loans, upon not less than three Business Days' prior written or telephonic notice confirmed in writing to Administrative Agent (which notice Administrative Agent will promptly transmit by telecopy, telex or telephone to each Lender), at any time and from time to time prepay any Loans (other than Swing Line Loans) in whole or in part in an aggregate minimum amount of $2,000,000 and integral multiples of $500,000 in excess of that amount; provided however that in the event that Company prepays a Eurodollar Rate Loan pursuant to this subsection 2.4A(i) on a date that is other than the expiration date of the Interest Period applicable thereto, Company shall compensate the Lender or Lenders receiving such prepayments in accordance with the provisions of subsection 2.6D. Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4A(iii). (b) In the event Company is entitled to replace a non-consenting Lender pursuant to subsection 9.7B, Company shall have the right, upon five Business Days' prior written notice to Administrative Agent (which notice Administrative Agent shall promptly transmit to each of the Lenders), to prepay all Loans, together with accrued and unpaid interest, fees and other amounts owing to such 55 Lender in accordance with subsection 9.7B so long as (1) in the case of the prepayment of the Revolving Loans of any Lender pursuant to this subsection 2.4A(i)(b), the Revolving Loan Commitment of such Lender is terminated concurrently with such prepayment pursuant to subsection 2.4C(ii) (at which time Schedule 2.1 shall be deemed ------------ modified to reflect the changed Revolving Loan Commitments), (2) in the case of the prepayment of the Tranche B Acquisition Term Loans of any Lender pursuant to this subsection 2.4A(i)(b), the Tranche B Commitment of such Lender is terminated concurrently with such prepayment pursuant to subsection 2.4C(ii) (at which time Schedule 2.1 ------------ shall be deemed modified to reflect the changed Tranche B Commitments), and (3) in the case of the prepayment of the Loans of any Lender, the consents required by subsection 9.7B in connection with the prepayment pursuant to this subsection 2.4A(i)(b) shall have been obtained, and at such time, such Lender shall no longer constitute a "Lender" for purposes of this Agreement, except with respect to indemnifications under this Agreement (including, without limitation, subsections 2.6D, 2.8, 2.7H, 9.3 and 9.4), which shall survive as to such Lender. (ii) Mandatory Prepayments. The Loans shall be prepaid and/or the --------------------- Tranche B Commitments and Revolving Loan Commitments shall be permanently reduced in the amounts and under the circumstances set forth below, all such prepayments and/or reductions to be applied as set forth below or as more specifically provided in subsection 2.4A(iii). (a) Prepayments and Reductions from Asset Sales. Subject to the ------------------------------------------- Intercreditor Agreement, no later than the first Business Day following the date of receipt by Company or any of its Subsidiaries of Cash Proceeds of any Asset Sale, Company shall prepay the Loans and/or the Tranche B Commitments and Revolving Loan Commitments shall be permanently reduced in an amount equal to 75% of the Estimated Net Cash Proceeds of such Asset Sale; provided that, in the event on the date of receipt by Company or any of its Subsidiaries of such Cash Proceeds, the Leverage Ratio as of the last day of the then most recently ended Fiscal Quarter for which financial statements have been delivered pursuant to subsection 5.1(i) or 5.1(ii) is less than 2.50:1.00, then the percentage applicable to Estimated Net Cash Proceeds set forth above shall be reduced to 50%. On or before the 90th day after receipt of any such Cash Proceeds, Company shall promptly make an additional prepayment of the Loans and/or the Tranche B Commitments and Revolving Loan Commitments shall be permanently reduced in an amount equal to 75% (or 50%, if the applicable percentage is reduced pursuant to the preceding proviso) of the excess, if any, of (1) the Net Cash Proceeds of Sale of such Asset Sale over (2) the portion of the Estimated Net Cash Proceeds of such Asset Sale already applied under the preceding sentence, to be applied in the manner described above with respect to the application of Estimated Net Cash Proceeds. Concurrently with any prepayment of the Loans and/or reduction of the Tranche B Commitments and Revolving Loan Commitments pursuant to this subsection 2.4A(ii)(a), Company shall deliver to 56 Administrative Agent an Officers' Certificate demonstrating the derivation of the Net Cash Proceeds of Sale or Estimated Net Cash Proceeds, as the case may be. (b) Prepayments and Reductions Due to Reversion of Surplus ------------------------------------------------------ Assets of Pension Plans. Within one Business Day after the return to ----------------------- Company or any of its Subsidiaries of any surplus assets of any pension plan of Company or any of its Subsidiaries, Company shall prepay the Loans and/or the Tranche B Commitments and Revolving Loan Commitments shall be permanently reduced in an amount (the "Net Reversion Amount") equal to 100% of such returned surplus assets, net of transaction costs and expenses incurred in obtaining such return, including incremental taxes payable as a result thereof. (c) Prepayments and Reductions Due to Issuance of Debt. Within -------------------------------------------------- one Business Day of receipt by Company or any of its Subsidiaries of the cash proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) from the issuance or sale of any Additional Subordinated Indebtedness or other debt Securities of Company or any of its Subsidiaries (excluding Indebtedness permitted by subsection 6.1 (other than subsection 6.1(x)), Company shall prepay the Loans and/or the Tranche B Commitments and Revolving Loan Commitments shall be permanently reduced in an amount equal to such net cash proceeds; provided that a prepayment and/or reduction pursuant to this subsection 2.4A(ii)(c) shall not be required in respect of any such net cash proceeds in excess of $200,000,000 in the aggregate during the term of this Agreement ("Net Additional Debt Proceeds") to the extent that such Net Additional Debt Proceeds are to be applied to consummate Acquisitions in accordance with subsection 6.7(v) within 90 days of the receipt thereof. On or before the 90th day after receipt of any such Net Additional Debt Proceeds, Company shall promptly make an additional prepayment of Loans and/or the Tranche B Commitments and Revolving Loan Commitments shall be permanently reduced in an amount equal to any Net Additional Debt Proceeds that have for any reason not been applied to consummate Acquisitions or to make such prepayments and/or reductions. Concurrently with any prepayment of the Term Loans and/or reduction of the Tranche B Commitments and Revolving Loan Commitments pursuant to this subsection 2.4A(ii)(c), Company shall deliver to Administrative Agent an Officers' Certificate demonstrating the derivation and application of the Net Additional Debt Proceeds. (d) Prepayments Due to Reductions or Restrictions of ------------------------------------------------ Commitments. Company shall from time to time prepay the Swing Line ----------- Loans and Revolving Loans to the extent necessary to give effect to the limitations set forth in the first two paragraphs of subsection 2.1A(iv) and the second paragraph of subsection 2.1A(iii), as applicable. Any such mandatory prepayments shall be applied first to the Swing Line Loans and then to the Revolving Loans, and otherwise as specified in subsection 2.4A(iii). Company shall from time to time 57 prepay the Tranche B Acquisition Term Loans to the extent necessary to give effect to the limitations set forth in the second paragraph of subsection 2.1A(ii)(b), such prepayments to be applied as specified in subsection 2.4A(iii). (e) Prepayments from Consolidated Excess Cash Flow and Unused --------------------------------------------------------- Proceeds of Sales of Printing Equipment. In the event that there --------------------------------------- shall be either (x) on April 15th of any year, Unused Proceeds of Sales of Printing Equipment derived from the Proceeds of Sales of Printing Equipment sold during the immediately preceding Fiscal Year commencing with 1996 or (y) Consolidated Excess Cash Flow for any Fiscal Year commencing with 1997, or both, Company shall, on the April 15th following the end of each such Fiscal Year, as applicable, prepay Loans and/or the Tranche B Commitments and Revolving Loan Commitments shall be permanently reduced in an amount equal to the amount of any such Unused Proceeds of Sales of Printing Equipment plus 50% of any such Consolidated Excess Cash Flow; provided that Company shall not be required to make any prepayment and/or reduction in respect of Consolidated Excess Cash Flow pursuant to this subsection 2.4A(ii)(e) in the event that on the relevant April 15th, the Leverage Ratio as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered pursuant to subsections 5.1(i) or 5.1(ii) is less than 2.50:1.00. On or before the last day of each Fiscal Year, Company shall promptly make an additional prepayment of Loans and/or the Tranche B Commitments and Revolving Loan Commitments shall be permanently reduced in an amount equal to any Unused Proceeds of Sales of Printing Equipment derived from Proceeds of Sales of Printing Equipment sold during any and all prior Fiscal Years (but not including the Fiscal Year ending on such day) that have for any reason whatsoever not theretofore been applied to make such prepayments and/or reductions (including, without limitation, because such Proceeds of Sales of Printing Equipment had become Committed Printing Equipment Proceeds in accordance with the definition thereof but the purchase order pursuant to which they were to have been expended subsequently was cancelled, revoked or otherwise terminated). On each April 15th commencing with April 15, 1997 and concurrently with the making of any prepayment and/or reduction pursuant to this subsection 2.4A(ii)(e) on any other date, Company shall deliver an Officers' Certificate demonstrating the calculation of the Leverage Ratio, if applicable, and the derivation of the amounts required to be prepaid and/or reduced in connection with such Unused Proceeds of Sales of Printing Equipment and such Consolidated Excess Cash Flow. (f) Prepayments from Proceeds of Permitted Receivables -------------------------------------------------- Transaction. Within one Business Day of receipt by Company or any of ----------- its Subsidiaries of Receivables Proceeds from any Permitted Receivables Transaction Company shall prepay Loans and/or the Tranche B Commitments and Revolving Loan Commitments shall be permanently reduced in an amount equal to the aggregate amount of such Receivables Proceeds. 58 (iii) Application of Prepayments. -------------------------- (a) Application of Voluntary Prepayments by Type of Loans and --------------------------------------------------------- Order of Maturity. Any voluntary prepayments pursuant to ----------------- subsection 2.4A(i) shall be applied to the Loans as Company may elect in its notice of prepayment delivered pursuant to subsection 2.4A(i). In the event that no such election is made, such prepayment shall be applied first to repay outstanding Acquisition Term Loans and Existing Term Loans to the full extent thereof, second to prepay outstanding Swing Line Loans to the full extent thereof, and third to prepay outstanding Revolving Loans to the full extent thereof; provided that any prepayment of Tranche B Term Loans pursuant to this subsection 2.4A(ii) shall effect a corresponding reduction of Tranche B Commitments in accordance with clause 1 of the second paragraph of subsection 2.1A(ii)(b). Any voluntary prepayments of the Term Loans pursuant to subsection 2.4A(i) shall be applied proportionally to reduce the remaining Scheduled Existing Term Loan Repayment Amount, the Scheduled Tranche A Repayment Amount, the Scheduled Tranche B Repayment Amount and Scheduled Tranche C Acquisition Repayment Amounts on a pro rata basis. (b) Application of Mandatory Prepayments by Type of Loans. Any ----------------------------------------------------- amount (the "Applied Amount") required to be applied as a mandatory prepayment of the Loans and/or a reduction of the Tranche B Commitments and Revolving Loan Commitments pursuant to subsections 2.4A(ii)(a)-(c), 2.4A(ii)(e) or 2.4A(ii)(f) shall be applied first to prepay the principal amount of Term Loans to the full extent thereof, second to the extent of any remaining portion of the Applied Amount, to permanently reduce the Tranche B Commitments and Revolving Loan Commitments on a pro rata basis and then, to the extent that the Revolving Loan Commitments are less than the Letter of Credit Usage, cash collateralize Letters of Credit outstanding. (c) Pro Rata Application of Mandatory Prepayments of Term Loans ----------------------------------------------------------- from Asset Sales, Pension Plan Surplus, Excess Cash Flow, Unused ---------------------------------------------------------------- Proceeds of Sales of Printing Equipment, Issuance of Debt Securities -------------------------------------------------------------------- and Permitted Receivables Transactions. Any mandatory prepayments of -------------------------------------- the Term Loans pursuant to subsections 2.4A(ii)(a), (b), (c), (e) or (f) shall be applied to prepay the outstanding Tranche A Acquisition Term Loans, Tranche B Acquisition Term Loans, Tranche C Acquisition Term Loans and Existing Term Loans and to make corresponding reductions of the Scheduled Tranche A Repayment Amount, Scheduled Tranche B Repayment Amount, Scheduled Tranche C Repayment Amount and Scheduled Existing Term Loan Repayment Amounts, respectively, by the amount of the related prepayments in each case on a pro rata basis; provided that, notwithstanding anything in the foregoing to the contrary, the first $200,000,000 in aggregate principal amount of prepayments pursuant to subsection 2.4A(ii)(c) shall be applied first to prepay the Tranche C Acquisition Term Loans and to reduce the Scheduled Tranche C Repayment Amount and then to prepay 59 the other Term Loans and reduce the Scheduled Tranche A Repayment Amount, Scheduled Tranche B Repayment Amount and Scheduled Existing Term Loan Repayment Amounts, in each case on a pro rata basis as set forth above. (d) Application of Prepayments to Principal and Interest. ---------------------------------------------------- Except as set forth in subsection 2.2C, all prepayments of principal shall be accompanied by payment of accrued interest on the principal amount being prepaid and shall be applied to the payment of interest before application to principal. Considering Term Loans, Swing Line Loans and Revolving Loans being prepaid separately, any prepayment shall be applied first to Prime Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Company pursuant to subsection 2.6D. B. General Provisions Regarding Payments. (i) Manner and Time of Payment. Except as provided in -------------------------- subsection 2.7, all payments of principal, interest and fees hereunder and under the Notes by Company shall be made without defense, set off and counterclaim and in same day funds and delivered to Administrative Agent not later than 12:00 Noon (New York time) on the date due at its office located at One Bankers Trust Plaza, New York, New York, for the account of Lenders; funds received by Administrative Agent after that time shall be deemed to have been paid by Company on the next succeeding Business Day. Company hereby authorizes Administrative Agent to charge its account with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest and fees due hereunder (subject to sufficient funds being available in its account for that purpose). (ii) Apportionment of Payments. Aggregate principal and interest ------------------------- payments shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares. Subject to the last sentence of subsection 2.7E, Administrative Agent (or, in the case of payments received by any Issuing Lender from Company after payments have been made to such Issuing Lender by Lenders pursuant to subsection 2.7E, such Issuing Lender) shall promptly distribute to each Lender at its primary address set forth below its name on the appropriate signature page hereof or such other address as any Lender may request, its share of all such payments received by Administrative Agent (or such Issuing Lender) and the commitment fees of such Lender when received by Administrative Agent pursuant to subsec- tions 2.3A and 2.3B. Notwithstanding the foregoing provisions of this subsection 2.4B(ii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Prime Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter. 60 (iii) Payments on Business Days. Whenever any payment to be made ------------------------- hereunder or under the Notes shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day (unless no further Business Day occurs in such Fiscal Quarter, in which case payment shall be made on the next preceding Business Day) and such extension of time shall be included in the computation of the payment of interest hereunder or under the Notes or of the commitment fees hereunder, as the case may be. C. Voluntary Reductions of Commitments. (i) Company shall have the right, at any time and from time to time, to terminate in whole or permanently reduce in part, without premium or penalty, (i) the Revolving Loan Commitments in an amount up to the amount by which the Revolving Loan Commitments exceed the Total Utilization of Revolving Loan Commitments and (ii) the Tranche B Commitments in an amount up to the amount by which the Tranche B Commitments exceed the aggregate principal amount of Tranche B Acquisition Term Loans then outstanding. Company shall give not less than five Business Days' prior written notice to Administrative Agent designating the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction. Promptly after receipt of a notice of such termination or partial reduction, Administrative Agent shall notify each Lender of the proposed termination or reduction. Such termination or partial reduction of the Revolving Loan Commitments or Tranche B Commitments, as the case may be, shall be effective on the date specified on Company's notice and shall reduce the Revolving Loan Commitments or Tranche B Commitments, as the case may be, of each Lender proportionately to its Pro Rata Share. Any such partial reduction of the Revolving Loan Commitments or Tranche B Commitments shall be in an aggregate minimum amount of $5,000,000, and integral multiples of $1,000,000 in excess of that amount. (ii) In the event Company is entitled to replace a non-consenting Lender pursuant to subsection 9.7B, Company shall have the right, upon five Business Days' written notice to Administrative Agent (which notice Administrative Agent shall promptly transmit to each of the Lenders), to terminate the entire Revolving Loan Commitment and Tranche B Commitment of such Lender, so long as (1) all Loans, together with accrued and unpaid interest, fees and other amounts owing to such Lender are repaid, including without limitation amounts owing to such Lender pursuant to subsection 2.6D, pursuant to subsection 2.4A(i)(b) concurrently with the effectiveness of such termination (at which time Schedule 2.1 shall be deemed modified to ------------ reflect such changed amounts) and (2) the consents required by subsection 9.7B in connection with the prepayment pursuant to subsection 2.4A(i)(b) shall have been obtained, and at such time, such Lender shall no longer constitute a "Lender" for purposes of this Agreement, except with respect to indemnifications under this Agreement (including, without limitation, subsections 2.6D, 2.8, 2.7H, 9.3 and 9.4), which shall survive as to such Lender. 61 D. Mandatory Reductions of Commitments. The Revolving Loan Commitments shall be permanently reduced on the date of any reduction of Revolving Loan Commitments in accordance with the provisions of subsections 2.4A(ii)(a), (b), (c), (e) or (f). The Tranche B Commitments shall be permanently reduced upon any mandatory prepayment of Tranche B Acquisition Term Loans as and to the extent provided in subsection 2.4A(ii)(a), (b), (c), (e) or (f) and on the date of any reduction of Tranche B Commitments in accordance with the provisions of subsection 2.4A(iii)(a) and as provided in the second paragraph of subsection 2.1A(ii)(b). E. Cash Collateralization of Standby Letters of Credit. In the event that a Benefitted Subsidiary with respect to any Standby Letter of Credit issued pursuant to subsection 2.7 is disposed of by Company or any of its Subsidiaries, Company shall, upon receipt by Company or such Subsidiary of the Cash Proceeds of such disposition, deliver to Administrative Agent, to hold as cash collateral pursuant to arrangements in form and substance satisfactory to Administrative Agent and Requisite Lenders as security for the obligation of Company to reimburse the Issuing Lender for the amount of any drawings honored under such Standby Letter of Credit, an amount which when added to all other amounts so delivered, equals the maximum amount which at any time may be available for drawing under such Standby Letter of Credit; provided that in lieu of furnishing such cash collateral as aforesaid, Company may deliver such Standby Letter of Credit to the Issuing Lender for cancellation. Any amounts delivered to Collateral Agent to hold as cash collateral pursuant to the preceding sentence shall be applied to reimburse the Issuing Lender for the amount of any drawings honored under the Letter of Credit in respect of which such cash collateral was delivered; provided further that, upon the cancellation or expiration of any Standby Letter of Credit in respect to which cash collateral has been delivered to Collateral Agent as provided in this subsection 2.4E, unless an Event of Default has occurred and is continuing, Collateral Agent shall deliver the remaining amount of any cash collateral held pursuant to the terms of this Agreement in respect of such Standby Letter of Credit to Company. 2.5 Use of Proceeds --------------- A. Existing Term Loans. The proceeds of the Existing Term Loans have been applied by Company as provided in subsection 2.5A and 2.5B of the Existing Credit Agreement. B. Tranche A Acquisition Term Loans. The proceeds of the Tranche A Acquisition Term Loans shall be immediately applied by Company on the Closing Date (i) to refinance and continue as Tranche A Acquisition Term Loans hereunder any 1995 Term Loans which are not refinanced and continued as Existing Term Loans hereunder and (ii) to acquire equity interests or other business assets and pay related expenditures in connection with the Identified Acquisition, including, without limitation, the repayment of indebtedness and transaction expenses in connection therewith. C. Tranche B Acquisition Term Loans. The proceeds of the Tranche B Acquisition Term Loans shall be immediately applied by Company to acquire equity interests or other business assets and pay related expenditures in connection with Acquisitions (other than the 62 Identified Acquisition), including, without limitation, the repayment of indebtedness and transaction expenses in connection therewith. D. Tranche C Acquisition Term Loans. The proceeds of the Tranche C Acquisition Term Loans shall be immediately applied by Company on the Closing Date to acquire equity interests or other business assets and pay related expenditures in connection with the Identified Acquisition, including, without limitation, the repayment of indebtedness and transaction expenses in connection therewith. E. Revolving Loans and Letters of Credit. The proceeds of the Revolving Loans and the Letters of Credit shall be applied by Company for (i) the working capital and other general corporate purposes of Company and its Subsidiaries (including to be used to refinance and continue the Revolving Loans and Swing Line Loans, in each case as defined in and which are outstanding under the Existing Credit Agreement) and (ii) to acquire equity interests or other business assets and pay related expenditures in connection with the Identified Acquisition, including, without limitation, the repayment of indebtedness and transaction expenses in connection therewith. F. Margin Regulations. No portion of the proceeds of any borrowing under this Agreement shall be used by Company or any of its Subsidiaries in any manner which might cause the borrowing or the application of such proceeds to violate Regulation G, Regulation U, Regulation T, or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. If requested by any Lender, or if necessary, in connection with any Acquisition, Company shall execute and deliver to Administrative Agent a completed F.R. Form U-1. 2.6 Special Provisions Governing Eurodollar Rate Loans -------------------------------------------------- Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: A. Determination of Applicable Interest Rate. As soon as practicable after 10:00 A.M. New York time on each Interest Rate Determination Date, Administrative Agent shall have determined in good faith (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. B. Inability to Determine Applicable Interest Rate. In the event that Administrative Agent shall have determined in good faith (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances occurring after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist 63 for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date give notice (by telecopy or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Company and Lenders that the circumstances giving rise to such notice no longer exist; (ii) any Notice of Conversion/Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company and (iii) any Notice of Borrowing given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be a request to make Prime Rate Loans. C. Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined in good faith (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank Eurodollar market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "Affected Lender" and it shall on that day give notice (by telecopy or by telephone confirmed in writing) to Company and Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender). Thereafter, (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Prime Rate Loan, and (c) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans, as the case may be (the "Affected Loans"), shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and the Affected Loans shall automatically convert into Prime Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telecopy or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Administrative Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make 64 or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement. D. Compensation For Breakage or Non-Commencement of Interest Periods. Company shall compensate each Lender, upon written request by that Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any reasonable loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender or the conversion of such Lender's Notice of Borrowing from a request to make Eurodollar Rate Loans into a request to make Prime Rate Loans pursuant to subsection 2.6B) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/ Continuation or a telephonic request for conversion or continuation, (ii) if any prepayment or conversion of any of its Eurodollar Rate Loans occurs on a date that is not the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company, or (iv) as a consequence of any other default by Company to repay its Eurodollar Rate Loans when required by the terms of this Agreement. E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender; provided however that if any transfer of Eurodollar Rate Loans from the office where such Eurodollar Rate Loans originated shall materially and unreasonably increase the cost to Company of such Eurodollar Rate Loans, such transfer may occur only if required (x) by the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation, or (y) to comply with any guideline or request from any central bank or other governmental authority of quasi- governmental authority exercising control over banks or financial institutions generally (whether or not such guideline or request shall have the force of law). F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.8A shall be made as though that Lender had actually funded (i) each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided however that each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this subsection 2.6 and under subsection 2.8A. 65 G. Eurodollar Rate Loans After Default. After the occurrence and during the continuation of a Potential Event of Default or an Event of Default, (i) Company may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed to be rescinded by Company. 2.7 Letters of Credit ----------------- A. Letters of Credit. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company set forth herein, Company may request, in accordance with the provisions of this subsection 2.7A, that on and after the Closing Date, one or more Issuing Lenders issue Standby Letters of Credit and Commercial Letters of Credit for the account of Company denominated in Dollars. Issuances of Letters of Credit shall be subject to the following limitations: (i) Company shall not request that any Lender issue any Standby Letter of Credit or Commercial Letter of Credit if, after giving effect to such issuance, the Total Utilization of Revolving Loan Commitments would exceed the Revolving Loan Commitments, as the amount available under such Revolving Loan Commitments may be limited from time to time pursuant to the second paragraph of subsection 2.1A(iii); (ii) Company shall not request that any Lender issue any Standby Letter of Credit having an expiration date later than the earlier of (a) the Commitment Termination Date and (b) the date which is one year from the date of issuance of such Standby Letter of Credit; provided that the immediately preceding clause (b) shall not prevent any Issuing Lender from agreeing that a Standby Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each unless such Issuing Lender elects not to extend for any such additional period; (iii) Company shall not request that any Lender issue any Commercial Letter of Credit having an expiration date (a) later than the earlier of (X) the date which is 30 days prior to the Commitment Termination Date and (Y) the date which is 180 days from the date of issuance of such Commercial Letter of Credit or (b) that is otherwise unacceptable to the applicable Issuing Lender in its reasonable discretion; and (iv) Company shall not request that any Issuing Lender issue any Letter of Credit if, after giving effect to such issuance, the sum of (x) the Letter of Credit Usage in respect of all Letters of Credit other than Standby Letters of Credit issued in support of Indebtedness to the extent included in clause (y) hereof and (y) the aggregate Indebtedness of Company and its Subsidiaries pursuant to subsection 6.1(vii) would exceed $50,000,000 at any time on or after the Closing Date. 66 It shall be a condition precedent to the issuance of any Standby Letter of Credit or Commercial Letter of Credit in accordance with the provisions of this subsection 2.7 that each condition set forth in subsections 3.2 and 3.3 shall have been satisfied. Immediately upon the issuance of each Standby Letter of Credit or Commercial Letter of Credit, and as of the Closing Date, with respect to each Existing Letter of Credit, each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and drawings thereunder in an amount equal to such Lender's Pro Rata Share of the maximum amount which is or at any time may become available to be drawn thereunder. Each Standby Letter of Credit and Commercial Letter of Credit may provide that the Issuing Lender may (but shall not be required to) pay the beneficiary thereof upon the occurrence of an Event of Default and the acceleration of the maturity of the Loans or, if payment is not then due to the beneficiary, provide for the deposit of funds in an account to secure payment to the beneficiary and that any funds so deposited shall be paid to the beneficiary of the Letter of Credit if conditions to such payment are satisfied or returned to the Issuing Lender for distribution to Lenders (or, if all Obligations shall have been indefeasibly paid in full, to Company) if no payment to the beneficiary has been made and 30 days after the final date available for drawings under the Letter of Credit has passed. Each payment or deposit of funds by an Issuing Lender as provided in this paragraph shall be treated for all purposes of this Agreement as a drawing duly honored by such Issuing Lender under the related Letter of Credit. B. Notice of Issuance. Whenever Company desires the issuance of a Letter of Credit, it shall deliver to Administrative Agent and the Lender which Company has requested to issue such Letter of Credit, a Notice of Issuance of Letter of Credit in the form of Exhibit III hereto no later than 12:00 Noon (New York time) at least three Business Days (in the case of Standby Letters of Credit), or five Business Days (in the case of Commercial Letters of Credit), or in each case such shorter period as may be agreed to by an Issuing Lender in any particular instance, in advance of the proposed date of issuance. The Notice of Issuance of Letter of Credit shall specify (i) the proposed date of issuance (which shall be a business day under the laws of the jurisdiction of the Issuing Lender), (ii) the face amount of the Letter of Credit, (iii) the expiration date of the Letter of Credit, (iv) the name and address of the beneficiary, (v) the Benefitted Subsidiary or Benefitted Subsidiaries, if any, with respect to such Letter of Credit and the amount inuring to the benefit of such Benefitted Subsidiary, (vi) which Lender Company has requested to issue such Letter of Credit and (vii) a summary of the purpose and contemplated terms of such Letter of Credit. As soon as practicable after delivery of such notice, the Issuing Lender for such Letter of Credit shall be determined as provided in subsec- tion 2.7C. Prior to the date of issuance, Company shall specify a precise description of the documents and the proposed text of any certificate to be presented by the beneficiary which, if presented by the beneficiary in substantial compliance with the terms and conditions of the Letter of Credit prior to the expiration date of the Letter of Credit, would require the Issuing Lender to make payment under the Letter of Credit; provided that the Issuing Lender, in its sole reasonable judgment, may require changes in any such documents and certificates; provided further that no Letter of Credit shall require payment against a conforming draft to be made thereunder on the same business day (under the 67 laws of the jurisdiction of the Issuing Lender) that such draft is presented if such presentation is made after 11:00 a.m. in the time zone of the Issuing Lender on such business day. In determining whether to pay under any Letter of Credit, the Issuing Lender shall be responsible only to determine that the documents and certificates required to be delivered under that Letter of Credit have been delivered and that they substantially comply on their face with the requirements of that Letter of Credit. C. Determination of Issuing Lender. (i) Company may request any Lender to issue a Letter of Credit and, upon receipt by a Lender of a notice from Company pursuant to subsection 2.7B requesting the issuance of a Letter of Credit, such Lender shall promptly notify Company and Administrative Agent whether or not, in its sole discretion, it has elected to issue such Letter of Credit. If such Lender elects to issue such Letter of Credit, such Lender shall be the Issuing Lender with respect thereto. If such Lender declines to issue such Letter of Credit, Company may request any other Lender to issue such Letter of Credit by delivering the notice described in subsection 2.7B to such Lender. In the event that all Lenders shall have declined to issue such Letter of Credit, notwithstanding the prior election of Bankers not to issue such Letter of Credit, but subject to the terms and conditions of this Agreement, Bankers shall be obligated to issue such Letter of Credit and Bankers shall be an Issuing Lender with respect to the Letter of Credit issued by it. (ii) Each Issuing Lender which elects to issue a Standby Letter of Credit shall promptly after issuance thereof, or any amendment, payment or cancellation thereto, furnish each Lender (and Administrative Agent, if Administrative Agent is not such Issuing Lender) with a copy of such Standby Letter of Credit or of such amendment, payment or cancellation, as the case may be. D. Payment of Amounts Drawn Under Letters of Credit. In the event of any drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall promptly notify Company (and Administrative Agent, if Administrative Agent is not such Issuing Lender), and Company shall reimburse such Issuing Lender on the date on which such drawing is honored in an amount in same day funds equal to the amount of such drawing. E. Payment by Lenders with Respect to Letters of Credit. In the event that Company shall fail to reimburse an Issuing Lender as provided in subsection 2.7D in an amount equal to the amount of any drawing honored by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall promptly notify each Lender of the unreimbursed amount of such drawing and of such Lender's respective participation therein, which participation shall be equal to such Lender's Pro Rata Share of the unreimbursed amount of such drawing. Each Lender shall make available to such Issuing Lender an amount equal to its respective participation in same day funds, at the office of such Issuing Lender specified in such notice, not later than 1:00 P.M. (New York time) on the business day (under the laws of the jurisdiction of such Issuing Lender) after the date notified by such Issuing Lender. In the event that any Lender fails to make available to such Issuing Lender the amount of such Lender's participation in such 68 Letter of Credit as provided in this subsection 2.7E, such Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest at the customary rate set by such Issuing Lender for the correction of errors among banks for three Business Days and thereafter at the Prime Rate. Nothing in this subsection 2.7 shall be deemed to prejudice the right of any Lender to recover from such Issuing Lender any amounts made available by such Lender to such Issuing Lender pursuant to this subsection 2.7E in the event that it is determined by a court of competent jurisdiction that the payment with respect to a Letter of Credit by such Issuing Lender in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of such Issuing Lender. Each Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under this subsection 2.7E with respect to any Letter of Credit issued by such Issuing Lender such other Lender's Pro Rata Share of all payments received by such Issuing Lender from Company in reimbursement of drawings honored by such Issuing Lender under such Letter of Credit, as the case may be, when such payments are received. Notwithstanding anything to the contrary herein, each Lender which has paid all amounts payable by it under this subsection 2.7E shall have a direct right to reimbursement of such amounts from Company, subject to the procedures for reimbursing Lenders set forth in this subsection 2.7. F. Compensation. Company agrees to pay, without duplication, the following amounts to each Issuing Lender with respect to each Letter of Credit issued by it: (i) with respect to each Letter of Credit, an administrative fee payable to the Issuing Lender equal to the greater of (a) for the period from and after the date of issuance thereof (or, with respect to Existing Letters of Credit, for the period from and after the Closing Date) 1/4 of 1% per annum of the maximum amount available from time to time to be drawn under such Letter of Credit, in each case calculated in arrears on and through the last day of each Fiscal Quarter and on the basis of a 360-day year and the actual number of days elapsed and (b) $500, and payable on the Business Day immediately succeeding such date of calculation in immediately available funds; (ii) with respect to each Letter of Credit, a letter of credit fee payable to the Administrative Agent equal to, for the period from and including the date of issuance thereof (or, with respect to Existing Letters of Credit, for the period from and after the Closing Date) including the Closing Date, (a) (x) the per annum Applicable Eurodollar Rate Margin (as defined and calculated in accordance with subsection 2.2A) minus (y) 5/8 of 1% per annum (not to be less than zero), multiplied by (b) the maximum amount available from time to time to be drawn under such Letter of Credit, calculated on the basis of a 360-day year and the actual number of days elapsed and payable quarterly in arrears on the first Business Day immediately succeeding the last day of each Fiscal Quarter and upon expiration of such Letter of Credit in immediately available funds; (iii) with respect to honored drawings made under any Letter of Credit, interest, payable in immediately available funds on demand, on the amount paid by such Issuing Lender in respect of each such drawing from the date of the drawing to but excluding the 69 date such amount is reimbursed by Company at a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement for Prime Rate Loans; and (iv) with respect to the issuance, amendment or transfer of each Letter of Credit and each payment made thereunder, documentary and processing charges in accordance with such Issuing Lender's standard schedule for such charges in effect at the time of such issuance, amendment, transfer or drawing, as the case may be. Promptly upon receipt by such Issuing Lender or Administrative Agent, as the case may be, of any amount described in subdivision (ii) or (iii) of this subsection 2.7F, such Issuing Lender or Administrative Agent, as the case may be, shall distribute to each Lender its Pro Rata Share of such amount. G. Obligations Absolute. The obligation of Company to reimburse each Issuing Lender for drawings made under the Letters of Credit issued by it and the obligations by Lenders under subsection 2.7E shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Company may have at any time against a beneficiary or any transferee of any Letter of Credit (or any persons or entities for whom any such transferee may be acting), such Issuing Lender, Administrative Agent, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Company or any of its Subsidiaries and the beneficiary for which the Letter of Credit was procured); (iii) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by such Issuing Lender under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit, provided that such payment does not constitute bad faith, gross negligence or willful misconduct of such Issuing Lender; (v) any other circumstance or happening whatsoever, which is similar to any of the foregoing; or (vi) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing. 70 H. Additional Payments. If by reason of (a) any change in applicable law, regulation, rule, decree or regulatory requirement or any change in the interpretation or application by any judicial or regulatory authority of any law, regulation, rule, decree or regulatory requirement in each case that becomes effective after the date hereof or (b) compliance by any Issuing Lender or any Lender with any direction, request or requirement issued after the date hereof (whether or not having the force of law) by any governmental or monetary authority including, without limitation, Regulation D: (i) any reserve, deposit or similar requirement is or shall be applicable, imposed or modified in respect of any Letters of Credit issued by such Issuing Lender or participations therein purchased by any Lender; or (ii) there shall be imposed on such Issuing Lender or any Lender any other condition regarding this subsection 2.7, any Letter of Credit or any participation therein; and the result of the foregoing is to directly or indirectly increase the cost to such Issuing Lender or any Lender of issuing, making or maintaining any Letter of Credit or of purchasing or maintaining any participation therein, or to reduce the amount receivable in respect thereof by such Issuing Lender or any Lender (other than an increase in cost or reduction in amount receivable as a consequence of any Tax, which shall be governed by the provisions of subsection 2.8), then and in any such case such Issuing Lender or such Lender may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Company, and Company shall pay on demand such amounts as such Issuing Lender or such Lender may specify to be necessary to compensate such Issuing Lender or such Lender for such additional cost or reduced receipt, together with interest on such amount from 10 days after the date of such demand until payment in full thereof at a rate equal at all times to the Prime Rate per annum. The determination by such Issuing Lender or any Lender, as the case may be, of any amount due pursuant to this subsection 2.7H as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto. I. Indemnification; Nature of Issuing Lender's Duties. In addition to amounts payable as elsewhere provided in this subsection 2.7, Company hereby agrees to protect, indemnify, pay and save each Issuing Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees and allocated costs of internal counsel) which such Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of the Letters of Credit, other than as a result of the bad faith, gross negligence or willful misconduct of such Issuing Lender as determined by a court of competent jurisdiction or (ii) the failure of such Issuing Lender to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "Government Acts"). As between Company and each Issuing Lender, Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by such Issuing Lender by, the 71 respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, such Issuing Lender shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of such Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of any such Letter of Credit to comply fully with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of such Issuing Lender, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of any of such Issuing Lender's rights or powers hereunder; provided however that such Issuing Lender shall be responsible for any payment such Issuing Lender makes under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit in the event such payment constitutes gross negligence or willful misconduct of such Issuing Lender as determined by a court of competent jurisdiction. In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by any Issuing Lender under or in connection with the Letters of Credit issued by it or the related certificates, if taken or omitted in good faith and without bad faith, gross negligence or willful misconduct, shall not put such Issuing Lender under any resulting liability to Company. Notwithstanding anything to the contrary contained in this subsection 2.7, Company shall have no obligation to indemnify any Issuing Lender in respect of any liability incurred by such Issuing Lender arising out of the gross negligence or willful misconduct of such Issuing Lender, as determined by a court of competent jurisdiction, or out of the wrongful dishonor by such Issuing Lender of proper demand for payment made under the Letters of Credit issued by it. J. Computation of Interest. Interest payable pursuant to this subsection 2.7 shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues. K. Amendments. Company may request that the Issuing Lender that issued a Letter of Credit enter into one or more amendments of such Letter of Credit by delivering to Administrative Agent and Issuing Lender a Notice of Issuance of Letter of Credit specifying (i) the Issuing Lender, (ii) the proposed date of the amendment and (iii) the requested amendment. Any Issuing Lender shall be entitled to enter into amendments with respect to 72 Letters of Credit; provided however that any such amendment extending the expiry date or increasing the stated amount of any Letter of Credit shall only be permitted if such Issuing Lender would be permitted to issue a new Letter of Credit having such an expiry date or stated amount under this subsection 2.7 on the date of the amendment. L. Existing Letters of Credit. Notwithstanding anything to the contrary herein, as of the Closing Date, all of the Existing Letters of Credit shall be deemed to be Letters of Credit issued hereunder and shall be subject to all of the terms and provisions of this Agreement, including all terms and provisions applicable to Letters of Credit under this Agreement. Each Lender agrees that its obligations with respect to Letters of Credit pursuant to subsection 2.7E shall include the Existing Letters of Credit as of the Closing Date. With respect to each Existing Letter of Credit, for the period commencing on the Closing Date to and including the expiration date of any such Existing Letter of Credit, Company shall pay all fees and commissions set forth in subsection 2.7F at the times and in the manner set forth therein. 2.8 Increased Costs; Taxes; Capital Adequacy. ---------------------------------------- A. Compensation for Increased Costs and Taxes. In the event that any Lender shall determine in good faith (which determination shall, absent manifest or demonstrable error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Covered Tax with respect to this Agreement or any of the Loans or any of its obligations hereunder, or changes the basis of taxation of payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder (but not changes in Excluded Taxes); (ii) imposes, modifies or holds applicable any additional reserve (including without limitation any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, Lender (or its applicable lending office) (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate, as the case may be); or (iii) imposes any other condition on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the interbank Eurodollar market, other than with respect to Taxes; 73 and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto, then, in any such case, Company shall promptly pay to such Lender, upon demand, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender on an after-tax basis for any such increased cost or reduction in amounts received or receivable hereunder; provided that any increased cost arising as a result of any of the foregoing other than in respect of Taxes shall apply only to Eurodollar Rate Loans. Such Lender shall deliver to Company a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this subsection 2.8A, which statement shall be conclusive and binding upon all parties hereto absent manifest or demonstrable error. B. Withholding of Taxes. (i) Payments to Be Free and Clear. All sums payable by Company under ----------------------------- this Agreement and the other Loan Documents to or for the benefit of any Lender or Administrative Agent or any Person who acquires any interest in the Loans pursuant to the provisions hereof shall be paid free and clear of and (except to the extent required by law) without any deduction or withholding on account of any Covered Tax imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of Company or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment. (ii) Withholding in respect of Payments. If Company or any other ---------------------------------- Person is required by law to make any deduction or withholding on account of any Tax from any sum paid or payable by a Loan Party to Administrative Agent or any Lender under any of the Loan Documents: (a) Company shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Company becomes aware of it; (b) Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on Company) for its own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender; (c) in the event such Tax is a Covered Tax, the sum payable by Company in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date and retains (free from any liability 74 in respect of any such deduction, withholding or payment) a net sum equal to what it would have received and so retained had no such deduction, withholding or payment in respect of Covered Taxes been required or made; and (d) within 30 days after paying any sum from which it is required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which it is required to pay by clause (b) above, Company shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided that no such additional amount shall be required to be paid to any Lender under clause (c) above except to the extent that any change after the date hereof in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date of this Agreement in respect of payments to such Lender. (iii) Tax Refund. If Company determines in good faith that a ---------- reasonable basis exists for contesting a Covered Tax, the relevant Lender or Tax Transferee or Administrative Agent, as applicable, shall cooperate with Company in challenging such Tax at Company's expense if requested by Company (it being understood and agreed that neither Administrative Agent nor any Lender shall have any obligation to contest, or any responsibility for contesting, any Tax). If any Lender, Tax Transferee or Administrative Agent, as applicable, receives a refund (whether by way of a direct payment or by offset) of any Covered Tax for which a payment has been made pursuant to this subsection 2.8 which, in the reasonable good faith judgment of such Lender, Tax Transferee or Administrative Agent, as the case may be, is allocable to such payment made under subsection 2.8, the amount of such refund (together with any interest received thereon) shall be paid to Company to the extent payment has been made in full pursuant to this subsection 2.8. (iv) U.S. Tax Certificates. Each Lender that is organized under the --------------------- laws of any jurisdiction other than the United States or any state or other political subdivision thereof shall deliver to Administrative Agent for transmission to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date (and as a condition to effectiveness) of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), such certificates, documents or other evidence, properly completed and duly executed by such Lender (including, without limitation, Internal Revenue Service Form 1001 or Form 4224 or any other certificate or statement of exemption required by Treasury Regulations Section 1.1441-4(a) or Section 1.1441-6(c) or any successor thereto) to establish whether or not such Lender is subject to deduction or withholding of United States federal income tax under Section 1441 or 1442 of the Internal Revenue Code or otherwise (or under any comparable provisions of any successor 75 statute) or is subject to deduction or withholding at a reduced rate under any applicable treaty or otherwise with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents. Company shall not be required to pay any additional amount to any such Lender under clause (c) of subsection 2.8B(ii) if such Lender shall have failed to satisfy the requirements of the immediately preceding sentence; provided that if such Lender shall have satisfied such requirements on the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment Agreement pursuant to which it became a Lender (in the case of each other Lender), nothing in this subsection 2.8B(iv) shall relieve Company of its obligation to pay any additional amounts pursuant to clause (c) of subsection 2.8B(ii) in the event that, as a result of any change in applicable law, such Lender is no longer properly entitled to deliver certificates, documents or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in the immediately preceding sentence. C. Capital Adequacy Adjustment. If any Lender shall have determined in good faith that the adoption, effectiveness, phase-in or applicability of any law, rule or regulation (or any provision thereof) regarding capital adequacy after the date hereof, or any change therein or in the interpretation or administration thereof after the date hereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive issued after the date hereof, regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or will have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans or Commitments or other obligations hereunder to a level below that which such Lender or such controlling corporation would have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after demand by such Lender (with a copy of such demand to Administrative Agent), Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction as and when incurred. Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this subsection 2.8C, will give prompt written notice thereof to Company, which notice shall set forth the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish any of Company's obligations to pay additional amounts under this subsection 2.8C. 2.9 Lenders' Obligation to Mitigate ------------------------------- Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering the Loans under this Agreement becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under subsection 2.6, 2.7H or 2.8, it will, to the extent not inconsistent with such Lender's internal policies, use reasonable efforts 76 (i) to make, fund or maintain the Commitments of such Lender or the Affected Loans of such Lender through another lending office of such Lender, or (ii) take such other reasonable measures, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to subsection 2.6, 2.7H or 2.8 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, funding or maintaining of such Commitments or Loans through such other lending office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Commitments or Loans or the interests of such Lender; provided that such Lender will not be obligated to utilize such other lending office pursuant to this subsection 2.9 unless Company agrees to pay all expenses incurred by such Lender in utilizing such other lending office. A certificate as to the amount of any such expenses payable by Company pursuant to this subsection 2.9 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Company shall be conclusive absent manifest or demonstrable error. 2.10 Replacement of a Lender ----------------------- In the event of a refusal by a Lender to consent to a proposed change, waiver, discharge or termination with respect to this Agreement which has been approved by the Requisite Lenders, Company shall have the right for a 60 day period following such refusal, to replace such Lender (a "Replaced Lender") with one or more Eligible Assignees (collectively, the "Replacement Lender") acceptable to Administrative Agent, provided that (i) at the time of any replacement pursuant to this subsection 2.10 the Replacement Lender and Replaced Lender shall enter into one or more Assignment Agreements pursuant to subsection 9.2B (and with all fees payable pursuant to such subsection 9.2B to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the outstanding Loans and Commitments of, and in each case participations in Letters of Credit and Swing Line Loans by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, (B) an amount equal to all unpaid drawings with respect to Letters of Credit that have been funded by (and not reimbursed to) such Replaced Lender, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, fees owing to the Replaced Lender with respect thereto, (y) the appropriate Issuing Lender an amount equal to such Replaced Lender's Pro Rata Share of any unpaid drawings with respect to Letters of Credit (which at such time remains an unpaid drawing) issued by it to the extent such amount was not theretofore funded by such Replaced Lender, and (z) Swing Line Lender an amount equal to such Replaced Lender's Pro Rata Share of any Refunded Swing Line Loans to the extent such amount was not theretofore funded by such Replaced Lender, and (ii) all obligations (including without limitation all such amounts, if any, owing under subsection 2.6D) of Company owing to the Replaced Lender (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid), shall be paid in full to such Replaced Lender concurrently with such replacement. Upon the execution of the respective Assignment Agreements, recordation of such assignment in the Register by Administrative Agent pursuant to subsection 2.1D, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the 77 Replacement Lender, delivery to the Replacement Lender of the appropriate Note or Notes executed by Company, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder except with respect to indemnification provisions under this Agreement which by the terms of this Agreement survive the termination of this Agreement, which indemnification provisions shall survive as to such Replaced Lender. Notwithstanding anything to the contrary contained above, no Issuing Lender may be replaced hereunder at any time while it has Letters of Credit outstanding hereunder unless arrangements satisfactory to such Issuing Lender (including the furnishing of a Standby Letter of Credit in form and substance, and issued by an issuer satisfactory to such Issuing Lender or the furnishing of cash collateral in amounts and pursuant to arrangements satisfactory to such Issuing Lender) have been made with respect to such outstanding Letters of Credit. SECTION 3. CONDITIONS TO EFFECTIVENESS OF AGREEMENT AND TO LOANS AND LETTERS OF CREDIT The obligations of each Lender to make Loans and issue Letters of Credit hereunder is subject to the satisfaction of all of the following conditions: 3.1 Conditions to Effectiveness --------------------------- The effectiveness of this Agreement is subject to prior or concurrent satisfaction of the following conditions: A. Company Documents. On or before the Closing Date, Company shall execute and deliver to Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel), each, unless otherwise noted, dated the Closing Date: (i) certified copies of its Certificate of Incorporation, together with a good standing certificate from the Secretary of State of the State of Delaware and from the applicable Secretary of State of every jurisdiction in which it is qualified to conduct its business, each to be dated a recent date prior to the Closing Date; (ii) copies of its Bylaws, certified as of the Closing Date by its corporate secretary or an assistant secretary; (iii) Resolutions of its Board of Directors approving and authorizing (i) the consummation of the Identified Acquisition in accordance with the terms of the Identified Acquisition Agreement and (ii) the execution, delivery and performance of this Agreement and each Collateral Document to which it is a party and all other agreements, documents, instruments and certificates required to be executed by Company in connection with the 78 foregoing, each certified as of the Closing Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; (iv) signature and incumbency certificates of the officers of Company executing this Agreement and any Collateral Documents to which it is a party; (v) executed copies of this Agreement and any Collateral Documents to which it is a party; and (vi) such other documents as Administrative Agent may reasonably request. B. Company Subsidiary Documents. On or before the Closing Date, each Loan Party (other than Company), shall execute and deliver to Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel), each, unless otherwise noted, dated the Closing Date: (i) certified copies of its Certificate or Articles of Incorporation or other organizational document, together with good standing certificates from the applicable Secretary of State of its jurisdiction of organization and of every jurisdiction in which it is qualified to conduct its business, each to be dated a recent date prior to the Closing Date; (ii) copies of its Bylaws, certified as of the Closing Date by its corporate secretary or an assistant secretary; (iii) Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of the Guaranty and each Collateral Document to which it is a party and any other agreements or documents executed in connection herewith to which it is a party, each certified as of the Closing Date by its corporate secretary or an assistant secretary; (iv) signature and incumbency certificates of its officers executing the Guaranty and any Collateral Document to which it is a party and other agreements or documents executed in connection herewith; (v) executed copies of the Guaranty and any Collateral Documents to which it is a party; and (vi) such other documents as Administrative Agent may reasonably request. C. Payment of Fees and Expenses. On the Closing Date, Company shall have paid to Administrative Agent, for distribution (as appropriate) to Lenders, Departing Lenders and Administrative Agent (i) the fees payable on the Closing Date referred to in subsection 2.3, (ii) all "breakage" amounts due under subsection 2.6D of the Existing Credit Agreement as a result of the payments to be made to the Departing Lenders pursuant to subsection 2.1G (or 79 arrangements satisfactory to Administrative Agent shall have been made for the payment of such fees) and (iii) all accrued and unpaid interest, letter of credit fees and other fees and expenses under the Existing Credit Agreement. D. Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel shall be reasonably satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request. E. Opinions of Counsel for Loan Parties. Lenders and their respective counsel shall have received originally executed copies of one or more favorable written opinions of Latham & Watkins, counsel for the Loan Parties, in form and substance reasonably satisfactory to Administrative Agent and its counsel dated as of the Closing Date and setting forth substantially the matters in the opinions designated as Exhibit XIX annexed hereto, and covering such other matters and including such changes as shall be reasonably requested by Administrative Agent for the benefit of Lenders and their counsel. F. Opinion of Administrative Agent's Counsel. Lenders shall have received an originally executed copy of one or more favorable written opinions of O'Melveny & Myers LLP, counsel to Administrative Agent, dated as of the Closing Date, substantially in the form of Exhibit XXI annexed hereto and as to such other matters as Administrative Agent on behalf of Lenders may reasonably request. G. Representations and Warranties of Loan Parties. Concurrently with the making of the Loans, each of the Loan Parties (other than Company) shall have delivered to Administrative Agent an Officers' Certificate from such Loan Party in form and substance satisfactory to Administrative Agent to the effect that the representations and warranties in Section 4 hereof pertaining to such Loan Party are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date and that no Event of Default or Potential Event of Default has occurred and is continuing. H. Performance of Agreements. Each of the Loan Parties shall have performed in all material respects all agreements which this Agreement and the other Loan Documents provide shall be performed by such Person on or before the Closing Date except as otherwise disclosed to and agreed to in writing by Requisite Lenders. I. Existing Debt, Consents and Other Matters. Company shall have obtained all such consents, waivers, amendments, approvals and other third party instruments similar to the foregoing as may be required under the existing contracts and agreements of Company and its Subsidiaries (after giving effect to the Identified Acquisition), including, without limitation, under the Senior Subordinated Note Indenture, the Existing Indebtedness, the GECC Leveraged Lease and any other Indebtedness or Contractual Obligations, to permit the borrowings under this 80 Agreement, the consummation of the transactions contemplated by the Loan Documents and the Identified Acquisition and other related transactions, which shall be in form and substance satisfactory to Administrative Agent and Requisite Lenders, and no event of default or event that with the giving of notice or the passage of time could result in an event of default shall have occurred and be continuing under any of the Senior Subordinated Note Indenture, the Existing Indebtedness, the GECC Leveraged Lease or any other Indebtedness or Contractual Obligations, and Administrative Agent shall have received an Officers' Certificate from Company to such effect, except to the extent that on or concurrently with the Closing Date any such Indebtedness owed to such existing lenders shall have been paid in full, and any commitments to lend thereunder shall have been terminated. J. Copies of Certain Amendments. Company shall have delivered or caused to be delivered a certificate of its chief financial officer certifying either: that since March 6 1995 there have been no amendments to the Senior Subordinated Note Indenture, the GECC Leveraged Lease or any Existing Indebtedness or that, to the extent there have been such amendments, that a true and accurate schedule identifying each such amendment is attached to such certificate. K. Security Interests. Each Loan Party shall have taken or caused to be taken all such actions as may be necessary (in Administrative Agent's reasonable judgment) to give Collateral Agent a valid and perfected first priority security interest in the Collateral, subject only to Permitted Encumbrances and Liens permitted under subsection 6.2. Such actions shall include, without limitation: (i) the delivery to Collateral Agent for filing pursuant to the Security Agreement of properly executed financing statements under the Uniform Commercial Code (or any equivalent or similar legislation) in form and substance satisfactory to Collateral Agent in each jurisdiction as may be necessary (in Collateral Agent's reasonable judgment) to perfect effectively the security interests in the Collateral created by the Security Agreement; (ii) the delivery pursuant to the Security Agreement of (a) Intercom- pany Notes (if any) and (b) the stock or similar certificates (which certificates shall be registered in the name of Collateral Agent or properly endorsed in blank for transfer or accompanied by irrevocable undated stock powers duly endorsed in blank, all in form and substance satisfactory to Collateral Agent) representing the capital stock or other equity to be pledged on the Closing Date pursuant to the Security Agreement; (iii) the delivery to Collateral Agent in a form suitable for filing with the United States Trademark and Patent Office, the Trademark Agreement and the Patent Agreement. (iv) Collateral Agent and Company shall have agreed upon the form of a letter agreement ("Deposit Letter") or amendment thereto to be sent to the financial institutions maintaining Deposit Accounts of Company or any of its Subsidiaries (in accordance with the provisions of subsection 5.13), which Deposit Letter shall provide, 81 among other things, that the applicable financial institutions (i) transfer all amounts in such accounts to the account specified therein at the request of Collateral Agent (provided that Collateral Agent shall not make such a request unless an Event of Default shall have occurred and be continuing) and (ii) acknowledge that Collateral Agent's security interest in such accounts is prior to any bankers' lien, right of set-off or other right or interest of such financial institution in such account; (v) the delivery to Collateral Agent of one or more favorable written opinions of counsel to the Loan Parties in the states of Tennessee, Florida, Kentucky and Wisconsin, in each case addressed to the Collateral Agent for the benefit of the Secured Parties and in form and substance satisfactory to Collateral Agent and its counsel dated as of the Closing Date; and (vi) evidence reasonably satisfactory to Collateral Agent that all other filings, recordings and other actions Collateral Agent deems necessary or advisable to establish, preserve and perfect the Liens granted to Collateral Agent in the Collateral shall have been made. L. Departing Lender Consent. Administrative Agent shall have received, with a copy for each Lender, a copy of the consent made by each Departing Lender, substantially in the form of Exhibit XXII annexed hereto. M. Management Stock Agreements. Company shall have delivered to Administrative Agent copies of the Management Stock Agreements certified in an Officer's Certificate as being true, correct and complete as of the Closing Date. N. Identified Acquisition Documents. On the Closing Date (i) Lenders shall have received executed or conformed copies of the Identified Acquisition Agreement and any exhibits, schedules and amendments thereto and Administrative Agent, on behalf of Lenders, shall have received all other agreements, documents and legal opinions to be delivered in connection therewith, each of the foregoing being certified by an officer of Company as being true, complete and correct as of the Closing Date, which Identified Acquisition Agreement and other agreements, documents and legal opinions shall, to the extent not delivered to Administrative Agent on or prior to April 30, 1996, be in form and substance satisfactory to Administrative Agent and which amendments to the Identified Acquisition Agreement shall be in form and substance satisfactory to Requisite Lenders, (ii) Lenders shall have received an Officers' Certificate from Company stating that (a) the Identified Acquisition Agreement shall be in full force and effect and no material term or condition thereof shall have been amended, modified or waived after the execution thereof except with the prior written consent of Administrative Agent and Requisite Lenders, (b) all agreements and conditions contained in the Identified Acquisition Agreement and any agreements or documents referred to therein required to be performed or complied with by any Loan Party party thereto on or before the date the Identified Acquisition is consummated shall have been so performed or satisfied, (c) Company shall not be in default in the performance of or compliance with any of the terms or provisions thereof and (d) to the best of Company's knowledge, each seller thereunder has performed, satisfied or 82 complied with all agreements and conditions contained in the Identified Acquisition Agreement and any agreements or documents referred to therein required to be performed or complied with by such seller on or before the date on which the Identified Acquisition is consummated, no such seller is in default in the performance of or compliance with any of the term or provisions of the Identified Acquisition Agreement and each such seller will consummate the Identified Acquisition as provided in the Identified Acquisition Agreement. O. Identified Acquisition. Company shall have submitted a Notice of Borrowing to make not less than $148,220,000 of Tranche A Acquisition Term Loans and not less than $200,000,000 of Tranche C Acquisition Term Loans in connection with the consummation of the Identified Acquisition and all conditions to the funding of such Loans on the Closing Date shall have been satisfied, including, but not limited to all requirements required under subsection 5.8 with respect to all Identified Target Subsidiaries. P. Other Documents. Each Loan Party shall have delivered to Administrative Agent such other documents as Administrative Agent may reasonably request. 3.2 Conditions to All Letters of Credit ----------------------------------- The obligation of Bankers to issue any Letter of Credit hereunder and the issuance of any Letter of Credit by any other Lender hereunder are in addition to the conditions precedent specified in subsection 3.4, subject to prior or concurrent satisfaction of all of the following conditions: A. On or before the date of issuance of a Letter of Credit pursuant to this Agreement, each of the conditions set forth in subsections 3.1 shall have been satisfied as of the Closing Date. B. On or before the date of issuance of any Letter of Credit hereunder, Administrative Agent shall have received, in accordance with the provisions of subsection 2.7B, a Notice of Issuance of Letter of Credit relating to the proposed Letter of Credit, all other information specified in subsection 2.7B, and such other documents as the Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. 3.3 Conditions to All Acquisition Term Loans ---------------------------------------- The obligations of Lenders to make each Acquisition Term Loan hereunder on any Funding Date other than the Closing Date are in addition to the conditions precedent specified in subsection 3.4, subject to prior or concurrent satisfaction of all of the following conditions: A. Administrative Agent shall have received (i) an originally executed Compliance Certificate signed by the chief financial officer of Company demonstrating in reasonable detail the calculation of the Leverage Ratio and Company's compliance with the restrictions contained in subsections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8 and 6.9 and subsection 3.3B(i), in each case on a pro forma basis after giving effect to the related Acquisition and (ii) the information and 83 Officer's Certificate required to be delivered by Company in connection with such Acquisition pursuant to subsection 5.1(xviii), including, but not limited to, the applicable Acquisition Compliance Certificate and Cost Adjustment Certificate (if any). B. As of that Funding Date: (i) the Leverage Ratio for the four most recently completed Fiscal Quarters shall be equal to or less than 4.50:1.00 (it being understood and agreed that Company shall not be required to comply with the Leverage Ratio requirement of this clause (i) as a condition to the making of Acquisition Term Loans hereunder in connection with the Identified Acquisition); (ii) the representations and warranties contained herein shall be true and correct in all material respects on and as of that Funding Date after giving effect to consummation of the related Acquisition to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; and (iii) no event shall have occurred and be continuing or would result from the consummation of the related Acquisition which would constitute an Event of Default or Potential Event of Default. 3.4 Conditions to All Loans and Letters of Credit --------------------------------------------- The obligations of Lenders to make each Loan and the obligation of an Issuing Lender to issue a Letter of Credit on each Funding Date are subject to the following further conditions precedent: A. Administrative Agent shall have received, in accordance with the provisions of subsection 2.1B or 2.7B, as the case may be, an originally executed Notice of Borrowing or Notice of Issuance of Letter of Credit, as the case may be, in each case signed by the chief executive officer, the chief financial officer or the treasurer of Company or any executive officer of Company designated by any of the above-described officers on behalf of Company in writing delivered to Administrative Agent. B. As of that Funding Date: (i) the representations and warranties contained herein shall be true and correct in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; 84 (ii) no event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing or the issuance of such Letter of Credit which would constitute an Event of Default or a Potential Event of Default; (iii) each of the Loan Parties shall have performed in all material respects all agreements and satisfied all conditions which this Agreement and the other Loan Documents provide shall be performed by it on or before such Funding Date; (iv) no order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain any Lender from making that Loan or Issuing Lender from issuing that Letter of Credit; and (v) there shall not be pending or, to the knowledge of Company threatened, any action, suit, proceeding or arbitration or, to the knowledge of Company, any governmental investigation pending or threatened, against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries, which has not been disclosed by Company pursuant to subsection 4.6 or 5.1(viii) prior to the making of the last preceding Loans (or, in the case of the initial Loans made hereunder, prior to the execution of this Agreement) or the issuing of the most recent Letter of Credit (or, in the case of the initial Letter of Credit, prior to the execution of this Agreement) and there shall have occurred no development not so disclosed in any such action, suit, proceeding, governmental investigation or arbitration so disclosed, which, in either event, in the opinion of Requisite Lenders, could reasonably be expected to have a Material Adverse Effect. No injunction or other restraining order shall have been issued and no hearing to cause an injunction or other restraining order to be issued shall be pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, this Agreement or the making of the Loans or the issuing of a Letter of Credit hereunder (or, with respect to any Acquisition Term Loan, the consummation of the related Acquisition). SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Agreement and to maintain and make the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce Lenders to purchase participations in Letters of Credit, Company represents and warrants to each Lender that the following statements are true: 4.1 Organization, Powers, Good Standing and Subsidiaries ---------------------------------------------------- A. Organization and Powers. Each Loan Party is a corporation or other Person duly organized, validly existing and in good standing under the laws of its jurisdiction of organization 85 (which jurisdiction is set forth on Schedule 4.1 annexed hereto, as Schedule 4.1 may be modified by Company to reflect the creation or acquisition of any New Subsidiary formed or acquired in accordance with subsection 5.8 or the deletion of any Subsidiary no longer existing; all references herein to Schedule 4.1 shall be deemed to be references to Schedule 4.1 as it may be so modified, amended or supplemented from time to time), has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, to enter into each Loan Document to which it is, respectively, a party, to carry out the transactions contemplated hereby and thereby and, in the case of Company, to issue the Notes and, in the case of each Loan Party issuing an Intercompany Note, to issue the Intercompany Notes issued by such Loan Party. B. Good Standing. Each Loan Party is in good standing wherever necessary to carry on its present business and operations, except in jurisdictions in which the failure to be in good standing has and will have no Material Adverse Effect. The jurisdictions in which each Loan Party owns property or otherwise conducts business as of the Closing Date are set forth on Schedule 4.1 annexed hereto. C. Subsidiaries. Company has no Subsidiaries other than as identified in Schedule 4.1 annexed hereto. The capital stock of Company and each of its Subsidiaries is duly authorized, validly issued and fully paid and nonassessable. The capital stock or other equity interests of each Person (other than Company) identified on Schedule 4.1 is not Margin Stock. Company and each of its Subsidiaries is validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has full power and authority to own its assets and properties and to operate its business as presently owned and operated except where failure to be in good standing or lack of power has not had and will not have a Material Adverse Effect. Schedule 4.1 hereto correctly sets forth the ownership interest of each Subsidiary of Company. D. Inactive Subsidiaries. Except as set forth on Schedule 4.1 annexed hereto, no Inactive Subsidiary has any property or other assets of any kind (except for its corporate name) and no Inactive Subsidiary is conducting any business. E. Acquisitions. Company and each Subsidiary making any Acquisition shall have the corporate, partnership or other power to consummate such Acquisition upon the consummation thereof, on the terms set forth in any applicable purchase agreement, agreement of merger or other operative agreement. Upon the consummation of any Acquisition, such Acquisition shall have been duly authorized by all necessary action of Company and any of its Subsidiaries participating therein. 4.2 Authorization of Borrowing, etc. -------------------------------- A. Authorization of Borrowing. The execution, delivery and performance of the Loan Documents to which it is a party and the issuance, delivery and payment of the Notes and the Intercompany Notes have been duly authorized by all necessary corporate, partnership or other action by each Loan Party, as the case may be. 86 B. No Conflict. Except as disclosed on Schedule 4.2B annexed hereto, the execution, delivery and performance by each Loan Party of each Loan Document to which it is a party and the consummation of the transactions contemplated hereby and thereby, the consummation of any Acquisition (including the Identified Acquisition) and the issuance, delivery and payment of the Notes and the Intercompany Notes or any Subordinated Indebtedness do not and will not (i) violate any provision of law applicable to Company or any of its Subsidiaries, the Certificate of Incorporation or Bylaws or partnership agreement or other organizational document of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than Liens permitted under subsection 6.2(ii) and 6.2(v)), or (iv) require any approval of stockholders or other holders of equity interests or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries other than approvals or consents which will be or have been obtained on or before the Closing Date (or, in the case of an Acquisition or any Subordinated Indebtedness, on or before the date such Acquisition is consummated or such Subordinated Indebtedness is issued, as the case may be, except that all such approvals or consents with respect to the Identified Acquisition shall have been obtained on or before the Closing Date) and disclosed in writing to Lenders. As of the Closing Date, neither Company nor any of its Subsidiaries is obligated or liable under any Contingent Obligation prohibited under subsection 6.4. C. Governmental Consents. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party and application of the proceeds of the Loans, the issuance, delivery and payment of the Notes, the issuance, delivery and payment of the Senior Subordinated Notes pursuant to the Senior Subordinated Note Indenture and the consummation of any Acquisition (including the Identified Acquisition) do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body except for the filings to perfect the security interests granted pursuant to Loan Documents and except with respect to any Acquisition (including the Identified Acquisition), such consents, filings, approvals and authorizations as shall have been made or obtained prior to the consummation of such Acquisition or for which arrangements shall have been made for the subsequent issuance thereof within four weeks of the closing of such Acquisition (or, if an additional period is necessary such additional period as is satisfactory to the Administrative Agent; provided that with respect to the Identified Acquisition, all such consents, filings, approvals and authorizations shall have been made or obtained prior to the Closing Date). As of the Closing Date, all consents or approvals from or notices to or filings with any federal, state, or other (domestic or foreign) regulatory authorities required to be obtained on or before such date in connection with the documents or transactions described or referred to in the preceding sentence will have been accomplished in all material respects in compliance in all material respects with all applicable laws and regulations. None of the issuance of the Senior Subordinated Notes (or any other Subordinated Indebtedness) or the consummation of the transactions contemplated thereby violates any applicable law or regulation in any material respect. 87 D. Binding Obligation. This Agreement is, and the other Loan Documents when executed and delivered hereunder will be, the legally valid and binding obligations of the applicable Loan Parties, enforceable against the applicable Loan Parties in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. E. Valid Issuance of Subordinated Indebtedness. Company and each other applicable Loan Party (if any) has the corporate power and authority to issue its Subordinated Indebtedness. Such Subordinated Indebtedness is the legally valid and binding obligation of such Loan Party enforceable in accordance with its terms (including, without limitation, those terms pertaining to subordination) except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. The subordination provisions of such Subordinated Indebtedness are enforceable against the holders thereof except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. Such Subordinated Indebtedness has either (i) been registered or qualified under applicable federal or state securities laws, or (ii) is exempt therefrom. F. Obligations Constitute Senior Indebtedness. With respect to Subordinated Indebtedness that is authorized and issued by Company or any other Loan Party, all outstanding monetary Obligations including, without limitation, all of such Loan Party's monetary obligations with respect to the repayment of Loans, its obligations under the Guaranty and its pledge of Collateral under the Security Agreement and the other Collateral Documents as security for the repayment of all monetary Obligations, will not violate, or constitute (with due notice or lapse of time or both) a default under, any indenture or note pursuant to which such Subordinated Indebtedness has been issued, and all indebtedness with respect to such Loans and all other monetary obligations hereunder will be within the definition of "Senior Indebtedness" or equivalent definition contained in such indentures or notes. G. Deposit Accounts. Each Deposit Account of Company and its Subsidiaries as of the Closing Date is listed on Schedule 4.2G annexed hereto. 4.3 Financial Condition ------------------- Company has heretofore delivered to Lenders the following financial statements: the audited combined balance sheets of Company and its Subsidiaries as at the end of the 1995 Fiscal Year and the related combined statements of income, stockholders' equity and changes in cash flow of Company and its Subsidiaries for such fiscal year. All financial statements set forth or referred to in the materials specified in the first sentence of this subsection 4.3A were prepared in accordance with GAAP and fairly present the financial position of Company and of its Subsidiaries, as the case may be, as at the date thereof and the results of operations and changes in cash flow of Company and its Subsidiaries for the period then ended. Neither Company nor any of its Subsidiaries has any material Contingent Obligation, contingent liability or liability for 88 taxes, long-term lease or unusual forward or long-term commitment, which is not reflected in the foregoing statements, in the notes thereto or the most recent financial statements delivered pursuant to subsection 5.1 (if any). 4.4 No Material Adverse Change; No Stock Payments --------------------------------------------- Since the last day of its 1995 Fiscal Year, there has been no change in the business, operations, properties, assets or condition or prospects (financial or otherwise) of Company and its Subsidiaries, taken as a whole, or other event that has caused or evidences, in any case or in the aggregate, a Material Adverse Effect. Since the last day of its 1995 Fiscal Year, neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made or set apart any sum or property for any Restricted Junior Payment or agreed to do so except as permitted by subsection 6.5. Except as permitted pursuant to subsection 6.5 hereof or, with respect to time periods prior to the Closing Date, subsection 6.5 of the Existing Credit Agreement, no Restricted Junior Payments have been made since the last day of its 1995 Fiscal Year. 4.5 Title to Properties; Liens -------------------------- Each Loan Party and each Subsidiary thereof has good, sufficient and legal title to the Collateral and all the properties and assets reflected in the most recent consolidated balance sheets referred to in subsection 4.3 or in the most recent financial statements delivered pursuant to subsection 5.1 of this Agreement, except for assets acquired or disposed of in the ordinary course of business since the date of such consolidated balance sheet or assets disposed of in accordance with subsection 6.7. Except as permitted hereunder, all such properties and assets are free and clear of Liens. 4.6 Litigation; Adverse Facts ------------------------- There is no action, suit, proceeding or arbitration (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any arbitrator or panel of arbitrators, or, to the knowledge of Company, pending or threatened against or affecting any Loan Party or any of their respective Subsidiaries or any property of any Loan Party or any of their respective Subsidiaries which could reasonably be expected to result in any Material Adverse Effect, and there is no basis known to Company for any such action, suit or proceeding. Neither Company nor any of its Subsidiaries is (i) in violation of any applicable law which has caused or may cause a Material Adverse Effect or (ii) subject to or in default with respect to any final judgment, writ, injunction, decree, rule or regulation of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could reasonably be expected to have a Material Adverse Effect. To the knowledge of Company, there is no action, suit, proceeding or investigation pending or threatened against or affecting Company or any of its Subsidiaries which would be expected to affect the validity or the enforceability of this Agreement, the Notes or the other Loan Documents or any purchase 89 agreements, agreement of merger or other operative agreement entered into in connection with an Acquisition. 4.7 Payment of Taxes ---------------- Except to the extent permitted by subsection 5.3, all material tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed (except with respect to a Target acquired on or after the date hereof pursuant to an Acquisition provided that such Target is in compliance with subsection 5.3 as of the date of such Acquisition), and all material taxes, assessments and other governmental fees and charges upon Company and its Subsidiaries and upon their respective properties, assets, income and franchises which are due and payable have been paid when due and payable or an adequate reserve therefor has been made in accordance with GAAP. Company does not have written notice, and no executive officer of Company has actual knowledge, of any proposed tax assessment against any Loan Party or any of their respective Subsidiaries that would have a Material Adverse Effect. Neither Company nor any of its Subsidiaries has executed or filed with the Internal Revenue Service or any other governmental authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any taxes, assessments, fees or other governmental charges. Except as set forth on Schedule 4.7 annexed hereto, as such Schedule 4.7 may be modified by Company to include any tax sharing agreements or agreements regarding payments in lieu of taxes relating, in either case, to a Target acquired in an Acquisition permitted under subsection 6.7(v) hereof, neither Company nor any of its Subsidiaries has any obligation under any written tax sharing agreement or agreement regarding payments in lieu of taxes. 4.8 Performance ----------- A. Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of Company or any of its Subsidiaries, and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect. B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to any agreement or instrument or any charter or other internal restriction which has had, or is reasonably expected to result in, individually or in the aggregate, a Material Adverse Effect. 4.9 Governmental Regulation ----------------------- Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or under any federal or state statute or regulation limiting its ability to incur Indebtedness for money borrowed. 90 4.10 Securities Activities --------------------- Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. 4.11 Employee Benefit Plans ---------------------- Except as set forth on Schedule 4.11 annexed hereto: A. Each Loan Party and each of its ERISA Affiliates is in compliance in all material respects with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans. B. There has been no ERISA Event in respect of which there is any outstanding liability of a Loan Party or any of its ERISA Affiliates, except to the extent that any such event could not reasonably be expected to result in liability in excess of $5,000,000. C. Except to the extent required under Section 4980B of the Internal Revenue Code, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of a Loan Party, except to the extent that the annual cost of providing such health and welfare benefits does not exceed $5,000,000. D. As of the most recent valuation date for any Pension Plan, the excess of (i) the actuarial present value (determined on the basis of reasonable assumptions employed by the independent actuary for such Pension Plan) of the benefit liabilities (as defined in Section 4001(a)(16) of ERISA) over (ii) the fair market value of the assets of such Pension Plan, individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which there is no such excess), does not exceed the greater of (x) 20% of the value set forth in clause (i) above and (y) $5,000,000. 4.12 Disclosure ---------- No representation or warranty of any Loan Party contained in this Agreement, or any other document, certificate or written statement furnished to Lenders by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement (including any Acquisition) contains any untrue statement of a material fact or omits to state a material fact (known to executive officers of Company or any of its Subsidiaries in the case of any document not prepared by it) necessary in order to make the statements contained herein or therein not misleading. The historical financial information relating to Company and its Subsidiaries contained in the financial materials distributed to Administrative Agent and Lenders fairly presents the consolidated financial position and the results of operations of Company and its Subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flow of Company and its Subsidiaries for each of the periods covered thereby subject, in the case of unaudited financial statements, to changes resulting from normal year end adjustments and 91 based on their normal accounting procedures applied on a consistent basis. The projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by such projections may differ from projected results. There is no fact known to any Loan Party or any of their respective Subsidiaries (other than matters of a general economic nature) which could have a Material Adverse Effect which has not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. 4.13 Environmental Protection ------------------------ Except to the extent that such matter, operation, event, occurrence, condition, activity or non-compliance could not reasonably be expected, together with any other matter, operation, event, occurrence, condition, activity or noncompliance, to have a Material Adverse Effect: (i) The past and current operations of each Loan Party and its Subsidiaries (and, the Target of any Acquisition) (including, without limitation, all operations and conditions at or in the Facilities currently owned and/or operated by any Loan Party or any of its Subsidiaries) and, to the best knowledge of the Loan Parties, the past operations of any predecessor in interest, have been and continue to be conducted in compliance in all material respects with all Environmental Laws, except for such items of non-compliance which have been cured and for which there is no material future liability. (ii) Each Loan Party and each of its Subsidiaries (and the Target of any Acquisition) have obtained all material permits under Environmental Laws necessary to their respective operations, and all such permits are in good standing, and each Loan Party and each of its Subsidiaries are in compliance with all material terms and conditions of such permits. (iii) No Loan Party and none of its Subsidiaries (nor the Target of any Acquisition) has received (A) any written notice or claim alleging that it is or may be liable to any Person as a result of the Release or threatened Release of any Hazardous Materials or (B) any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Sec. 9604) or comparable state laws, and to the best knowledge of the Loan Parties, none of the operations of any Loan Party or any of their respective Subsidiaries (or the Target of any Acquisition) is the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a Release or threatened Release of any Hazardous Material at any Facility or at any other location. (iv) None of the operations of any Loan Party or any of its Subsidiaries (or, to the best knowledge of Company at the time of any Acquisition, the Target of any Acquisition) is subject to any judicial or administrative proceeding alleging the violation 92 of or liability under any Environmental Laws which if adversely determined could reasonably be expected to have a Material Adverse Effect. (v) Each Loan Party and each of its Subsidiaries (and the Target of any Acquisition) and all of their Facilities or operations are not subject to any outstanding written order or written agreement with any governmental authority or private party respecting (A) any Environmental Laws or (B) any Environmental Claims. (vi) No Loan Party and none of its Subsidiaries (nor the Target of any Acquisition) has any contractual undertaking which would create a liability in connection with any Release of any Hazardous Materials by Company or any of its Subsidiaries. (vii) No Loan Party and none of its Subsidiaries or, to the knowledge of the Loan Parties, any predecessor of any Loan Party or any of its Subsidiaries (including the Target of any Acquisition), has filed any notice under any Environmental Law indicating past or present treatment or disposal of Hazardous Materials at any Facility, and none of any Loan Party's or any of its Subsidiary's operations (or the operations of the Target of any Acquisition) involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent in either case (A) in violation of any Environmental Laws, in any material respect or (B) other than in the ordinary course of such Loan Party's or such Subsidiary's (or such Target's) business. (viii) To the best knowledge of the Loan Parties, no Hazardous Material exists on, under or about any Facility in a manner that could reasonably be expected to give rise to an Environmental Claim having a Material Adverse Effect, and no Loan Party and none of its Subsidiaries has filed any notice or report required by any governmental authority of a Release of any Hazardous Materials that could reasonably be expected to give rise to an Environmental Claim which could reasonably be expected to have a Material Adverse Effect. (ix) No Loan Party and none of its Subsidiaries (or, to the knowledge of any of the Loan Parties, any of their predecessors or the Target of any Acquisition) has disposed of any Hazardous Materials in a manner that may give rise to an Environmental Claim which could reasonably be expected to have a Material Adverse Effect. (x) No underground storage tanks or surface impoundments are on or at the Facilities currently owned and/or operated by any Loan Party or any of its Subsidiaries or, to the best of the knowledge of the Loan Parties, were on or at any Facilities previously owned and/or operated by any of them during or prior to the period of such ownership or operation, except in compliance with Environmental Laws in all material respects. 93 (xi) No Lien in favor of any Person for (A) any liability under Environmental Laws, or (B) damages arising from or costs incurred by such Person in response to a Release has been filed or has been attached to the Facilities. (xii) To the best knowledge of the Loan Parties (i) there are no wastes, drums or containers discharged, disposed of, accumulated or buried on, in or under the ground or ground waters or any surface waters located on any premises owned or operated by any Loan Party or any of its Subsidiaries in violation of any Environmental Laws; and (ii) no Loan Party and none of its Subsidiaries and no third parties have discharged, disposed of, accumulated or buried any wastes, drums or containers on, in or under the ground or any ground waters or surface waters located on such premises in violation of any Environmental Laws. (xiii) There are no polychlorinated biphenyls, and, to the best knowledge of the Loan Parties, asbestos or urea formaldehyde in or on premises owned or operated by any Loan Party or any of its Subsidiaries in a manner that could reasonably be expected to give rise to an Environmental Claim. Notwithstanding anything in this subsection 4.13 to the contrary, all references in this subsection 4.13 to Subsidiaries shall also refer to Unrestricted Subsidiaries and no event or condition has occurred with respect to any Loan Party or any of its Subsidiaries (or any of their predecessors or the Target of any Acquisition) relating to any Environmental Laws or any Release of Hazardous Materials at any Facility or any other location which, individually or in the aggregate, has had a Material Adverse Effect. 4.14 Solvency -------- Company and its Subsidiaries, taken as a whole, are (i) Solvent, (ii) have capital that is not unreasonably small in relation to their respective businesses or any contemplated or undertaken transaction and (iii) do not intend to incur, or believe that they will incur, debts beyond their ability to pay such debts as they mature. 4.15 Patents, Trademarks, etc. ------------------------- Each Loan Party and its Subsidiaries own, or are licensed to use, all patents, trademarks, trade names, copyrights, technology, know-how and processes used in or necessary for the conduct of its business as currently conducted that are material to the condition (financial or other), business, or operations of the Loan Parties and their Subsidiaries taken as a whole ("Intellectual Property"). Schedule 4.15 annexed hereto, as such Schedule 4.15 may be modified by Company to include any patent, trademark, copyright registration and application therefor relating to an Acquisition permitted under subsection 6.7(v) hereof or otherwise acquired or held by any such Person, lists all patents, trademark and copyright registration and applications therefor of each Loan Party and its Subsidiaries (including, each Target in respect of the Identified Acquisition). No claim has been asserted by any Person with respect to the use of any such Intellectual Property, or challenging or questioning the validity or effectiveness of any such 94 Intellectual Property and neither Company knows of any valid basis for any such claim which, in either case, could reasonably be expected to result in a Material Adverse Effect. The use of such Intellectual Property by each Loan Party and its Subsidiaries does not infringe on the rights of any Person, subject to such claims and infringements as do not, in the aggregate, give rise to any liability on the part of any Loan Party or any of its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect. The consummation of the transactions contemplated by this Agreement will not in any material manner or to any material extent impair the ownership of (or the license to use, as the case may be) any of such Intellectual Property by any Loan Party or any of its Subsidiaries. The rights of each Loan Party and its Subsidiaries to sell, franchise or license under such brand names then being used may be transferred in connection with any sale of assets or stock of the related business by any Loan Party or any of its Subsidiaries. 4.16 Labor Matters ------------- There are no strikes or other labor disputes against any Loan Party or any of its Subsidiaries, including any Target, pending or, to the best knowledge of the Loan Parties, threatened that could reasonably be expected to have a Material Adverse Effect. Hours worked by and payments made by any Loan Party or any of its Subsidiaries (or, to the best knowledge of Company at the time of any Acquisition, the Target of such Acquisition) to their respective employees are not in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters. 4.17 Employment and Labor Agreements ------------------------------- Except as disclosed on Schedule 4.17 (as Schedule 4.17 may be modified by Company in connection with an Acquisition, it being understood that all such disclosures with respect to the Identified Acquisitions shall be set forth on Schedule 4.17), there are no employment agreements covering management employees of any Loan Party or any of its Subsidiaries and there are no collective labor agreements covering any employees of any Loan Party or any of its Subsidiaries. Each Loan Party and each of its Subsidiaries is in compliance with the terms and conditions of all such collective bargaining agreements except where failure to so comply could not reasonably be expected to have a Material Adverse Effect. SECTION 5. AFFIRMATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments shall be in effect and until payment in full of all of the Loans and other Obligations, the cancellation or expiration of all Letters of Credit and the reimbursement of all amounts drawn thereunder, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform all covenants in this Section 5. 95 5.1 Financial Statements and Other Reports -------------------------------------- Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Company will deliver to Lenders: (i) as soon as practicable and in any event within 45 days after the end of the first through third Fiscal Quarter during each Fiscal Year commencing with the first Fiscal Quarter ending in 1996, (a) a consolidated balance sheet of Company and its Subsidiaries as at the end of such period and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Quarter, setting forth in each case in comparative form the consolidated figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and statement of cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustment and (b) a narrative description of the financial performance of Company and its Subsidiaries for the applicable period as compared with the corresponding period of the prior Fiscal Year (it being understood and agreed that any analysis prepared by the management of Company contained in a Form 10-Q and delivered to Lenders shall satisfy the requirement for such narrative required under this subsection 5.1(i)(b)); (ii) as soon as practicable and in any event within 90 days after the end of each Fiscal Year commencing with Fiscal Year 1996, (a) a consolidated balance sheet of Company and its Subsidiaries as at the end of such year and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case, in comparative form the consolidated figures for the previous Fiscal Year, all in reasonable detail and (b) in the case of such consolidated financial statements, accompanied by a report thereon of Deloitte & Touche or other independent certified public accountants of recognized national standing selected by Company and satisfactory to Requisite Lenders which report shall be unqualified and shall state that such consolidated financial statements present fairly the financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and statement of cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise stated therein) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards and (b) in the case of all such financial statements, certified by the chief financial officer of Company; (iii) (a) together with each delivery of financial statements pursuant to subdivisions (i) and (ii) above, (x) an Officers' Certificate of Company stating that the signers have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of 96 Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of the Officers' Certificate, of any condition or event which constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action Company or any of its Subsidiaries has taken, is taking or proposes to take with respect thereto; and (y) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of such accounting periods with the restrictions contained in subsections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8 and 6.9 and, if not specified in the financial statements delivered pursuant to subdivisions (i) or (ii) above, as the case may be, specifying the aggregate amount of interest paid or accrued by Company and its Subsidiaries and the aggregate amount of depreciation and amortization charged on the books of Company and its Subsidiaries during such accounting period; and (b) together with each delivery of financial statements pursuant to subdivision (i) and (ii) above, a Cost Adjustment Certificate in respect of each Acquisition consummated during the preceding five Fiscal Quarter period and for which Company delivered an Initial Cost Adjustment Certificate; (iv) together with each delivery of consolidated financial statements pursuant to subdivision (ii) above, a written statement by the independent certified public accountants giving the report thereon (a) stating that their audit examination has included a review of the terms of this Agreement and the other Loan Documents as they relate to accounting matters, (b) stating whether, in connection with their audit examination, any condition or event which constitutes an Event of Default or Potential Event of Default has come to their attention, and if such a condition or event has come to their attention, specifying the nature and period of existence thereof; provided that such accountants shall not be liable by reason of any failure to obtain knowledge of any such Event of Default or Potential Event of Default that would not be disclosed in the course of their audit examination, and (c) stating that based on their audit examination nothing has come to their attention which causes them to believe that either or both the information contained in the certificates delivered therewith pursuant to subdivision (iii) above is not correct or that the matters set forth in the Compliance Certificates delivered therewith pursuant to clause (a)(y) of such subdivision (iii) above for the applicable Fiscal Year are not stated in accordance with the terms of this Agreement; provided that any statement required to be made under this subdivision (iv) may be omitted or modified to the extent that the making of such statement would expressly violate GAAP; (v) promptly upon receipt thereof, copies of all reports submitted to Company or any of its Subsidiaries by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company or such Subsidiaries made by such accountants (excluding the comment letter submitted by such accountants to management in connection with their annual audit); (vi) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by Company to its security holders or by any Subsidiary of Company to its 97 security holders other than Company or another Subsidiary of Company, of all regular and periodic reports and all registration statements and prospectuses, if any, filed by Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental authority succeeding to any of its functions, and of all press releases and other statements made available generally by Company or any of its Subsidiaries to the public concerning material developments in the business of Company and its Subsidiaries ; (vii) within two Business Days, in the case of clauses (a) and (b) below, and within five Business Days, in the case of clauses (c) and (d) below, upon any executive officer of any Loan Party obtaining knowledge (a) of any condition or event which constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender or Administrative Agent has given any notice or taken any other action with respect to a claimed Event of Default or Potential Event of Default under this Agreement, (b) that any Person has given any notice to Company or any Subsidiary of Company or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 7.2, (c) of any condition or event which would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4 and 5 of such Form as in effect on the date hereof) if Company were required to file such reports under the Exchange Act, or (d) of any development or other information which could reasonably be expected to have a Material Adverse Effect, notice of any such condition, event or development (which notice may be telephonic), such notice to be promptly followed by an Officers' Certificate specifying the nature and period of existence of any such condition or event, or specifying the notice given or action taken by such holder or Person and the nature of such claimed default, Event of Default, Potential Event of Default, event or condition, and what action Company or any of its Subsidiaries has taken, is taking or proposes to take with respect thereto; (viii) within five Business Days after any executive officer of any Loan Party obtaining knowledge of (a) the institution of, or threat of, any action, suit, proceeding, governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries not previously disclosed by Company to Lenders, or (b) any material development in any such action, suit, proceeding, governmental investigation or arbitration, which, in either case, if adversely determined, might result in a Material Adverse Effect, Company shall, or shall cause such Loan Party to, promptly give notice thereof to Lenders and provide such other information as may be reasonably available to it to enable Lenders and their counsel to evaluate such matters. (ix) within ten Business Days after Company or any executive officer of Company or any other Loan Party knows or has reason to know of the occurrence of any ERISA Event (other than an event described in clause (vii) of the definition of ERISA Event which could not reasonably be expected to result in liability, and in the case of any 98 event described in clause (viii) or (ix) of the definition of ERISA Event, liability in excess of $500,000), a written notice specifying the nature thereof, what action Company or any of its Subsidiaries has taken, is taking or proposes to take with respect thereto, and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (x) with reasonable promptness copies of (a) all notices received by Company or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA; and (b) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request; (xi) as soon as available and in any event within 60 days after the end of each Fiscal Year (A) projected annual balance sheets, income statements and cash flow statements for Company and its Subsidiaries prepared on a consolidated basis for Company for the succeeding Fiscal Year and (B) projected income statements and cash flow statements for Company for the succeeding Fiscal Year on a quarterly basis, all signed by the chief financial officer of Company together with appropriate supporting details as requested by Administrative Agent; (xii) promptly after the end of each Fiscal Quarter, a report listing the Letters of Credit outstanding on the last day of such Fiscal Quarter, which report shall include, with respect to each Letter of Credit, the stated amount, expiry date and Issuing Lender; (xiii) (a) promptly upon entering into any Indebtedness, guaranty of Indebtedness of any Person, receivables financing, leveraged lease or similar financing (other than Miscellaneous Operating Leases), copies of the documents and agreements entered into in connection therewith and (b) promptly upon entering into any amendment, modification, supplement or waiver to any Indebtedness, leveraged lease or similar financing (other than Miscellaneous Operating Leases) or any document or agreement entered into in connection therewith, that imposes additional obligations upon Company or any of its Subsidiaries or confers additional rights upon the holders of such Indebtedness or other financing, in either case that could be adverse in any material respect to Company or any of its Subsidiaries or any Lender, including, without limitation, any amendment, modification or supplement that imposes any obligation that is more restrictive than the provisions of this Agreement and the other Loan Documents or imposes any financial or operational requirements or restrictions or reduces any commitment or obligation of the Person providing such financing, a copy of such amendment, modification, supplement or waiver along with an Officers' Certificate describing such amendment, modification, supplement or waiver and the reasons therefor; (xiv) promptly, in the event Company or any of its Subsidiaries enters into an Interest Rate Agreement, written notice of the amount, maturity and rate thereof and the financial institution party thereto and promptly, in the event Company or any of its 99 Subsidiaries opens a new Deposit Account, written notice thereof and of the purpose for which such Deposit Account is to be utilized; (xv) promptly upon the combination or merger of Company or any of its Subsidiaries into Company, all agreements and documentation pursuant to which such combination or merger is consummated; (xvi) promptly upon the formation or acquisition of a Subsidiary which Company desires to designate as an Unrestricted Subsidiary, an Officers' Certificate of Company notifying Administrative Agent of such Unrestricted Subsidiary and describing the type and amount of the initial Investment to be made by Company or any of its Subsidiaries in such Unrestricted Subsidiary and the anticipated business activities of such Unrestricted Subsidiary and promptly upon the making of any subsequent Investment by Company or any of its Subsidiaries in such Unrestricted Subsidiary, an Officers' Certificate of Company describing the type and amount of such subsequent Investment; (xvii) on April 15th and the last Business Day of each Fiscal Year, an Officers' Certificate of the chief financial officer of Company detailing the amount and derivation of both Unused Proceeds of Sales of Printing Equipment and Committed Printing Equipment Proceeds derived from the Proceeds of Sales of Printing Equipment sold during the immediately preceding Fiscal Year; and (xviii) as soon as practicable but in no event less than five Business Days prior to the date on which any Acquisition is consummated, (a) financial statements of the Target and its Subsidiaries, if any, on a consolidated basis, for the most recently completed fiscal year of the Target, (b) copies of all other consolidated balance sheets and consolidating balance sheets (to the extent consolidating balance sheets are available) and related statements of operations and statements of cash flows of the Target and its Subsidiaries, if any, acquired in such Acquisition, that are to be delivered to Company or any of its Subsidiaries in connection with such Acquisition, (c) to the extent then available, copies of all purchase agreements, agreements of merger, letters of intent or other operative agreements entered into by Company or any of its Subsidiaries in connection with such Acquisition (it being understood and agreed that, to the extent such agreements or letters of intent have not been entered into at such time, copies of such agreements and letters of intent shall be delivered reasonably promptly after the execution thereof), (d) an Acquisition Compliance Certificate of Company completed in respect of such Acquisition, (e) in the case of any Acquisition, at Company's option, a Cost Adjustment Certificate completed in respect of such Acquisition, (f) to the extent applicable, supplements to Schedules 4.1, 4.7, 4.15 and 4.17 to this Agreement, which supplements shall, from and after the relevant date of acquisition be deemed to form a part of the applicable Schedules to this Agreement and (g) any other information relating to such Acquisition reasonably requested by Administrative Agent or any Lender except to the extent that such information includes matter as to which a legal privilege is asserted in good faith by any Loan Party; provided however that, notwithstanding anything contained in this subsec- tion 5.1(xviii) to the contrary, Administrative Agent and each 100 Lender shall hold all non-public information that has been identified as such by Company obtained pursuant to the requirements of this subsection 5.1(xviii) in accordance with its customary procedures for handling confidential information of this nature and, in any event, may make disclosures reasonably required by any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer of any of the Commitments or Loans or participation therein or Letters of Credit, provided still further that such assignee, transferee or participant agrees to be bound by this paragraph, or as required or requested by any governmental agency or representative thereof or pursuant to legal process; provided still further that, unless specifically prohibited by applicable law or court order, any Lender that receives a request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information shall notify Company of such request as soon as reasonably practicable prior to disclosure of such information to enable Company and its Subsidiaries to seek a protective order or other appropriate confidential treatment; provided still further that in no event shall Administrative Agent or any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries. (xix) with reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries, including any Unrestricted Subsidiary, as from time to time may be reasonably requested by any Lender. 5.2 Corporate Existence, etc. ------------------------- Company will at all times preserve and keep in full force and effect the existence of Company and the corporate, partnership or other existence of each of its Subsidiaries and the rights and franchises material to the business of Company and each of its Subsidiaries; provided however that the existence of any such Subsidiary (other than any Unrestricted Subsidiary owned in whole or part by Company or any of its Subsidiaries) may be terminated if such termination is in the best interest of Company and is not materially disadvantageous to any Lender; provided further that, so long as no Potential Event of Default or Event of Default has occurred and is continuing or would be caused thereby, the existence of any Unrestricted Subsidiary may be terminated; provided still further that, if any such Unrestricted Subsidiary is merged with a Subsidiary of Company, such Subsidiary of Company that is not an Unrestricted Subsidiary (or that ceases to be an Unrestricted Subsidiary pursuant to an Officers' Certificate of Company delivered to Administrative Agent giving notice that such Unrestricted Subsidiary is being re-designated a Subsidiary of Company for all purposes of this Agreement and the other Loan Documents and stating that all of the provisions of subsection 5.8 have been satisfied with respect to such Subsidiary as if it were a New Subsidiary) shall be the surviving entity and the equity of such Subsidiary shall have been, or shall simultaneously with the consummation of the merger be, pledged to Collateral Agent for the benefit of Secured Parties pursuant to the Security Agreement. 101 5.3 Payment of Taxes and Claims; Tax Consolidation ---------------------------------------------- A. Company will, and will cause each of its Subsidiaries to, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien upon any of its properties or assets, prior to the time when any material penalty or fine shall be incurred with respect thereto; provided that no such charge or claim need be paid if being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; provided further that no such charge or claim with respect to amounts not previously paid in good faith incurring interest, penalty or fines shall result in a breach of this subsection 5.3 so long as such charge or claim and any interest, penalty or fines incurred thereon are (a) paid when due upon first notice thereof from the applicable taxing authority (if any) or (b) contested in accordance with the first proviso hereof; provided still further that, anything to the contrary contained herein notwithstanding, no such tax, assessment, charge or levy shall remain unpaid beyond the date five days prior to the date of any proposed sale under any judgment, writ or warrant of attachment entered or filed against Company or any of its Subsidiaries, or any of the respective properties, as a result of the failure to make such payment. B. Company will not, and will not permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person other than Company and its Subsidiaries for any period ending on or after Fiscal Year 1995. 5.4 Maintenance of Properties; Insurance ------------------------------------ Company will maintain or cause to be maintained in good repair, working order and condition all material properties of Company and its Subsidiaries used or useful in the businesses of Company and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. Company will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and businesses and the properties and businesses of its Subsidiaries against loss or damage of the kinds customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations. 5.5 Inspection; Lender Meeting; Appraisals -------------------------------------- Company shall permit any authorized representatives designated by any Lender at the expense of that Lender, to visit and inspect any of the properties of Company or any of its Subsidiaries, including its and their financial and accounting records (such records to include, without limitation, copies of all federal, state, local and foreign tax returns filed by Company or any of its Subsidiaries, and any comment letters submitted by accountants to management in 102 connection with any audit of the financial statements of such Persons by such accountants), and to make copies and take extracts therefrom, and to discuss its and their affairs, finances and accounts with its and their officers and independent certified public accountants, all upon reasonable notice and at such reasonable times during normal business hours and as often as may be reasonably requested and Company hereby authorizes such accountants to discuss, at Company's expense, the affairs, finances and accounts of Company and its Subsidiaries with Administrative Agent or any Lender. At any one time during each Fiscal Year at Administrative Agent's sole discretion, or at any time upon the occurrence or continuance of a Potential Event of Default or an Event of Default, Administrative Agent and its authorized representatives shall be entitled to conduct an audit of Company and its Subsidiaries (including the books and records, inventory and accounts receivable of such Persons), the reasonable expenses of which shall be payable by Company, and in connection therewith Administrative Agent and such representatives shall have access to records and personnel as provided in the preceding sentence. Without in any way limiting the foregoing, Company at its expense shall participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year at such time as may be agreed to by Company and Administrative Agent. Administrative Agent and Requisite Lenders may request from time to time that Company conduct appraisals of any of the equipment included in the Collateral or any of the Facilities and, promptly upon receiving any such request, Company shall retain a nationally recognized appraisal firm acceptable to Administrative Agent and Requisite Lenders to conduct any such appraisals. One such appraisal of the real property at each Facility and one such appraisal of the equipment located at any one Facility shall be at Company's expense. Company will use its best efforts to have such appraisals completed as soon as practicable and in a manner satisfactory to Administrative Agent and Requisite Lenders. In the event that Company or any of its Subsidiaries conducts an appraisal of one or more of the Facilities and/or the equipment or other property owned or leased by any such Subsidiary, Company shall deliver a copy of such appraisal to Administrative Agent for distribution to Lenders promptly upon the completion thereof. 5.6 Equal Security for Loans and Notes; No Further Negative Pledges --------------------------------------------------------------- A. If Company or any of its Subsidiaries shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens not prohibited by subsection 6.2 (unless prior written consent to the creation or assumption thereof shall have been obtained from Requisite Lenders), it shall make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness thereby secured as long as any such other Indebtedness shall be so secured; provided that this covenant shall not be construed as consent by Requisite Lenders to any violation by Company of the provisions of subsection 6.2; provided further that Company shall under no circumstances be required to make or cause to be made effective provision whereby the Loans or the Notes will be secured, directly or indirectly, by Margin Stock to the extent that such grant of security would violate applicable law. 103 B. Except with respect to Margin Stock and as disclosed on Schedule 6.2 annexed hereto, neither Company nor any of its Subsidiaries shall maintain or enter into any agreement prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired; provided that restrictions on the creation or assumption of any Lien (i) upon assets being sold pursuant to a definitive agreement for the sale of such assets to which Company or any of its Subsidiaries is a party are permitted if such sale of assets is permitted under subsection 6.7, (ii) upon assets being financed pursuant to Indebtedness in respect of such assets to which Company or any of its Subsidiaries is a party are permitted if such Indebtedness is permitted under subsection 6.1 and such assets secure such Indebtedness as permitted under subsection 6.2 and (iii) upon assets which are subject to an option to acquire such assets pursuant to a definitive agreement containing such option to which Company or any of its Subsidiaries is a party are permitted if the sale of the underlying assets would be permitted under subsection 6.7 (subject, however, to the Liens of Collateral Agent). 5.7 Compliance with Laws, etc. ------------------------- Company shall, and shall cause its Subsidiaries (including any Unrestricted Subsidiaries) to, exercise all due diligence in order to comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, noncompliance with which would in any case or in the aggregate have a Material Adverse Effect. 5.8 New Subsidiaries ---------------- In the event that any Unrestricted Subsidiary is re-designated a Subsidiary of Company in a notice to such effect delivered pursuant to subsection 5.2 or, after the date hereof, any Loan Party forms or acquires in any manner a Subsidiary (a "New Subsidiary") which has not been designated as an Unrestricted Subsidiary, Company shall promptly cause the following to occur: (i) the New Subsidiary shall execute and deliver the Guaranty substantially in the form of the Guaranty annexed hereto as Exhibit XII (or, if the Guaranty has already been executed and delivered, such New Subsidiary shall execute and deliver a counterpart to the Guaranty substantially in the form of Exhibit A thereto pursuant to which such New Subsidiary shall become jointly and severally liable as a guarantor under the Guaranty). (ii) Each Loan Party that owns any of the capital stock or other equity of such New Subsidiary shall assume all obligations as a "Pledgor" under the Security Agreement including the obligation to pledge all shares of capital stock and other equity of any direct or indirect Subsidiary of Company to Collateral Agent for the benefit of Secured Parties. (iii) Company shall cause the New Subsidiary to execute and deliver a promissory note evidencing all Intercompany Indebtedness owed by such New Subsidiary to Company and its Subsidiaries and such promissory note shall be pledged to Collateral Agent for the benefit of Secured Parties under the Security Agreement. 104 (iv) the New Subsidiary shall execute and deliver counterparts to the Security Agreement substantially in the form of Exhibit A thereto and shall execute and deliver counterparts to the Trademark and Patent Agreements in substantially the form of Exhibit A thereto, if applicable, and take all actions and deliver all documents (if any) required under subsection 5.9 hereof. (v) if requested by Administrative Agent and Requisite Lenders, opinion(s) of counsel covering the matters described in clauses (i), (ii), (iii) and (iv) above, substantially in the form of opinions as to similar matters given pursuant to subsections 3.1E and 3.1K(v) and otherwise in form and substance reasonably satisfactory to Administrative Agent and Requisite Lenders shall be delivered to Administrative Agent and each Lender; provided that the failure of Company to deliver opinions reasonably requested by Administrative Agent and Requisite Lenders covering matters not opined on pursuant to the opinions delivered pursuant to such subsection 3.1E shall not become an Event of Default pursuant to subsec- tion 7.3 of this Agreement unless and until such failure has not been remedied or waived within 30 days after receipt by Company of notice from Administrative Agent of such failure. Notwithstanding anything in the foregoing to the contrary (but subject to the proviso contained in clause (v) above), if such New Subsidiary is acquired in connection with an Acquisition, then Company shall comply with the foregoing requirements within two Business Days following the consummation of such Acquisition; provided that Company shall comply with the foregoing requirements on or prior to the Closing Date with respect to the Identified Acquisition. In addition to the foregoing, in the event Company forms or acquires a Receivable SPC, Company shall promptly cause the capital stock or other equity of such Receivables SPC to be pledged to Collateral Agent under the Security Agreement. 5.9 Maintenance of Leasehold Property; Excluded Collateral ------------------------------------------------------ A. Maintenance of Leasehold Property. Company shall, and shall cause its Subsidiaries to, comply with all of their respective obligations under all leases of real property or similar agreements now existing or hereafter entered into by them (whether as lessor or lessee) except that Company and its Subsidiaries may amend, modify or terminate any lease in the ordinary course of business if such amendment, modification or termination could not reasonably be expected to have a Material Adverse Effect. Company shall (i) make available to Administrative Agent and, if requested, provide Administrative Agent with, a copy of each notice of default received by Company or and of its Subsidiaries under any such lease and make available to Administrative Agent and, if requested, provide Administrative Agent with, a copy of each notice of default sent by Company or any if its Subsidiaries under any such lease; and (ii) notify Administrative Agent, on or before the fifteenth day of each month, of any new leased premises or lease that Company or such Subsidiary plans to take possession of during the following thirty day period or has become liable for during the preceding thirty day period. 105 B. Excluded Collateral; Other Matters. (i) Administrative Agent and Requisite Lenders may, in their discretion from time to time, designate any Excluded Collateral as Collateral (other than Excluded Collateral that is encumbered by a Lien securing Indebtedness permitted under this Agreement to the extent that the granting of a Lien in such Excluded Collateral to the Collateral Agent would violate any agreement relating to such Indebtedness) hereunder and Company shall, and shall cause its Subsidiaries to, take such actions and deliver such instruments with respect to such Collateral as required to grant a perfected security interest in such Collateral or as otherwise required by the provisions of any Collateral Document. In addition, Administrative Agent and Requisite Lenders may, in their discretion from time to time, designate any property of Company or any of its Subsidiaries now existing or hereafter acquired as Excluded Collateral in which case it shall not be necessary to satisfy the requirements of the Security Agreement or the immediately preceding sentence with respect to such property (unless and until Administrative Agent and Requisite Lenders otherwise elect pursuant to the preceding sentence) and Administrative Agent and Requisite Lenders hereby instruct Collateral Agent and Collateral Agent hereby agrees to release any security interests with respect to any Excluded Collateral benefitting Secured Parties and execute any and all such instruments or documents (including, without limitation, UCC-3 release statements) as Company shall reasonably request to evidence such release; and (ii) Administrative Agent and Requisite Lenders hereby designate pursuant to this subsection 5.9B as Excluded Collateral hereunder each of the Facilities and items of equipment set forth on Schedule 1.1B annexed hereto. 5.10 Environmental Disclosure and Inspection --------------------------------------- (i) Company shall, and shall cause each of its Subsidiaries to, exercise all reasonable due diligence in order to comply and cause (a) all tenants under any lease or occupancy agreement affecting any portion of the Facilities and (b) all other Persons on or occupying such property to comply with all Environmental Laws in all material respects. (ii) Except to the extent such disclosure would include a matter as to which a legal privilege is asserted in good faith by any Loan Party, Company shall: (a) have delivered to Administrative Agent and Lenders on or before the Closing Date, a Schedule of Environmental Matters annexed as Schedule 5.10 hereto setting forth in reasonable detail a description of all material operations, claims, notices, investigations, allegations, events, occurrences, conditions, activities and other matters whether or not similar to the foregoing that are exceptions to the representations and warranties made pursuant to the enumerated subdivisions of subsection 4.13 as of the Closing Date, but as if such representations and warranties were made without giving effect to the materiality qualification contained in the introductory language contained in subsection 4.13 and (b) promptly advise Lenders in writing and in reasonable detail of 106 (1) any material Release of any Hazardous Material reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (2) any and all material written communications with respect to material Environmental Claims or any material Release of Hazardous Material reported to any federal, state or local governmental or regulatory agency, (3) any material remedial action taken by Company or any other Person in response to (A) any Hazardous Material on, under or about any Facility, the existence of which could reasonably be expected to result in an Environmental Claim having a Material Adverse Effect or (B) any Environmental Claim that could reasonably be expected to have a Material Adverse Effect, (4) any Loan Party's discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any material part thereof, in the good faith determination of Company, to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws or that could otherwise reasonably be expected to have a material adverse effect on the use of the Facilities, (5) any request for information from any governmental agency that indicates such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for a material Release of Hazardous Materials and (6) promptly upon the completion of any material excavation or remediation relating to the existence of any Hazardous Materials at any of the Facilities, written evidence satisfactory to Administrative Agent that such excavation has occurred in material compliance with any applicable Environmental Laws. (iii) Company shall promptly notify Lenders of any proposed acquisition of stock, assets, or property by Company or any of its Subsidiaries that could reasonably be expected to expose Company or any of its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to have a Material Adverse Effect and any proposed action to be taken by Company or any of its Subsidiaries to commence manufacturing, industrial or other operations that could reasonably be expected to subject Company or any of its Subsidiaries to additional Environmental Laws compliance or non-compliance with which could reasonably be expected to have a Material Adverse Effect. (iv) Company and its Subsidiaries shall, at their own expense, provide copies of such documents or information as Administrative Agent or any Lender may reasonably request in relation to any matters disclosed pursuant to this subsection 5.10 except to the extent that such document or the information includes a matter as to which a legal privilege is asserted in good faith by Company or such Subsidiary. (v) Not later than 45 days from the date on which a request is received from Administrative Agent, Company and its Subsidiaries shall conduct and complete, or shall cause to be conducted and completed, at its expense, additional environmental investigations, audits and reviews as is reasonably requested by Administrative Agent at any of the Facilities if deemed necessary by Administrative Agent in its reasonable discretion. Company and its Subsidiaries shall deliver to Administrative Agent the information and reports which are obtained pursuant to such investigations, audits and reviews, except to 107 the extent that such information or reports include matter as to which a legal privilege is asserted in good faith by any Loan Party. (vi) Notwithstanding anything contained in this subsection 5.10 to the contrary, Administrative Agent and each Lender shall hold all non-public information that has been identified as such by Company obtained pursuant to the requirements of this subsection 5.10 in accordance with its customary procedures for handling confidential information of this nature and, in any event, may make disclosures reasonably required by any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer of any of the Commitments or Loans or participation therein or Letters of Credit, provided that such assignee, transferee or participant agrees to be bound by this paragraph, or as required or requested by any governmental agency or representative thereof or pursuant to legal process; provided further that, unless specifically prohibited by applicable law or court order, any Lender that receives a request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information shall notify Company of such request as soon as reasonably practicable prior to disclosure of such information to enable Company and its Subsidiaries to seek a protective order or other appropriate confidential treatment; provided still further that in no event shall Administrative Agent or any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries. 5.11 Hazardous Materials; Remedial Action ------------------------------------ Company shall, and shall cause its Subsidiaries to, promptly take any and all necessary or appropriate remedial action, as determined by Company in its reasonable judgment, in connection with the presence, storage, use, disposal, transportation or Release of any Hazardous Materials on, under or about any Facility. In the event Company or any of its Subsidiaries undertakes any remedial action with respect to any Hazardous Material on, under or about any Facility, Company or such Subsidiary shall conduct and complete such remedial action in material compliance with all applicable Environmental Laws and in accordance with the policies, orders and directives of all federal, state and local governmental authorities, except when and only to the extent that Company's or such Subsidiary's liability or the means by which such liability may be addressed for such presence, storage, use, disposal, transportation or discharge of any Hazardous Material or such remedial action is being contested in good faith by Company or such Subsidiary. 5.12 Environmental Indemnity ----------------------- Company shall fully and promptly pay, perform, discharge, defend, indemnify and hold harmless Agents and Secured Parties, their Subsidiaries and Affiliates, and their respective directors, officers and employees ("Indemnitees") from and against any action, suit, proceeding, claim, loss, damage, cost or expense, including, without limitation, interest, penalties and reasonable attorneys' and consultants' fees, asserted against, suffered or incurred by any 108 Indemnitee arising under or resulting from this Agreement or the other Loan Documents (or the enforcement of the rights of any Indemnitee under the Loan Documents or in the Collateral) or Lenders' agreements to make the Loans and (i) any Environmental Laws on account of any operations or activities at the Facilities, (ii) any Release of any Hazardous Material by Company or any of its Subsidiaries whether or not such Release originates or emanates from Company's or such Subsidiary's Facilities or any premises contiguous thereto or (iii) any other environmental matter affecting such Facility within the jurisdiction of any federal, state or municipal official administering Environmental Laws; provided that Company shall not have any obligation to an Indemnitee hereunder with respect to any liabilities arising from the bad faith, gross negligence or willful misconduct of such Indemnitee. 5.13 Deposit Accounts and Cash Management Systems -------------------------------------------- Company shall use and maintain, and shall cause its Subsidiaries to use and maintain, their respective Deposit Accounts and cash management systems in a manner reasonably satisfactory to Collateral Agent. Company shall not permit any of its Deposit Accounts or any Deposit Account of any of its Subsidiaries at any time to have a principal balance in excess of $2,000,000 unless Company has delivered to Collateral Agent an agreement in form and substance satisfactory to Collateral Agent executed by the financial institution at which such Deposit Account is maintained confirming, among other things, Collateral Agent's security interest in such Deposit Account and has taken all other steps necessary or otherwise reasonably requested by Collateral Agent to ensure that Collateral Agent has control of such Deposit Account; provided, however that, for the fifteen-day period immediately following the Closing Date, Company and its Subsidiaries shall not be required to deliver any such agreement with respect to the Deposit Accounts acquired in connection with the Identified Acquisition. Company shall not permit the aggregate amount on deposit in the Deposit Accounts of Company and all of its Subsidiaries (other than Deposit Accounts maintained by a Lender) to exceed $10,000,000. Notwithstanding the foregoing paragraph, at Collateral Agent's or Requisite Lenders' written request, Company and its Subsidiaries shall promptly take all actions that are reasonably requested by Collateral Agent or otherwise necessary to grant to Collateral Agent for the benefit of Secured Parties control of the Deposit Accounts of Company and its Subsidiaries and, in connection therewith, Company and its Subsidiaries shall promptly obtain agreements with the Persons at which such Deposit Accounts are maintained in form and substance satisfactory to Collateral Agent pursuant to which each such Person, among other things, waives its rights to set-off with respect to amounts in each such Deposit Account (provided that if Company or any of its Subsidiaries is unable to obtain any such agreements from any such Person, Company or such Subsidiary shall, within thirty days after receipt by Company or such Subsidiary of such written request by Collateral Agent or Requisite Lenders, transfer all amounts in the applicable Deposit Account to a Deposit Account maintained at a financial institution from which Company or such Subsidiary shall be able to obtain such agreements) and shall deliver to Collateral Agent opinions of counsel reasonably requested by Collateral Agent or Requisite Lenders confirming the first priority status of such Liens (which opinion may be a reasoned opinion). 109 5.14 Further Assurances ------------------ Company shall, and shall cause each of its Subsidiaries to, execute and deliver, or cause to be executed and delivered, to Administrative Agent such documents and agreements, and shall take or cause to be taken such actions, as Administrative Agent may from time to time request to carry out the terms and conditions of this Agreement and the other Loan Documents. 5.15 Fiscal Periods -------------- Company shall maintain and Company shall cause their its Subsidiaries to maintain the Fiscal Years and Fiscal Quarters ending on the dates set forth on Schedule 1.1C. In the event that any Fiscal Year or Fiscal Quarter or end for any Subsidiary of Company is changed (provided however that no such change shall affect the dates on which payments are to be paid by Company hereunder or have the effect of changing the Commitment Termination Date without the prior written consent of Administrative Agent and all affected Lenders), it shall be changed in the same manner for Company and all of its Subsidiaries. SECTION 6. NEGATIVE COVENANTS Company covenants and agrees that, from and after the Closing Date and so long as any of the Commitments shall be in effect and until payment in full of all of the Loans and other Obligations, the cancellation or expiration of all Letters of Credit and the reimbursement of all amounts drawn thereunder, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform all covenants in this Section 6. 6.1 Indebtedness ------------ Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (i) Company and its Subsidiaries may become and remain liable with respect to the Obligations; (ii) in addition to Indebtedness otherwise permitted by this subsection 6.1, Company and each of its Subsidiaries may become and remain liable with respect to its respective Contingent Obligations permitted to be incurred by such Person under subsection 6.4 and, upon any obligations actually arising pursuant thereto, the Indebtedness corresponding to the Contingent Obligation so extinguished; (iii) Company and each of its Subsidiaries may remain and may become and remain liable with respect to Intercompany Indebtedness; provided that (a) all such 110 Intercompany Indebtedness shall be evidenced by Intercompany Notes, (b) all such Intercompany Indebtedness shall, to the extent permitted by applicable law, be subordinated pursuant to the terms of the promissory notes evidencing such Intercompany Indebtedness in right of payment, from and after such time as the Loans shall become due and payable (whether at stated maturity, by acceleration or otherwise), to the payment in full of the Obligations of such Subsidiary under the Loan Documents, as applicable, and (c) any payment by Company or any of its Subsidiaries under any guaranty of the Obligations shall result in a pro tanto reduction of the amount of any Intercompany Indebtedness owed by such Subsidiary to Company or any Subsidiary of Company for whose benefit the payment is made; provided further that neither Company nor any Subsidiary of Company the equity of which is pledged as Collateral shall extend any loans to any Subsidiary of Company the equity of which is not pledged as Collateral hereunder; (iv) Company and its Subsidiaries may remain liable with respect to the Existing Indebtedness; provided however that from and after the Closing Date the principal amount of each such item of Existing Indebtedness and the Refinancing Indebtedness therefor shall not exceed the amount thereof set forth on Schedule 6.1 annexed hereto; (v) Company may become and remain liable with respect to the Senior Subordinated Notes; (vi) Company and its Subsidiaries may become and remain liable with respect to (y) unsecured Indebtedness which refinances any Indebtedness permitted under subsections 6.1(iv), (v), (x) or (xi) and (z) Indebtedness secured by Liens on real or personal property which refinances Existing Indebtedness which was secured by Liens as of the date of this Agreement (collectively, the "Refinancing Indebtedness"); provided that (a) the aggregate principal amount of any item of Refinancing Indebtedness shall not exceed the aggregate principal amount of the Indebtedness which was outstanding on the date of such refinancing that is being refinanced with the proceeds thereof (except that Existing Indebtedness secured by real property may be refinanced by non-recourse Refinancing Indebtedness secured by the same real property collateral, in an original principal amount up to the appraised value of such real property collateral), (b) each item of Refinancing Indebtedness specified in clause (z) shall be unsecured or, if secured, secured only by all or a portion of the same real or personal property which secured the Existing Indebtedness which has been refinanced, (c) the average maturity of any Refinancing Indebtedness shall be no less than the average maturity of the Existing Indebtedness which has been refinanced, (d) with respect to Refinancing Indebtedness that refinances Subordinated Indebtedness, such Refinancing Indebtedness shall provide for subordination thereof to the Obligations (and any refinancing thereof) to the same or a greater degree as applies to the Subordinated Indebtedness being refinanced and (e) the Refinancing Indebtedness shall include representations and warranties, covenants, events of default and other provisions that are not more restrictive or burdensome in any material respect than the terms of the Indebtedness which has been refinanced, and in the case of 111 Refinancing Indebtedness which is Subordinated Indebtedness, shall satisfy the requirements set forth in subsection 6.12 otherwise applicable to amendments to Subordinated Indebtedness (except that such Refinancing Indebtedness may bear interest at the market rate at the time of such refinancing), unless Administrative Agent and Requisite Lenders otherwise consent in writing; (vii) Company and its Subsidiaries may become and remain liable with respect to promissory notes issued in respect of a Company's or any such Subsidiary's obligation to make deferred payments of insurance premiums arising in the ordinary course of business in an aggregate amount for Company and its Subsidiaries not to exceed, when aggregated with the Letter of Credit Usage other than with respect to Standby Letters of Credit issued in support of Indebtedness otherwise permitted pursuant to this subsection 6.1(vii), $50,000,000 in aggregate principal amount at any time, it being understood that all such promissory notes listed on Schedule 6.1A annexed hereto shall be taken into account for purposes of determining the limits set forth in this subsection 6.1(vii); (viii) so long as at the time of incurrence thereof no Event of Default or Potential Event of Default has occurred and is continuing or would be caused thereby, Company and its Subsidiaries may become and remain liable with respect to Indebtedness (including Capital Lease obligations) to finance or refinance permitted Consolidated Capital Expenditures incurred after December 31, 1995; provided that (a) either (1) after giving effect to such incurrence, the aggregate principal amount of all such Indebtedness incurred in the then-current Fiscal Year shall not exceed $60,000,000 for the 1996 Fiscal Year and thereafter an amount equal to the sum of (x) $60,000,000 plus (y) if and to the extent the amount of Indebtedness incurred under this subsection 6.1(viii)(a)(1) during the 1996 Fiscal Year or any subsequent Fiscal Year is less than the amount permitted under this subsection 6.1(viii)(a)(1), the difference between the amount of such Indebtedness permitted and the amount of such Indebtedness so incurred for each such Fiscal Year shall be carried forward and available to be incurred under this subsection 6.1(viii)(a)(1) in any subsequent year to the extent that such amount has not been previously utilized under this subsection 6.1(viii)(a)(1) (it being understood and agreed that the amount permitted to be so carried forward from the 1996 Fiscal Year shall not exceed $60,000,000) or (2) the Leverage Ratio measured as at the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered pursuant to subsection 5.1(i), for the four Fiscal Quarter period ending on such date, calculated on a pro forma basis after giving effect to the incurrence of such Indebtedness proposed to be incurred, is not greater than 2.50:1.00, (b) if secured, such Indebtedness shall be secured only by Liens on the real or personal property so financed or refinanced and the loan to value ratio thereof shall not exceed 100% and (c) the documentation governing such Indebtedness shall not contain any financial covenants or any cross-default provision to this Agreement or the documentation governing the Senior Subordinated Notes or other Subordinated Indebtedness, and no such Indebtedness the outstanding principal amount of which is $20,000,000 or more shall contain any cross-default provision to the 112 documentation governing any other obligation of Company or any of its Affiliates (other than to any other obligation owed to the holder of such obligation or its Affiliates); (ix) Company may become and remain liable with respect to any unsecured Indebtedness evidencing an obligation in respect of a Restricted Junior Payment otherwise permitted by subsection 6.5(iii) but not paid in cash; (x) so long as at the time of incurrence thereof no Event of Default or Potential Event of Default has occurred and is continuing or would be caused thereby, Company may from time to time following the Closing Date issue debt Securities subordinate in right and time of payment to the Obligations (the "Additional Subordinated Indebtedness"); provided that (a) such Additional Subordinated Indebtedness is unsecured, (b) the maturity of any Additional Subordinated Indebtedness is no less than one year following the Commitment Termination Date, (c) such Additional Subordinated Indebtedness includes representations and warranties, covenants, events of default and other provisions that are not more restrictive or burdensome to Company than the terms of this Agreement, (d) such Additional Subordinated Indebtedness is satisfactory in form and substance to Administrative Agent and Requisite Lenders, in their sole discretion, and (e) Company applies the proceeds of such Additional Subordinated Indebtedness (net of underwriting discounts and commissions and other reasonable costs associated therewith) to prepay the Loans pursuant to subsection 2.4A(ii)(c) to the extent required thereby; (xi) so long as at the time of incurrence thereof no Event of Default or Potential Event of Default has occurred and is continuing or would be caused thereby, Indebtedness of any Target and its Subsidiaries acquired in respect of an Acquisition may remain outstanding; provided that (a) such Indebtedness was incurred prior to the date of such Acquisition and was not incurred in contemplation of such Acquisition; and (b) the aggregate principal amount of such Indebtedness (and any Indebtedness refinancing such Indebtedness) outstanding at any time with respect to all Acquisitions, together with the aggregate amount of Contingent Obligations under subsection 6.4(vi) (other than any such Contingent Obligations guarantying Indebtedness otherwise included under this clause (b)), shall not exceed the sum of (1) $100,000,000 and (2) (x) prior to the Acquisition Commitment Termination Date, the amount by which the Tranche B Commitments have been reduced pursuant to subsection 2.4C or 2.4D and (y) from and after the Acquisition Commitment Termination Date, the amount by which the Tranche B Commitments had been reduced pursuant to subsection 2.4C or 2.4D prior to the Acquisition Commitment Termination Date; and (xii) in addition to Indebtedness otherwise permitted by this subsection 6.1, Company and its Subsidiaries may become and remain liable with respect to Indebtedness in an aggregate amount not to exceed $50,000,000 in principal amount outstanding at any time; provided however that to the extent the principal amount of any Indebtedness incurred in one or more related transactions under this clause (xii) exceeds $20,000,000, the documentation governing such Indebtedness shall contain no financial covenants or 113 cross-default provisions or only those financial covenants and cross- default provisions as are in all respects satisfactory in form and substance to Administrative Agent and Requisite Lenders, and no provision contained in such documentation shall in any event be more burdensome to Company or any of its Subsidiaries than the provisions contained in this Agreement. 6.2 Liens ----- Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset (including any document or instrument in respect of goods or accounts receivable) of Company or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except: (i) Permitted Encumbrances; (ii) Liens granted pursuant to the Collateral Documents; (iii) Liens described in Schedule 6.2 annexed hereto; (iv) Liens granted to secure either Existing Indebtedness as permitted by subsection 6.1(iv) to the extent such Liens are granted prior to the Closing Date, Refinancing Indebtedness to the extent permitted by subsection 6.1(vi)(z), Indebtedness to the extent permitted by subsection 6.1(viii) or Contingent Obligations as permitted by subsection 6.4(v); (v) Liens created to secure Indebtedness permitted under subsection 6.1(xi) of the Target and its Subsidiaries of any Acquisition outstanding on the date of such Acquisition; provided that (a) such Liens exist pursuant to an agreement executed prior to the date of such Acquisition and were not created in contemplation of such Acquisition; (b) the aggregate amount of such secured Indebtedness outstanding (together with all other Indebtedness and Contingent Obligations referred to in subsection 6.1(xi)) at any time shall not exceed the amount permitted under subsection 6.1(xi)(b) and (c) such Liens shall encumber only assets encumbered by such Liens on or prior to the date such Acquisition is consummated or after acquired property as provided under any agreement which creates such Liens and is in effect prior to the date of such Acquisition; and (vi) in addition to the Liens permitted by clauses (i)-(v), the Company and its Subsidiaries may grant Liens securing the payment of Indebtedness described in subsection 6.1(xii); provided that if such Liens are on Collateral and such Collateral has not been released from the Liens of the Collateral Documents, such Liens otherwise permitted under this subsection 6.2(vi) shall be subordinate to the Liens of the Collateral Documents. 114 6.3 Investments; Joint Ventures --------------------------- Company will not, and will not permit any of its Subsidiaries to, directly or indirectly make or own any Investment in any Person or enter into any Joint Venture, except: (i) Cash and Cash Equivalents; (ii) Company and its Subsidiaries may make intercompany loans to the extent permitted under subsection 6.1(iii); (iii) Company and its Subsidiaries may make and own Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations and other debts of, and other disputes with, customers and suppliers arising in the ordinary course of business; (iv) Company and its Subsidiaries may receive and hold promissory notes or other Investments received in connection with the settlement of pending litigation; (v) Company and its Subsidiaries may acquire and retain ownership of Investments in connection with Asset Sales or other dispositions of assets not prohibited by subsection 6.7 effected in compliance with the provisions thereof; (vi) Company and its Subsidiaries may make and own Investments described in Schedule 6.3 annexed hereto; (vii) so long as at the time of the making of such Investment no Event of Default or Potential Event of Default has occurred and is continuing or would be caused thereby, Company and its Subsidiaries may make and own Investments in Unrestricted Subsidiaries; provided that the aggregate cumulative fair market value (measured as of the time of the respective transfer) of all assets (including, but not limited to Cash, Cash Equivalents, capital and other assets) directly or indirectly transferred by Company or any of its Subsidiaries to any and all Persons in connection with acquisitions of Unrestricted Subsidiaries and to Unrestricted Subsidiaries by way of capital contribution, loan or otherwise shall not exceed $25,000,000; provided further that neither Company nor any of its Subsidiaries shall at any time be obligated or liable to any Person with respect to any of the assets, actions or activities of any Unrestricted Subsidiary; (viii) Company or any of its Subsidiaries may make and own Investments acquired in connection with the sale of the stock or all or any part of the assets of any Unrestricted Subsidiary; (ix) Company's officers and employees may issue promissory notes to Company in payment for equity interests of Company issued to such officers and employees pursuant to Company's management equity program in an aggregate amount outstanding from time to time not to exceed $20,000,000 during the term of this Agreement; and 115 (x) subject to the limitations set forth therein, Company and its Subsidiaries may make and own Investments permitted by subsection 6.4(v); (xi) in addition to the Investments permitted by clauses (i)-(x), Company and its Subsidiaries may make and own Investments (other than Investments of the types described in subsection 6.3(vii) or 6.3(viii)) in an aggregate amount (measured with respect to each such Investment according to the amount of Cash and fair market value (as determined in good faith by two executive officers of Company) of all other property comprising such Investment at the time such Investment was made) of not more than the sum of $75,000,000 minus the amount of any Investments made pursuant to subsection 6.3(vii); provided that in no event shall Company or any of its Subsidiaries be permitted to make Investments pursuant to this subsection 6.3(xi) if at the time such Investment is made, an Event of Default or Potential Event of Default has occurred and is continuing or would be caused thereby. 6.4 Contingent Obligations ---------------------- Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or become or be liable with respect to any Contingent Obligation, except: (i) Company (a) may become and remain liable with respect to interest rate cap agreements and other similar Interest Rate Agreements which do not require any payments to be made or received by Company or any of its Subsidiaries after the date of effectiveness thereof and (b) may also become and remain liable with respect to other Interest Rate Agreements in an aggregate notional amount under all such Interest Rate Agreements described in this clause (b) of not more than the aggregate principal amount of floating rate Indebtedness of Company then outstanding; (ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations under this Agreement, the Guaranty, the Collateral Documents and with respect to Letters of Credit; (iii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations described in Schedule 6.4 annexed hereto; (iv) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of any obligation of Company or one of its Subsidiaries permitted under subsection 6.1 and in respect of any obligation of one of Company's Subsidiaries not expressly prohibited by the provisions of this Agreement; provided however that the principal amount of any such Contingent Obligation shall not exceed the principal amounts of the corresponding obligation to which it relates; (v) Company and its Subsidiaries may make and own Investments in any investment accounts established by Company for the sole purpose of securing (a) worker's compensation liabilities of Company or any of its Subsidiaries or (b) the obligations of 116 third party insurers of Company and any of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring third party insurers; provided that the sum of (x) the aggregate principal amount of such Investments and any other Investments or property securing the obligations described in clauses (a) or (b) above plus (y) the aggregate face amount of any Letters of Credit issued to support such liabilities and obligations of Company and any of its Subsidiaries shall not at any time exceed $75,000,000; (vi) so long as at the time of incurrence thereof no Event of Default or Potential Event of Default has occurred and is continuing or would be caused thereby, Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations of any Target acquired in respect of an Acquisition that were incurred prior to the date of such Acquisition; provided that the aggregate amount of such Contingent Obligations (other than the amount of any such Contingent Obligations excluded from subsection 6.1(xi)(c)), when added to the aggregate principal amount of Indebtedness of the Company and its Subsidiaries outstanding at such time permitted solely pursuant to subsection 6.1(xi) hereof, shall not exceed the sum of the amount specified in subsection 6.1(xi)(b)(1) plus the amount specified in subsection 6.1(xi)(b)(2) at any time; and (vii) in addition to the Contingent Obligations permitted by clauses (i) - (vi) of this subsection 6.4, Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations not to exceed $30,000,000 in the aggregate at any time outstanding; provided that any outstanding Indebtedness incurred by Company or any of its Subsidiaries pursuant to subsection 6.1(ii) in respect of a Contingent Obligation of Company or such Subsidiary created pursuant to this clause (vii) shall be treated as a Contingent Obligation for purposes of calculating the aggregate amount permitted at any time by this clause (vii). 6.5 Restricted Junior Payments -------------------------- Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment except that (i) Company may pay any management fees to KKR in accordance with the terms of and subject to the subordination provisions required in the agreement referred to in Schedule 6.5 annexed hereto; (ii) Company and its Subsidiaries may make Restricted Junior Payments to cancel or repurchase Securities or options for Securities granted pursuant to Management Stock Agreements to holders of such Securities upon the death, disability or termination of employment of such holders; (iii) Company may make Restricted Junior Payments to the holders of the Senior Subordinated Notes and the holders of the Additional Subordinated Indebtedness from the proceeds of the sale of Equity Securities of Company; (iv) Company may make scheduled interest payments on the Senior Subordinated Notes (to the extent permitted by the subordination provisions of the Senior Subordinated Note Indenture) and in respect of the Additional Subordinated Indebtedness (to the extent permitted by the subordination provisions of the instruments evidencing such Additional Subordinated Indebtedness and the documents pursuant to which such Additional Subordinated Indebtedness is issued); and (v) Company may declare and pay dividends in Cash on the common stock of Company; provided that the aggregate 117 amount of such Restricted Junior Payments does not exceed the sum of (a) $12,500,000 plus (b) (1) 25% multiplied by the positive Consolidated Net Income, if any, for the period (treated as a single accounting period) from the Closing Date to the end of the most recent completed Fiscal Quarter preceding the date of computation minus (2) 100% of all such dividends, distributions and payments made and funds set apart for such purpose pursuant to this subsection 6.5(v)(b) during such period plus (c) 100% of the Net Equity Contribution Amount, it being understood and agreed that unless Company designates otherwise in writing delivered to Administrative Agent prior to the date Company makes such Restricted Junior Payment, such Restricted Junior Payment shall be allocated first to any amounts available under clause 6.5(v)(b), second to amounts available under clause (a) and then to amounts available under clause (c) of this subsection 6.5(v); provided however that in no event shall Company be permitted to make the Restricted Junior Payments pursuant to subsections 6.5(i), (iii) or (v) upon the occurrence and during the continuance of an Event of Default or if an Event of Default would be caused thereby. 6.6 Financial Covenants ------------------- A. Consolidated Fixed Charge Coverage Ratio. Company will not permit the ratio of (i) Consolidated Cash Flow Available for Fixed Charges to (ii) Consolidated Fixed Charges as measured on the last day of each Fiscal Quarter (the "Reference Date"), commencing with the last day of the second Fiscal Quarter of Fiscal Year 1996, for any four Fiscal Quarter period ending on any Reference Date, to be less than the correlative ratio applicable below: Minimum Consolidated Fixed Charge Reference Date Coverage Ratio Second Fiscal Quarter 1996 1.85:1.00 Third Fiscal Quarter 1996 1.90:1.00 Fourth Fiscal Quarter 1996 2.00:1.00 First Fiscal Quarter 1997 2.00:1.00 Second Fiscal Quarter 1997 2.00:1.00 Third Fiscal Quarter 1997 2.00:1.00 Fourth Fiscal Quarter 1997 2.00:1.00 First Fiscal Quarter 1998 2.00:1.00 Second Fiscal Quarter 1998 1.75:1.00 Third Fiscal Quarter 1998 1.75:1.00 Fourth Fiscal Quarter 1998 1.50:1.00 118 Minimum Consolidated Fixed Charge Reference Date Coverage Ratio First Fiscal Quarter 1999 1.50:1.00 Second Fiscal Quarter 1999 1.40:1.00 Third Fiscal Quarter 1999 1.40:1.00 Fourth Fiscal Quarter 1999 1.40:1.00 First Fiscal Quarter 2000 1.40:1.00 Second Fiscal Quarter 2000 1.40:1.00 Third Fiscal Quarter 2000 1.40:1.00 Fourth Fiscal Quarter 2000 1.30:1.00 First Fiscal Quarter 2001 1.30:1.00 Second Fiscal Quarter 2001 1.30:1.00 Third Fiscal Quarter 2001 1.30:1.00 Fourth Fiscal Quarter 2001 1.30:1.00 First Fiscal Quarter 2002 1.30:1.00 Second Fiscal Quarter 2002 1.00:1.00 Third Fiscal Quarter 2002 1.00:1.00 B. Leverage Ratio. Company will not permit at any time the Leverage Ratio as measured on the last day of each Fiscal Quarter (the "Reference Date"), commencing with the last day of the second Fiscal Quarter of Fiscal Year 1996, to exceed the correlative ratio applicable below. Maximum Reference Date Leverage Ratio Second Fiscal Quarter 1996 4.95:1.00 Third Fiscal Quarter 1996 4.65:1.00 Fourth Fiscal Quarter 1996 4.15:1.00 First Fiscal Quarter 1997 4.15:1.00 119 Maximum Reference Date Leverage Ratio Second Fiscal Quarter 1997 4.00:1.00 Third Fiscal Quarter 1997 4.00:1.00 Fourth Fiscal Quarter 1997 3.75:1.00 First Fiscal Quarter 1998 3.75:1.00 Second Fiscal Quarter 1998 3.50:1.00 Third Fiscal Quarter 1998 3.50:1.00 Fourth Fiscal Quarter 1998 3.50:1.00 First Fiscal Quarter 1999 3.25:1.00 Second Fiscal Quarter 1999 3.25:1.00 Third Fiscal Quarter 1999 3.25:1.00 Fourth Fiscal Quarter 1999 3.00:1.00 First Fiscal Quarter 2000 3.00:1.00 Second Fiscal Quarter 2000 3.00:1.00 Third Fiscal Quarter 3.00:1.00 Fourth Fiscal Quarter 2000 2.50:1.00 First Fiscal Quarter 2001 2.50:1.00 Second Fiscal Quarter 2001 2.50:1.00 Third Fiscal Quarter 2001 2.50:1.00 Fourth Fiscal Quarter 2001 2.00:1.00 First Fiscal Quarter 2002 2.00:1.00 Second Fiscal Quarter 2002 2.00:1.00 Third Fiscal Quarter 2002 2.00:1.00 C. Consolidated Cash Flow Available for Fixed Charges. Company will not permit Consolidated Cash Flow Available for Fixed Charges as measured on the last day of each Fiscal Quarter (the "Reference Date"), commencing with the last day of the second Fiscal Quarter of Fiscal Year 1996), to be less than: for any four Fiscal Quarter period ending on any Reference Date, the amount indicated under "Minimum Consolidated Cash Flow Available for Fixed Charges (Four Fiscal Quarters)" for such Reference Date, it being understood that Company shall 120 not be deemed to have violated this subsection 6.6C unless Consolidated Cash Flow Available for Fixed Charges for the applicable period is less than the amount specified above for such period as of a particular Reference Date: Minimum Consolidated Cash Flow Available for Fixed Charges (Four Fiscal Reference Date Quarters) Second Fiscal Quarter 1996 $215,000,000 Third Fiscal Quarter 1996 $240,000,000 Fourth Fiscal Quarter 1996 $270,000,000 First Fiscal Quarter 1997 $275,000,000 Second Fiscal Quarter 1997 $275,000,000 Third Fiscal Quarter 1997 $275,000,000 Fourth Fiscal Quarter 1997 $275,000,000 First Fiscal Quarter 1998 $300,000,000 Second Fiscal Quarter 1998 $300,000,000 Third Fiscal Quarter 1998 $300,000,000 Fourth Fiscal Quarter 1998 $300,000,000 First Fiscal Quarter 1999 $300,000,000 Second Fiscal Quarter 1999 $300,000,000 Third Fiscal Quarter 1999 $300,000,000 Fourth Fiscal Quarter 1999 $300,000,000 First Fiscal Quarter 2000 $320,000,000 Second Fiscal Quarter 2000 $320,000,000 Third Fiscal Quarter 2000 $320,000,000 Fourth Fiscal Quarter 2000 $320,000,000 121 Minimum Consolidated Cash Flow Available for Fixed Charges (Four Fiscal Reference Date Quarters) First Fiscal Quarter 2001 $330,000,000 Second Fiscal Quarter 2001 $330,000,000 Third Fiscal Quarter 2001 $330,000,000 Fourth Fiscal Quarter 2001 $330,000,000 First Fiscal Quarter 2002 $340,000,000 Second Fiscal Quarter 2002 $340,000,000 Third Fiscal Quarter 2002 $340,000,000 6.7 Restriction on Fundamental Changes ---------------------------------- Subject to the provisions of subsection 5.2, Company will not, and will not permit any of its Subsidiaries to, form or acquire any new Subsidiaries, enter into any transaction of merger or consolidation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of their business, property or fixed assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise any of the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person, except: (i) any Subsidiary of Company may be merged or consolidated with or into Company or any wholly-owned Subsidiary of Company (provided that an Inactive Subsidiary shall not be the surviving entity of any such merger or consolidation), or be liquidated, wound up or dissolved, or all or substantially all of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any wholly-owned Subsidiary of Company (other than any Inactive Subsidiary); provided that, in the case of such a merger or consolidation, Company or such wholly-owned Subsidiary, as the case may be, shall be the continuing or surviving corporation; provided further that, in the case of such a merger or consolidation or disposition of a majority of the stock of a Subsidiary of Company or substantially all of the business, property or assets of such a Subsidiary (the "Affected Subsidiary") which is a guarantor of any of the Obligations (a) the continuing, surviving or transferee corporation (if other than Company) shall expressly assume the obligations of the Affected Subsidiary under such guaranty and (b) in the case of a merger or consolidation, the net worth of the continuing or surviving corporation 122 (calculated without giving effect to any increase in the amount of Intercompany Indebtedness for which the continuing or surviving corporation is liable as compared to the amount of Intercompany Indebtedness for which the Affected Subsidiary was liable immediately prior to such merger or consolidation) shall not be less than the net worth of the Affected Subsidiary immediately prior to such merger or consolidation and (c) the continuing, surviving or transferee corporation shall deliver to Administrative Agent an Officers' Certificate to the effect that such merger, consolidation, liquidation or sale and each agreement, if any, required by this subsection 6.7(i) complies with the requirements of this subsection 6.7(i) and that all conditions precedent relating to such transaction have been complied with; provided still further that, subject to the terms of the applicable Collateral Document, in the case of such a merger or consolidation or disposition of a majority of the stock of an Affected Subsidiary or any of the business, property or assets of such Affected Subsidiary the stock or assets of which are pledged to secure the Obligations, the stock or assets, as the case may be, of the continuing, surviving or transferee corporation (if other than Company) shall, at the time of consummation of such merger, consolidation or transfer, be pledged to secure the Obligations; (ii) Company or any of its Subsidiaries may sell or dispose of in the ordinary course of business property which is obsolete or no longer useful in any of its businesses or is of de minimis value, as determined in good faith by any executive officer of such Person; provided that the proceeds of an Asset Sale pursuant to this clause (ii) shall be applied in accordance with subsection 2.4A(ii)(a); (iii) so long as no Event of Default has occurred and is continuing or would be caused thereby, Company and any of its Subsidiaries may sell or otherwise dispose of any of its assets outside of the ordinary course of business (it being agreed that all sales of Printing Equipment are deemed to be outside the ordinary course of business for purposes of this clause (iii)); provided that any such sale or other disposition is made for the fair market value of such assets as determined in good faith by two executive officers of Company; provided further that (except for trade-ins of Printing Equipment), (x) to the extent that the aggregate fair market value of all property other than Cash received at any time during the term of this Agreement as consideration for assets sold pursuant to this clause (x) (but excluding any such property received in asset sales pursuant to clause (y) below) that remains held by Company or any of its Subsidiaries does not exceed $25,000,000, not less than 50% of the consideration received by Company or such Subsidiary in any such transaction shall be Cash and (y) except as otherwise permitted by the foregoing clause (x), not less than 80% of the consideration received by Company 123 or such Subsidiary shall be Cash, however the simultaneous receipt of promissory notes or other consideration and sale of such promissory notes or other consideration to a third party for Cash shall be deemed to be Cash for purposes of this second proviso if such sale of notes is permitted under subsection 6.10; provided still further that the proceeds of an Asset Sale pursuant to this clause (iii) shall be applied in accordance with subsection 2.4A(ii); provided still further that except for sales of Printing Equipment during any Fiscal Year the net proceeds of which are applied to acquire Replacement Printing Equipment during such Fiscal Year, Company and its Subsidiaries shall not sell or otherwise dispose of assets pursuant to this clause (iii) (including by way of a sale-leaseback transaction except a sale-leaseback transaction that is entered into within 90 days of Company's initial acquisition of the asset subject to such sale- leaseback) either (a) having an aggregate value in excess of $100,000,000 during any 12-month period preceding the date of any such asset sale or disposition or (b) $200,000,000 from the Closing Date through the Commitment Termination Date; (iv) Company or any of its Subsidiaries may sell assets (other than Printing Equipment) in the ordinary course of business; provided that any such sale or other disposition of assets is made for the fair market value of such assets and that the proceeds of an Asset Sale pursuant to this clause (iv) shall be applied in accordance with subsection 2.4A(ii)(a); (v) Company or any of its Subsidiaries may (a) purchase inventory, equipment and other personal property in the ordinary course of business, (b) make capital expenditures in accordance with subsection 6.9, (c) make and own Investments in accordance with the provisions of subsection 6.3, (d) purchase or otherwise acquire stock and other Securities, or beneficial interests therein, of its Subsidiaries (including of Persons who become Subsidiaries by virtue of any such purchase or acquisition) (but not, in any event, of any Unrestricted Subsidiary), (d) make any loan, advance or capital contribution to its Subsidiaries (other than Unrestricted Subsidiaries) and (e) make Acquisitions; provided that Company shall comply with the ratio set forth in subsection 3.3B(i) as of the date of any Acquisition and any other requirements set forth herein (including under subsection 5.1(xviii)) and, to the extent such Acquisition is of the equity interest of any Person, such Person shall be a Subsidiary of Company upon giving effect to such Acquisition or shall be merged with and into Company or one of its Subsidiaries within five days of the consummation of such Acquisition; provided further that the board of directors of the Target of any Acquisition shall have adopted a resolution approving such Acquisition pursuant to applicable corporate law; provided still 124 further that, notwithstanding anything in the foregoing to the contrary, Company and its Subsidiaries shall not make any Acquisition (other than the Identified Acquisition) the aggregate purchase price of which exceeds $250,000,000 unless Administrative Agent and Requisite Lenders otherwise consent in writing; (vi) Company and its Subsidiaries may create New Subsidiaries or a Receivables SPC (and transfer Receivable Assets thereto in accordance with subsection 6.10); provided that the requirements of subsection 5.8 shall be satisfied with respect to any such New Subsidiary or Receivables SPC; (vii) Company and its Subsidiaries may be combined as contemplated by subsection 5.2; (viii) in addition to the dispositions permitted under subsection 6.7(iii), so long as no Event of Default has occurred and is continuing or would be caused thereby, Company and its Subsidiaries may sell or otherwise dispose of any of its assets in one or a related series of transactions outside the ordinary course of business having a fair market value of $5,000,000 or less, up to $60,000,000 in the aggregate during the term of this Agreement; and (ix) in addition to the dispositions permitted under subsection 6.7(iii), so long as no Event of Default has occurred and is continuing or would be caused thereby, Company may sell, transfer or otherwise dispose of assets as permitted pursuant to subsection 6.8A. 6.8 Special Restrictions on Leases ------------------------------ A. Company will not and will not permit any of its Subsidiaries to, directly or indirectly, enter into any sale-leaseback transaction with or relating to any governmental Person or related entity, including but not limited to any Other IDB Sale-Leaseback Transaction; except Company may sell, transfer or otherwise dispose of assets to an IDB Lessor in connection with an Other IDB Sale-Leaseback Transaction provided that the following conditions are met on or prior to the consummation of such Other IDB Sale-Leaseback Transaction: (i) except for any such assets subject to Liens permitted under subsection 6.1(viii), such assets shall be transferred subject to the Liens created by the Collateral Documents in favor of Collateral Agent for the benefit of the Secured Parties; 125 (ii) Collateral Agent shall have received a written acknowledgement signed by such IDB Lessor and any other parties to such Other IDB Sale- Leaseback Transaction acknowledging the seniority of the security interest in such assets (other than in respect of any such assets subject to Liens permitted under subsection 6.1(viii)) created by the Collateral Documents in favor of Collateral Agent for the benefit of the Secured Parties; (iii) Collateral Agent shall have received a first priority security interest in Company's interest in and to each document to which it is a party delivered in connection with such Other IDB Sale-Leaseback Transaction, including the taking of possession of any instruments delivered in connection therewith; and (iv) Collateral Agent shall have received a consent letter executed and acknowledged by such IDB Lessor, in form and substance satisfactory to Collateral Agent, in its sole discretion, pursuant to which such IDB Lessor shall, among other things, (i) grant to Collateral Agent a right of entry, at any time and from time to time, onto the premises on which such assets are located to inspect or remove such assets or arrange a public or other sale of such assets and (ii) agree that all liens, claims, demands, rights or interest which such IDB Lessor then has or thereafter acquires in, on or to such assets shall be subordinate in right of time and payment to the security interest of Collateral Agent in such assets (other than in respect of any such assets subject to Liens permitted under subsection 6.1(viii)). B. Company will not, and will not permit any of its Subsidiaries to, become liable, whether directly or by assignment or as a guarantor or other surety, for the obligations of a lessee under any Operating Lease of a Subsidiary of Company, except (i) in connection with the financing or refinancing of permitted Consolidated Capital Expenditures and (ii) Miscellaneous Operating Leases. 6.9 Limitation on Net Consolidated Capital Expenditures --------------------------------------------------- Company will not, and will not permit any of its Subsidiaries to, make or incur, in the aggregate, obligations for Net Consolidated Capital Expenditures during any Fiscal Year in excess of $135,000,000 (the "Target Amount"); provided however that if the aggregate amount of Net Consolidated Capital Expenditures for the immediately preceding Fiscal Year (commencing with the 1996 Fiscal Year) is less than the Target Amount for such immediately preceding Fiscal Year, then the lesser of (i) the Target Amount for such immediately preceding Fiscal Year minus the Net Consolidated Capital Expenditures for such immediately preceding Fiscal Year and (ii) 25% 126 of the Target Amount, so adjusted pursuant to this subsection 6.9, for such immediately preceding Fiscal Year, shall be added to the Target Amount for the current Fiscal Year. Notwithstanding the foregoing, Company's repurchase of the Covington, Tennessee, and Dyersburg, Tennessee, facilities and/or any other assets which are the subject of an Other IDB Sale-Leaseback Transaction pursuant to the exercise of its option to repurchase such facilities received in connection with the sale-leaseback of such facilities, shall not be deemed to be a Consolidated Capital Expenditure under this subsection 6.9 except to the extent of the exercise price with respect to such options and any other expendi- tures of Company in connection with such repurchases that would otherwise be deemed to be Consolidated Capital Expenditures. 6.10 Sale or Discount of Receivables ------------------------------- Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, sell with recourse (except to the extent of the amount Company or such Subsidiary reasonably estimates, based on historical loss experience, will not be received in connection with the collection of notes or accounts receivable), or discount or otherwise sell for less than 95% of the face value thereof, any of its notes or accounts receivable or otherwise enter into an accounts receivable or similar financing; provided that Company and its Subsidiaries may sell, transfer or otherwise convey their respective Receivables Assets to a Receivables SPC for not less than 95% of the face value thereof in connection with a securitized accounts receivable financing on terms and conditions in form and substance acceptable to Administrative Agent and Requisite Lenders in their sole discretion (the "Permitted Receivables Transaction") so long as Company applies the Receivables Proceeds thereof to prepay the Loans pursuant to subsection 2.4A(ii)(f); it being understood and agreed that to the extent Company and its Subsidiaries enter into any Permitted Receivables Transaction pursuant to this subsection 6.10, Collateral Agent shall release the Lien of the Security Documents encumbering any such Receivables Assets sold in connection therewith. 6.11 Transactions with Affiliates ---------------------------- Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 10% or more of the capital stock of Company, or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or such Subsidiary, as the case may be, than those which might be obtained at the time from a Person who is not such a holder of Affiliate; provided that the foregoing restriction shall not apply to (i) any transaction between or among 127 Company and/or any of Company's wholly-owned (directly or indirectly) Subsidiaries, (ii) any management fees paid to KKR pursuant to an agreement which was entered into and effective prior to January 1, 1990, (iii) the Management Stock Agreements or (iv) the Intercompany Notes. 6.12 Other Indebtedness; Amendments and Waivers of Certain Documents --------------------------------------------------------------- Neither Company nor any of its Subsidiaries will (i) amend or otherwise change the terms of the Senior Subordinated Note Indenture, the Additional Subordinated Indebtedness, any other Subordinated Indebtedness, Existing Indebtedness, Refinancing Indebtedness or Indebtedness described in subsections 6.1(viii) or (xi) (the "Other Indebtedness") except as specifically permitted hereby, or make any payment consistent with an amendment or change thereto, if the effect of such amendment or change is to increase the interest rate on such Other Indebtedness, change the dates upon which payments of principal or interest are due thereon in a manner adverse to the obligor, change any event of default or condition to an event of default with respect to such Other Indebtedness in a manner adverse to the obligor, change the redemption or any repurchase provisions thereof in a manner adverse to the obligor, change the subordination provisions thereof (or of any guaranty thereof) or which amendment or change, together with all other amendments or changes made, increases materially the obligations of the obligor or confers additional rights on the holder of such Other Indebtedness which would be adverse to Company, any of its Subsidiaries or any Lender; or (ii) defease, or make any payments the effect of which is to defease the Senior Subordinated Notes or any other Subordinated Indebtedness in whole or in part (whether pursuant to the defeasance provisions of the Senior Subordinated Note Indenture or the documentation governing such other Subordinated Indebtedness or otherwise). 6.13 Conduct of Business ------------------- From and after the Closing Date, Company will not permit Company and its Subsidiaries to engage in any business other than the business engaged in by Company and its Subsidiaries the date hereof and similar and related businesses. Any Receivables SPC shall engage only in the business of holding Receivables Assets pursuant to a Permitted Receivables Transaction and in activities incidental thereto. Company will not permit any of its Subsidiaries that may exist as of the Closing Date and that is not a Loan Party to engage in any business or incur any Indebtedness or Contingent Obligations in each case other than as specified on Schedule 4.1 annexed hereto. Anything contained herein to the contrary notwithstanding, neither Company nor any of its Subsidiaries shall directly or indirectly distribute, sell or otherwise transfer any property or other assets of any 128 kind to any Subsidiary of Company that is in existence as of the Closing Date and that is not a Loan Party. SECTION 7. EVENTS OF DEFAULT IF any of the following conditions or events ("Events of Default") shall occur and be continuing: 7.1 Failure to Make Payments When Due --------------------------------- Failure to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise; failure to pay when due any amount payable to any Issuing Lender in reimbursement of any drawing under any Letter of Credit issued pursuant to subsection 2.7; or failure to pay interest or any other amount due under this Agreement within five days after the date due; or 7.2 Default in Other Agreements --------------------------- (a) Failure of Company or any of its Subsidiaries or any Receivables SPC to pay when due or any default in the payment when due of any principal or interest on any other Indebtedness having an outstanding principal amount of $20,000,000 or more, individually or in the aggregate, or in the payment when due of any Contingent Obligation of $20,000,000 or more, individually or in the aggregate, or obligation under an Operating Lease requiring annual lease payments in any Fiscal Year in excess of $7,500,000 for such Operating Lease in each case beyond any period of grace provided which failure to pay or default in payment shall be continuing; or (b) breach or default by Company or any of its Subsidiaries or any Receivables SPC with respect to any other term of any evidence of any other Indebtedness or Contingent Obligation in an amount of $20,000,000 or more, individually or in the aggregate or Operating Lease, requiring annual payments in excess of $7,500,000 or more individually or in the aggregate, of any loan agreement, mortgage, indenture, lease or other agreement relating thereto, in each case beyond any period of grace provided which breach or default shall be continuing, if the effect of such failure, default or breach is to cause, or to permit the holder or holders of that Indebtedness, Operating Lease or Contingent Obligation (or a trustee on behalf of such holder or holders or counterpart to such Interest Rate Agreement), as the case may be, to cause, 129 that Indebtedness, Operating Lease or Contingent Obligation, as the case may be, to become or be declared due prior to its stated maturity or, in the case of any lease, terminated prior to its stated maturity, or in the case of an Interest Rate Agreement terminated prior to its stated date of termination, it being understood that, for purposes of this clause (b), the amount of liability under any Interest Rate Agreement is the amount payable by Company and its Subsidiaries upon termination thereof; or 7.3 Breach of Certain Covenants --------------------------- Failure of Company or any other Loan Party to perform or comply with any term or condition contained in the second paragraph of subsection 2.1A(iii) or subsections 2.4A(ii), 2.5, 5.2, 5.6, 5.8, 5.9, 5.13, or Section 6 of this Agreement; or 7.4 Breach of Warranty ------------------ Any representation or warranty made by any Loan Party in any Loan Document or in any statement, certificate, report or financial statement at any time given by such Person in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made or deemed made; or 7.5 Other Defaults under Agreement or Loan Documents ------------------------------------------------ Company or any other Loan Party shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents other than those referred to above in subsections 7.1, 7.3 or 7.4 and such default shall not have been remedied or waived within 30 days after the first to occur of (A) the date as of which such Loan Party shall receive written notice of any such failure from Administrative Agent or any Lender and (B) the date as of which any executive officer of Company shall become aware thereof; or 7.6 Involuntary Bankruptcy; Appointment of Receiver, etc. ----------------------------------------------------- (A) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any Receivables SPC in an involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (B) an involuntary case shall be commenced against Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any Receivables SPC under the Bankruptcy Code or under any other bankruptcy, insolvency or similar law now or hereafter in effect and such case is not dismissed or discharged for 90 days; or (C) a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any of its Subsidiaries (other than any 130 Inactive Subsidiary) or any Receivables SPC, or over all or a substantial part of its property, shall have been entered; or the involuntary appointment of an interim receiver, trustee or other custodian of Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any Receivables SPC, for all or a substantial part of its property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any Receivables SPC and the continuance of any such events in subpart (C) for 30 days unless dismissed or discharged; or 7.7 Voluntary Bankruptcy; Appointment of Receiver, etc. --------------------------------------------------- Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any Receivables SPC, shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; the making by Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any Receivables SPC, of any assignment for the benefit of creditors; or the inability or failure of Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any Receivables SPC, or the admission by Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any Receivables SPC in writing of its inability to pay its debts as such debts become due; or the Board of Directors of Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any Receivables SPC or any committee thereof adopts any resolution or otherwise authorizes action to approve any of the foregoing; or 7.8 Judgments and Attachments ------------------------- A. Any of the assets of Company or any of its Subsidiaries (other than any Inactive Subsidiary) shall be attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of Company or any such Subsidiary; or any Person shall move or apply for the appointment of a receiver, trustee or custodian for any of the assets of Company or any of its Subsidiaries (other than any Inactive Subsidiary) and such motion or application shall remain unstayed or undismissed for 30 consecutive days; or Company or any of its 131 Subsidiaries (other than any Inactive Subsidiary) shall have concealed, removed or permitted to be concealed or removed, any part of its property with intent to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of its property or incurred an obligation which may be fraudulent under any bankruptcy, fraudulent conveyance or other similar law; or B. Any money judgment, writ or warrant of attachment, or similar process involving in any case an amount in excess of $5,000,000 shall be entered or filed against Company or any of its Subsidiaries (other than any Inactive Subsidiary) or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 30 days or in any event later than five days prior to the date of any proposed sale thereunder; or 7.9 Dissolution ----------- Any order, judgment or decree shall be entered against Company or any Material Subsidiary decreeing the dissolution or split up of such Person and such order shall remain unstayed or undischarged for a period in excess of 30 days; or 7.10 ERISA ----- There occurs one or more ERISA Events which individually or in the aggregate results in liability of the Loan Parties and their ERISA Affiliates in excess of $5,000,000 during the term of this Agreement; or there exists, as of any valuation date for a Pension Plan, an excess of (i) the actuarial present value (determined on the basis of reasonable assumptions employed by the independent actuary for such Pension Plan) of benefit liabilities (as defined in Section 4001(a)(16) of ERISA) over (ii) the fair market value of the assets of such Pension Plan, individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which there is no such excess) which exceeds the greater of (x) 20% of the value set forth in clause (i) above or (y) $5,000,000. 7.11 Invalidity of Guaranty ---------------------- The Guaranty for any reason, other than the satisfaction in full of all of the Obligations, the termination of this Agreement or the termination of such Guaranty (or any Loan Party's obligations thereunder) in accordance with its terms, ceases to be in full force and effect or is declared to be null and void, or any Loan Party thereto denies that it has any further liability 132 under such Guaranty or that such Guaranty is void or has no force or effect in whole or in part or gives notice to such effect; or 7.12 Failure of Security ------------------- The Security Agreement or any other Collateral Document shall, at any time, cease to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by any Loan Party or, in the case of the Security Agreement, Collateral Agent shall not have or shall cease to have a valid and perfected first priority security interest in the Collateral, in each case for any reason other than (i) the failure of Collateral Agent to take any action within its control, (ii) the release of Collateral in accordance with the terms of the Security Agreement or (iii) the failure of Collateral Agent to have a perfected security interest in Collateral located at any sales office of any Loan Party (other than any such sales office listed on Schedule VIII of the Security Agreement or that is otherwise required to be disclosed to the Lenders under the Loan Documents); or 7.13 Change in Control ----------------- A Change In Control shall have occurred; or 7.14 Conduct of Business ------------------- Company or any of its Subsidiaries (other than any Inactive Subsidiary) shall be enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or a material part of its business, and such order shall not be vacated or stayed within 20 days after the issuance thereof; THEN (i) upon the occurrence of any Event of Default described in the foregoing subsections 7.6 or 7.7 each of (x) the unpaid principal amount of and accrued interest on the Loans, (y) an amount equal to the maximum amount which may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letter of Credit) and (z) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company and the obligation of each Lender to make any Loan and the obligation and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence and 133 during the continuation of any other Event of Default, Requisite Lenders may, by written notice to Company, declare all of the Loans to be, and an amount equal to the amounts described in clauses (x) through (z) above to be, and the same shall forthwith become, due and payable, together with accrued interest thereon, and the obligation of each Lender to make any Loan and the obligation and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate; provided that the foregoing shall not affect in any way the obligations of Lenders to purchase from Issuing Lenders participations in the unreimbursed amount of any drawings under any Letters of Credit as provided in subsection 2.7E. So long as any Letter of Credit shall remain outstanding, any amounts described in clause (y) above with respect to such Letter of Credit, when received by Issuing Lender, shall be held by the Issuing Lender pursuant to such documentation as the Issuing Lender shall request, as cash collateral for the obligation of Company to reimburse the respective Issuing Lender in the event of any drawing under such Letter of Credit, and so much of such funds shall at all times remain on deposit as cash collateral as aforesaid as shall equal the maximum amount available at any time for drawing under all Letters of Credit (the "Maximum Available Amount"); provided that, in the event of cancellation or expiration of any Letter of Credit or any reduction in the Maximum Available Amount, the Issuing Lender shall apply the difference between the Maximum Available Amount immediately prior to such cancellation, expiration or reduction and the Maximum Available Amount immediately after such cancellation or reduction, first, to the payment in full of the outstanding Obligations, second, to the payment in full of the other outstanding Benefitted Obligations (as defined in the Intercreditor Agreement) and then, to Company or to such other Person who may be lawfully entitled to receive such funds or as a court of competent jurisdiction may direct. Nevertheless, if at any time within 60 days after acceleration of the maturity of any Loan, Company shall pay all arrears of interest and all payments on account of the principal which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than non-payment of principal of and accrued interest on the Loans, and payments of amounts referred to in clause (y) above, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 9.7, then Requisite Lenders by written notice to Company may rescind and annul the acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. The provisions of this paragraph are intended merely to bind Lenders to a decision which may be made at the election of Requisite Lenders and are not intended to benefit Company and do not grant Company the right to require Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. Except as otherwise expressly provided in this Section 7, Company hereby waives diligence, presentment, demand, protest and notice of every kind. 134 SECTION 8. ADMINISTRATIVE AGENT 8.1 Appointment ----------- Bankers is hereby appointed Administrative Agent hereunder by each Lender and each Lender hereby authorizes Administrative Agent to act hereunder and under the other instruments and agreements referred to herein (including, without limitation, the Collateral Documents) as its agent hereunder and thereunder. Administrative Agent agrees to act as such upon the express conditions contained in this Section 8, the Intercreditor Agreement and in the other Loan Documents. Other than as set forth in this subsection 8.1 or subsection 8.6 or in the last sentence of subsection 8.7, the provisions of this Section 8 are solely for the benefit of Administrative Agent and Lenders and Company shall not have any rights as a third party beneficiary of, nor shall it have any obligations under or with respect to, any of the provisions of this Section 8. In performing its functions and duties under this Agreement, Administrative Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any of its Subsidiaries. 8.2 Powers; General Immunity ------------------------ A. Duties Specified. Each Lender irrevocably authorizes Administrative Agent to take such action on such Lender's behalf and to exercise such powers hereunder and under the other instruments and agreements referred to herein (including, without limitation, the Collateral Documents) as are specifically delegated to Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Administrative Agent shall have only those duties and responsibilities which are expressly specified in this Agreement and the other Loan Documents and it may perform such duties by or through its agents or employees. The duties of Administrative Agent shall be mechanical and administrative in nature; Administrative Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Administrative Agent any obligations in respect of this Agreement or the other instruments and agreements referred to herein except as expressly set forth herein or therein. 135 B. No Responsibility for Certain Matters. Administrative Agent shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement, or any other Loan Document, including the Notes issued hereunder, or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by such Administrative Agent to Lenders or by or on behalf of Company to Administrative Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or the use of Letters of Credit or of the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. C. Exculpatory Provisions. Administrative Agent and its directors, employees or agents shall not be liable to Lenders for any action taken or omitted hereunder or in connection herewith (including, without limitation, any act or omission under any Loan Document) unless caused by its or their gross negligence or willful misconduct. If Administrative Agent shall request instructions from Lenders with respect to any act or action (including the failure to take an action) in connection with this Agreement or any other Loan Document, Administrative Agent shall be entitled to refrain from such act or taking such action unless and until Administrative Agent shall have received instructions from Requisite Lenders. Without prejudice to the generality of the foregoing, (i) Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys, accountants, experts and others professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Administrative Agent as a result of Administrative Agent acting or (where so instructed) refraining from acting under this Agreement or any other Loan Document in accordance with the instructions of Requisite Lenders. Administrative Agent shall be entitled to refrain from exercising any power, discretion or authority vested in it under this Agreement unless and until it has obtained the instructions of Requisite Lenders. D. Administrative Agent Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Administrative Agent in its individual capacity. With respect to its 136 participation in the Loans and Letters of Credit, Administrative Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include Administrative Agent in its individual capacity. Administrative Agent and each of its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Company or any Affiliate of Company as if it were not performing the duties specified herein, and may accept fees and other consideration from Company or any such Affiliate for services in connection with this Agreement or any other transaction or otherwise without having to account for the same to Lenders. 8.3 Representations and Warranties; No Responsibility for Appraisal of Credit- -------------------------------------------------------------------------- worthiness ---------- Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans and the issuance of Letters of Credit hereunder and such Lender's purchasing of participations in such Letters of Credit and has made and shall continue to make its own appraisal of the creditworthiness of such Persons. Administrative Agent shall have no duty or responsibility either initially or on a continuing basis to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto whether coming into its possession before the making of the Loans or the issuance of the Letters of Credit or any time or times thereafter and shall further have no responsibility with respect to the accuracy of or the completeness of the information provided to Lenders. 8.4 Indemnification of Administrative Agent --------------------------------------- Each Lender severally agrees to indemnify Administrative Agent, proportionately to such Lender's Pro Rata Share, to the extent Administrative Agent shall not have been reimbursed by Company, for liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Administrative Agent in performing its duties hereunder or any of the other instruments and agreements referred to herein, in any way relating to or arising out of this Agreement, including, but not limited to, its duties as Collateral Agent; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements 137 resulting from Administrative Agent's gross negligence or willful misconduct. If any indemnity furnished to Administrative Agent for any purpose shall, in the opinion of such Administrative Agent, be insufficient or become impaired Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 8.5 Registered Persons Treated as Owner ----------------------------------- Administrative Agent may deem and treat the Persons listed as Lenders in the Register as the owners of the corresponding Loans listed therein for all purposes hereof unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by Administrative Agent and recorded in the Register as provided in subsection 9.2B. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, transferee or assignee of the corresponding Loan. 8.6 Successor Administrative Agent ------------------------------ A. Successor Administrative Agent. Administrative Agent may resign at any time by giving thirty days' prior written notice thereof to Lenders and Company and may be removed at any time with or without cause by Requisite Lenders. Upon any such resignation or removal, Requisite Lenders shall have the right, upon five days' notice to Company, to appoint a successor Administrative Agent; provided further that if such successor shall not be a Lender, such appointment shall be subject to the consent of Company, which consent shall not be unreasonably withheld. If no successor Administrative Agent shall have been so appointed by Requisite Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or Requisite Lenders' removal of the retiring Administrative Agent, then, upon five days' notice to Company, the retiring Administrative Agent may, on behalf of Lenders, appoint a successor Administrative Agent, which shall be a bank which maintains an office in the United States, or a commercial bank organized under the laws of the United States of America or of any State thereof, or any Affiliate of such bank, having a combined capital and surplus of at least $50,000,000; provided that if such successor shall not be a Lender, such appointment shall be subject to the consent of Company, which consent shall not be unreasonably withheld. Upon the acceptance of any appointment as an Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative 138 Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. B. Successor Swing Line Lender. Any resignation or removal of Administrative Agent pursuant to subsection 8.6A shall also constitute the resignation or removal of Bankers or its successor as Swing Line Lender, and any successor Administrative Agent appointed pursuant to subsection 8.6A shall, upon its acceptance of such appointment, become the successor Swing Line Lender for all purposes hereunder. In such event (i) Company shall prepay any outstanding Swing Line Loans made by the retiring or removed Administrative Agent in its capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or removed Administrative Agent and Swing Line Lender shall surrender any Swing Line Note held by it to Company for cancellation, and (iii) if so requested by the successor Administrative Agent and Swing Line Lender in accordance with subsection 2.1F, Company shall issue a new Swing Line Note to the successor Agent and Swing Line Lender substantially in the form of Exhibit X annexed --------- hereto, in the principal amount of the Swing Line Loan Commitment then in effect and with other appropriate insertions. C. Successor Collateral Agent. Any resignation or removal of Administrative Agent pursuant to subsection 8.6A shall also constitute the resignation or removal of Bankers or its successor as Collateral Agent, and any successor Administrative Agent appointed pursuant to subsection 8.6A shall, upon its acceptance of such appointment, become the successor Collateral Agent for all purposes hereunder. 8.7 Intercreditor Agreement ----------------------- Each Lender hereby authorizes Collateral Agent to enter into the Intercreditor Agreement for the benefit of that Lender and agrees to be bound by the terms of such document. Each Lender hereby authorizes the Collateral Agent to enter into each of the Collateral Documents and the Guaranty on behalf of and for the benefit of Lenders and agrees to be bound by the terms of the Collateral Documents and the Guaranty; provided that Collateral Agent shall not enter into or consent to any amendment, modification, termination or waiver of any provi- sion contained in the Intercreditor Agreement or the Collateral Documents or the Guaranty without the prior consent of Requisite Lenders in accordance with subsection 9.7. Each Lender agrees that no Lender shall have any right individually to seek or to enforce the Guaranty or to realize upon the security granted by any Collateral Document, in each case as amended, it being understood and agreed that such rights and remedies may be exercised only by Collateral Agent for the benefit 139 of Lenders and the other Secured Parties in accordance with the terms of the Guaranty, the Collateral Documents and the Intercreditor Agreement, as applicable. 8.8 Notice of Default ----------------- Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or Potential Event of Default unless Administrative Agent has received actual notice from a Lender or Company or any other Loan Party referring to this Agreement, describing such Event of Default or Potential Event of Default and stating that such notice is a "notice of default." In the event that Administrative Agent receives such a notice, Administrative Agent shall give notice thereof to Lenders as soon as may be reasonably practicable; provided that if a notice received by Administrative Agent has also been provided to Lenders, Administrative Agent shall have no obligation to give notice to Lenders with respect thereto. Subject to the provisions of the clause beginning with the word "THEN" appearing after subsection 7.14, Administrative Agent shall take such action with respect to such Event of Default or Potential Event of Default as shall be reasonably directed by Requisite Lenders; provided that, unless and until Administrative Agent shall have received such directions, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default or Potential Event of Default as it may deem advisable in the interests of Lenders. In the event that any Lender has actual knowledge of any Event of Default or Potential Event of Default, such Lender shall give notice thereof to Administrative Agent as soon as reasonably practicable. SECTION 9. MISCELLANEOUS 9.1 Representations of Lenders -------------------------- Each Lender hereby represents that it is a commercial bank, insurance company, savings and loan association, savings bank or other financial institution, pension fund or mutual fund or other "accredited investor" (as defined in Regulation D under the Securities Act of 1933, as amended) which makes (or purchases interests in) loans in the ordinary course of its business and that it will make all Loans made by it for its own account in the ordinary course of such business and not with a view to or for sale in connection with any distribution of the Notes or other evidence of Indebtedness; provided however that, subject to subsection 9.2, the disposition of the 140 Notes or other evidence of Indebtedness held by that Lender shall at all times be within its exclusive control. Each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree that the representations and warranties of such Lender contained in Section 2(c) of such Assignment Agreement are incorporated herein by this reference. 9.2 Assignments and Participations in Loans and Notes ------------------------------------------------- A. General. Subject to subsection 9.2B, each Lender shall have the right at any time to (i) sell, assign or transfer to one or more commercial banks, insurance companies, savings and loan associations, savings banks or other financial institutions, pension funds or mutual funds or other accredited investors ("Eligible Assignees") or (ii) sell participations to any Person in, all or any part of its Commitments or any Loan or Loans made by it or its Letters of Credit or participations therein or any other interest herein or in any other Obligations owed to it; provided that no such sale, assignment, transfer or participation shall, without the consent of Company, require Company to file a registration statement with the Securities and Exchange Commission or apply to qualify such sale, assignment, transfer or participation under the securities laws of any state; provided further that prior to receiving any confidential or other material information regarding Company or the transactions contemplated by this Agreement, any Eligible Assignee shall have entered into a Confidentiality Agreement; provided further that no such sale, assignment or transfer described in clause (i) above shall be effective unless and until an Assignment Agreement effecting such sale, assignment or transfer shall have been accepted by Administrative Agent and recorded in the Register as provided in subsection 9.2B(ii); provided further that no such sale, assignment, transfer or participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the Revolving Loan Commitment and the Revolving Loans of the Lender effecting such sale, assignment, transfer or participation; and provided further that, anything contained herein to the contrary notwithstanding, the Swing Line Loan Commitment and the Swing Line Loans of Swing Line Lender may not be sold, assigned or transferred as described in clause (i) above to any Person other than a successor Administrative Agent and Swing Line Lender to the extent contemplated by subsection 8.6. Except as otherwise provided in this subsection 9.2, no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Commitments or the Loans, the Letters of Credit or participations therein, or the other Obligations owed to such Lender. 141 B. Assignments. (i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter -------------------------------- of Credit or participation therein, or other Obligation may (a) be assigned in any amount to another Lender, with the giving of written notice to Company and Administrative Agent, (b) be assigned in any amount to any Affiliate of any Lender with the prior consent of Administrative Agent (which consent shall not be unreasonably withheld) or (c) be assigned in an aggregate amount of not less than $10,000,000 (or such lesser amount as shall constitute the aggregate amount of the Commitments, Loans, Letters of Credit and participations therein, and other Obligations of the assigning Lender) to any other Eligible Assignee with the prior consent of Administrative Agent (which consent shall not be unreasonably withheld). To the extent of any such assignment in accordance with either clause (a), (b) or (c) above, the assigning Lender shall be relieved of its obligations with respect to its Commitments, Loans, Letters of Credit or participations therein, or other Obligations or the portion thereof so assigned. The parties to each such assignment shall execute and deliver to Administrative Agent, for its acceptance and recording in the Register, an Assignment Agreement, together with a processing and recordation fee of $3,500 and such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to subsection 2.8B(iv). Upon such execution, delivery, acceptance and recordation, from and after the effective date specified in such Assignment Agreement, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 9.11B) and be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto; provided that, anything contained in any of the Loan Documents to the contrary notwithstanding, if such Lender is the Issuing Lender with respect to any outstanding Letters of Credit such Lender shall continue to have all rights and obligations of an Issuing Lender with respect to such Letters of Credit until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder). The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Lender 142 and, if any such assignment occurs after the issuance of any Notes hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes, if any, to Administrative Agent for cancellation, and thereupon new Notes shall, if so requested by the assignee and/or the assigning Lender in accordance with subsection 2.1F, be issued to the assignee and/or to the assigning Lender, with appropriate insertions, to reflect the new Commitments and/or outstanding Term Loans, as the case may be, of the assignee and/or the assigning Lender. (ii) Acceptance by Administrative Agent; Recordation in Register. ----------------------------------------------------------- Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing and recordation fee referred to in subsection 9.2B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Administrative Agent pursuant to subsection 2.8B(iv), Administrative Agent shall, if Administrative Agent has consented to the assignment evidenced thereby (to the extent such consent is required pursuant to subsection 9.2B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), (b) record the information contained therein in the Register, and (c) give prompt notice thereof to Company. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 9.2B(ii). C. Participations. The holder of any participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting (i) the extension of the scheduled final maturity date of any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation, and all amounts payable by Company hereunder (including amounts payable to such Lender pursuant to subsections 2.6D and 2.8) shall be determined as if such Lender had not sold such participation. Company and each Lender hereby acknowl- edge and agree that, solely for purposes of subsections 9.5 and 9.6, (a) any participation will give rise to a direct obligation of Company to the participant and (b) the participant shall be considered to be a "Lender". D. Assignments to Federal Reserve Banks. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 9.2, any Lender may 143 assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that (i) no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. 9.3 Expenses -------- Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all the reasonable costs and expenses of preparation of this Agreement and the other Loan Documents, and all the reasonable costs of furnishing all opinions by counsel for Company and the other Loan Parties (including without limitation any opinions requested by Lenders as to any legal matters arising hereunder) and of Company's performance of and compliance with all agreements and conditions contained herein on its part to be performed or complied with; (ii) the reasonable fees, expenses and disbursements of counsel to Administrative Agent and Collateral Agent (including reasonable allocated costs of internal counsel) in connection with the negotiation, preparation, execution and administration of this Agreement, the other Loan Documents, the Letters of Credit, the Notes and the Loans hereunder, and any amendments and waivers hereto and thereto; (iii) all other actual and reasonable costs and expenses incurred by Administrative Agent and Collateral Agent (including reasonable attorneys' fees) in connection with the negotiation, preparation and execution of the Loan Documents and the transactions contemplated hereby and thereby, including the arrangement by Administrative Agent for one or more Lenders to participate in the facilities described herein; (iv) all the actual costs and expenses of creating and perfecting Liens in favor of Secured Parties pursuant to any Loan Document, including filing and recording fees and expenses, title insurance, fees and expenses of counsel for providing such opinions as Lenders may reasonably request and reasonable fees and expenses of legal counsel to Administrative Agent and Collateral Agent; and (v) after the occurrence of an Event of Default, all reasonable costs and expenses (including reasonable attorneys' fees, including reasonable allocated costs of internal counsel, and reasonable costs of settlement) incurred by each Lender in enforcing any Obligations of or in collecting any payments due from Company hereunder or under the Notes, if any, by reason of such Event of Default or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceeding. 144 9.4 Indemnity --------- In addition to the payment of expenses pursuant to subsection 9.3, whether or not the transactions contemplated hereby shall be consummated, Company agrees to indemnify, pay and hold Agents and Lenders, and the officers, directors, employees and agents of Agents and Lenders (collectively called the "Indemnitees") harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitee shall be designated a party thereto) other than losses and costs with respect to Taxes which shall be governed by subsection 2.8, which may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement or the other Loan Documents, or Lenders' agreement to make the Loans or the use or intended use of the proceeds of Loans and the issuance of Letters of Credit hereunder and Lenders' agreement to purchase participations therein as provided for herein, or the use or intended use of the Letters of Credit, the Guaranty or the transactions or documents contemplated thereby or referenced to therein, including but not limited to any Acquisition (the "indemnified liabilities"); provided that Company shall not have any obligation to an Indemnitee hereunder with respect to indemnified liabilities arising from the bad faith, gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Company shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all indemnified liabilities incurred by the Indemnitees or any of them. 9.5 Set Off ------- In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default (after the giving of any notice and the expiration of any grace period contained in the definition thereof), each Lender is hereby authorized by Company at any time or from time to time, without notice to Company, or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, Indebtedness evidenced by certificates of deposit, whether matured or unmatured but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender to or for the credit or the account of Company or against and on account 145 of the obligations and liabilities of Company to that Lender under this Agreement and the Notes, the Letters of Credit including, but not limited to, all claims of any nature or description arising out of or connected with this Agreement, the Letters of Credit or the other Loan Documents, irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) that Lender shall have declared the principal of and interest on the Loans and Notes, if any, any obligations of Company in respect of the Letters of Credit and other amounts due hereunder to be due and payable as permitted by Section 7 and although said obligations and liabilities, or any of them, may be contingent or unmatured. 9.6 Ratable Sharing --------------- Each Lender agrees with each other Lender that (i) with respect to all amounts received by them which are applicable to the payment of principal of or interest on the Loans and amounts payable in respect of Letters of Credit or commitment fees, equitable adjustment will be made so that, in effect, all such amounts will be shared among Lenders proportionately to their respective Pro Rata Shares (subject to adjustment to give effect to the interest rate borne by Affected Loans pursuant to subsection 2.6C) whether received by voluntary payment, by the exercise of the right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any or all of the Obligations and (ii) if any of them shall exercise any right of counterclaim, set-off, banker's lien or similar right with respect to amounts owed by Company hereunder or in respect of the Letters of Credit, that Lender shall apportion the amount recovered as a result of the exercise of such right pro rata in accordance with (a) all amounts outstanding at such time owed by Company to it hereunder and (b) all amounts otherwise owed by Company to it, and (iii) if any of them shall thereby through the exercise of any right of counterclaim, set- off, banker's lien or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal and interest due with respect to the Loans made by that Lender or amounts payable in respect of any Letter of Credit or any participation therein, or any other amount payable hereunder (collectively, the "Aggregate Amounts Due" to such Lender), which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (y) notify each other Lender and Administrative Agent of such receipt and (z) purchase participations (which it shall be deemed to have done simultaneously upon the receipt of such payment) in the Aggregate Amounts Due to the other Lenders so that all recoveries of Aggregate Amounts Due shall be shared by Lenders in proportion to their respective Pro Rata Shares; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender, those purchases shall be rescinded and the 146 purchase prices paid for such participations shall be returned to that Lender to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangements and agrees that any participant in respect of any Loan may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Company to that participant as fully as if that participant were a Lender in the amount of such participation held by that participant. 9.7 Amendments and Waivers ---------------------- A. No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, if any, or of any other Loan Document, or consent to any departure by Company or any of its Subsidiaries therefrom, shall in any event be effective without the written concurrence of Requisite Lenders and Company; provided that any amendment, modification, termination, or waiver: (i) of the definition of any "Pro Rata Share" or of "Requisite Lenders"; (ii) of the final maturity dates (but not the date of any scheduled installment of principal) of any of the Loans; (iii) resulting in a decrease of the principal of or interest rates borne by the Loans, any amounts payable in respect of the Letters of Credit (including affecting the fees payable in connection therewith) or the amount of fees payable to Lenders hereunder; or (iv) the provisions contained in subsections 2.6B, 2.6C, 2.6D, 7.1 and 9.7 shall be effective only if evidenced by a writing signed by or on behalf of Requisite Lenders and any Lender adversely affected thereby; provided further that any amendment, modification, termination, or waiver: (a) of any provision expressly requiring the approval or concurrence of all Lenders, (b) releasing all or substantially all of the Collateral or (c) releasing the Guaranty or any Loan Party from its obligations under the Guaranty other than in accordance with the terms thereof shall be effective only if evidenced by a writing signed by or on behalf of all Lenders; and provided still further that Company may supplement Schedules 4.1, 4.7, 4.15 and 4.17 to this Agreement to the extent permitted by this Agreement and the Schedules to the Security Agreement and the Patent and Trademark Agreements to the extent permitted by each such Agreement, respectively, without requiring the consent of Administrative Agent or any Lender. No increase in any Lender's Commitments shall be effective without the concurrence of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Potential Events of Default or Events of Default or of a mandatory reduction in the Commitments shall not constitute an increase in the Commitment of any Lender, and that an increase in the available portion of any Commitment of, or the extension of credit in excess of its Commitment by, any Lender shall not constitute an increase in the Commitment of such Lender). No amendment, modification, termination or waiver of (1) any provision of Section 8 shall be effective without the written concurrence of Administrative Agent and (2) any provision of subsection 2.1A(iv) or any other 147 provision of this Agreement relating to the Swing Line Loan Commitment or the Swing Line Loans shall be effective without the written concurrence of the Swing Line Lender. B. If, in connection with any proposed amendment, modification, termination or waiver to any of the provisions of this Agreement or the Notes as contemplated by clauses (i) through (iv) of the first proviso of subsection 9.7A or clauses (a) through (c) of the second proviso of subsection 9.7A, the consent of the Requisite Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then Company shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clause (i) or (ii) below, to either (i) replace each such non-consenting Lender or Lenders with one or more Replacement Lenders pursuant to subsection 2.10 so long as at the time of such replacement, each such Replacement Lender consents to the proposed amendment, modification, termination or waiver, or (ii) terminate such non-consenting Lender's Commitments and repay in full its outstanding Loans in accordance with subsections 2.4A(i)(b) and 2.4C(ii); provided that unless the Commitments that are terminated and the Loans that are repaid pursuant to the preceding clause (ii) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to the preceding clause (ii), the Requisite Lenders (determined before giving effect to the proposed action) shall specifically consent thereto; provided further that Company shall not have the right to terminate such non-consenting Lender's Commitment and repay in full its outstanding Loans pursuant to clause (ii) of this subsection 9.7B if, immediately after the termination of such Lender's Revolving Loan Commitment in accordance with subsection 2.4C(ii), the Revolving Loan Exposure of all Lenders would exceed the Revolving Loan Commitments of all Lenders; provided still further that Company shall not have the right to replace a Lender solely as a result of the exercise of such Lender's rights (and the withholding of any required consent by such Lender) pursuant to the second and third sentences of subsection 9.7A. C. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Company in any case shall entitle Company to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 9.7 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Company, on Company and its Subsidiaries. 148 9.8 Independence of Covenants ------------------------- All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists. 9.9 Change in Accounting Principles ------------------------------- If any changes in accounting principles from those used in the preparation of the financial statements referred to in subsection 4.3 hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) result in a change in the method of calculation of financial covenants, standards or terms found in Sections 1, 5 and 6 hereof, the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating Company's financial condition shall be the same after such changes as if such changes had not been made. 9.10 Notices ------- Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, telexed by facsimile transmission, cable or United States mail or courier service and shall be deemed to have been given when delivered in person, receipt of telecopy, telex, facsimile transmission or cable or four Business Days after deposit in the United States mail, registered or certified, with postage prepaid and properly addressed; provided that notices to Administrative Agent shall not be effective until received. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this subsection 9.10) shall be as set forth below each party's name on the signature pages hereof. 9.11 Survival of Warranties and Certain Agreements --------------------------------------------- A. All agreements, representations and warranties made herein shall survive the execution and delivery and effectiveness of this Agreement, the making of the Loans hereunder, the execution and delivery of the Notes and the issuance of the Letters of Credit. 149 B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7H, 2.7I, 2.8, 2.9, 5.12, 8.6, 9.3 and 9.4 and the agreements of Lenders set forth in subsections 8.2C, 8.4, 9.5 and 9.6 and subsection 8(c) of the Intercreditor Agreement shall survive the payment of the Loans, the Notes, the cancellation or expiration of the Letters of Credit and the termination of this Agreement. 9.12 Failure or Indulgence Not Waiver; Remedies Cumulative ----------------------------------------------------- No failure or delay on the part of any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to and not exclusive of, any rights or remedies otherwise available. 9.13 Severability ------------ In case any provision in or obligation under this Agreement or the other Loan Documents shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 9.14 Obligations Several; Independent Nature of Lenders' Rights ---------------------------------------------------------- The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement and no action taken by Lenders pursuant hereto shall be deemed to constitute Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement, and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 150 9.15 Headings -------- Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 9.16 Applicable Law -------------- THIS AGREEMENT AND THE NOTES, IF ANY, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK) WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993) REVISION, INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK. 9.17 Successors and Assigns ---------------------- This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders. The terms and provisions of this Agreement shall inure to the benefit of any assignee or transferee of any Loan or Commitment, and in the event of such transfer or assignment, the rights and privileges herein conferred upon Lenders shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. Neither Company's rights or obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders. Lenders' rights of assignment are subject to subsection 9.2. 9.18 Consent to Jurisdiction and Service of Process ---------------------------------------------- ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN 151 DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 9.10; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 9.18 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE. 9.19 Counterparts; Effectiveness --------------------------- This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. It is the intention of each of the 152 parties hereto that all indebtedness of the Company under the Existing Credit Agreement be continued hereunder, that the Existing Credit Agreement be amended and restated to reflect such continuation and to preserve the perfection and priority of all security interests securing such indebtedness under the Existing Credit Agreement and the other Loan Documents, and that all indebtedness and obligations of Company and its Subsidiaries hereunder and thereunder shall be secured by the Collateral Documents. This Agreement constitutes an amendment and restatement of the Existing Credit Agreement made under the terms of subsection 9.7 thereof, and is not intended by the parties to constitute a novation or refinancing of the Notes. Notwithstanding the use of the terms "Loan" or "Loans" to denote the interest of an individual Lender under this Agreement, no construction shall be applied so as to defeat such intention of the parties. All increases in the respective Commitments and Pro Rata Shares of Lenders under the terms of this Agreement as of the Closing Date shall be deemed to be a purchase of an assignment of Loans under subsection 9.2 of the Existing Credit Agreement, notwithstanding the fact that the parties may not have strictly complied with the terms thereof, strict compliance with the provisions of which are hereby waived solely for those assignments occurring on the Closing Date effected by the execution and delivery of this Agreement. This Agreement shall become effective upon the execution of a counterpart hereof by Company, Agents and Lenders and written or telephonic notification of such execution and authorization of delivery thereof has been received by Company and Administrative Agent; provided that unless and until all the conditions set forth in Section 3.1 have been satisfied or waived by Administrative Agent or Lenders then the Existing Credit Agreement shall remain in full force and effect without giving effect to the amendments set forth herein, as if this Second Amended and Restated Credit Agreement shall have never been executed and delivered. Any references in the Loan Documents to specific section numbers of the Existing Credit Agreement or to specific Schedules or Exhibits thereof shall be deemed to refer to the appropriate section numbers of this Agreement (however numbered) corresponding to the specific numbered sections of the Existing Credit Agreement or to the appropriate Schedules or Exhibits hereof (however identified) corresponding to the specific Schedules or Exhibits of the Existing Credit Agreement. 9.20 Marshalling; Payments Set Aside ------------------------------- Neither any Lender nor Administrative Agent shall be under any obligation to marshal any assets in favor of any Loan Party or any other party or against or in payment of any or all of the Obligations. To the extent that any Loan Party makes a payment or payments to Agent or any Lender (or to Administrative Agent for the benefit of any Lender), or Administrative Agent or any Lender enforce their security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are 153 subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 9.21 Waiver of Jury Trial -------------------- EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 9.21 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 154 WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. WORLD COLOR PRESS, INC. By: --------------------------- Name: Title: Notice Address: World Color Press, Inc. The Mill 340 Pemberwick Greenwich, CT 06831 Attention: Marc L. Reisch with a copy to: Latham & Watkins 885 Third Avenue New York, New York 10022 Attention: Steven Della Rocca, Esq. SECOND AMENDED AND RESTATED WCP CREDIT AGREEMENT S-1 BANKERS TRUST COMPANY, individually as a Lender and as Administrative Agent By: --------------------------- Name: Title: Notice to Address: Bankers Trust Company 130 Liberty Street New York, New York 10006 (Mail Stop 2141) Attention: Mary Jo Jolly with a copy to: Bankers Trust Company 300 South Grand Avenue Los Angeles, California 90071 Attention: Patrice Daniels SECOND AMENDED AND RESTATED WCP CREDIT AGREEMENT S-2 BA SECURITIES, INC., as Syndication Agent By: --------------------------- Name: Title: Notice to Address: Bank of America NT & SA 200 West Jackson Street, 9th Floor Chicago, Illinois 60697 Attention: Celyndia Williams AA - Account Administrator With a copy to: BA Securities, Inc. 335 Madison Avenue, 5th Floor New York, New York 10017 Attention: Brock T. Harris SECOND AMENDED AND RESTATED WCP CREDIT AGREEMENT S-3 BANK OF AMERICA NT & SA, as a Lender By: --------------------------- Name: Title: Notice to Address: Bank of America NT & SA 200 West Jackson Street, 9th Floor Chicago, Illinois 60697 Attention: Celyndia Williams AA - Account Administrator With a copy to: Bank of America NT & SA 335 Madison Avenue, 5th Floor New York, New York 10017 Attention: Brock T. Harris SECOND AMENDED AND RESTATED WCP CREDIT AGREEMENT S-4 CITIBANK, N.A., as a Lender and as Documentation Agent By: --------------------------- Name: Title: Notice to Address: Citibank, N.A. 399 Park Avenue, 6th Floor New York, New York 10043 Attention: Michael Mahre SECOND AMENDED AND RESTATED WCP CREDIT AGREEMENT S-5 ACKNOWLEDGED AND AGREED: BANKERS TRUST COMPANY, as Collateral Agent By: --------------------------- Name: Title: Notice to Address: Bankers Trust Company 130 Liberty Avenue New York, New York 10006 (Mail Stop 2141) Attention: Mary Jo Jolly with a copy to: Bankers Trust Company 300 South Grand Avenue Los Angeles, California 90071 Attention: Patrice Daniels SECOND AMENDED AND RESTATED WCP CREDIT AGREEMENT S-6 EX-10.3 4 EXHIBIT 10.3 WORLD COLOR PRESS, INC. FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") is dated as of June 10, 1996 and entered into by and among WORLD COLOR PRESS, INC., a Delaware corporation ("Company"), the Lenders party to the Credit Agreement referred to below on the date hereof but and immediately before giving effect to this Amendment (the "Existing Lenders"), BA SECURITIES, INC., as Syndication Agent, CITIBANK, N.A., as Documentation Agent and BANKERS TRUST COMPANY, as Administrative Agent, and each of the lenders listed on Exhibit A hereto (the "New --------- Lenders"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company, the Existing Lenders, the Syndication Agent, the Documentation Agent and the Administrative Agent are parties to the Second Amended and Restated Credit Agreement dated as of June 6, 1996 (the"Credit Agreement"); and WHEREAS, the parties hereto wish to amend the Credit Agreement as herein provided. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: Section 1. DEEMED ASSIGNMENT A. Each of the Existing Lenders (the "Assignor Lenders," and each an "Assignor Lender") severally and not jointly hereby sells and assigns to each of the New Lenders without recourse and without representation or warranty (other than as expressly provided herein), and each New Lender hereby purchases and assumes from each Assignor Lender, that interest in and to each of such Assignor Lender's rights and obligations under the Credit Agreement as of the date hereof which in the 3aggregate represents such New Lender's pro rata share (for each such New Lender, its "Pro Rata Share") as set forth on, and in respect of the credit facilities listed on, Exhibit B hereto (calculated after giving --------- 1 effect to this Amendment), and such Pro Rata Share represents all of the outstanding rights and obligations under the Credit Agreement that are being sold and assigned to each New Lender, including, without limitation, (x) in the case of any assignment of all or any portion of the Existing Term Loans and the Tranche A Acquisition Term Loans, all rights and obligations with respect to such New Lender's Pro Rata Share of such outstanding Existing Term Loans and outstanding Tranche A Acquisition Term Loans, and (y) in the case of any assignment of all or any portion of the Tranche B Acquisition Term Loan Commitments and Revolving Loan Commitments and outstanding Tranche B Acquisition Term Loans and outstanding Revolving Loans, all rights and obligations with respect to such New Lender's Pro Rata Share of such Tranche B Acquisition Term Loan Commitments and Revolving Loan Commitments and such outstanding Tranche B Term Loans and outstanding Revolving Loans, including in the case of the Revolving Loan Commitments, all rights and obligations relating thereto with respect to Letters of Credit and Swing Line Loans. B. In consideration of the assignment to each New Lender described in Section 1A above, such New Lender hereby agrees to pay to Administrative Agent, on the First Amendment Effective Date (as defined herein), the principal amount of any outstanding Loans included within the New Lender's Pro Rata Share of the credit facilities listed on Exhibit B hereto, such payment to be made by wire transfer of immediately available funds to Administrative Agent in accordance with payment instructions separately provided by Administrative Agent to such New Lender. Upon receipt of any such payment, Administrative Agent shall pay each Assignor Lender its share of such payment. C. The parties hereby agree that, upon giving effect to the assignment and assumption described above, (i) each New Lender shall be a party to the Credit Agreement and shall have all of the rights and obligations under the Loan Documents, and shall be deemed to have made all of the covenants and agreements contained in the Loan Documents, arising out of or otherwise related to its share of the credit facilities assigned to such New Lender hereby, and (ii) each Assignor Lender shall be absolutely released from any of such obligations, covenants and agreements assumed or made by any New Lender in respect of assignments to such New Lender hereby. D. Each Assignor Lender and each New Lender hereby acknowledge and confirm their understanding and intent that from and after the First Amendment Effective Date, Administrative Agent shall make all payments under the Credit Agreement in respect of the assignment made hereby to such New Lender (including without limitation all payments of principal and accrued but unpaid interest, commitment fees and letter of credit fees with respect thereto) (i) in the case of any such interest and fees that shall have accrued prior to the First Amendment Effective Date, to the applicable Assignor Lender, and (ii) in all other cases, to the applicable New Lender; provided that each Assignor Lender and each New Lender shall make payments directly to each other to the extent necessary to effect any appropriate adjustments in any amounts distributed to such 2 Assignor Lender and/or such New Lender by Administrative Agent under the Loan Documents in respect of the share of the credit facilities assigned to such New Lender hereby in the event that, for any reason whatsoever, the payment of consideration contemplated by Section 1A occurs on a date other than the First Amendment Effective Date. Each Assignor Lender and each New Lender hereby agrees from time to time, upon request of a party hereto, to take such additional actions and to execute and deliver such additional documents and instruments as such party may reasonably request to effect the transactions contemplated by, and to carry out the intent of, this Agreement. E. No Assigning Lender shall be responsible to any New Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of any of the Loan Documents or for any representations, warranties, recitals or statements made therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any Assigning Lender to any New Lender or by or on behalf of Company or any of its Subsidiaries to any Assigning Lender or any New Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for the payment of any Obligations, nor shall any Assigning Lender be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. F. Each New Lender represents and warrants that it is an Eligible Assignee; that it has experience and expertise in the making of loans such as the Loans; that it has acquired the assignment evidenced by this Agreement for its own account in the ordinary course of business and not with a view to or for sale in connection with any distribution of Notes or other evidence of Indebtedness (it being understood and agreed that, subject to the provisions of 9.2B of the Credit Agreement, the disposition of such assignment or of any interest therein shall at all times remain within such New Lender's exclusive control); and that it has received, reviewed and approved a copy of the Credit Agreement (including all Exhibits and Schedules thereto). G. Each New Lender represents and warrants that it has received from Assigning Lenders such financial information regarding Company and its Subsidiaries as is available to Assigning Lenders and as such New Lender has requested, that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the assignment evidenced by this Agreement, and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. No Assignor Lender shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of any New Lender or to provide any New Lender with any other credit or other information with respect thereto, whether coming into its possession before the making of 3 the initial Loans or at any time or times thereafter, and no Assignor Lender shall have any responsibility with respect to the accuracy of or the completeness of any information provided to any New Lender. H. Each Assignor Lender represents and warrants to each New Lender that the rights and obligations of such Assignor Lender assigned hereby are not subject to any Liens created by that Assignor Lender. I. Administrative Agent hereby waives any processing and recordation fee that may be payable under subsection 9.2B(i) of the Credit Agreement as a result of the assignments contemplated hereby. J. Notwithstanding anything herein to the contrary, in the event any New Lender does not execute and deliver this Amendment to Administrative Agent on or prior to 10:00 a.m., June 10, 1996, Administrative Agent may elect in its sole discretion to remove such Person as a New Lender for all purposes under this Amendment, it being understood that any rights and obligations under the Credit Agreement that would have been assigned to such Person shall be retained by the Assignor Lenders, Administrative Agent shall amend Exhibit A and Exhibit B hereto to give effect to such removal and the removal of any Persons as a New Lender as provided in this paragraph shall not preclude the effectiveness of this Amendment as provided in Section 3 hereof. Section 2. ADDITION OF New Lenders AS LENDERS; PRO RATA SHARES AND NOTICE ADDRESSES; AMENDMENTS TO CREDIT AGREEMENT The Credit Agreement is hereby amended to include the New Lenders listed on Exhibit A to this Agreement as Lenders for all purposes and as such --------- New Lenders shall hereby become vested with all the rights, powers, privileges and duties of a Lender under the Credit Agreement and each of the other Loan Documents. For purposes of the Credit Agreement, the addresses of each of the New Lenders shall be as set forth under such New Lenders name on the signature pages hereof. Accordingly, the Pro Rata Shares set forth on Schedule 1.1A/2.1 to the Credit Agreement is hereby amended by deleting it in ----------------- its entirety and substituting in place thereof a new Schedule 1.1A/2.1 in the ----------------- form of Exhibit B to this Amendment. --------- Section 3. CONDITIONS TO EFFECTIVENESS Sections 1 and 2 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "First Amendment Effective Date"): A. On or before the First Amendment Effective Date, Company shall have delivered to Administrative Agent (i) executed copies of this Amendment and (ii) the 4 Notes, drawn to the order of each Existing Lender and New Lender and with appropriate insertions, each dated the First Amendment Effective Date (collectively, the "Amended Notes"). B. On or before the First Amendment Effective Date, each Assignor Lender and each New Lender shall have delivered to Administrative Agent an executed original or telefacsimile of a counterpart of this Amendment. Section 4. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Lender that the following statements are true, correct and complete: A. Corporate Power and Authority. Company has all requisite corporate power and authority to enter into this Amendment and to issue the Amended Notes and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "Amended Agreement"). B. Authorization of Agreements. The execution and delivery of this Amendment and the issuance, delivery and payment of the Amended Notes have been duly authorized by all necessary corporate action on the part of Company. C. No Conflict. The execution and delivery by Company of this Amendment and the Amended Notes and the performance by Company of the Amended Agreement and the issuance, delivery and payment of the Amended Notes by Company do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries. D. Governmental Consents. The execution and delivery by Company of this Amendment and the Amended Notes and the performance by Company of the Amended Agreement and the issuance, delivery and payment of the Amended Notes by Company do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. 5 E. Binding Obligation. This Amendment and the Amended Agreement and the Amended Notes being delivered by Company pursuant to the Amendment have been duly executed and delivered by Company and, when executed and delivered, will be the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. F. Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the First Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. G. Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Potential Event of Default. Section 5. MISCELLANEOUS A. Reference to and Effect on the Credit Agreement and the Other Loan Documents. (i) On and after the First Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent or any Lender under, the Credit Agreement or any of the other Loan Documents. 6 B. Fees and Expenses. Company acknowledges that all costs, fees and expenses as described in subsection 9.3 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Company. C. Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. D. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. E. Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment (other than the provisions of Sections 1 and 2 hereof, the effectiveness of which is governed by Section 3 hereof) shall become effective upon the execution of a counterpart hereof by Company, Existing Lenders, New Lenders, Syndication Agent, Distribution Agent and Administrative Agent and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. WORLD COLOR PRESS, INC. By: ------------------------------------------- Name Title: BANKERS TRUST COMPANY, individually as a Lender and as Administrative Agent By: ------------------------------------------- Name: Title: S-1 BANK OF AMERICA NT & SA, as a Lender By: ------------------------------------------- Name: Title: CITIBANK, N.A., as a Lender and as Documentation Agent By: ------------------------------------------- Name: Title: S-2 New Lenders ABN AMRO BANK, NV, NEW YORK BRANCH, as Lender By: ABN Amro North America, Inc., as Agent By: -------------------------------------- Name: Title: Notice Address: 500 Park Avenue, 2nd Floor New York, New York 10022 Attention: Laura Fazio BANK OF MONTREAL, as Lender By: ------------------------------------------- Name: Title: Notice Address: 430 Park Avenue 14th Floor New York, New York 10022 Attention: Kanu Modi S-3 THE BANK OF NOVA SCOTIA as Lender By: ------------------------------------------- Name: Title: Notice Address: 165 Broadway One Liberty Plaza, 26th Floor New York, New York 10006 Attention: Daniel Foote BANK OF SCOTLAND, as Lender By: ------------------------------------------- Name: Title: Notice Address: 565 Fifth Avenue New York, New York 10017 Attention: John Kelly S-4 BANK OF TOKYO - MITSUBISHI TRUST COMPANY, as Lender By: ------------------------------------------- Name: Title: Notice Address: 1251 Avenue of the Americas New York, NY 10020 Attention: Randy Szuch BANQUE PARIBAS, as Lender By: ------------------------------------------- Name: Title: Notice Address: 787 Seventh Avenue, 32nd Floor New York, NY 10019 Attention: Mark Black S-5 CIBC, INC., as Lender By: ------------------------------------------- Name: Title: Notice Address: 425 Lexington Avenue New York, NY 10017 Attention: Richard Hassard FLEET NATIONAL BANK, as Lender By: ------------------------------------------- Name: Title: Notice Address: 75 State Street Boston, MA 02109 Attention: William M. Clark S-6 THE FUJI BANK, LIMITED, NEW YORK BRANCH, as Lender By: ------------------------------------------- Name: Title: Notice Address: Two World Trade Center, 79th Floor New York, New York 10048 Attention: Vincent Ingato THE INDUSTRIAL BANK OF JAPAN, LTD., as Lender By: ------------------------------------------- Name Title: Notice Address: 245 Park Avenue, 22nd Floor New York, New York 10167 Attention: Jennifer McNamara S-7 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. CHICAGO BRANCH, as Lender By: ------------------------------------------- Name: Title: Notice Address: 190 South LaSalle, Suite 800 Chicago, IL 60603 Attention: Yoshio Takai NATIONSBANK, N.A., as Lender By: ------------------------------------------- Name: Title: Notice Address: 767 Fifth Avenue, 5th Floor New York, New York 10153 Attention: Margaret Vandenberg S-8 PNC BANK, KENTUCKY, INC., as Lender By: ------------------------------------------- Name: Title: Notice Address: Citizens Plaza 500 West Jefferson Louisville, KY 40202 Attention: Ralph Phillips THE SANWA BANK, LIMITED, as Lender By: ------------------------------------------- Name: Title: Notice Address: 55 East 52nd Street New York, NY 10055 Attention: Dominic Sorresso S-9 BANK OF IRELAND, GRAND CAYMAN BRANCH, as Lender By: ------------------------------------------- Name: Title: Notice Address: 640 Fifth Avenue, 2nd Floor New York, NY 10019 Attention: Roger Burns THE FIRST NATIONAL BANK OF BOSTON, as Lender By: ------------------------------------------- Name: Title: Notice Address: 100 Federal Street Boston, MA 02109 Attention: Julie Jalelian S-10 CREDIT LYONNAIS NEW YORK BRANCH, as Lender By: ------------------------------------------- Name: Title: Notice Address: 1301 Avenue of the Americas New York, NY 10019 Attention: Heidi Sandquist CREDIT SUISSE, as Lender By: ------------------------------------------- Name: Title: By: ------------------------------------------- Name: Title: Notice Address: 12 East 49th Street 44th Floor New York, NY 10017 Attention: Chris Horgan S-11 THE DAI-ICHI KANGYO BANK, LTD., as Lender By: ------------------------------------------- Name: Title: Notice Address: One World Trade Center 48th Floor New York, NY Attention: Ron Wollinsky DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Lender By: ------------------------------------------- Name: Title: Notice Address: 75 Wall Street 29th Floor New York, NY 10005-2889 Attention: Bill Lambert S-12 THE SAKURA BANK, LIMITED, as Lender By: ------------------------------------------- Name: Title: Notice Address: 277 Park Ave. New York, NY 10172 Attention: Barry Wilson THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH, as Lender By: ------------------------------------------- Name: Title: Notice Address: 277 Park Avenue New York, NY 10172 Attention: Dan Lenzo S-13 THE SUMITOMO TRUST & BANKING CO., LTD., NEW YORK BRANCH, as Lender By: ------------------------------------------- Name: Title: Notice Address: 527 Madison Avenue New York, NY 10022 Attention: Robin Schreiber TORONTO DOMINION (NEW YORK), INC., as Lender By: ------------------------------------------- Name: Title: Notice Address: 31 West 52nd Street New York, NY 10019-6101 Attention: Douglas Weir S-14 UNITED JERSEY BANK, as Lender By: ------------------------------------------- Name: Title: Notice Address: 25 East Salem Street 6th Floor Hackensack, New Jersey 07602 Attention: Bruce Gray THE YASUDA TRUST AND BANKING CO., LTD., NEW YORK BRANCH, as Lender By: ------------------------------------------- Name: Title: Notice Address: 666 5th Avenue Suite 801 New York, NY 10103 Attention: Nick Pullen S-15 THE TOKAI BANK, LTD., NEW YORK BRANCH, as Lender By: ------------------------------------------- Name: Title: Notice Address: 55 East 52nd St. Park Avenue Plaza New York, NY 10055 Attention: Mr. Muto MERITA BANK LTD NEW YORK BRANCH as Lender By: ------------------------------------------- Name: Title: Notice Address: 437 Madison Avenue New York, NY 10022 Attention: Frank Maffei S-16 BAYERISCHE VEREINSBANK AG, NEW YORK BRANCH, as Lender By: ------------------------------------------- Name: Title: By: ------------------------------------------- Name: Title: Notice Address: 335 Madison Avenue, 19th Floor New York, NY 10017 Attention: Ralph Enke THE BANK OF NEW YORK, as Lender By: Name Title: Notice Address: New York Corporate Division One Wall Street, 22nd Floor New York, NY 10005 Attention: William G. C. Dakin S-17 RIGGS BANK N.A., as Lender By: -------------------------------------- Name Title: Notice Address: 808 17th Street, N.W., 10th Floor Washington, D.C. 20074-0649 Attention: Tai M. Pham FIRST UNION NATIONAL BANK, as Lender By: -------------------------------------- Name Title: Notice Address: 550 Broad Street Newark, NJ 17102 Attention: Robert Doherty S-18 GIROCREDIT BANK AKTIENGESELLSCHAFT DER SPARKASSEN, GRAND CAYMAN ISLAND BRANCH, as Lender By: -------------------------------------- Name Title: Notice Address: 65 E. 55th Street, 21st Floor New York, NY 10022 Attention: Patricia Hogan S-19 EXHIBIT A New Lenders ABN Amro Bank NV, New York Branch Bank of Montreal The Bank of Nova Scotia Bank of Scotland Bank of Tokyo - Mitsubishi Trust Company Banque Paribas CIBC, Inc. Fleet National Bank The Fuji Bank, Limited, New York Branch The Industrial Bank of Japan, Ltd. The Long-Term Credit Bank of Japan, Ltd., Chicago Branch Nationsbank, N.A. PNC Bank, Kentucky, Inc. The Sanwa Bank, Limited Bank of Ireland, Grand Cayman Branch The First National Bank of Boston Credit Lyonnais New York Branch Credit Suisse The Dai-Ichi Kangyo Bank, Ltd. Dresdner Bank AG, New York and Grand Cayman Branches The Sakura Bank, Limited The Sumitomo Bank, Limited, New York Branch The Sumitomo Trust & Banking Co., Ltd., New York Branch Toronto Dominion (New York), Inc. United Jersey Bank The Yasuda Trust and Banking Co., Ltd., New York Branch The Tokai Bank, Ltd., New York Branch Merita Bank Ltd Bayerische Vereinsbank AG, New York Branch The Bank of New York Riggs Bank N.A. First Union National Bank GiroCredit Bank Aktiengesellschaft der Sparkassen, Grand Cayman Island Branch Ex. A-1 EXHIBIT B Schedule 1.1A/2.1 Ex. B-1 -----END PRIVACY-ENHANCED MESSAGE-----