-----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, I+TQHNragL1gGwMlBHVxXIMn3A5nTMZTwvILG4UwcWEIxrsqbmhwEqOZphtLRgbs /AMwQZohC/iCUJ29E/9SXw== 0000912057-99-006741.txt : 19991119 0000912057-99-006741.hdr.sgml : 19991119 ACCESSION NUMBER: 0000912057-99-006741 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19991118 GROUP MEMBERS: SIGNAL ACQUISTION CORPORATION GROUP MEMBERS: THYSSEN-BORNEMISZA CONTINUITY TRUST GROUP MEMBERS: TRIPOINT GLOBAL COMMUNICATIONS INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VERTEX COMMUNICATIONS CORP /TX/ CENTRAL INDEX KEY: 0000780416 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 751982974 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-38309 FILM NUMBER: 99760344 BUSINESS ADDRESS: STREET 1: 2600 N LONGVIEW ST STREET 2: PO BOX 1277 CITY: KILGORE STATE: TX ZIP: 75662 BUSINESS PHONE: 9039840555 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TRIPOINT GLOBAL COMMUNICATIONS INC CENTRAL INDEX KEY: 0001099157 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 565 FIFTH AVENUE 17TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128508500 MAIL ADDRESS: STREET 1: 565 FIFTH AVENUE 17TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D 1 SCHEDULE 13D - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 13D Under the Securities Exchange Act of 1934 ------------------------ VERTEX COMMUNICATIONS CORPORATION (Name of Issuer) COMMON STOCK, PAR VALUE $.10 PER SHARE (Title of Class of Securities) 925320-10-3 (CUSIP Number of Class of Securities) STEPHEN GREEN, ESQ. TRIPOINT GLOBAL COMMUNICATIONS INC. 565 FIFTH AVENUE, 17TH FLOOR NEW YORK, NY 10017 (212) 850-8500 (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications) ------------------------------ COPIES TO: FAIZA J. SAEED, ESQ. WILLIAM F. PYNE, ESQ. CRAVATH, SWAINE & MOORE THOMPSON & KNIGHT L.L.P. WORLDWIDE PLAZA 1700 PACIFIC AVENUE 825 EIGHTH AVENUE SUITE 3300 NEW YORK, NY 10019 DALLAS, TX 75201 TELEPHONE: (212) 474-1454 TELEPHONE: (214) 969-1700
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) NOVEMBER 11, 1999 (Date of Event which Requires Filing of this Statement) ------------------------------ If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Section 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box / /. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7(b) for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the act (however, see the Notes). - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP No. 925320-10-3 - --------------------------------------------------------------------- (1) NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON SIGNAL ACQUISITION CORPORATION (I.R.S. IDENTIFICATION NO. APPLIED FOR) - --------------------------------------------------------------------- (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A)(X) (B)( ) - --------------------------------------------------------------------- (3) SEC USE ONLY - --------------------------------------------------------------------- (4) SOURCE OF FUNDS AF - --------------------------------------------------------------------- (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) ( ) - --------------------------------------------------------------------- (6) CITIZENSHIP OR PLACE OF ORGANIZATION TEXAS - ---------------------------------------------------------------------
(7) SOLE VOTING POWER NUMBER OF - -------------------------------------------------------------------------------- SHARES BENEFICIALLY (8) SHARED VOTING POWER OWNED BY EACH 705,913 - -------------------------------------------------------------------------------- REPORTING PERSON (9) SOLE DISPOSITIVE POWER - -------------------------------------------------------------------------------- WITH (10) SHARED DISPOSITIVE POWER 705,913 - --------------------------------------------------------------------------------
- --------------------------------------------------------------------- (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 705,913 - --------------------------------------------------------------------- (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ( ) (SEE INSTRUCTIONS) - --------------------------------------------------------------------- (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) APPROXIMATELY 13.1% OF THE COMMON STOCK OUTSTANDING - --------------------------------------------------------------------- (14) TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------
*See Note on page 5. 2 CUSIP No. 925320-10-3 - --------------------------------------------------------------------- (1) NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON TRIPOINT GLOBAL COMMUNICATIONS INC. (I.R.S. IDENTIFICATION NO. 56-1871899) - --------------------------------------------------------------------- (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A)(X) (B)( ) - --------------------------------------------------------------------- (3) SEC USE ONLY - --------------------------------------------------------------------- (4) SOURCE OF FUNDS BK, WC - --------------------------------------------------------------------- (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) ( ) - --------------------------------------------------------------------- (6) CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - ---------------------------------------------------------------------
(7) SOLE VOTING POWER NUMBER OF - -------------------------------------------------------------------------------- SHARES BENEFICIALLY (8) SHARED VOTING POWER OWNED BY EACH 705,913 - -------------------------------------------------------------------------------- REPORTING PERSON (9) SOLE DISPOSITIVE POWER - -------------------------------------------------------------------------------- WITH (10) SHARED DISPOSITIVE POWER 705,913 - --------------------------------------------------------------------------------
- --------------------------------------------------------------------- (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 705,913 - --------------------------------------------------------------------- (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ( ) (SEE INSTRUCTIONS) - --------------------------------------------------------------------- (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) APPROXIMATELY 13.1% OF THE COMMON STOCK OUTSTANDING - --------------------------------------------------------------------- (14) TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------
*See Note on page 5. 3 CUSIP No. 925320-10-3 - --------------------------------------------------------------------- (1) NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON THYSSEN-BORNEMISZA CONTINUITY TRUST - --------------------------------------------------------------------- (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A)(X) (B)( ) - --------------------------------------------------------------------- (3) SEC USE ONLY - --------------------------------------------------------------------- (4) SOURCE OF FUNDS N/A - --------------------------------------------------------------------- (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) ( ) - --------------------------------------------------------------------- (6) CITIZENSHIP OR PLACE OF ORGANIZATION BERMUDA - ---------------------------------------------------------------------
(7) SOLE VOTING POWER NUMBER OF - -------------------------------------------------------------------------------- SHARES BENEFICIALLY (8) SHARED VOTING POWER OWNED BY EACH 863,013 - -------------------------------------------------------------------------------- REPORTING PERSON (9) SOLE DISPOSITIVE POWER - -------------------------------------------------------------------------------- WITH (10) SHARED DISPOSITIVE POWER 863,013 - --------------------------------------------------------------------------------
- --------------------------------------------------------------------- (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 863,013 - --------------------------------------------------------------------- (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ( ) (SEE INSTRUCTIONS) - --------------------------------------------------------------------- (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) APPROXIMATELY 16.1% OF THE COMMON STOCK OUTSTANDING - --------------------------------------------------------------------- (14) TYPE OF REPORTING PERSON OO - ---------------------------------------------------------------------
*See Note on page 5. 4 NOTE. On November 11, 1999, TriPoint Global Communications Inc. ("Parent") and Signal Acquisition Corporation (the "Purchaser"), a wholly owned subsidiary of Parent, entered into a Company Shareholder Agreement (the "Shareholder Agreement") with certain shareholders of Vertex Communications Corporation (the "Company") (collectively the "Principal Shareholders"), pursuant to which each Principal Shareholder has agreed, among other things, to accept the Offer (as defined in the Offer to Purchase referred to below) with respect to all the shares of Common Stock, par value $0.10 per share, of the Company ("Shares") that he owns and to tender such Shares pursuant to the Offer. In addition, each Principal Shareholder has granted the Purchaser an option to purchase all his Shares at a price equal to the Offer Price in the event that such Principal Shareholder fails to tender such Shares pursuant to the Offer, or withdraws such Shares prior to expiration of the Offer. Under the Shareholder Agreement, each Principal Shareholder has granted to certain individuals designated by Parent an irrevocable proxy with respect to the Shares subject to the Shareholder Agreement to vote such Shares in a manner consistent with the Shareholder Agreement. The Purchaser's right to purchase and vote the Shares subject to the Shareholder Agreement is reflected in Rows 8 and 10 of each of the tables above. A copy of the Shareholder Agreement is attached hereto as an Exhibit, and the Shareholder Agreement is described more fully in Section 12 of the Offer to Purchase dated November 18, 1999 (the "Offer to Purchase") attached hereto as Exhibit 2(a). In addition, Thyssen-Bornemisza Continuity Trust, through its subsidiaries Thybo Gamma Ltd. and Vulcan Securities Limited, both Bermuda corporations, beneficially owns 157,100 shares, none of which were acquired during the past 60 days. ITEM 1. SECURITY AND ISSUER (a) This Schedule 13D relates to the Common Stock, par value $0.10 per share, of Vertex Communications Corporation. (b) The Issuer is Vertex Communications Corporation, a Texas corporation. (c) The address of the Issuer's principal executive office is 2600 North Longview Street, Kilgore, Texas 75662. ITEM 2. IDENTITY AND BACKGROUND (a)-(c) and (f) This Schedule 13D is being filed by the Purchaser, a Texas corporation and a wholly owned subsidiary of Parent, a Delaware corporation, which is an 80% owned indirect subsidiary of TBG Holdings NV, a Netherlands Antilles corporation ("TBG Holdings"). Information concerning the principal business and the address of the principal offices of the Purchaser and Parent is set forth in Section 9 ("Certain Information Concerning the Purchaser, Parent and TBG Holdings") of the Offer to Purchase and is incorporated herein by reference. Thyssen-Bornemisza Continuity Trust, a Bermuda trust, is the sole shareholder of TBG Holdings and ultimately controls Parent. The address of the Trust's principal business and principal office is at Clarendon House, Church Street, Hamilton, Bermuda. The Trust's principal business is holding the assets of the Trust, which consist of operating companies, management companies and investment companies worldwide. The trustee of the Trust is Thybo Trustees Limited (the "Trustee"), whose registered office is also at Clarendon House, Church Street, Hamilton, Bermuda. The directors of Tornabuoni Limited, a Guernsey corporation, have the power to appoint and remove directors of the Trustee, but have no other control with respect to the Trust. This filing shall not be construed as an admission that the Trust is, for purposes of Regulation 14D under the Securities Exchange Act of 1934, as amended, a bidder on whose behalf this tender offer is being made. The name, citizenship, business address and present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I to the Offer to Purchase which is incorporated herein by reference. The name, citizenship, business address and present principal occupation or employment of each of the directors and executive officers of the Trustee is set forth in Schedule I hereto and is incorporated herein by reference. 5 (d) and (e) During the last five years, none of the Purchaser, Parent or the Trust or, to the best knowledge of the Purchaser, Parent and the Trust, any of their respective executive officers or directors, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), nor has any of them been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. ITEM 4. PURPOSE OF TRANSACTION (a)-(g) and (j) The information set forth in Section 12 ("Purpose of the Offer; the Merger Agreement; the Shareholder Agreement; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. (h) and (i) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares; Continued Listing on the NYSE; Exchange Act Registration; Margin Regulations") of the Offer to Purchase is incorporated herein by reference. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a)-(c) The information set forth in "Introduction", Section 9 ("Certain Information Concerning the Purchaser, Parent and TBG Holdings") and Section 12 ("Purpose of the Offer; the Merger Agreement; the Shareholder Agreement; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The information set forth in "Introduction", Section 9 ("Certain Information Concerning the Purchaser, Parent and TBG Holdings"), Section 11 ("Contacts and Transactions with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; the Merger Agreement; the Shareholder Agreement; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS (1) Credit Facility dated June 25, 1998 among Parent (under its former name, Prodelin Holding Corporation), certain of its subsidiaries, First Union National Bank and certain other financial institutions. (2)(a) Offer to Purchase. (2)(b) Agreement and Plan of Merger dated as of November 11, 1999, among the Purchaser, Parent and the Company. (2)(c) Company Shareholder Agreement dated as of November 11, 1999, among the Purchaser, Parent and certain shareholders of the Company. (3) See Exhibits 2(a), 2(b) and 2(c).
6 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Signal Acquisition Corporation, By /s/ JACK HAEGELE ----------------------------------------- Name: Jack Haegele Title: Chief Executive Officer TriPoint Global Communications Inc., By /s/ JACK HAEGELE ----------------------------------------- Name: Jack Haegele Title: Chief Executive Officer THYBO TRUSTEES LIMITED (AS TRUSTEE OF THE THYSSEN-BORNEMISZA CONTINUITY TRUST), By /s/ FRANK MUTCH ----------------------------------------- Name: Frank Mutch Title: Director
Dated: November 18, 1999 7 EXHIBIT INDEX
EXHIBIT PAGE NUMBER EXHIBIT NAME NUMBER - --------------------- ------------ -------- (1) Credit Facility dated June 25, 1998, among Parent (under its former name, Prodelin Holding Corporation), certain of its subsidiaries, First Union National Bank and certain other financial institutions...................................... (2)(a) Offer to Purchase........................................... (2)(b) Agreement and Plan of Merger dated as of November 11, 1999, among the Purchaser, Parent and the Company................. (2)(c) Company Shareholder Agreement dated as of November 11, 1999, among the Purchaser, Parent and certain shareholders of the Company..................................................... (3) See exhibits 2(a), 2(b) and 2(c)............................
8 SCHEDULE I The following is a list of the directors and executive officers of the Trustee, setting forth the residence or business address, citizenship, principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted for each such person.
PRESENT PRINCIPAL OCCUPATION AND NAME, TITLE AND ADDRESS CITIZENSHIP BUSINESS ADDRESS - ----------------------- ----------- -------------------------------------------------- Retired Arne Hovdesven USA Director and President 1425 Regatta Drive Wilmington, North Carolina Attorney Conyers, Dill & Pearman P.O. Box HM 666 Clarendon House Church Street Hamilton HM CX Bermuda Frank Mutch British Director c/o Conyers, Dill & Pearman P.O. Box HM 666 Clarendon House Church Street Hamilton HM CX Bermuda Attorney Maitland & Co. 44-48 Dover Street (5th Floor) London W1X 3RF England Eric P. Pfaff British Director, Vice President and Assistant Secretary Maitland & Co. 44-48 Dover Street (5th Floor) London W1X 3RF England Vice President of the Bank of Bermuda The Bank of Bermuda Limited 6, Front Street Hamilton 5-31 Bermuda Cummings V. Zuill British Director and Vice President The Bank of Bermuda Limited 6, Front Street Hamilton 5-31 Bermuda
9 EX-99.(1) 2 EXHIBIT 99.(1) CREDIT AGREEMENT Dated as of June 25, 1998 among PRODELIN HOLDING CORPORATION as Borrower, AND CERTAIN SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME PARTY HERETO, as Guarantors, THE SEVERAL LENDERS FROM TIME TO TIME PARTY HERETO AND FIRST UNION NATIONAL BANK, as Agent TABLE OF CONTENTS SECTION 1 DEFINITIONS ...........................................................................................1 1.1 DEFINITIONS .........................................................................................1 1.2 COMPUTATION OF TIME PERIODS..........................................................................26 1.3 ACCOUNTING TERMS ....................................................................................26 SECTION 2 CREDIT FACILITIES .....................................................................................26 2.1 REVOLVING LOANS .....................................................................................26 2.2 LETTER OF CREDIT SUBFACILITY.........................................................................28 2.3 SWINGLINE LOANS .....................................................................................33 2.4 TRANCHE A TERM LOAN..................................................................................35 2.5 TRANCHE B TERM LOAN..................................................................................36 SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES.........................................................39 3.1 DEFAULT RATE ........................................................................................39 3.2 BORROWINGS; EXTENSION AND CONVERSION.................................................................39 3.3 PREPAYMENTS .........................................................................................41 3.4 TERMINATION AND REDUCTION OF REVOLVING COMMITTED AMOUNT..............................................43 3.5 FEES ................................................................................................43 3.6 CAPITAL ADEQUACY ....................................................................................44 3.7 LIMITATION ON EURODOLLAR LOANS.......................................................................45 3.8 ILLEGALITY ..........................................................................................45 3.9 REQUIREMENTS OF LAW..................................................................................45 3.10 TREATMENT OF AFFECTED LOANS.........................................................................46 3.11 TAXES ..............................................................................................47 3.12 COMPENSATION .......................................................................................49 3.13 PRO RATA TREATMENT..................................................................................50 3.14 SHARING OF PAYMENTS.................................................................................51 3.15 PAYMENTS, COMPUTATIONS, ETC.........................................................................51 3.16 EVIDENCE OF DEBT....................................................................................53 SECTION 4 GUARANTY ..............................................................................................54 4.1 THE GUARANTY ........................................................................................54 4.2 OBLIGATIONS UNCONDITIONAL............................................................................55 4.3 REINSTATEMENT .......................................................................................56 4.4 CERTAIN ADDITIONAL WAIVERS...........................................................................56 4.5 REMEDIES ............................................................................................56 4.6 RIGHTS OF CONTRIBUTION...............................................................................56 4.7 CONTINUING GUARANTEE.................................................................................58 SECTION 5 CONDITIONS ............................................................................................58 5.1 CLOSING CONDITIONS...................................................................................58 5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT...............................................................64 SECTION 6 REPRESENTATIONS AND WARRANTIES.........................................................................65 6.1 FINANCIAL CONDITION..................................................................................65
i 6.2 NO MATERIAL CHANGE...................................................................................66 6.3 ORGANIZATION AND GOOD STANDING.......................................................................66 6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS........................................................66 6.5 NO CONFLICTS ........................................................................................67 6.6 NO DEFAULT ..........................................................................................67 6.7 OWNERSHIP ...........................................................................................67 6.8 LITIGATION ..........................................................................................68 6.9 TAXES ...............................................................................................68 6.10 COMPLIANCE WITH LAW.................................................................................68 6.11 ERISA ..............................................................................................68 6.12 SUBSIDIARIES .......................................................................................69 6.13 GOVERNMENTAL REGULATIONS, ETC.......................................................................70 6.14 PURPOSE OF LOANS AND LETTERS OF CREDIT..............................................................71 6.15 ENVIRONMENTAL MATTERS...............................................................................71 6.16 INTELLECTUAL PROPERTY...............................................................................72 6.17 SOLVENCY ...........................................................................................72 6.18 INVESTMENTS ........................................................................................72 6.19 LOCATION OF COLLATERAL..............................................................................72 6.20 DISCLOSURE .........................................................................................73 6.21 NO BURDENSOME RESTRICTIONS..........................................................................73 6.22 LABOR MATTERS ......................................................................................73 6.23 NATURE OF BUSINESS..................................................................................73 6.24 REPRESENTATIONS AND WARRANTIES FROM PURCHASE AGREEMENT..............................................73 6.25 YEAR 2000 COMPLIANCE................................................................................73 SECTION 7 AFFIRMATIVE COVENANTS..................................................................................74 7.1 INFORMATION COVENANTS................................................................................74 7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.............................................................78 7.3 BOOKS AND RECORDS....................................................................................78 7.4 COMPLIANCE WITH LAW..................................................................................78 7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS..............................................................78 7.6 INSURANCE ...........................................................................................78 7.7 MAINTENANCE OF PROPERTY..............................................................................79 7.8 PERFORMANCE OF OBLIGATIONS...........................................................................80 7.9 USE OF PROCEEDS .....................................................................................80 7.10 AUDITS/INSPECTIONS..................................................................................80 7.11 FINANCIAL COVENANTS.................................................................................80 7.12 ADDITIONAL CREDIT PARTIES...........................................................................82 7.13 PLEDGED ASSETS .....................................................................................82 7.14 YEAR 2000 COMPLIANCE................................................................................83 7.15 ANNUAL MEETING......................................................................................83 7.16 NAME CHANGE DOCUMENTATION...........................................................................84 7.17 IRB FACILITY. ....................................................................................84 7.18 NORTH CAROLINA SURVEY...............................................................................84 7.19 INTEREST RATE PROTECTION............................................................................84 SECTION 8 NEGATIVE COVENANTS ....................................................................................84 8.1 INDEBTEDNESS ........................................................................................85
ii 8.2 LIENS ...............................................................................................86 8.3 NATURE OF BUSINESS...................................................................................86 8.4 CONSOLIDATION, MERGER, DISSOLUTION, ETC..............................................................86 8.5 ASSET DISPOSITIONS...................................................................................87 8.6 INVESTMENTS .........................................................................................88 8.7 RESTRICTED PAYMENTS..................................................................................88 8.8 PREPAYMENTS OF INDEBTEDNESS, ETC.....................................................................88 8.9 TRANSACTIONS WITH AFFILIATES.........................................................................89 8.10 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS...............................................................89 8.11 LIMITATION ON RESTRICTED ACTIONS....................................................................89 8.12 OWNERSHIP OF SUBSIDIARIES...........................................................................90 8.13 SALE LEASEBACKS ....................................................................................90 8.14 NO FURTHER NEGATIVE PLEDGES.........................................................................90 SECTION 9 EVENTS OF DEFAULT .....................................................................................91 9.1 EVENTS OF DEFAULT....................................................................................91 9.2 ACCELERATION; REMEDIES...............................................................................94 SECTION 10 AGENCY PROVISIONS ....................................................................................95 10.1 APPOINTMENT, POWERS AND IMMUNITIES..................................................................95 10.2 RELIANCE BY AGENT...................................................................................95 10.3 DEFAULTS ...........................................................................................96 10.4 RIGHTS AS A LENDER..................................................................................96 10.5 INDEMNIFICATION ....................................................................................96 10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.............................................................97 10.7 SUCCESSOR AGENT ....................................................................................97 SECTION 11 MISCELLANEOUS ........................................................................................98 11.1 NOTICES ............................................................................................98 11.2 RIGHT OF SET-OFF; ADJUSTMENTS.......................................................................99 11.3 BENEFIT OF AGREEMENT................................................................................99 11.4 NO WAIVER; REMEDIES CUMULATIVE......................................................................101 11.5 EXPENSES; INDEMNIFICATION...........................................................................101 11.6 AMENDMENTS, WAIVERS AND CONSENTS....................................................................102 11.7 COUNTERPARTS .......................................................................................104 11.8 HEADINGS ...........................................................................................104 11.9 SURVIVAL ...........................................................................................104 11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE...................................................104 11.11 SEVERABILITY ......................................................................................105 11.12 ENTIRETY ..........................................................................................105 11.13 BINDING EFFECT; TERMINATION........................................................................105 11.14 SOURCE OF FUNDS....................................................................................106 11.15 CONFLICT ..........................................................................................106 11.16 CONFIDENTIALITY....................................................................................106 11.17 ARBITRATION; CONSENT TO JURISDICTION AND SERVICE OF PROCESS........................................107
iii SCHEDULES Schedule 1.1A Investments Schedule 1.1B Liens Schedule 2.1(a) Lenders Schedule 5.1(j) Corporate Structure Schedule 6.1 Modifications to GAAP Schedule 6.2 Material Change Schedule 6.4 Required Consents, Authorizations, Notices and Filings Schedule 6.8 Litigation Schedule 6.12 Subsidiaries Schedule 6.16 Intellectual Property Schedule 6.19(a) Mortgaged Properties Schedule 6.19(b) Collateral Locations Schedule 6.19(c) Chief Executive Offices/Principal Places of Business Schedule 7.6 Insurance Schedule 8.1 Indebtedness Schedule 8.9 Transactions with Affiliates Schedule 8.11 Restricted Actions EXHIBITS Exhibit 1.1A Form of Pledge Agreement Exhibit 1.1B Form of Security Agreement Exhibit 2.1(e) Form of Revolving Note Exhibit 2.3(d) Form of Swingline Note Exhibit 2.4(e) Form of Tranche A Term Note Exhibit 2.5(e) Form of Tranche B Term Note Exhibit 3.2(a)(i) Form of Notice of Borrowing Exhibit 3.2(a)(iii) Form of Notice of Account Designation Exhibit 3.2(b) Form of Notice of Extension/Conversion Exhibit 7.1(d) Form of Officer's Compliance Certificate Exhibit 7.12 Form of Joinder Agreement Exhibit 11.3(b) Form of Assignment and Acceptance iv CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of June 25, 1998 (as amended, modified, restated or supplemented from time to time, the "CREDIT AGREEMENT"), is by and among PRODELIN HOLDING CORPORATION, a Delaware corporation (the "BORROWER"), the Guarantors (as defined herein), the Lenders (as defined herein) and FIRST UNION NATIONAL BANK, as Agent for the Lenders (in such capacity, the "AGENT"). W I T N E S S E T H WHEREAS, the Borrower has requested that the Lenders provide a $160,000,000 credit facility for the purposes hereinafter set forth; and WHEREAS, the Lenders have agreed to make the requested credit facility available to the Borrower on the terms and conditions hereinafter set forth; NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS 1.1 DEFINITIONS. As used in this Credit Agreement, the following terms shall have the meanings specified below unless the context otherwise requires: "ACQUIRED COMPANY" means Comsat RSI, Inc., a Delaware corporation. "ACQUISITION" means the acquisition by any Person of the Capital Stock or all or substantially all of the Property of another Person, whether or not involving a merger or consolidation with such Person. "ADDITIONAL CREDIT PARTY" means each Person that becomes a Guarantor after the Closing Date by execution of a Joinder Agreement. "ADJUSTED BASE RATE" means the Base Rate PLUS the Applicable Percentage. "ADJUSTED EURODOLLAR RATE" means the Eurodollar Rate PLUS the Applicable Percentage. "AFFILIATE" means, with respect to any Person, any other Person (i) directly or indirectly controlling or controlled by or under direct or indirect common control with such Person or (ii) directly or indirectly owning or holding five percent (5%) or more of the 1 equity interest in such Person. For purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AGENT" shall have the meaning assigned to such term in the heading hereof, together with any successors or assigns. "AGENT'S FEE LETTER" means that certain letter agreement, dated as of April 21, 1998, between the Agent and the Borrower, as amended, modified, restated or supplemented from time to time. "AGENT'S FEES" shall have the meaning assigned to such term in Section 3.5(d). "APPLICABLE LENDING OFFICE" means, for each Lender, the office of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify to the Agent and the Borrower by written notice as the office by which its Eurodollar Loans are made and maintained. "APPLICABLE PERCENTAGE" means, for purposes of calculating the applicable interest rate for any day for any Revolving Loan, any Tranche A Term Loan or any Tranche B Term Loan, the applicable rate of the Commitment Fee for any day for purposes of Section 3.5(a), and the applicable rate of the Letter of Credit Fee for any day for purposes of Section 3.5(b)(i), the appropriate applicable percentage corresponding to the Leverage Ratio in effect as of the most recent Calculation Date:
APPLICABLE APPLICABLE APPLICABLE APPLICABLE PERCENTAGE PERCENTAGE FOR PERCENTAGE FOR PERCENTAGE FOR FOR TRANCHE REVOLVING LOANS AND REVOLVING LOANS AND TRANCHE B TERM B TERM LOANS TRANCHE A TERM TRANCHE A TERM LOANS WHICH WHICH ARE PRICING LEVERAGE LOANS WHICH ARE LOANS WHICH ARE ARE EURODOLLAR BASE RATE LEVEL RATIO EURODOLLAR LOANS BASE RATE LOANS LOANS LOANS --------- ---------------------- --------------------- --------------------- ---------------- -------------- I GREATER THAN 5.0 to 1.0 2.50% 1.25% 3.00% 1.75% II LESS THAN 5.0 to 1.0 but GREATER THAN 4.5 to 1.0 2.25% 1.00% 2.75% 1.50% III LESS THAN 4.5 to 1.0 but GREATER THAN 3.75 to 1.0 2.00% .75% 2.50% 1.25% IV LESS THAN 3.75 to 1.0 but GREATER THAN 3.25 to 1.0 1.50% .25% 2.50% 1.25% V LESS THAN 3.25 to 1.0 but GREATER THAN 2.75 to 1.0 1.25% 0% 2.25% 1.00% VI LESS THAN 2.75 to 1.0 1.00% 0% 2.00% .75% ========= ====================== ===================== ===================== ================ ==============
APPLICABLE APPLICABLE PERCENTAGE PERCENTAGE FOR PRICING LEVERAGE FOR LETTER COMMITMENT LEVEL RATIO OF CREDIT FEE FEES --------- ------------------------- -------------- ------------- I GREATER THAN 5.0 to 1.0 2.50% .50% II LESS THAN 5.0 to 1.0 but GREATER THAN 4.5 to 1.0 2.25% .50% III LESS THAN 4.5 to 1.0 but GREATER THAN 3.75 to 1.0 2.00% .375% IV LESS THAN 3.75 to 1.0 but GREATER THAN 3.25 to 1.0 1.50% .375% V LESS THAN 3.25 to 1.0 but GREATER THAN 2.75 to 1.0 1.25% .25% VI LESS THAN 2.75 to 1.0 1.00% .25% ========= ========================= ============== =============
The Applicable Percentages shall be determined and adjusted quarterly on the date (each a "CALCULATION DATE") five Business Days after receipt by the Agent of the officer's certificate in accordance with the provisions of Section 7.1(c) for the most recently ended fiscal quarter 2 of the Consolidated Parties the first of which to occur on August 31, 1998; PROVIDED, HOWEVER, that (i) the initial Applicable Percentages shall be based on Pricing Level I (as shown above) and shall remain at Pricing Level I until the first Calculation Date subsequent to the Closing Date and, thereafter, the Pricing Level shall be determined by the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding the applicable Calculation Date, and (ii) if the Borrower fails to provide the officer's certificate to the Agent as required by Section 7.1(c) for the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding the applicable Calculation Date, the Applicable Percentage from such Calculation Date shall be based on Pricing Level I until such time as an appropriate officer's certificate is provided, whereupon the Pricing Level shall be determined by the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding such Calculation Date. Each Applicable Percentage shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the Applicable Percentages shall be applicable to all existing Loans as well as any new Loans made or issued. "APPLICATION PERIOD", in respect of any Asset Disposition, shall have the meaning assigned to such term in Section 8.5. "ASSET DISPOSITION" means the disposition of any or all of the assets (including without limitation the Capital Stock of a Subsidiary) of any Consolidated Party whether by sale, lease, transfer or otherwise. The term "Asset Disposition" shall not include (i) any Equity Issuance, (ii) sales of inventory and Cash Equivalents, and grants of licenses in Intellectual Property, in each case in the ordinary course of business for fair consideration or (iii) the sale or disposition of machinery and equipment no longer used or useful in the conduct of such Person's business. "ASSET DISPOSITION PREPAYMENT EVENT" means, with respect to any Asset Disposition other than an Excluded Asset Disposition, the failure of the Borrower to apply (or cause to be applied) the Net Cash Proceeds of such Asset Disposition to the purchase, acquisition or construction of Eligible Assets during the Application Period for such Asset Disposition. "BANKRUPTCY CODE" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. "BANKRUPTCY EVENT" means, with respect to any Person, the occurrence of any of the following with respect to such Person: (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar 3 official) of such Person or for any substantial part of its Property or ordering the winding up or liquidation of its affairs; or (ii) there shall be commenced against such Person an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded for a period of sixty (60) consecutive days; or (iii) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or make any general assignment for the benefit of creditors; or (iv) such Person shall be unable to, or shall admit in writing its inability to, pay its debts generally as they become due. "BASE RATE" means, for any day, the rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus one-half of one percent (.5%) and (b) the Prime Rate for such day. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate. "BASE RATE LOAN" means any Loan bearing interest at a rate determined by reference to the Base Rate. "BORROWER" means the Person identified as such in the heading hereof, together with any permitted successors and assigns. "BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to close, EXCEPT THAT, when used in connection with a Eurodollar Loan, such day shall also be a day on which dealings between banks are carried on in U.S. dollar deposits in London, England. "CALCULATION DATE" has the meaning set forth in the definition of "Applicable Percentage" set forth in this Section 1.1. "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 accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person. "CAPITAL STOCK" means (i) in the case of a corporation, capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) in the case of a limited liability company, membership interests. "CASH EQUIVALENTS" means (a) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) U.S. 4 dollar denominated time deposits and certificates of deposit of (i) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (ii) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "APPROVED BANK"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within six months of the date of acquisition, (d) repurchase agreements with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America in which any Credit Party shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations and (e) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (d). "CHANGE OF CONTROL" means that TBG Industries, Inc. and/or Chase Capital Partners and their Affiliates shall own outstanding shares of Capital Stock representing less than 51% of the Voting Stock of the Borrower. "CLOSING DATE" means the date hereof. "CODE" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "COLLATERAL" means a collective reference to the collateral which is identified in, and at any time will be covered by, the Collateral Documents. "COLLATERAL DOCUMENTS" means a collective reference to the Security Agreement, the Pledge Agreement, the Mortgage Instruments and such other documents executed and delivered in connection with the attachment and perfection of the Agent's security interests and liens arising thereunder, including without limitation, UCC financing statements and patent and trademark filings. "COMMITMENT" means (i) with respect to each Lender, the Revolving Commitment of such Lender, the Tranche A Term Loan Commitment of such Lender and the Tranche B Term Loan Commitment of such Lender, (ii) with respect to the Issuing Lender, the LOC Commitment and (iii) with respect to the Swingline Lender, the Swingline Commitment. 5 "COMMITMENT FEE" shall have the meaning assigned to such term in Section 3.5(a). "COMMITMENT FEE CALCULATION PERIOD" shall have the meaning assigned to such term in Section 3.5(a). "CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, all capital expenditures (excluding capital expenditures made with proceeds from Asset Dispositions or proceeds received from casualty or condemnation recovery events) of the Consolidated Parties on a consolidated basis for such period, as set forth on a statement of cash flows of the Consolidated Parties in accordance with GAAP. "CONSOLIDATED EBITDA" means, for any period, the sum of (i) Consolidated Net Income (excluding non-recurring, non-duplicative non-cash items including those associated with the sale of the Divested Businesses, which amount in connection with such sale shall not in an aggregate amount on an after-tax basis exceed $4,800,000) for such period, plus (ii) an amount which, in the determination of Consolidated Net Income for such period, has been deducted for (A) Consolidated Interest Expense, (B) total federal, state, local and foreign income, value added and similar taxes and (C) depreciation and amortization expense, all as determined in accordance with GAAP. For purposes hereof, Consolidated EBITDA of the Consolidated Parties for the quarterly period ending November 30, 1997 shall be $7,367,000 and for the quarterly period ending February 28, 1998, $7,199,000. "CONSOLIDATED INTEREST EXPENSE" means, for any period, interest expense (including the amortization of debt discount and premium, the interest component under Capital Leases and the implied interest component under Synthetic Leases, but excluding pay-in-kind interest) of the Consolidated Parties on a consolidated basis for such period, as determined in accordance with GAAP. For purposes hereof, Consolidated Interest Expense of the Consolidated Parties for the first three fiscal quarters to occur after the Closing Date shall be determined by annualizing the components thereof such that Consolidated Interest Expense for the first fiscal quarter to occur after the Closing Date would be multiplied by four (4), the first two (2) fiscal quarters would be multiplied by two (2) and the first three (3) fiscal quarters would be multiplied by one and one-third (1 1/3). "CONSOLIDATED NET INCOME" means, for any period, net income after taxes for such period of the Consolidated Parties on a consolidated basis, as determined in accordance with GAAP. "CONSOLIDATED NET WORTH" means, as of any date, shareholders' equity of the Consolidated Parties on a consolidated basis, as determined in accordance with GAAP. "CONSOLIDATED PARTIES" means a collective reference to the Borrower and its Subsidiaries, and "CONSOLIDATED PARTY" means any one of them. 6 "CONSOLIDATED SCHEDULED FUNDED DEBT PAYMENTS" means, as of the end of each fiscal quarter of the Consolidated Parties, for the Consolidated Parties on a consolidated basis, the sum of all scheduled payments of principal on Funded Indebtedness for the applicable period ending on such date (including the principal component of payments due on Capital Leases during the applicable period ending on such date); it being understood that Scheduled Funded Debt Payments shall not include voluntary prepayments or the mandatory prepayments required pursuant to Section 3.3. "CONSOLIDATED WORKING CAPITAL" means, at any time, the excess of (i) current assets of the Consolidated Parties on a consolidated basis at such time over (ii) current liabilities of the Consolidated Parties on a consolidated basis at such time, all as determined in accordance with GAAP. "CONTINUE", "CONTINUATION", and "CONTINUED" shall refer to the continuation pursuant to Section 3.2(b) hereof of a Eurodollar Loan from one Interest Period to the next Interest Period. "CONVERT", "CONVERSION", and "CONVERTED" shall refer to a conversion pursuant to Section 3.2(b) or Sections 3.7 through 3.12, inclusive, of a Base Rate Loan into a Eurodollar Loan. "CREDIT DOCUMENTS" means a collective reference to this Credit Agreement, the Notes, the LOC Documents, each Joinder Agreement, the Agent's Fee Letter, the Collateral Documents and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto (in each case as the same may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time), and "CREDIT DOCUMENT" means any one of them. "CREDIT PARTIES" means a collective reference to the Borrower and the Guarantors, and "CREDIT PARTY" means any one of them. "CREDIT PARTY OBLIGATIONS" means, without duplication, (i) all of the obligations of the Credit Parties to the Lenders (including the Issuing Lender) and the Agent, whenever arising, under this Credit Agreement, the Notes, the Collateral Documents or any of the other Credit Documents (including, but not limited to, any interest accruing after the occurrence of a Bankruptcy Event with respect to any Credit Party, regardless of whether such interest is an allowed claim under the Bankruptcy Code) and (ii) all liabilities and obligations, whenever arising, owing from the Borrower to any Lender, or any Affiliate of a Lender, arising under any Hedging Agreement. "DEBARMENT EVENT" means an event or series of events with respect to which (i) one or more Consolidated Parties are "debarred" from participation in federal, state or local government contract programs and (ii) revenues of the Consolidated Parties derived from such debarred government programs in the prior fiscal year taken as a whole are equal to or greater than the lesser of (a) 7% of total revenues of the Consolidated Parties during such period or (b) $25,000,000. 7 "DEBT ISSUANCE" means the issuance of any Indebtedness for borrowed money by any Consolidated Party. "DEFAULT" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "DEFAULTING LENDER" means, at any time, any Lender that (a) has failed to make a Loan or purchase a Participation Interest required pursuant to the term of this Credit Agreement within one Business Day of when due, (b) other than as set forth in (a) above, has failed to pay to the Agent or any Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement within one Business Day of when due, unless such amount is subject to a good faith dispute or (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or with respect to which (or with respect to any of assets of which) a receiver, trustee or similar official has been appointed. "DESIGNATED CORPORATIONS" means Comsat RSI, Inc., Comsat RSI Communications Corp., Comsat RSI Foreign Sales Corporation and Comsat RSI Maryland Inc. "DIVESTED BUSINESSES" means the operating assets of the Acquired Company involved in network systems and precision grinding technology or the Capital Stock of PG Technology Ltd. (or any Subsidiary engaged in the network systems business). "DOLLARS" and "$" means dollars in lawful currency of the United States of America. "DOMESTIC SUBSIDIARY" means, with respect to any Person, any Subsidiary of such Person which is incorporated or organized under the laws of any State of the United States or the District of Columbia. "ELIGIBLE ASSETS" means another business or any substantial part of another business or other long-term assets, in each case, in, or used or useful in, the same or a similar line of business as the Consolidated Parties were engaged in on the Closing Date or any reasonable extensions or expansions thereof. "ELIGIBLE ASSIGNEE" means (i) a Lender; (ii) an Affiliate of a Lender; (iii) a Related Fund; and (iv) any other Person approved by the Agent (such approval not to be unreasonably withheld or delayed) and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 11.3, the Borrower (such approval not to be unreasonably withheld or delayed by the Borrower and such approval to be deemed given by the Borrower if no objection is received by the assigning Lender and the Agent from the Borrower within three Business Days after notice of such proposed assignment has been provided by the assigning Lender to the Borrower); PROVIDED, HOWEVER, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "ENVIRONMENTAL LAWS" means any and all lawful and applicable Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, 8 permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "EQUITY ISSUANCE" means any issuance by any Consolidated Party to any Person which is not a Credit Party of shares of its Capital Stock. The term "Equity Issuance" shall not include any Asset Disposition. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA AFFILIATE" means an entity which is under common control with any Credit Party within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the Borrower and which is treated as a single employer under Sections 414(b) or (c) of the Code. "ERISA EVENT" means (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal by any Consolidated Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the complete or partial withdrawal of any Consolidated Party or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for imposition of a lien under Section 302(f) of ERISA exist with respect to any Plan; or (vii) the adoption of an amendment to any Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA. "EURODOLLAR LOAN" means any Loan that bears interest at a rate based upon the Eurodollar Rate. "EURODOLLAR RATE" means, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the Agent to be equal to the quotient obtained by dividing (a) the London Interbank Offered Rate for such Eurodollar Loan for such Interest Period by (b) 1 minus the Eurodollar Reserve Requirement for such Eurodollar Loan for such Interest Period. 9 "EURODOLLAR RESERVE REQUIREMENT" means, at any time, the maximum rate at which reserves (including, without limitation, any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Eurodollar Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the Adjusted Eurodollar Rate is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Loans. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Requirement. "EVENT OF DEFAULT" means such term as defined in Section 9.1. "EXCESS CASH FLOW" means, with respect to any fiscal year period of the Consolidated Parties on a consolidated basis, an amount equal to (a) Consolidated EBITDA for such period MINUS (b) Consolidated Capital Expenditures for such period MINUS (c) Consolidated Interest Expense for such period MINUS (d) increases (or PLUS decreases) in Consolidated Working Capital for such fiscal year MINUS (e) Federal, state and other income, value added and similar taxes actually paid by the Consolidated Parties on a consolidated basis during such period MINUS (f) Consolidated Scheduled Funded Debt Payments made during such period. "EXCLUDED ASSET DISPOSITION" means any Asset Disposition by any Consolidated Party to any Credit Party if the Credit Parties shall cause to be executed and delivered such documents, instruments and certificates as the Agent may request so as to cause the Credit Parties to be in compliance with the terms of Section 7.13 after giving effect to such Asset Disposition. "EXCLUDED ISSUANCE" means either (i) the receipt by the Borrower of a capital contribution from, or the sale by the Borrower of its Capital Stock to, TBG Industries, Inc. and/or Chase Capital Partners or any of their Affiliates (ii) the issuance by the Borrower in favor of TBG Industries, Inc. and/or Chase Capital Partners or any of their Affiliates after the Closing Date of subordinated debt on terms and conditions reasonably satisfactory to the Required Lenders or (iii) the issuance of any other Indebtedness permitted to be issued pursuant to Section 8.1 (excluding for purposes hereof Section 8.1(g)). "FEES" means all fees payable pursuant to Section 3.5. "FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; PROVIDED that (a) if such day is not a 10 Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Agent (in its individual capacity) on such day on such transactions as determined by the Agent. "FIRST UNION NATIONAL BANK" means First Union National Bank and its successors. "FOREIGN SUBSIDIARY" means, with respect to any Person, any Subsidiary of such Person which is not a Domestic Subsidiary of such Person. "FUNDED INDEBTEDNESS" means, with respect to any Person, without duplication, (i) all Indebtedness of such Person for borrowed money, (ii) all purchase money Indebtedness of such Person, including without limitation the principal portion of all obligations of such Person under Capital Leases, (iii) all Guaranty Obligations of such Person with respect to Funded Indebtedness of another Person, (iv) all Funded Indebtedness of another Person secured by a Lien on any Property of such Person, whether or not such Funded Indebtedness has been assumed, PROVIDED that for purposes hereof the amount of such Funded Indebtedness shall be limited to the greater of (A) the amount of such Funded Indebtedness to which there is recourse to such Person and (B) the fair market value of the property which is subject to the Lien (unless the amount of Funded Indebtedness secured by such Lien is less than such fair market value in which case the amount of such Funded Indebtedness), and (v) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product to which such Person is a party, where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP. The Funded Indebtedness of any Person shall include the Funded Indebtedness of any partnership or joint venture in which such Person is a general partner or joint venturer, but only to the extent to which there is recourse to such Person for the payment of such Funded Indebtedness. "GAAP" means generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3. "GOVERNMENTAL AUTHORITY" means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "GUARANTOR" means each of the Persons identified as a "Guarantor" on the signature pages hereto and each Additional Credit Party which may hereafter execute a Joinder Agreement, together with their successors and permitted assigns, and "GUARANTOR" means any one of them. "GUARANTY OBLIGATIONS" means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including 11 without limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any Property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase Property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made. "HEDGING AGREEMENTS" means any interest rate protection agreement or foreign currency exchange agreement between any Consolidated Party and any Lender, or any Affiliate of a Lender. "ILLINOIS IRB" means the $3,065,000 Illinois Development Finance Authority Industrial Development Bonds (Mark Antenna Products, Inc. Project) Series 1991. "INDEBTEDNESS" of any Person means (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations of such Person issued or assumed as the deferred purchase price of Property or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (f) all Guaranty Obligations of such Person, (g) the principal portion of all obligations of such Person under Capital Leases, (h) all obligations of such Person under Hedging Agreements, (i) the maximum amount of all letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (j) all preferred Capital Stock issued by such Person and required by the terms thereof to be redeemed, or for which mandatory sinking fund payments are due, by a fixed date, but only to the extent such redemption or sinking fund payments would be due prior to the final maturity date of the Loans hereunder, (k) the principal portion of all obligations of such Person under Synthetic Leases and (l) the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, but only to the extent to which there is recourse to such Person for the payment of such Indebtedness. 12 "INTEREST COVERAGE RATIO" means, with respect to the Consolidated Parties on a consolidated basis for the twelve month period ending on the last day of any fiscal quarter of the Consolidated Parties, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period. "INTEREST PAYMENT DATE" means (a) as to Base Rate Loans, the last day of each fiscal quarter and the Maturity Date, and (b) as to Eurodollar Loans, the last day of each applicable Interest Period and the Maturity Date, and in addition where the applicable Interest Period for a Eurodollar Loan is greater than three months, then also the date three months from the beginning of the Interest Period and each three months thereafter. "INTEREST PERIOD" means, as to Eurodollar Loans, a period of one, two, three or six months' duration, as the Borrower may elect, commencing, in each case, on the date of the borrowing (including continuations and conversions thereof); PROVIDED, HOWEVER, (a) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (b) no Interest Period shall extend beyond the Maturity Date, (c) with regard to the Tranche A Term Loans, no Interest Period shall extend beyond any Principal Amortization Payment Date unless the portion of Tranche A Term Loans comprised of Base Rate Loans together with the portion of Tranche A Term Loans comprised of Eurodollar Loans with Interest Periods expiring prior to the date such Principal Amortization Payment is due, is at least equal to the amount of such Principal Amortization Payment due on such date, (d) with regard to the Tranche B Term Loans, no Interest Period shall extend beyond any Principal Amortization Payment Date unless the portion of Tranche B Term Loans comprised of Base Rate Loans together with the portion of Tranche B Term Loans comprised of Eurodollar Loans with Interest Periods expiring prior to the date such Principal Amortization Payment due, is at least equal to the amount of such Principal Amortization Payment due on such date and (e) where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month. "INVESTMENT" in any Person means (a) the acquisition (whether for cash, property, services, assumption of Indebtedness, securities or otherwise) of assets (excluding capital expenditures, purchases of inventory and other assets acquired in the ordinary course of business and similar items), shares of Capital Stock, bonds, notes, debentures, partnership, joint ventures or other ownership interests or other securities of such other Person or (b) any deposit with, or advance, loan or other extension of credit to, such Person (other than deposits made in connection with the purchase of equipment or other assets or extensions of credit to customers in the ordinary course of business) or (c) any other capital contribution to or investment in such Person, including, without limitation, any Guaranty Obligations (including any support for a letter of credit issued on behalf of such Person) incurred for the benefit of such Person, but excluding any Restricted Payment to such Person. "ISSUING LENDER" means First Union National Bank. 13 "ISSUING LENDER FEES" shall have the meaning assigned to such term in Section 3.5(b)(iii). "JOINDER AGREEMENT" means a Joinder Agreement substantially in the form of EXHIBIT 7.12 hereto, executed and delivered by an Additional Credit Party in accordance with the provisions of Section 7.12. "LENDER" means any of the Persons identified as a "Lender" on the signature pages hereto, and any Person which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns. "LETTER OF CREDIT" means any letter of credit issued by the Issuing Lender for the account of any Credit Party in accordance with the terms of Section 2.2. "LETTER OF CREDIT FEE" shall have the meaning assigned to such term in Section 3.5(b)(i). "LEVERAGE RATIO" means, with respect to the Consolidated Parties on a consolidated basis for the twelve month period ending on the last day of any fiscal quarter, the ratio of (a) Funded Indebtedness of the Consolidated Parties on a consolidated basis on the last day of such period to (b) Consolidated EBITDA for such period. "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise) or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement which purports to create an encumbrance or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). "LOAN" or "LOANS" means the Revolving Loans, the Tranche A Term Loans and/or the Tranche B Term Loans (or a portion of any Revolving Loan, any Tranche A Term Loan or any Tranche B Term Loan bearing interest at the Adjusted Base Rate or the Adjusted Eurodollar Rate), individually or collectively, as appropriate. "LOC COMMITMENT" means the commitment of the Issuing Lender to issue Letters of Credit in an aggregate face amount at any time outstanding (together with the amounts of any unreimbursed drawings thereon) of up to the LOC Committed Amount. "LOC COMMITTED AMOUNT" shall have the meaning assigned to such term in Section 2.2. "LOC DOCUMENTS" means, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or 14 providing for (i) the rights and obligations of the parties concerned or at risk or (ii) any collateral security for such obligations. "LOC OBLIGATIONS" means, at any time, the sum of (i) the maximum amount which is, or at any time thereafter may become, available to be drawn under Letters of Credit then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit PLUS (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender but not theretofore reimbursed by the Borrower. "LONDON INTERBANK OFFERED RATE" shall mean, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; PROVIDED, HOWEVER, if more than one rate is specified on Telerate Page 3750, the applicable rate shall be the arithmetic mean of all such rates. If, for any reason, such rate is not available, the term "LONDON INTERBANK OFFERED RATE" shall mean, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the condition (financial or otherwise), operations, business, assets or liabilities of the Consolidated Parties, taken as a whole, (ii) the ability of the Credit Parties to perform any material obligation under the Credit Documents to which it is a party or (iii) the material rights and remedies of the Lenders under the Credit Documents. "MATERIALS OF ENVIRONMENTAL CONCERN" means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Laws, including, without limitation, friable asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "MATURITY DATE" means (i) as to the Revolving Loans, June 25, 2004, (ii) as to Letters of Credit (and the related LOC Obligations), June 15, 2004 and (iii) as to the Tranche A Term Loan and the Tranche B Term Loan, the date of the final maturity of such Term Loan. "MAXIMUM PAYMENT AMOUNT" means, as of the date of determination, the sum of the following: (a) for each complete fiscal year ending on or after November 30, 1999 where the Leverage Ratio on the last day of such fiscal year is less than or equal to 3.0 to 1.0 15 but greater than 2.5 to 1.0 (calculated after giving effect to any dividend or payment proposed to be paid pursuant to Section 8.7 in connection with the calculation of such Maximum Payment Amount), 50% of Excess Cash Flow for such fiscal year, plus (b) for each complete fiscal year ending on or after November 30, 1999 where the Leverage Ratio on the last day of such fiscal year is less than or equal to 2.5 to 1.0 but greater than 2.0 to 1.0 (calculated after giving effect to any dividend or payment proposed to be paid pursuant to Section 8.7 in connection with the calculation of such Maximum Payment Amount), 75% of Excess Cash Flow, plus (c) for each complete fiscal year ending on or after November 30, 1999 where the Leverage Ratio is less than or equal to 2.0 to 1.0, 100% of Excess Cash Flow (measured cumulatively from the Closing Date) not otherwise distributed either in the form of payments permitted under Section 8.7 or repayments of the Loans as set forth in Section 3.3(b)(ii) since the Closing Date. "MOODY'S" means Moody's Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities. "MORTGAGE INSTRUMENTS" shall have the meaning assigned such term in Section 5.1(h). "MORTGAGE POLICIES" shall have the meaning assigned such term in Section 5.1(h). "MORTGAGED REAL PROPERTIES" shall have the meaning assigned such term in Section 5.1(h). "MULTIEMPLOYER PLAN" means a Plan which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA. "MULTIPLE EMPLOYER PLAN" means a Plan which any Consolidated Party or any ERISA Affiliate and at least one employer other than the Consolidated Parties or any ERISA Affiliate are contributing sponsors. "NET CASH PROCEEDS" means the aggregate cash proceeds received by the Consolidated Parties in respect of any Asset Disposition, Debt Issuance or Equity Issuance, net of (a) direct costs (including, without limitation, legal, accounting and investment banking fees, and sales commissions) (b) taxes paid or payable as a result thereof, (c) the amount of all payments required to be made by the Borrower and its Subsidiaries as a result of such event to repay Indebtedness secured by the assets the subject of such Asset Disposition or otherwise subject to mandatory prepayment as a result of such event (including in order to obtain consent required therefor) and (d) the amount of any reserves established by the Borrower and its Subsidiaries to fund contingent liabilities reasonably estimated to be payable, and that are directly attributable to such event (as determined reasonably and in good faith by the chief financial officer of the Borrower); it being understood that "Net Cash Proceeds" shall include, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received by the Consolidated Parties in any Asset Disposition or Equity Issuance. 16 "NOTE" or "NOTES" means the Revolving Notes and/or the Term Notes, individually or collectively, as appropriate. "NOTICE OF ACCOUNT DESIGNATION" means a written notice of account designation in substantially the form of EXHIBIT 3.2(A)(III). "NOTICE OF BORROWING" means a written notice of borrowing in substantially the form of EXHIBIT 3.2(A)(I), as required by Section 3.2(a)(i). "NOTICE OF EXTENSION/CONVERSION" means the written notice of extension or conversion in substantially the form of EXHIBIT 3.2(B), as required by Section 3.2(b). "OPERATING LEASE" means, as applied to any Person, any lease (including, without limitation, leases which may be terminated by the lessee at any time) of any Property (whether real, personal or mixed) which is not a Capital Lease other than any such lease in which that Person is the lessor. "OTHER TAXES" means such term as is defined in Section 3.11. "PARTICIPATION INTEREST" means a purchase by a Lender of a participation in Letters of Credit or LOC Obligations as provided in Section 2.2, in Swingline Loans as provided in Section 2.3 or in any Loans as provided in Section 3.14. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereof. "PERMITTED INVESTMENTS" means Investments which are either (i) cash and Cash Equivalents; (ii) accounts receivable created, acquired or made by any Consolidated Party in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (iii) Investments consisting of Capital Stock, obligations, securities or other property received by any Consolidated Party in settlement of accounts receivable (created in the ordinary course of business) or other obligations from bankrupt obligors; (iv) Investments existing as of the Closing Date and set forth in SCHEDULE 1.1A, (v) Guaranty Obligations permitted by Section 8.1; (vi) transactions permitted by Section 8.9, (vii) Investments resulting from non-cash proceeds of Asset Dispositions permitted under Section 8.5, (viii) payroll, travel and similar advances made in the ordinary course of business which are expected to be treated as expenses for accounting purposes and other advances or loans to directors, officers, employees, agents, customers or suppliers that do not exceed $500,000 in the aggregate at any one time outstanding for all of the Consolidated Parties; (ix) Investments in any other Credit Party, (x) equity securities listed on the New York Stock Exchange, PROVIDED that (A) the long-term credit rating of the corporation issuing such securities shall be A- (or the equivalent thereof) or better from S&P or A3 (or the equivalent thereof) or better from Moody's and (B) the purchase price paid for all such equity securities held at any time shall not exceed $100,000, (xi) Investments in Subsidiaries which are not Credit Parties in an aggregate amount not to exceed $1,000,000 in the aggregate at any time outstanding, (xii) Hedging Agreements and other hedging contracts not entered into for 17 speculative purposes, (xiii) acquisitions of Eligible Assets as contemplated by 8.5(f), (xiv) Investments resulting from transactions permitted by Section 8.4 and (xv) other Investments in an aggregate amount not to exceed $200,000. "PERMITTED LIENS" means: (i) Liens in favor of the Agent to secure the Credit Party Obligations; (ii) Liens (other than Liens created or imposed under ERISA) for taxes, assessments or governmental charges or levies not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business, PROVIDED that such Liens secure only amounts not yet due and payable or, if due and payable, are unfiled and no other action has been taken to enforce the same or are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iv) Liens (other than Liens created or imposed under ERISA) incurred or deposits made by any Consolidated Party 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, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (v) Liens in connection with attachments or judgments (including judgment or appeal bonds) PROVIDED that the judgments secured shall, within 30 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall have been discharged within 30 days after the expiration of any such stay; (vi) easements, rights-of-way, restrictions (including zoning restrictions), minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered Property for its intended purposes; (vii) Liens on Property securing purchase money Indebtedness (including Capital Leases) to the extent permitted under Section 8.1(c), PROVIDED that any such Lien attaches to such Property concurrently with or within 90 days after the acquisition thereof; (viii) any interest of title of a lessor under, and Liens arising from UCC financing statements (or equivalent filings, registrations or agreements in foreign jurisdictions) relating to, leases permitted by this Credit Agreement; 18 (ix) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 8.6; (x) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions; (xi) Liens existing as of the Closing Date and set forth on SCHEDULE 1.1B; PROVIDED that (a) no such Lien shall at any time be extended to or cover any Property other than the Property subject thereto on the Closing Date and (b) the principal amount of the Indebtedness secured by such Liens shall not be extended, renewed, refunded or refinanced; (xii) Liens of a collection bank arising in the ordinary course of business not to exceed the amount of any fees incurred in connection therewith as provided under Section 4-208 of the Uniform Commercial Code in effect in the relevant jurisdiction; (xiii) licenses of patents, trademarks and other intellectual property entered into in the ordinary course of business; and (xiv) other Liens securing amounts not to exceed $1,000,000 at any time outstanding. "PERSON" means any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any Governmental Authority. "PLAN" means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which any Consolidated Party or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA. "PLEDGE AGREEMENT" means the pledge agreement dated as of the Closing Date in the form of EXHIBIT 1.1A to be executed in favor of the Agent by each of the Credit Parties, as amended, modified, restated or supplemented from time to time. "PRIME RATE" means the per annum rate of interest established from time to time by First Union National Bank as its prime rate, which rate may not be the lowest rate of interest charged by First Union National Bank to its customers. "PRINCIPAL AMORTIZATION PAYMENT" means a principal payment on the Tranche A Term Loans as set forth in Section 2.4(c) or on the Tranche B Term Loans as set forth in Section 2.5(c). "PRINCIPAL AMORTIZATION PAYMENT DATE" means the date a Principal Amortization Payment is due. 19 "PRINCIPAL OFFICE" means the principal office of First Union National Bank, presently located at Charlotte, North Carolina. "PRO FORMA BASIS" means, with respect to any transaction, that such transaction shall be deemed to have occurred (for purposes of calculating compliance in respect of such transaction with each of the financial covenants set forth in Section 7.11 as of the most recent fiscal quarter end preceding the date of such transaction with respect to which the Agent has received the required financial information) as of the first day of the four fiscal-quarter period ending as of such fiscal quarter end. As used herein, "TRANSACTION" shall mean (i) any incurrence or assumption of Indebtedness as referred to in Section 8.1(g)(i), (ii) any merger, consolidation or other transaction as referred to in Section 8.4 or (iii) any Asset Disposition as referred to in Section 8.5. With respect to any transaction of the type described in clause (i) above regarding Indebtedness which has a floating or formula rate, the implied rate of interest for such Indebtedness for the applicable period for purposes of this definition shall be determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination. With respect to any transaction of the type described in clause (ii) above, any Indebtedness incurred by the Borrower or any of its Subsidiaries in order to consummate such transaction (A) shall be deemed to have been incurred on the first day of the applicable period four fiscal-quarter period and (B) if such Indebtedness has a floating or formula rate, then the implied rate of interest for such Indebtedness for the applicable period for purposes of this definition shall be determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination. In connection with any calculation of the financial covenants set forth in Section 7.11 upon giving effect to a transaction on a Pro Forma Basis for purposes of Section 8.1(g)(i), Section 8.4 or Section 8.5 as applicable: (A) for purposes of any such calculation in respect of any incurrence or assumption of Indebtedness as referred to in Section 8.1(g)(i), any Indebtedness which is retired in connection with such incurrence or assumption shall be excluded and deemed to have been retired as of the first day of the applicable period; (B) for purposes of any such calculation in respect of any Asset Disposition as referred to in Section 8.5, (1) income statement items (whether positive or negative) attributable to the Property disposed of in such Asset Disposition shall be excluded and (2) any Indebtedness which is retired in connection with such Asset Disposition shall be excluded and deemed to have been retired as of the first day of the applicable period; (C) for purposes of any such calculation in respect of any merger or consolidation as referred to in Section 8.4, (1) any Indebtedness incurred by the Borrower or any of its Subsidiaries in connection with such transaction shall be deemed to have been incurred as of the first day of the applicable period and (2) income statement items (whether positive or negative) attributable to the Property acquired in such transaction or to the Investment comprising such transaction, as 20 applicable, shall be included to the extent relating to the relevant period. The Borrower may, on a one-time basis in connection with a merger, consolidation or other transaction referred to in Section 8.4, include readily definable cost savings (subject to the Agent's reasonable consent) in an aggregate amount not to exceed 10% of the earnings before interest, taxes, depreciation and amortization of the Person acquired for the immediately preceding fiscal year; and (D) for purposes of any such calculation, the principles set forth in the second paragraph of Section 1.3 shall be applicable. "PRO FORMA COMPLIANCE CERTIFICATE" means a certificate of the chief financial officer of the Borrower delivered to the Agent in connection with (i) any incurrence, assumption or retirement of Indebtedness as referred to in Section 8.1(g)(i), (ii) any merger or consolidation as referred to in Section 8.4 or (iii) any Asset Disposition as referred to in Section 8.5, as applicable, and containing reasonably detailed calculations, upon giving effect to the applicable transaction on a Pro Forma Basis, of the Interest Coverage Ratio and the Leverage Ratio as of the most recent fiscal quarter end preceding the date of the applicable transaction with respect to which the Agent shall have received the required financial information. "PROPERTY" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "PURCHASE AGREEMENT" means that certain Stock Purchase and Sale Agreement dated as of March 16, 1998, as amended, among Comsat Corporation, TBG Industries, Inc. and the Borrower. "REAL PROPERTIES" shall have the meaning given such term in Section 6.15. "REGISTER" shall have the meaning given such term in Section 11.3(c). "REGULATION T, U, OR X" means Regulation T, U or X, respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "RELATED FUNDS" means, with respect to any Lender which is a fund that invests in loans, any other fund that invests in loans and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "RELEASE" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Materials of Environmental Concern). "REPORTABLE EVENT" means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the notice requirement has been waived by regulation. 21 "REQUIRED LENDERS" means, at any time, (i) Lenders which are then in compliance with their obligations hereunder (as determined by the Agent) and holding in the aggregate at least 51% of the Revolving Commitments (and Participation Interests therein) and the outstanding Tranche A Term Loans (and Participation Interests therein) or if the Commitments have been terminated, the outstanding Revolving Loans and Tranche A Term Loans and Participation Interests (including the Participation Interests of the Issuing Lender in any Letters of Credit and of the Swingline Lender in any Swingline Loans) and (ii) Lenders which are then in compliance with their obligations hereunder (as determined by the Agent) and holding in the aggregate at least 51% of the Tranche B Term Loans (and Participation Interests therein) or if the Commitments have been terminated, the outstanding Tranche B Term Loans and Participation Interests. "REQUIREMENT OF LAW" means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or with respect to which any of its material property is subject. "RESTRICTED PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding, (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 Capital Stock of any Consolidated Party, now or hereafter outstanding and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding. "REVOLVING COMMITMENT" means, with respect to each Lender, the commitment of such Lender in an aggregate principal amount at any time outstanding of up to such Lender's Revolving Commitment Percentage of the Revolving Committed Amount, (i) to make Revolving Loans in accordance with the provisions of Section 2.1(a) and (ii) to purchase Participation Interests in Letters of Credit in accordance with the provisions of Section 2.2(c). "REVOLVING COMMITMENT PERCENTAGE" means, for any Lender, the percentage identified as its Revolving Commitment Percentage on SCHEDULE 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3. "REVOLVING COMMITTED AMOUNT" shall have the meaning assigned to such term in Section 2.1(a). "REVOLVING LOANS" shall have the meaning assigned to such term in Section 2.1(a). 22 "REVOLVING NOTE" or "REVOLVING NOTES" means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Revolving Loans provided pursuant to Section 2.1(e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities. "SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to any Consolidated Party of any Property, whether owned by such Consolidated Party as of the Closing Date or later acquired, which has been or is to be sold or transferred by such Consolidated Party to such Person or to any other Person from whom funds have been, or are to be, advanced by such Person on the security of such Property. "SECURITY AGREEMENT" means the security agreement dated as of the Closing Date in the form of EXHIBIT 1.1B to be executed in favor of the Agent by each of the Credit Parties, as amended, modified, restated or supplemented from time to time. "SENIOR DEBT" means all Funded Indebtedness which is not contractually subordinated or junior in right of payment to the Credit Party Obligations. "SENIOR LEVERAGE RATIO" means with respect to the Consolidated Parties on a consolidated basis for the twelve month period ending on the last day of any fiscal quarter of the Consolidated Parties, the ratio of (a) Senior Debt at such time to (b) Consolidated EBITDA for such period. "SENIOR SUBORDINATED NOTES" means the Prodelin Holding Corporation Senior Subordinated Notes in favor of TBG Industries, Inc. and Chase Equity Associates, L.P. dated as of June 25, 1998. "SINGLE EMPLOYER PLAN" means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan. "SOLVENT" or "SOLVENCY" means, with respect to any Person as of a particular date, that on such date (i) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (ii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (iv) the fair value of the Property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (v) the present fair salable value of the 23 assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "SUBSIDIARY" means, as to any Person, (a) any corporation more than 50% of whose Capital Stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries, and (b) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than 50% equity interest at any time. "SWINGLINE COMMITMENT" means the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding of up to the Swingline Committed Amount. "SWINGLINE COMMITTED AMOUNT" shall have the meaning assigned to such term in Section 2.3(a). "SWINGLINE LENDER" means First Union National Bank. "SWINGLINE LOAN" shall have the meaning assigned to such term in Section 2.3(a). "SWINGLINE NOTE" means the promissory note of the Borrower in favor of the Swingline Lender in the original principal amount of $4,000,000, as such promissory note may be amended, modified, restated or replaced from time to time. "SYNTHETIC LEASE" means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease. "TAX SHARING AGREEMENT" means that certain Federal Income Tax Allocation Agreement dated as of May 21, 1998 among Holland America Investment Corporation and its Subsidiaries. "TAXES" means such term as is defined in Section 3.11. "TRANCHE A TERM LOAN" shall have the meaning assigned to such term in Section 2.4(a). 24 "TRANCHE A TERM LOAN COMMITMENT" means, with respect to each Lender, the commitment of such Lender to make its portion of the Tranche A Term Loan in a principal amount equal to such Lender's Tranche A Term Loan Commitment Percentage of the Tranche A Term Loan Committed Amount. "TRANCHE A TERM LOAN COMMITMENT PERCENTAGE" means, for any Lender, the percentage identified as its Tranche A Term Loan Commitment Percentage on SCHEDULE 2.1(A), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3. "TRANCHE A TERM LOAN COMMITTED AMOUNT" shall have the meaning assigned to such term in Section 2.4(a). "TRANCHE A TERM NOTE" or "TRANCHE A TERM NOTES" means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Tranche A Term Loans provided pursuant to Section 2.4(e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time. "TRANCHE B TERM LOAN" shall have the meaning assigned to such term in Section 2.5(a). "TRANCHE B TERM LOAN COMMITMENT" means, with respect to each Lender, the commitment of such Lender to make its portion of the Tranche B Term Loan in a principal amount equal to such Lender's Tranche B Term Loan Commitment Percentage of the Tranche B Term Loan Committed Amount. "TRANCHE B TERM LOAN COMMITMENT PERCENTAGE" means, for any Lender, the percentage identified as its Tranche B Term Loan Commitment Percentage on SCHEDULE 2.1(A), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3. "TRANCHE B TERM LOAN COMMITTED AMOUNT" shall have the meaning assigned to such term in Section 2.5(a). "TRANCHE B TERM NOTE" or "TRANCHE B TERM NOTES" means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Tranche B Term Loans provided pursuant to Section 2.5(e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time. "VOTING STOCK" means, with respect to any Person, Capital Stock issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. 25 "WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary 100% of whose Voting Stock or other equity interests (other than directors qualifying shares required by applicable law) is at the time owned by such Person directly or indirectly through other Wholly Owned Subsidiaries. 1.2 COMPUTATION OF TIME PERIODS. For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.3 ACCOUNTING TERMS. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 7.1 (or, prior to the delivery of the first financial statements pursuant to Section 7.1, consistent with the financial statements as at November 29, 1997; PROVIDED, HOWEVER, if (a) the Borrower shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Agent or the Required Lenders shall so object in writing within 60 days after delivery of such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Borrower to the Lenders as to which no such objection shall have been made. Notwithstanding the above, the parties hereto acknowledge and agree that, for purposes of all calculations made in determining compliance with the financial covenants set forth in Section 7.11 (including without limitation for purposes of the definitions of "Applicable Percentage" and "Pro Forma Basis" set forth in Section 1.1), (i) income statement items (whether positive or negative) attributable to the Property disposed of in any Asset Disposition as contemplated by Section 8.5, as applicable, shall be excluded to the extent relating to any period occurring prior to the date of such transaction and (ii) Indebtedness which is retired in connection with any such Asset Disposition shall be excluded and deemed to have been retired as of the first day of the applicable period. SECTION 2 CREDIT FACILITIES 2.1 REVOLVING LOANS. (a) REVOLVING COMMITMENT. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally 26 agrees to make available to the Borrower such Lender's Revolving Commitment Percentage of revolving credit loans requested by the Borrower in Dollars ("REVOLVING LOANS") from time to time from the Closing Date until the Maturity Date, or such earlier date as the Revolving Commitments shall have been terminated as provided herein for the purposes hereinafter set forth; PROVIDED, HOWEVER, that the sum of the aggregate principal amount of outstanding Revolving Loans shall not exceed FORTY MILLION DOLLARS ($40,000,000) (provided, that until the time that amounts outstanding under the loan agreement in connection with the Illinois IRB shall have been paid in full as set forth in Section 7.17, the aggregate principal amount of outstanding Revolving Loans shall not exceed $37,500,000), (as such aggregate maximum amount may be reduced from time to time as provided in Section 3.4, the "REVOLVING COMMITTED AMOUNT"); PROVIDED, FURTHER, (A) with regard to each Lender individually, such Lender's outstanding Revolving Loans shall not exceed such Lender's Revolving Commitment Percentage of the Revolving Committed Amount, and (B) the aggregate principal amount of outstanding Revolving Loans PLUS LOC Obligations PLUS outstanding Swingline Loans outstanding shall not exceed the Revolving Committed Amount. Revolving Loans may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof; PROVIDED, HOWEVER, that no more than 10 Eurodollar Loans shall be outstanding in the aggregate under this Credit Agreement at any time. For purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period. Revolving Loans hereunder may be repaid and reborrowed in accordance with the provisions hereof. (b) REVOLVING LOAN BORROWINGS. The Borrower shall request Revolving Loans as set forth in Section 3.2(a). (c) REPAYMENT. The principal amount of all Revolving Loans shall be due and payable in full on the Maturity Date, unless accelerated sooner pursuant to Section 9.2. (d) INTEREST. Subject to the provisions of Section 3.1, (i) BASE RATE LOANS. During such periods as Revolving Loans shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the applicable Adjusted Base Rate. (ii) EURODOLLAR LOANS. During such periods as Revolving Loans shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the applicable Adjusted Eurodollar Rate. Interest on Revolving Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). 27 (e) REVOLVING NOTES. The Revolving Loans made by each Lender shall be evidenced by a duly executed promissory note of the Borrower payable to such Lender in an original principal amount equal to such Lender's Revolving Commitment Percentage of the Revolving Committed Amount and in substantially the form of EXHIBIT 2.1(E). 2.2 LETTER OF CREDIT SUBFACILITY. (a) ISSUANCE. Subject to the terms and conditions hereof and of the LOC Documents, if any, and any other terms and conditions which the Issuing Lender may reasonably require and in reliance upon the representations and warranties set forth herein, the Issuing Lender agrees to issue, and each Lender severally agrees to participate in the issuance by the Issuing Lender of Letters of Credit in Dollars from time to time from the Closing Date until the Maturity Date as the Borrower may request, in a form acceptable to the Issuing Lender; PROVIDED, HOWEVER, that (i) the LOC Obligations outstanding shall not at any time exceed FIFTEEN MILLION DOLLARS ($15,000,000) (the "LOC COMMITTED AMOUNT") and (ii) the sum of the aggregate principal amount of outstanding Revolving Loans PLUS LOC Obligations outstanding PLUS outstanding Swingline Loans shall not at any time exceed the Revolving Committed Amount. No Letter of Credit shall (x) except as otherwise agreed by the Agent, have an original expiry date more than one year from the date of issuance or (y) as originally issued or as extended, have an expiry date extending beyond the Maturity Date. Each Letter of Credit shall comply with the related LOC Documents. The issuance and expiry dates of each Letter of Credit shall be a Business Day. (b) NOTICE AND REPORTS. The request for the issuance of a Letter of Credit shall be submitted by the Borrower to the Issuing Lender at least three (3) Business Days prior to the requested date of issuance. The Issuing Lender will, at least quarterly, disseminate to each of the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of the prior report, and including therein, among other things, the beneficiary, the face amount and the expiry date, as well as any payment or expirations which may have occurred. (c) PARTICIPATION. Each Lender, upon issuance of a Letter of Credit, shall be deemed to have purchased without recourse a Participation Interest from the applicable Issuing Lender in such Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its pro rata share of the obligations under such Letter of Credit (based on the respective Revolving Commitment Percentages of the Lenders) and shall absolutely, unconditionally and irrevocably assume and be obligated to pay to the Issuing Lender and discharge when due, its pro rata share of the obligations arising under such Letter of Credit. Without limiting the scope and nature of each Lender's Participation Interest in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any such Letter of Credit, each such Lender shall pay to the Issuing Lender its pro rata share of such unreimbursed drawing in same day funds on the day of notification by the Issuing Lender of an unreimbursed drawing pursuant to the provisions of subsection (d) below. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and 28 shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrower to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. (d) REIMBURSEMENT. In the event of any drawing under any Letter of Credit, the Issuing Lender will promptly notify the Borrower. Unless the Borrower shall immediately notify the Issuing Lender that the Borrower intends to otherwise reimburse the Issuing Lender for such drawing, the Borrower shall be deemed to have requested that the Lenders make a Revolving Loan in the amount of the drawing as provided in subsection (e) below on the related Letter of Credit, the proceeds of which will be used to satisfy the related reimbursement obligations. The Borrower promises to reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either with the proceeds of a Revolving Loan obtained hereunder or otherwise) in same day funds. If the Borrower shall fail to reimburse the Issuing Lender as provided hereinabove, the unreimbursed amount of such drawing shall bear interest at a per annum rate equal to the Adjusted Base Rate PLUS 2%. The Borrower's reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of any rights of setoff, counterclaim or defense to payment the Borrower may claim or have against the Issuing Lender, the Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including without limitation any defense based on any failure of the Borrower or any other Credit Party to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit. The Issuing Lender will promptly notify the other Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Agent for the account of the Issuing Lender in Dollars and in immediately available funds, the amount of such Lender's pro rata share of such unreimbursed drawing. Such payment shall be made on the day such notice is received by such Lender from the Issuing Lender if such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time) otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice is received. If such Lender does not pay such amount to the Issuing Lender in full upon such request, such Lender shall, on demand, pay to the Agent for the account of the Issuing Lender interest on the unpaid amount during the period from the date of such drawing until such Lender pays such amount to the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business Days of the date that such Lender is required to make payments of such amount pursuant to the preceding sentence, the Federal Funds Rate and thereafter at a rate equal to the Base Rate. Each Lender's obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Credit Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the obligations of the Borrower hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever. Simultaneously with the making of each such payment by a Lender to the Issuing Lender, such Lender shall, automatically and without any further action on the part of the Issuing Lender or such Lender, acquire a Participation Interest in an amount equal to such payment (excluding the portion of such payment constituting interest owing to the Issuing Lender) in the related unreimbursed drawing 29 portion of the LOC Obligation and in the interest thereon and in the related LOC Documents, and shall have a claim against the Borrower with respect thereto. (e) REPAYMENT WITH REVOLVING LOANS. On any day on which the Borrower shall have requested, or been deemed to have requested, a Revolving Loan advance to reimburse a drawing under a Letter of Credit, the Agent shall give notice to the Lenders that a Revolving Loan has been requested or deemed requested by the Borrower to be made in connection with a drawing under a Letter of Credit, in which case a Revolving Loan advance comprised of Base Rate Loans (or Eurodollar Loans to the extent the Borrower has complied with the procedures of Section 3.2(a)(i) with respect thereto) shall be immediately made to the Borrower by all Lenders (notwithstanding any termination of the Commitments pursuant to Section 9.2) PRO RATA based on the respective Revolving Commitment Percentages of the Lenders (determined before giving effect to any termination of the Commitments pursuant to Section 9.2) and the proceeds thereof shall be paid directly to the Issuing Lender for application to the respective LOC Obligations. Each such Lender hereby irrevocably agrees to make its pro rata share of each such Revolving Loan immediately upon any such request or deemed request in the amount, in the manner and on the date specified in the preceding sentence NOTWITHSTANDING (i) the amount of such borrowing may not comply with the minimum amount for advances of Revolving Loans otherwise required hereunder, (ii) whether any conditions specified in Section 5.2 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) failure for any such request or deemed request for Revolving Loan to be made by the time otherwise required hereunder, (v) whether the date of such borrowing is a date on which Revolving Loans are otherwise permitted to be made hereunder or (vi) any termination of the Commitments relating thereto immediately prior to or contemporaneously with such borrowing. In the event that any Revolving Loan cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower or any Credit Party), then each such Lender hereby agrees that it shall forthwith purchase (as of the date such borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Issuing Lender such Participation Interests in the outstanding LOC Obligations as shall be necessary to cause each such Lender to share in such LOC Obligations ratably (based upon the respective Revolving Commitment Percentages of the Lenders (determined before giving effect to any termination of the Commitments pursuant to Section 9.2)), PROVIDED that at the time any purchase of Participation Interests pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Issuing Lender, to the extent not paid to the Issuing Lender by the Borrower in accordance with the terms of subsection (d) above, interest on the principal amount of Participation Interests purchased for each day from and including the day upon which such borrowing would otherwise have occurred to but excluding the date of payment for such Participation Interests, at the rate equal to, if paid within two (2) Business Days of the date of the Revolving Loan advance, the Federal Funds Rate, and thereafter at a rate equal to the Base Rate. (f) DESIGNATION OF CONSOLIDATED PARTIES AS ACCOUNT PARTIES. Notwithstanding anything to the contrary set forth in this Credit Agreement, including without limitation 30 Section 2.2(a), a Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is issued for the account of a Consolidated Party other than the Borrower, provided that notwithstanding such statement, the Borrower shall be the actual account party for all purposes of this Credit Agreement for such Letter of Credit and such statement shall not affect the Borrower's reimbursement obligations hereunder with respect to such Letter of Credit. (g) RENEWAL, EXTENSION. The renewal or extension of any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder. (h) UNIFORM CUSTOMS AND PRACTICES. The Issuing Lender may have the Letters of Credit be subject to The Uniform Customs and Practice for Documentary Credits, as published as of the date of issue by the International Chamber of Commerce (the "UCP"), in which case the UCP may be incorporated therein and deemed in all respects to be a part thereof. (i) INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES. (i) In addition to its other obligations under this Section 2.2, the Borrower hereby agrees to pay, and protect, indemnify and save each Lender harmless from and against, any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) that such Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or (B) the failure of such Lender to honor a drawing under a 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"). (ii) As between the Borrower and the Lenders (including the Issuing Lender), the Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. No Lender (including the Issuing Lender) shall be responsible: (A) 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 any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) 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; (D) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (E) for any consequences arising from causes beyond the control of such Lender, including, without limitation, 31 any Government Acts. None of the above shall affect, impair, or prevent the vesting of the Issuing Lender's rights or powers hereunder. (iii) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by any Lender (including the Issuing Lender), under or in connection with any Letter of Credit or the related certificates, if taken or omitted in good faith, shall not put such Lender under any resulting liability to the Borrower or any other Credit Party. It is the intention of the parties that this Credit Agreement shall be construed and applied to protect and indemnify each Lender (including the Issuing Lender) against any and all risks involved in the issuance of the Letters of Credit, all of which risks are hereby assumed by the Borrower (on behalf of itself and each of the other Credit Parties), including, without limitation, any and all Government Acts. No Lender (including the Issuing Lender) shall, in any way, be liable for any failure by such Lender or anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control of such Lender. (iv) Nothing in this subsection (i) is intended to limit the reimbursement obligations of the Borrower contained in subsection (d) above. The obligations of the Borrower under this subsection (i) shall survive the termination of this Credit Agreement. No act or omissions of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Lenders (including the Issuing Lender) to enforce any right, power or benefit under this Credit Agreement. (v) Notwithstanding anything to the contrary contained in this subsection (i), the Borrower shall have no obligation to indemnify any Lender (including the Issuing Lender) in respect of any liability incurred by such Lender (A) arising solely out of the gross negligence or willful misconduct of such Lender, as determined by a court of competent jurisdiction, or (B) caused by such Lender's failure to pay under any Letter of Credit after presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit, as determined by a court of competent jurisdiction, unless such payment is prohibited by any law, regulation, court order or decree. (j) RESPONSIBILITY OF ISSUING LENDER. It is expressly understood and agreed that the obligations of the Issuing Lender hereunder to the Lenders are only those expressly set forth in this Credit Agreement and that the Issuing Lender shall be entitled to assume that the conditions precedent set forth in Section 5.2 have been satisfied unless it shall have acquired actual knowledge that any such condition precedent has not been satisfied; PROVIDED, HOWEVER, that nothing set forth in this Section 2.2 shall be deemed to prejudice the right of any Lender to recover from the Issuing Lender any amounts made available by such Lender to the Issuing Lender pursuant to this Section 2.2 in the event that it is determined by a court of competent jurisdiction that the payment with respect to a Letter of Credit constituted gross negligence or willful misconduct on the part of the Issuing Lender. 32 (k) CONFLICT WITH LOC DOCUMENTS. In the event of any conflict between this Credit Agreement and any LOC Document (including any letter of credit application), this Credit Agreement shall control. 2.3 SWINGLINE LOANS. (a) SWINGLINE COMMITMENT. Subject to the terms and conditions hereof and in reliance upon the representations and warranties herein set forth, the Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans to the Borrower (each a "SWINGLINE LOAN" and, collectively, the "SWINGLINE LOANS") from time to time from the Closing Date until the Maturity Date for the purposes hereinafter set forth; PROVIDED, HOWEVER, (i) the aggregate principal amount of Swingline Loans outstanding at any time shall not exceed FOUR MILLION DOLLARS ($4,000,000) (the "SWINGLINE COMMITTED AMOUNT"), and (ii) the sum of the aggregate principal amount of outstanding Revolving Loans plus LOC Obligations PLUS outstanding Swingline Loans at any time shall not exceed the Revolving Committed Amount. Swingline Loans hereunder shall be made as Base Rate Loans in accordance with the provisions of this Section 2.3, and may be repaid and reborrowed in accordance with the provisions hereof. (b) SWINGLINE LOAN ADVANCES. (i) NOTICES; DISBURSEMENT. Whenever the Borrower desires a Swingline Loan advance hereunder it shall give written notice (or telephone notice promptly confirmed in writing) to the Swingline Lender not later than 12:00 Noon (Charlotte, North Carolina time) on the Business Day of the requested Swingline Loan advance. Each such notice shall be irrevocable and shall specify (A) that a Swingline Loan advance is requested, (B) the date of the requested Swingline Loan advance (which shall be a Business Day) and (C) the principal amount of the Swingline Loan advance requested. Each Swingline Loan shall be made as a Base Rate Loan and shall have such maturity date as the Swingline Lender and the Borrower shall agree upon receipt by the Swingline Lender of any such notice from the Borrower. The Swingline Lender shall initiate the transfer of funds representing the Swingline Loan advance to the Borrower by 3:00 P.M. (Charlotte, North Carolina time) on the Business Day of the requested borrowing. (ii) MINIMUM AMOUNT. Each Swingline Loan shall be in a minimum principal amount of $300,000 and in integral multiples of $100,000 in excess thereof (or the remaining amount of the Swingline Committed Amount, if less). (iii) REPAYMENT OF SWINGLINE LOANS. The principal amount of all Swingline Loans shall be due and payable on the earlier of (A) the maturity date agreed to by the Swingline Lender and the Borrower with respect to such Loan (which maturity date shall be upon demand by the Agent) or (B) the Maturity Date. The Swingline Lender may, at any time, in its sole discretion, by written notice to the Borrower and the Lenders, demand repayment of its Swingline Loans by way of a Revolving Loan advance, in which case the Borrower shall be deemed to have requested a Revolving Loan advance comprised solely of Base Rate Loans in the amount of such Swingline Loans; PROVIDED, HOWEVER, that any such demand shall be deemed to have been given one Business Day prior to the Maturity Date 33 and on the date of the occurrence of any Event of Default described in Section 9.1 and upon acceleration of the indebtedness hereunder and the exercise of remedies in accordance with the provisions of Section 9.2. Each Lender hereby irrevocably agrees to make its pro rata share of each such Revolving Loan in the amount, in the manner and on the date specified in the preceding sentence NOTWITHSTANDING (I) the amount of such borrowing may not comply with the minimum amount for advances of Revolving Loans otherwise required hereunder, (II) whether any conditions specified in Section 5.2 are then satisfied, (III) whether a Default or Event of Default then exists, (IV) failure of any such request or deemed request for Revolving Loan to be made by the time otherwise required hereunder, (V) whether the date of such borrowing is a date on which Revolving Loans are otherwise permitted to be made hereunder or (VI) any termination of the Commitments relating thereto immediately prior to or contemporaneously with such borrowing. In the event that any Revolving Loan cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower or any other Credit Party), then each Lender hereby agrees that it shall forthwith purchase (as of the date such borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause each such Lender to share in such Swingline Loans ratably based upon its Commitment Percentage of the Revolving Committed Amount (determined before giving effect to any termination of the Commitments pursuant to Section 3.4), PROVIDED that (A) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is purchased and (B) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Swingline Lender in accordance with the terms of subsection (c)(ii) hereof, interest on the principal amount of participation purchased for each day from and including the day upon which such borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the rate equal to the Federal Funds Rate. (c) INTEREST ON SWINGLINE LOANS. (i) Subject to the provisions of Section 3.1, each Swingline Loan shall bear interest at a per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the Base Rate PLUS the Applicable Percentage for Base Rate Loans. (ii) Interest on Swingline Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (d) SWINGLINE NOTE. The Swingline Loans shall be evidenced by a duly executed promissory note of the Borrower payable to the Swingline Lender in substantially the form of EXHIBIT 2.3(D). 34 2.4 TRANCHE A TERM LOAN. (a) TERM COMMITMENT. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein each Lender severally agrees to make available to the Borrower on the Closing Date such Lender's Tranche A Term Loan Commitment Percentage of a term loan in Dollars (the "TRANCHE A TERM LOAN") in the aggregate principal amount of TWENTY MILLION DOLLARS ($20,000,000) (the "TRANCHE A TERM LOAN COMMITTED AMOUNT") for the purposes hereinafter set forth. The Tranche A Term Loan may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request; PROVIDED, HOWEVER, that no more than 10 Eurodollar Loans shall be outstanding in the aggregate under this Credit Agreement at any time. For purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period. Amounts repaid on the Tranche A Term Loan may not be reborrowed. (b) BORROWING PROCEDURE. The Borrower shall request Tranche A Term Loan borrowings as set forth in Section 3.2(a). (c) REPAYMENT OF TERM LOAN. The principal amount of the Tranche A Term Loan shall be repaid in twenty (20) consecutive quarterly installments as follows, unless accelerated sooner pursuant to Section 9.2:
PRINCIPAL AMORTIZATION TERM LOAN PRINCIPAL PAYMENT DATES AMORTIZATION PAYMENT ---------------------- -------------------- May 31, 1999 $500,000 August 31, 1999 $500,000 November 30, 1999 $500,000 February 29, 2000 $500,000 May 31, 2000 $750,000 August 31, 2000 $750,000 November 30, 2000 $750,000 February 28, 2001 $750,000 May 31, 2001 $1,000,000 August 31, 2001 $1,000,000 November 30, 2001 $1,000,000
35 February 28, 2002 $1,000,000 May 31, 2002 $1,250,000 August 31, 2002 $1,250,000 November 30, 2002 $1,250,000 February 28, 2003 $1,250,000 May 31, 2003 $1,500,000 August 31, 2003 $1,500,000 November 30, 2003 $1,500,000 February 28, 2004 $1,500,000
(d) INTEREST. Subject to the provisions of Section 3.1, the Tranche A Term Loan shall bear interest at a per annum rate equal to: (i) BASE RATE LOANS. During such periods as the Tranche A Term Loan shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the applicable Adjusted Base Rate. (ii) EURODOLLAR LOANS. During such periods as the Tranche A Term Loan shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the applicable Adjusted Eurodollar Rate. Interest on the Tranche A Term Loan shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (e) TERM NOTES. The portion of the Tranche A Term Loan made by each Lender shall be evidenced by a duly executed promissory note of the Borrower payable to such Lender in an original principal amount equal to such Lender's Tranche A Term Loan Commitment Percentage of the Tranche A Term Loan and substantially in the form of EXHIBIT 2.4(E). 2.5 TRANCHE B TERM LOAN. (a) TRANCHE B TERM COMMITMENT. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Borrower on the Closing Date such Lender's Tranche B Term Loan Commitment Percentage of a term loan in Dollars (the "TRANCHE B TERM LOAN") in the aggregate principal amount of ONE HUNDRED MILLION DOLLARS ($100,000,000) (the "TRANCHE B TERM LOAN COMMITTED AMOUNT") for the purposes hereinafter set forth. The Tranche B Term Loan may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request; PROVIDED, 36 HOWEVER, that no more than 10 Eurodollar Loans shall be outstanding in the aggregate under this Credit Agreement at any time. For purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period. Amounts repaid on the Tranche B Term Loan may not be reborrowed. (b) BORROWING PROCEDURES. The Borrower shall request Tranche B Term Loan borrowings as set forth in Section 3.2(a). (c) REPAYMENT OF TRANCHE B TERM LOAN. The principal amount of the Tranche B Term Loan shall be repaid in thirty-two (32) consecutive quarterly installments as follows, unless accelerated sooner pursuant to Section 9.2:
TRANCHE B TERM LOAN PRINCIPAL AMORTIZATION PRINCIPAL AMORTIZATION PAYMENT DATES PAYMENT ---------------------- ---------------------- August 31, 1998 $250,000 November 30, 1998 $250,000 February 28, 1999 $250,000 May 31, 1999 $250,000 August 31, 1999 $250,000 November 30, 1999 $250,000 February 29, 2000 $250,000 May 31, 2000 $250,000 August 31, 2000 $250,000 November 30, 2000 $250,000 February 28, 2001 $250,000 May 31, 2001 $250,000 August 31, 2001 $250,000 November 30, 2001 $250,000 February 28, 2002 $250,000 May 31, 2002 $250,000
37
TRANCHE B TERM LOAN PRINCIPAL AMORTIZATION PRINCIPAL AMORTIZATION PAYMENT DATES PAYMENT ---------------------- ---------------------- August 31, 2002 $250,000 November 30, 2002 $250,000 February 28, 2003 $250,000 May 31, 2003 $250,000 August 31, 2003 $250,000 November 30, 2003 $250,000 February 29, 2004 $250,000 May 31, 2004 $250,000 August 31, 2004 $8,750,000 November 30, 2004 $8,750,000 February 28, 2005 $8,750,000 May 31, 2005 $8,750,000 August 31, 2005 $14,750,000 November 30, 2005 $14,750,000 February 28, 2006 $14,750,000 May 31, 2006 $14,750,000
(d) INTEREST. Subject to the provisions of Section 3.1, the Tranche B Term Loan shall bear interest at a per annum rate equal to: (i) BASE RATE LOANS. During such periods as the Tranche B Term Loan shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the applicable Adjusted Base Rate. (ii) EURODOLLAR LOANS. During such periods as the Tranche B Term Loan shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the applicable Adjusted Eurodollar Rate. Interest on the Tranche B Term Loan shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). 38 (e) TRANCHE B TERM NOTES. The portion of the Tranche B Term Loan made by each Lender shall be evidenced by a duly executed promissory note of the Borrower payable to such Lender in an original principal amount equal to such Lender's Tranche B Term Loan Commitment Percentage of the Tranche B Term Loan and substantially in the form of EXHIBIT 2.5(E). SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES 3.1 DEFAULT RATE. Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then the Adjusted Base Rate plus 2%). 3.2 BORROWINGS; EXTENSION AND CONVERSION. (a) (i) NOTICE OF BORROWING. The Borrower shall request a Revolving Loan borrowing, Tranche A Term Loan borrowing or a Tranche B Term Loan borrowing by written notice (or telephonic notice promptly confirmed in writing) to the Agent not later than 11:00 A.M. (Charlotte, North Carolina time) on the Business Day prior to the date of the requested borrowing in the case of Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of Eurodollar Loans; PROVIDED, HOWEVER that only Eurodollar Loans with Interest Periods of one month shall be available hereunder until the Borrower shall have received notification (which notification in any event shall be provided within 90 days after the Closing Date) from the Agent that it has completed the syndication process. Each such request for borrowing shall be irrevocable and shall specify (A) the type of Loan requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor. If the Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a Eurodollar Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Loan requested, then such notice shall be deemed to be a request for a Revolving Loan which is a Base Rate Loan hereunder. The Agent shall give notice to each affected Lender promptly upon receipt of each Notice of Borrowing pursuant to this Section 3.2(a)(i), the contents thereof and each such Lender's share of any borrowing to be made pursuant thereto. (ii) MINIMUM AMOUNTS. Each Eurodollar Loan shall be in a minimum aggregate principal amount of $3,000,000 and integral multiples of $1,000,000 in excess thereof. Each Base Rate shall be in a minimum aggregate principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof (or, as applicable, the remaining amount 39 of the Revolving Committed Amount, if less, the remaining principal balance of the Tranche A Term Loan, if less, or the remaining principal balance of the Tranche B Term Loan, if less). (iii) ADVANCES. Each Lender will make its Revolving Commitment Percentage of each Revolving Loan borrowing available to the Agent for the account of the Borrower as specified in SECTION 3.15(A), or in such other manner as the Agent may specify in writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Agent. Such borrowing will then be made available to the Borrower by the Agent by crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Agent by the Lenders and in like funds as received by the Agent. Each Lender shall make its Tranche A Term Loan Commitment Percentage of the Tranche A Term Loan and its Tranche B Term Loan Percentage of the Tranche B Term Loan available to the Agent for the account of the Borrower at the office of the Agent specified in SCHEDULE 2.1(A), or at such other office as the Agent may designate in writing, by 1:00 P.M. (Charlotte, North Carolina time) on the Closing Date in Dollars and in funds immediately available to the Agent. The Borrower hereby irrevocably authorizes the Agent to, and the Agent shall, on such date disburse the proceeds of each Revolving Loan requested by the Borrower pursuant to this subsection 3.2(a)(iii) in immediately available funds by crediting or wiring such proceeds to the deposit account of the Borrower identified in the most recent Notice of Account Designation substantially in the form of Exhibit 3.2(a)(iii) hereto (a "NOTICE OF ACCOUNT DESIGNATION") delivered by the Borrower to the Agent or as may be otherwise agreed upon by the Borrower and the Agent from time to time. (b) Subject to the terms of Section 5.2, the Borrower shall have the option, on any Business Day, to extend existing Loans into a subsequent permissible Interest Period or to convert Loans into Loans of another interest rate type; PROVIDED, HOWEVER, that (i) except as provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate Loans may be converted into Eurodollar Loans, only if no Default or Event of Default is in existence on the date of extension or conversion, (iii) Loans extended as, or converted into, Eurodollar Loans shall be subject to the terms of the definition of "INTEREST PERIOD" set forth in Section 1.1 and shall be in such minimum amounts as provided in Section 3.2(a), (iv) no more than 10 Eurodollar Loans shall be outstanding in the aggregate under this Credit Agreement at any time (it being understood that, for purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period) and (v) any request for extension or conversion of a Eurodollar Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month. Each such extension or conversion shall be effected by the Borrower by giving a Notice of Extension/Conversion (or telephonic notice promptly confirmed in writing) to the office of the Agent specified in specified in SCHEDULE 2.1(A), or at such other office as the Agent may designate in writing, prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan, and on the third Business Day prior to, in the case of the extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed extension or conversion, specifying the date of the proposed extension or conversion, the Loans to be so extended or converted, the types of Loans into which such Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. Each request for extension or conversion shall be irrevocable and shall constitute a representation and warranty by the Borrower of the matters specified in subsections (b), (c), (d), (e) and (f) of Section 5.2. In the event the Borrower fails to request extension or conversion of any Eurodollar Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then such Eurodollar Loan shall be automatically converted into a Base Rate Loan at the end of the Interest Period applicable thereto. The Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan. 3.3 PREPAYMENTS. (a) VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay Loans in whole or in part from time to time, without premium or penalty; PROVIDED, HOWEVER, that each partial prepayment of Loans shall be in a minimum principal amount of $1,000,000 and integral multiples of $100,000. Subject to the foregoing terms, amounts prepaid under this Section 3.3(a) shall be applied as the Borrower may elect; PROVIDED that if the Borrower fails to specify a voluntary prepayment then such prepayment shall be applied first ratably to the Tranche A Term Loan and the Tranche B Term Loan (in each case ratably to the remaining Principal Amortization Payments thereof), in each case first to Base Rate Loans and then to Eurodollar Loans in direct order of Interest Period maturities. All prepayments under this Section 3.3(a) shall be subject to Section 3.12 but shall be otherwise without premium or penalty. (b) MANDATORY PREPAYMENTS. (i) REVOLVING COMMITTED AMOUNT. If at any time, the sum of the aggregate principal amount of outstanding Revolving Loans plus LOC Obligations outstanding PLUS outstanding Swingline Loans shall exceed the Revolving Committed Amount, the Borrower immediately shall prepay the Revolving Loans and Swingline Loans and (after all Revolving Loans and Swingline Loans have been repaid) cash collateralize the LOC Obligations, in an amount sufficient to eliminate such excess. (ii) EXCESS CASH FLOW. Within 120 days after the end of each fiscal year (commencing with the fiscal year ending November 30, 1999), the Borrower shall prepay the Loans in an amount equal to (x) 50% of the Excess Cash Flow earned during such prior fiscal year less (y) the amount of any voluntary prepayments of the Tranche A Term Loan, the Tranche B Term Loan and (to the extent accompanied by a reduction in the Revolving Committed Amount) the Revolving Loans during such prior fiscal year; PROVIDED, HOWEVER, that the Borrower shall not be required to make 41 prepayments hereunder if, as of the most recently ended fiscal year of the Borrower, the Leverage Ratio was less than 3.0 to 1.0. Any payments of Excess Cash Flow shall be applied as set forth in clause (vi) below. (iii) ASSET DISPOSITIONS. Immediately upon the occurrence of any Asset Disposition Prepayment Event with Net Cash Proceeds in excess of $1,000,000, the Borrower shall prepay the Loans in an aggregate amount equal to the Net Cash Proceeds of the related Asset Disposition not applied (or caused to be applied) by the Consolidated Parties during the related Application Period to the purchase, acquisition or construction of Eligible Assets as contemplated by the terms of Section 8.5(f) (such prepayment to be applied as set forth in clause (vi) below); PROVIDED, HOWEVER, that if the Asset Disposition occurs with respect to assets of the Divested Businesses and the Leverage Ratio as of the end of the most recent fiscal quarter of the Borrower was less than 3.75 to 1.0 at the time such Asset Disposition occurs, the Borrower may apply Net Cash Proceeds from such Asset Disposition to prepay the Senior Subordinated Notes or, after such time as the pending litigation with respect to Anghel Laboratories, Inc. shall have been settled or otherwise concluded to the satisfaction of the Required Lenders, to redeem or repurchase preferred stock. (iv) DEBT ISSUANCES. Immediately upon receipt by any Consolidated Party of proceeds from any Debt Issuance (other than an Excluded Issuance), the Borrower shall prepay the Loans in an aggregate amount equal to the Net Cash Proceeds of such Debt Issuance to the Lenders (such prepayment to be applied as set forth in clause (vi) below); PROVIDED, HOWEVER, that if the Borrower shall have received in excess of $75,000,000 in Net Cash Proceeds from the issuance of additional subordinated debt on terms and conditions satisfactory to the Required Lenders and as otherwise permitted by Section 8.1(f), the Borrower may apply up to $20,000,000 of such Net Cash Proceeds to prepay the Senior Subordinated Notes or, after such time as the pending litigation with respect to Anghel Laboratories, Inc. shall have been settled or otherwise concluded to the satisfaction of the Required Lenders, to redeem or repurchase preferred stock. (v) ISSUANCES OF EQUITY. Immediately upon receipt by the Borrower of proceeds from any Equity Issuance (other than an Excluded Issuance), the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of such Equity Issuance to the Lenders (such prepayment to be applied as set forth in clause (vi) below). (vi) APPLICATION OF MANDATORY PREPAYMENTS. All amounts required to be paid pursuant to this Section 3.3(b) shall be applied as follows: (A) with respect to all amounts prepaid pursuant to Section 3.3(b)(i), to Revolving Loans and Swingline Loans and (after all Revolving Loans and Swingline Loans have been repaid) to a cash collateral account in respect of LOC Obligations, (B) with respect to all amounts prepaid pursuant to Section 3.3(b)(ii), (iii), (iv) and (v), pro rata to the Tranche A Term Loan and the Tranche B Term Loan (in each case to the 42 remaining Principal Amortization Payments thereof in direct order of maturity). Promptly upon notification thereof, one or more holders of the Tranche B Term Loans may decline to accept a mandatory prepayment under Section 3.3(b)(ii), (iii), (iv) or (v) to the extent there are sufficient Tranche A Term Loans outstanding to be paid with such prepayment, in which case, such declined prepayments shall be allocated pro rata among the Tranche A Term Loans and the Tranche B Term Loans held by Lenders accepting such prepayments. Within the parameters of the applications set forth above, prepayments shall be applied first to Base Rate Loans and then to Eurodollar Loans in direct order of Interest Period maturities. All prepayments under this Section 3.3(b) shall be subject to Section 3.12. 3.4 TERMINATION AND REDUCTION OF REVOLVING COMMITTED AMOUNT. (a) VOLUNTARY REDUCTIONS. The Borrower may from time to time permanently reduce or terminate the Revolving Committed Amount in whole or in part (in minimum aggregate amounts of $1,000,000 or in integral multiples of $500,000 in excess thereof (or, if less, the full remaining amount of the then applicable Revolving Committed Amount)) upon three Business Days prior written notice to the Agent; PROVIDED, HOWEVER, no such termination or reduction shall be made which would cause the aggregate principal amount of outstanding Revolving Loans PLUS LOC Obligations PLUS Swingline Loans outstanding to exceed the Revolving Committed Amount, unless, concurrently with such termination or reduction, the Revolving Loans are repaid to the extent necessary to eliminate such excess. The Agent shall promptly notify each affected Lender of receipt by the Agent of any notice from the Borrower pursuant to this Section 3.4(a). (b) MATURITY DATE. The Revolving Commitments of the Lenders and the LOC Commitment of the Issuing Lender shall automatically terminate on the Maturity Date. (c) GENERAL. The Borrower shall pay to the Agent for the account of the Lenders in accordance with the terms of Section 3.5(b), on the date of each termination or reduction of the Revolving Committed Amount, the Commitment Fee accrued through the date of such termination or reduction on the amount of the Revolving Committed Amount so terminated or reduced. 3.5 FEES. (a) COMMITMENT FEE. In consideration of the Revolving Commitments of the Lenders hereunder, the Borrower agrees to pay to the Agent for the account of each Lender a fee (the "COMMITMENT FEE") on the unused portion of the Revolving Committed Amount computed at a per annum rate for each day during the applicable Commitment Fee Calculation Period (hereinafter defined) at a rate equal to the Applicable Percentage in effect from time to time. The Commitment Fee shall commence to accrue on the Closing Date and shall be due and payable in arrears on the last business day of each February, May, August and November (and upon the Maturity Date) for the immediately preceding quarter (or portion thereof) (each such quarter or portion thereof for which the Commitment Fee is 43 payable hereunder being herein referred to as an "COMMITMENT FEE CALCULATION PERIOD"), beginning with the first of such dates to occur after the Closing Date. (b) LETTER OF CREDIT FEES. (i) LETTER OF CREDIT ISSUANCE FEE. In consideration of the issuance of Letters of Credit hereunder, the Borrower promises to pay to the Agent for the account of each Lender a fee (the "LETTER OF CREDIT FEE") on such Lender's Revolving Commitment Percentage of the average daily maximum amount available to be drawn under each such Letter of Credit computed at a per annum rate for each day from the date of issuance to the date of expiration equal to the Applicable Percentage (provided that the Letter of Credit Fee shall not be less than $500 in the aggregate for each Letter of Credit in any event). The Letter of Credit Fee will be payable quarterly in arrears on the last Business Day of each February, May, August and November for the immediately preceding quarter (or a portion thereof). (ii) ISSUING LENDER FEES. In addition to the Letter of Credit Fee payable pursuant to clause (i) above, the Borrower promises to pay to the Issuing Lender for its own account without sharing by the other Lenders the customary charges from time to time of the Issuing Lender with respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit (collectively, the "ISSUING LENDER FEES"). (c) ADMINISTRATIVE FEES. The Borrower agrees to pay to the Agent, for its own account, as applicable, the fees referred to in the Agent's Fee Letter (collectively, the "AGENT'S FEES"). 3.6 CAPITAL ADEQUACY. If any Lender has determined, after the date hereof, that the adoption or the becoming effective of, or any change in, or any change by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof in the interpretation or administration of, any applicable law, rule or regulation regarding capital adequacy, or compliance by such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy), then, upon notice from such Lender to the Borrower (such notice to be given within six calendar months of the Lender's determination thereof) specifying in reasonable detail the basis for the calculation of any additional amounts owed, the Borrower shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each determination by any such Lender of amounts 44 owing under this Section shall, absent manifest error, be conclusive and binding on the parties hereto. 3.7 LIMITATION ON EURODOLLAR LOANS. If on or prior to the first day of any Interest Period for any Eurodollar Loan: (a) the Agent determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period; or (b) the Required Lenders determine (which determination shall be conclusive) and notify the Agent that the Eurodollar Rate will not adequately and fairly reflect the cost to the Lenders of funding Eurodollar Loans for such Interest Period; then the Agent shall give the Borrower prompt notice thereof, and so long as such condition remains in effect, the Lenders shall be under no obligation to make additional Eurodollar Loans, Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans and the Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurodollar Loans, either prepay such Eurodollar Loans or Convert such Eurodollar Loans into Base Rate Loans in accordance with the terms of this Credit Agreement. 3.8 ILLEGALITY. Notwithstanding any other provision of this Credit Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall promptly notify the Borrower thereof and such Lender's obligation to make or Continue Eurodollar Loans and to Convert Base Rate Loans into Eurodollar Loans shall be suspended until such time as such Lender may again make, maintain, and fund Eurodollar Loans (in which case the provisions of Section 3.10 shall be applicable). 3.9 REQUIREMENTS OF LAW. (a) If, after the date hereof, the adoption of any applicable law, rule, or regulation, or any change in any applicable law, rule, or regulation, or any change in the interpretation or administration thereof 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 request or directive (whether or not having the force of law) of any such Governmental Authority, central bank, or comparable agency: (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Eurodollar Loans, its Notes, or its obligation to make Eurodollar Loans, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Credit Agreement or its Notes in respect of any Eurodollar Loans (other than taxes imposed on, or measured by, the overall net income or net capital of such Lender by the jurisdiction in which such Lender is 45 organized, has its principal office or such Applicable Lending Office or is doing business (other than solely in connection with this Credit Agreement)); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the Eurodollar Reserve Requirement utilized in the determination of the Adjusted Eurodollar Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Commitment of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting this Credit Agreement or its Notes or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, Converting into, Continuing, or maintaining any Eurodollar Loans or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Credit Agreement or its Notes with respect to any Eurodollar Loans, then the Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction. If any Lender requests compensation by the Borrower under this Section 3.9(a), the Borrower may, by notice to such Lender (with a copy to the Agent), suspend the obligation of such Lender to make or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 3.10 shall be applicable); PROVIDED that such suspension shall not affect the right of such Lender to receive the compensation so requested. (b) Each Lender shall promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 3.9 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section 3.9 shall furnish to the Borrower and the Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 3.10 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to make any Eurodollar Loan or to Continue, or to Convert Base Rate Loans into, Eurodollar Loans shall be suspended pursuant to Section 3.8 or 3.9 hereof, such Lender's Eurodollar Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for such Eurodollar Loans (or, in the case of a Conversion required by Section 3.8 hereof, on such earlier date as such Lender may specify to the Borrower with a copy to the Agent) and, unless and until such Lender gives notice as provided 46 below that the circumstances specified in Section 3.8 or 3.9 hereof that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Eurodollar Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Eurodollar Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Eurodollar Loans shall be made or Continued instead as Base Rate Loans, and all Base Rate Loans of such Lender that would otherwise be Converted into Eurodollar Loans shall remain as Base Rate Loans. If such Lender gives notice to the Borrower (with a copy to the Agent) that the circumstances specified in Section 3.8 or 3.9 hereof that gave rise to the Conversion of such Lender's Eurodollar Loans pursuant to this Section 3.10 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Loans made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Commitments. 3.11 TAXES. (a) Any and all payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any other Credit Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING, in the case of each Lender and the Agent, taxes imposed on, or measured by, its income or capital, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its Applicable Lending Office) or the Agent (as the case may be) is located or organized or in which such Lender or the Agent is doing business (other than solely by reason of this Agreement) or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Credit Agreement or any other Credit Document to any Lender or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.11) such Lender or the Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 11.1, the original or a certified copy of a receipt evidencing payment thereof. 47 (b) In addition, the Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Credit Agreement or any other Credit Document or from the execution or delivery of, or otherwise with respect to, this Credit Agreement or any other Credit Document (hereinafter referred to as "OTHER TAXES"). (c) The Borrower agrees to indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 3.11) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto. (d) Each Lender and the Agent hereby represents that as of the Closing Date (or at such time as it becomes a Lender or the Agent, as the case may be, if later), all payments or principal, interest, and fees to be made to such Lender or the Agent, as the case may be, by the Borrower or any other Credit Party pursuant to this Agreement will be totally exempt from Taxes which would require indemnification under Section 3.11(a), 3.11(b) or 3.11(c). Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Credit Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower and the Agent with complete and accurate copies of (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Credit Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Credit Agreement or any of the other Credit Documents. (e) For any period with respect to which a Lender has failed to provide the Borrower and the Agent with the appropriate form pursuant to Section 3.11(d) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 3.11(a), 3.11(b) or 3.11(c) with respect to Taxes imposed by the United States; PROVIDED, HOWEVER, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. The Borrower shall not be required to make gross-up or indemnification payments under Section 3.11(a), 3.11(b) or 3.11(c) to any Lender or the Agent, as the 48 case may be, to the extent that the obligation to pay such additional amounts or indemnification would not have arisen if the representation set forth in the first sentence of Section 3.11(d) were true with respect to such Lender or the Agent, as the case may be. (f) If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section 3.11, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender. (g) Within thirty (30) days after the date of any payment of Taxes, the Borrower shall furnish to the Agent the original or a certified copy of a receipt evidencing such payment. (h) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 3.11 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. (i) If any Lender or the Agent shall become aware that it is entitled to receive a refund in respect to Taxes as to which it has been indemnified by the Borrower pursuant to this Section 3.11, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after receipt of a request by the Borrower, apply for such refund at the expense of the Borrower. If any Lender receives a refund in respect of any Taxes as to which it has been indemnified by the Borrower pursuant to this Section 3.11, it shall promptly notify the Borrower of such refund and shall, within 30 days after receipt of a request by the Borrower (or promptly upon receipt, if the Borrower has requested application for such refund pursuant hereto), repay such refund (including any interest actually received from the taxing authority with respect thereto) to the Borrower (to the extent of amounts that have been paid by the Borrower under this Section 3.11 with respect to such refund), net of all out-of-pocket expenses of such Lender and Taxes imposed with respect to such refund; PROVIDED that the Borrower, upon the request of such Lender, agrees to return such refund (plus penalties, interest or other charges) to such Lender in the event such Lender is required to repay such refund. Nothing contained in this subsection 3.11(i) shall require any Lender to make available any tax returns (or any other information relating to its taxes that it deems confidential). 3.12 COMPENSATION. Upon the request of any Lender, the Borrower shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost, or expense incurred by it as a result of: (a) any payment, prepayment, or Conversion of a Eurodollar Loan for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 9.2) on a date other than the last day of the Interest Period for such Loan; or 49 (b) any failure by the Borrower for any reason (including, without limitation, the failure of any condition precedent specified in Section 5 to be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Loan on the date for such borrowing, Conversion, Continuation, or prepayment specified in the relevant notice of borrowing, prepayment, Continuation, or Conversion under this Credit Agreement. With respect to Eurodollar Loans, such indemnification may include an amount equal to the excess, if any, of (a) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Loans provided for herein (excluding, however, the Applicable Percentage included therein, if any) over (b) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. The covenants of the Borrower set forth in this Section 3.12 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. 3.13 PRO RATA TREATMENT. Except to the extent otherwise provided herein: (a) LOANS. Each Loan, each payment or (subject to the terms of Section 3.3) prepayment of principal of any Loan or reimbursement obligations arising from drawings under Letters of Credit, each payment of interest on the Loans or reimbursement obligations arising from drawings under Letters of Credit, each payment of Commitment Fees, each payment of the Letter of Credit Fee, each reduction of the Revolving Committed Amount and each conversion or extension of any Loan, shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Loans and Participation Interests. (b) ADVANCES. No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make its ratable share of a borrowing hereunder; PROVIDED, HOWEVER, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. Unless the Agent shall have been notified by any Lender prior to the date of any requested borrowing that such Lender does not intend to make available to the Agent its ratable share of such borrowing to be made on such date, the Agent may assume that such Lender has made such amount available to the Agent on the date of such borrowing, and the Agent in reliance upon such assumption, may (in its sole discretion but without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent, the Agent shall be able to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent will promptly notify the Borrower, and the Borrower shall immediately 50 pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent at a per annum rate equal to (i) from the Borrower at the applicable rate for the applicable borrowing pursuant to the Notice of Borrowing and (ii) from a Lender at the Federal Funds Rate. 3.14 SHARING OF PAYMENTS. The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan, LOC Obligations or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a Participation Interest in such Loans, LOC Obligations and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a Participation Interest theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a Participation Interest may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such Participation Interest as fully as if such Lender were a holder of such Loan, LOC Obligations or other obligation in the amount of such Participation Interest. Except as otherwise expressly provided in this Credit Agreement, if any Lender or the Agent shall fail to remit to the Agent or any other Lender an amount payable by such Lender or the Agent to the Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.14 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.14 to share in the benefits of any recovery on such secured claim. 3.15 PAYMENTS, COMPUTATIONS, ETC. (a) Except as otherwise specifically provided herein, all payments hereunder shall be made to the Agent in dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, at the Agent's office specified in 51 SCHEDULE 2.1(A) not later than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower maintained with the Agent (with notice to the Borrower). The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Agent the Loans, LOC Obligations, Fees, interest or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Agent shall distribute such payment to the Lenders in such manner as the Agent may determine to be appropriate in respect of obligations owing by the Borrower hereunder, subject to the terms of Section 3.13(a)). The Agent will distribute such payments to such Lenders, if any such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Agent will distribute such payment to such Lenders on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and Fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days. Interest shall accrue from and include the date of borrowing, but exclude the date of payment. (b) ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT. Notwithstanding any other provisions of this Credit Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Agent or any Lender on account of the Credit Party Obligations or any other amounts outstanding under any of the Credit Documents or in respect of the Collateral shall be paid over or delivered as follows: FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Agent in connection with enforcing the rights of the Lenders under the Credit Documents and any protective advances made by the Agent with respect to the Collateral under or pursuant to the terms of the Collateral Documents; SECOND, to payment of any fees owed to the Agent; THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys' fees) of each of the Lenders in connection with enforcing its rights under the Credit Documents or otherwise with respect to the Credit Party Obligations owing to such Lender; FOURTH, to the payment of all of the Credit Party Obligations consisting of accrued fees and interest; 52 FIFTH, to the payment of the outstanding principal amount of the Credit Party Obligations (including the payment or cash collateralization of the outstanding LOC Obligations); SIXTH, to all other Credit Party Obligations and other obligations which shall have become due and payable under the Credit Documents or otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH" above; and SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus. In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans and LOC Obligations held by such Lender bears to the aggregate then outstanding Loans and LOC Obligations) of amounts available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts available for distribution pursuant to clause "FIFTH" above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Agent in a cash collateral account and applied (A) first, to reimburse the Issuing Lender from time to time for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses "FIFTH" and "SIXTH" above in the manner provided in this Section 3.15(b). 3.16 EVIDENCE OF DEBT. (a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary. (b) The Agent shall maintain the Register pursuant to Section 11.3(c), and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder from or for the account of the Borrower and each Lender's share thereof. The Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary. (c) The entries made in the accounts, Register and subaccounts maintained pursuant to subsection (b) of this Section 3.16 (and, if consistent with the entries of the Agent, subsection (a)) shall be prima facie evidence of the existence and amounts of the 53 obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the failure of any Lender or the Agent to maintain any such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrower to repay the Loans made by such Lender in accordance with the terms hereof. SECTION 4 GUARANTY 4.1 THE GUARANTY. Each of the Guarantors hereby jointly and severally guarantees to each Lender, each Affiliate of a Lender that enters into a Hedging Agreement, and the Agent as hereinafter provided the prompt payment of the Credit Party Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Credit Party Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Credit Party Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents or Hedging Agreements, the obligations of each Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law. 54 4.2 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantors under Section 4.1 are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents or Hedging Agreements, or any other agreement or instrument referred to therein, or any substitution, release, impairment or exchange of any other guarantee of or security for any of the Credit Party Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 4.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrower or any other Guarantor of the Credit Party Obligations for amounts paid under this Section 4 until such time as the Lenders (and any Affiliates of Lenders entering into Hedging Agreements) have been paid in full, all Commitments under this Credit Agreement have been terminated and no Person or Governmental Authority shall have any right to request any return or reimbursement of funds from the Lenders in connection with monies received under the Credit Documents or Hedging Agreements. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder which shall remain absolute and unconditional as described above: (a) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Credit Party Obligations shall be extended, or such performance or compliance shall be waived; (b) any of the acts mentioned in any of the provisions of any of the Credit Documents, any Hedging Agreement or any other agreement or instrument referred to in the Credit Documents or Hedging Agreements shall be done or omitted; (c) the maturity of any of the Credit Party Obligations shall be accelerated, or any of the Credit Party Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Credit Documents, any Hedging Agreement or any other agreement or instrument referred to in the Credit Documents or Hedging Agreements shall be waived or any other guarantee of any of the Credit Party Obligations or any security therefor shall be released, impaired or exchanged in whole or in part or otherwise dealt with; (d) any Lien granted to, or in favor of, the Agent or any Lender or Lenders as security for any of the Credit Party Obligations shall fail to attach or be perfected; or (e) any of the Credit Party Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor). With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the 55 Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Credit Documents, any Hedging Agreement or any other agreement or instrument referred to in the Credit Documents or Hedging Agreements, or against any other Person under any other guarantee of, or security for, any of the Credit Party Obligations. 4.3 REINSTATEMENT. The obligations of the Guarantors under this Section 4 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Credit Party Obligations is rescinded or must be otherwise restored by any holder of any of the Credit Party Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, fees and expenses of counsel) incurred by the Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 4.4 CERTAIN ADDITIONAL WAIVERS. Without limiting the generality of the provisions of this Section 4, each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss. 26-7 through 26-9, inclusive, to the extent applicable. Each Guarantor further agrees that such Guarantor shall have no right of recourse to security for the Credit Party Obligations, except through the exercise of rights of subrogation pursuant to Section 4.2 and through the exercise of rights of contribution pursuant to Section 4.6. 4.5 REMEDIES. The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors, on the one hand, and the Agent and the Lenders, on the other hand, the Credit Party Obligations may be declared to be forthwith due and payable as provided in Section 9.2 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2) for purposes of Section 4.1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Credit Party Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Credit Party Obligations being deemed to have become automatically due and payable), the Credit Party Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of Section 4.1. The Guarantors acknowledge and agree that their obligations hereunder are secured in accordance with the terms of the Security Agreements and the other Collateral Documents and that the Lenders may exercise their remedies thereunder in accordance with the terms thereof. 4.6 RIGHTS OF CONTRIBUTION. The Guarantors hereby agree as among themselves that, if any Guarantor shall make an Excess Payment (as defined below), such Guarantor shall have a right of contribution from each 56 other Guarantor in an amount equal to such other Guarantor's Contribution Share (as defined below) of such Excess Payment. The payment obligations of any Guarantor under this Section 4.6 shall be subordinate and subject in right of payment to the prior payment in full to the Agent and the Lenders of the Guaranteed Obligations, and none of the Guarantors shall exercise any right or remedy under this Section 4.6 against any other Guarantor until payment and satisfaction in full of all of such Guaranteed Obligations. For purposes of this Section 4.6, (a) "GUARANTEED OBLIGATIONS" shall mean any obligations arising under the other provisions of this Section 4; (b) "EXCESS PAYMENT" shall mean the amount paid by any Guarantor in excess of its Pro Rata Share of any Guaranteed Obligations; (c) "PRO RATA SHARE" shall mean, for any Guarantor in respect of any payment of Guaranteed Obligations, the ratio (expressed as a percentage) as of the date of such payment of Guaranteed Obligations of (i) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (ii) the amount by which the aggregate present fair salable value of all assets and other properties of the Borrower and all of the Guarantors exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Borrower and the Guarantors hereunder) of the Borrower and all of the Guarantors; PROVIDED, HOWEVER, that, for purposes of calculating the Pro Rata Shares of the Guarantors in respect of any payment of Guaranteed Obligations, any Guarantor that became a Guarantor subsequent to the date of any such payment shall be deemed to have been a Guarantor on the date of such payment and the financial information for such Guarantor as of the date such Guarantor became a Guarantor shall be utilized for such Guarantor in connection with such payment; and (d) "CONTRIBUTION SHARE" shall mean, for any Guarantor in respect of any Excess Payment made by any other Guarantor, the ratio (expressed as a percentage) as of the date of such Excess Payment of (i) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (ii) the amount by which the aggregate present fair salable value of all assets and other properties of the Borrower and all of the Guarantors other than the maker of such Excess Payment exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Borrower and the Guarantors hereunder) of the Borrower and all of the Guarantors other than the maker of such Excess Payment; PROVIDED, HOWEVER, that, for purposes of calculating the Contribution Shares of the Guarantors in respect of any Excess Payment, any Guarantor that became a Guarantor subsequent to the date of any such Excess Payment shall be deemed to have been a Guarantor on the date of such Excess Payment and the financial information for such Guarantor as of the date such Guarantor became a Guarantor shall be utilized for such Guarantor in connection with such Excess Payment. This Section 4.6 shall not be deemed to affect any right of subrogation, indemnity, reimbursement or contribution that any Guarantor may have under applicable law against the Borrower in respect of any payment of Guaranteed Obligations. Notwithstanding the foregoing, all rights of contribution against any Guarantor shall terminate from and after such time, if ever, that such Guarantor shall be relieved of its obligations pursuant to Section 8.4. 57 4.7 CONTINUING GUARANTEE. The guarantee in this Section 4 is a guaranty of payment and not of collection, is a continuing guarantee, and shall apply to all Credit Party Obligations whenever arising. SECTION 5 CONDITIONS 5.1 CLOSING CONDITIONS. The obligation of the Lenders to enter into this Credit Agreement and to make the initial Loans or the Issuing Lender to issue the initial Letter of Credit, whichever shall occur first, shall be subject to satisfaction of the following conditions (in form and substance acceptable to the Lenders): (a) EXECUTED CREDIT DOCUMENTS. Receipt by the Agent of duly executed copies of: (i) this Credit Agreement; (ii) the Notes; (iii) the Collateral Documents and (iv) all other applicable Credit Documents, each in form and substance acceptable to the Lenders in their sole discretion. (b) CORPORATE DOCUMENTS. Receipt by the Agent of the following: (i) CHARTER DOCUMENTS. Copies of the articles or certificates of incorporation or other charter documents of each Credit Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation and certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (ii) BYLAWS. A copy of the bylaws of each Credit Party certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (iii) RESOLUTIONS. Copies of resolutions of the Board of Directors of each Credit Party approving and adopting the Credit Documents to which it is a party, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of such Credit Party to be true and correct and in force and effect as of the Closing Date. (iv) GOOD STANDING. Copies of (A) certificates of good standing, existence or its equivalent with respect to each Credit Party certified as of a recent date by the appropriate Governmental Authorities of the state or other jurisdiction of incorporation and each other jurisdiction in which the failure to so qualify and be in good standing could reasonably be expected to have a Material Adverse Effect and (B) to the extent available, a certificate indicating payment of all corporate franchise taxes certified as of a recent date by the appropriate governmental taxing authorities. 58 (v) INCUMBENCY. An incumbency certificate of each Credit Party certified by a secretary or assistant secretary to be true and correct as of the Closing Date. (c) FINANCIAL STATEMENTS. Receipt by the Agent and the Lenders of (i) the financial statements referred to in Section 6.1(a) and (b), (ii) satisfactory projections including balance sheets and income and cash flow statements for each twelve month period through the twelve month period ending November 30, 2006 and (iii) such other information relating to the Borrower and its Subsidiaries or the Acquired Company and its Subsidiaries as the Agent may reasonably require in connection with the structuring and syndication of credit facilities of the type described herein. (d) OPINIONS OF COUNSEL. The Agent shall have received legal opinions dated as of the Closing Date from counsel to the Credit Parties in form and substance satisfactory to the Agent. (e) ENVIRONMENTAL REPORTS. Receipt by the Agent in form and substance satisfactory to it of environmental assessment reports and related documents of a recent date with respect to all Real Properties. (f) PERSONAL PROPERTY COLLATERAL. The Agent shall have received: (i) searches of Uniform Commercial Code filings in the jurisdiction of the chief executive office of each Credit Party and each jurisdiction where any Collateral is located or where a filing would need to be made in order to perfect the Agent's security interest in such Collateral, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens; (ii) duly executed UCC financing statements for each appropriate jurisdiction as is necessary, in the Agent's sole discretion, to perfect the Agent's security interest in the Collateral; (iii) searches of ownership of intellectual property in the appropriate governmental offices and such patent/trademark/copyright filings as requested by the Agent in order to perfect the Agent's security interest in the Collateral; (iv) all stock certificates evidencing the Capital Stock pledged to the Agent pursuant to the Pledge Agreement, together with duly executed in blank undated stock powers attached thereto (unless, with respect to the pledged Capital Stock of any Foreign Subsidiary, such stock powers are deemed unnecessary by the Agent in its reasonable discretion under the law of the jurisdiction of incorporation of such Person); 59 (v) such patent/trademark/copyright filings as requested by the Agent in order to perfect the Agent's security interest in the Collateral; (vi) all instruments and chattel paper in the possession of any of the Credit Parties, together with allonges or assignments as may be necessary or appropriate to perfect the Agent's security interest in the Collateral; and (vii) duly executed consents as are necessary, in the Agent's sole discretion, to perfect the Lenders' security interest in the Collateral. (g) PRIORITY OF LIENS. The Agent shall have received satisfactory evidence that (i) the Agent, on behalf of the Lenders, holds a perfected, first priority Lien on all Collateral and (ii) none of the Collateral is subject to any other Liens other than Permitted Liens. (h) REAL PROPERTY COLLATERAL. The Agent shall have received, in form and substance reasonably satisfactory to the Agent: (i) fully executed and notarized mortgages, deeds of trust or deeds to secure debt (each, as the same may be amended, modified, restated or supplemented from time to time, a "MORTGAGE INSTRUMENT" and collectively the "MORTGAGE INSTRUMENTS") encumbering the fee interest and/or leasehold interest of any Credit Party (to the extent deemed material by the Agent) in each real property asset designated in SCHEDULE 6.19(A) (each a "MORTGAGED PROPERTY" and collectively the "MORTGAGED REAL PROPERTIES"); (ii) a title report obtained by the Credit Parties to the extent deemed necessary by the Agent) in respect of each of the Mortgaged Properties; (iii) in the case of each material real property leasehold interest of any Credit Party constituting Mortgaged Property, (a) such estoppel letters, consents and waivers from the landlords on such real property as may be required by the Agent, which estoppel letters shall be in the form and substance reasonably satisfactory to the Agent and (b) evidence that the applicable lease, a memorandum of lease with respect thereto, or other evidence of such lease in form and substance reasonably satisfactory to the Agent, has been or will be recorded in all places to the extent necessary or desirable, in the reasonable judgment of the Agent, so as to enable the Mortgage Instrument encumbering such leasehold interest to effectively create a valid and enforceable first priority lien (subject to Permitted Liens) on such leasehold interest in favor of the Agent (or such other Person as may be required or desired under local law) for the benefit of Lenders; (iv) the Agent shall have received, and the title insurance company issuing the policy referred to in Section 5.1(i) (the "TITLE INSURANCE COMPANY") shall have received, maps or plats of an as-built survey of the sites of the real 60 property covered by the Mortgage Instruments certified to the Agent and the Title Insurance Company in a manner reasonably satisfactory to each of the agent and the Title Insurance Company, dated a date reasonably satisfactory to the Agent and the Title Insurance Company by an independent professional licensed land surveyor, which maps or plats and the surveys on which they are based shall be made in accordance with standards that enable the Title Insurance Company to issue the policies referred to in Section 5.1(i)(v) below without exception for "Survey matters", except for matters as are reasonably acceptable to the Agent; (v) ALTA mortgagee title insurance policies issued by First American Title Insurance Company (the "MORTGAGE POLICIES"), in amounts not less than the respective amounts designated in SCHEDULE 6.19(A) with respect to any particular Mortgaged Property, assuring the Agent that each of the Mortgage Instruments creates a valid and enforceable first priority mortgage lien on the applicable Mortgaged Property, free and clear of all defects and encumbrances except Permitted Liens, which Mortgage Policies shall be in form and substance reasonably satisfactory to the Agent and shall provide for affirmative insurance and such reinsurance as the Agent may reasonably request, all of the foregoing in form and substance reasonably satisfactory to the Agent; (vi) Evidence, which may be in the form of a letter from an insurance broker or a municipal engineer or certified on a survey, as to whether (a) any Mortgaged Property (an "FLOOD HAZARD PROPERTY") is in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards and (b) the community in which such Flood Hazard Property is located is participating in the National Flood Insurance Program; (vii) If there are any Flood Hazard Properties, a Credit Party's written acknowledgment of receipt of written notification from the Agent (a) as to the existence of each such Flood Hazard Property and (b) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program; (viii) If there are maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Agent and the Title Insurance Company in a manner reasonably satisfactory to them, dated a date satisfactory to the Agent and the Title Insurance Company by an independent professional licensed land surveyor reasonably satisfactory to the Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be sufficient to delete any standard printed survey exception contained in the applicable title policy and be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992 or 1997, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (A) the locations on such sites of all the buildings, structures and other 61 improvements and the established building setback lines; (B) the lines of streets abutting the sites and width thereof; (C) all access and other easements appurtenant to the sites necessary to use the sites; (D) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (E) any encroachments on any adjoining property by the building structures and improvements on the sites; and (F) if the site is described as being on a filed map, a legend relating the survey to said map; and (ix) Evidence reasonably satisfactory to the Agent that each of the Mortgaged Properties, and the uses of the Mortgaged Properties, are in compliance in all material respects with all applicable laws, regulations and ordinances including without limitation health and environmental protection laws, erosion control ordinances, storm drainage control laws, doing business and/or licensing laws, zoning laws (the evidence submitted as to zoning should include the zoning designation made for each of the Real Properties, the permitted uses of each such Real Properties under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks) and laws regarding access and facilities for disabled persons including, but not limited to, the federal Architectural Barriers Act, the Fair Housing Amendments Act of 1988, the Rehabilitation Act of 1973 and the Americans with Disabilities Act of 1990. (i) EVIDENCE OF INSURANCE. Receipt by the Agent of copies of insurance policies or certificates of insurance of the Consolidated Parties evidencing liability and casualty insurance meeting the requirements set forth in the Credit Documents, including, but not limited to, naming the Agent as sole loss payee on behalf of the Lenders. (j) CORPORATE STRUCTURE. The corporate capital and ownership structure of the Consolidated Parties (after giving effect to the purchase of the Acquired Company) shall be as described in SCHEDULE 5.1(J). (k) GOVERNMENT CONSENT. Receipt by the Agent of evidence that all governmental, shareholder and material third party consents (including Hart-Scott-Rodino clearance) and approvals necessary in connection with the acquisition of the Acquired Company and the related financings and other transactions contemplated hereby and expiration of all applicable waiting periods without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on the acquisition of the Acquired Company or such other transactions or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable which in the judgment of the Agent could have such effect. (l) MATERIAL ADVERSE EFFECT. No material adverse change shall have occurred since November 29, 1997 in the condition (financial or otherwise), business or management of the Consolidated Parties taken as a whole. 62 (m) LITIGATION. There shall not exist (i) any order, decree, judgment, ruling or injunction which restrains the consummation of the acquisition of the Acquired Company in the manner contemplated by the Purchase Agreement or (ii) any pending or threatened action, suit, investigation or proceeding against a Consolidated Party that could reasonably be expected to have a Material Adverse Effect. (n) EQUITY INVESTMENT. Receipt by the Agent of satisfactory evidence that a cash equity investment of at least $20,000,000 shall have been received by the Borrower on terms and conditions satisfactory to the Agent. (o) SUBORDINATED DEBT. The Borrower shall have received proceeds from the issuance of Senior Subordinated Notes on terms and conditions acceptable to the Lenders in an aggregate principal amount not less than $13,000,000. (p) PREFERRED EQUITY. The Borrower shall have received proceeds from the issuance of preferred stock on terms and conditions acceptable to the Lenders in an aggregate principal amount not less than $7,000,000. (q) PURCHASE AGREEMENT. There shall not have been any material modification, amendment, supplement or waiver to the Purchase Agreement without the prior written consent of the Agent, including, but not limited to, any material modification, amendment, supplement or waiver relating to the amount or type of consideration to be paid in connection with the acquisition of the Acquired Company and the contents of all disclosure schedules and exhibits, and the acquisition of the Acquired Company shall have been consummated in accordance with the terms of the Purchase Agreement (without waiver of any conditions precedent to the obligations of the buyer thereunder) and the purchase price related to such acquisition shall not exceed $116,500,000 (subject to a purchase price adjustment not greater than $5,000,000) The Agent shall have received a final Purchase Agreement, together with all exhibits and schedules thereto, certified by an officer of the Borrower. (r) EBITDA OF ACQUIRED COMPANY. The Agent shall have determined to its reasonable satisfaction that the net income of the Acquired Company before deductions for interest, taxes, depreciation and amortization expenses was at least $13,000,000 for the twelve month period ending on March 31, 1998. (s) OFFICER'S CERTIFICATES. The Agent shall have received a certificate or certificates executed by a responsible officer of the Borrower as of the Closing Date stating that (A) each Consolidated Party is in material compliance with all material existing financial obligations, (B) all material governmental, shareholder and third party consents and approvals, if any, with respect to the Credit Documents and the transactions contemplated thereby have been obtained, (C) no action, suit, investigation or proceeding is pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to affect any Consolidated Party or any transaction contemplated by the Credit Documents, if such action, suit, investigation or proceeding could reasonably be expected to have a Material Adverse Effect, (D) after receipt of proceeds of the Loans hereunder, the 63 transactions contemplated by the Purchase Agreement shall be consummated on the Closing Date in accordance with the terms thereof and (E) immediately after giving effect to this Credit Agreement, the other Credit Documents and all the transactions contemplated therein to occur on such date, (1) each of the Credit Parties is Solvent, (2) no Default or Event of Default exists, (3) all representations and warranties contained herein and in the other Credit Documents are true and correct in all material respects, and (4) the Credit Parties are in compliance with each of the financial covenants set forth in Section 7.11. (t) FEES AND EXPENSES. Payment by the Credit Parties of all fees and expenses owed by them to the Lenders and the Agent, including, without limitation, payment to the Agent of the fees set forth in the Fee Letter. (u) OTHER. Receipt by the Lenders of such other documents, instruments, agreements or information as reasonably requested by any Lender, including, but not limited to, information regarding litigation, tax, accounting, labor, insurance, pension liabilities (actual or contingent), real estate leases, material contracts, debt agreements, property ownership and contingent liabilities of the Consolidated Parties. 5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The obligations of each Lender to make, convert or extend any Loan and of the Issuing Lender to issue or extend any Letter of Credit (including the initial Loans and the initial Letter of Credit) are subject to satisfaction of the following conditions in addition to satisfaction on the Closing Date of the conditions set forth in Section 5.1: (a) The Borrower shall have delivered (i) in the case of any Revolving Loan, any portion of the Tranche A Term Loan or any portion of the Tranche B Term Loan, an appropriate Notice of Borrowing or Notice of Extension/Conversion or (ii) in the case of any Letter of Credit, an appropriate request for issuance in accordance with the provisions of Section 2.2(b); (b) The representations and warranties set forth in Section 6 shall, subject to the limitations set forth therein, be true and correct in all material respects as of such date (except for those which expressly relate to an earlier date); (c) No Default or Event of Default shall exist and be continuing either prior to or after giving effect thereto; (d) Immediately after giving effect to the making of such Loan (and the application of the proceeds thereof) or to the issuance of such Letter of Credit, as the case may be, (i) the sum of the aggregate principal amount of outstanding Revolving Loans PLUS LOC Obligations outstanding shall not exceed the Revolving Committed Amount, and (ii) the LOC Obligations shall not exceed the LOC Committed Amount. 64 The delivery of each Notice of Borrowing, each Notice of Extension/Conversion and each request for a Letter of Credit pursuant to Section 2.2(b) shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b), (c) and (d) above. SECTION 6 REPRESENTATIONS AND WARRANTIES The Credit Parties hereby represent to the Agent and each Lender that: 6.1 FINANCIAL CONDITION. (a)(i) The audited consolidated balance sheet and the consolidated statement of income and retained earnings and the consolidated statement of cash flows as of November 29, 1997 and for the year ended, and the audited consolidated balance sheet and the consolidated statement of income and retained earnings and the consolidated of cash flows as of November 30, 1996 and for the eight months then ended, and the audited consolidated balance sheet and the consolidated statement of income and retained earnings and the consolidated statement of cash flows as of December 31, 1995 and for the year then ended have heretofore been furnished to each Lender. Such financial statements (including the notes thereto) (A) have been audited by Price Waterhouse, LLP, (B) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and (C) present fairly (on the basis disclosed in the footnotes to such financial statements) the consolidated financial condition, results of operations and cash flows of the Borrower and its Subsidiaries as of such date and for such periods. The unaudited interim balance sheets of the Borrower and its Subsidiaries as at the end of, and the related unaudited interim statements of earnings and of cash flows for the period ended February 28, 1998 have heretofore been furnished to each Lender. Such interim financial statements for each such quarterly period, (A) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and (B) present fairly in all material respects consolidated financial condition in each case subject to year end audit adjustments and the absence of footnotes, results of operations and cash flows of the Borrower and its Subsidiaries as of such date and for such periods. During the period from November 29, 1997 to and including the Closing Date, there has been no sale, transfer or other disposition by the Borrower or any of its Subsidiaries of any material part of the business or property of the Borrower and its Subsidiaries, taken as a whole, and no purchase or other acquisition by any of them of any business or property (including any capital stock of any other person) material in relation to the consolidated financial condition of the Borrower and its Subsidiaries, taken as a whole, in each case, which, is not reflected in the foregoing financial statements or in the notes thereto and has not otherwise been disclosed in writing to the Lenders on or prior to the Closing Date. (ii) The financial information of the Acquired Company and its Subsidiaries referred to in Section 2.4.1 and Section 3.6 of the Purchase Agreement has heretofore been furnished to each Lender. Such financial information fairly presents the financial condition, 65 results of operations, retained earnings and cash flows for the Acquired Company and its Subsidiaries for the dates and periods therein indicated Such financial information was prepared in accordance with GAAP consistently applied throughout the periods covered thereby except as otherwise noted in the Purchase Agreement, in the schedules thereto or in SCHEDULE 6.1. (b) The pro forma consolidated balance sheet of the Consolidated Parties as of the Closing Date giving effect to the Acquisition in accordance with the terms of the Purchase Agreement and reflecting estimated purchase price accounting adjustments, has heretofore been furnished to each Lender. Such pro forma balance sheet is based upon reasonable assumptions made known to the Lenders and upon information not known to be incorrect or misleading in any material respect. (c) The financial statements delivered to the Lenders pursuant to Section 7.1(a) and (b), (i) have been prepared in accordance with GAAP (except as may otherwise be permitted under Section 7.1(a) and (b)) and (ii) present fairly in all material respects (on the basis disclosed in the footnotes to such financial statements) the consolidated and consolidating financial condition, results of operations and cash flows of the Consolidated Parties as of such date and for such periods in the case of the financial statements referred to in Section 7.1(b), subject to year and audit adjustments and the absence of footnotes. 6.2 NO MATERIAL CHANGE. Since November 29, 1997, (a) there has been no development or event relating to or affecting a Consolidated Party which has had or could reasonably be expected to have a Material Adverse Effect and (b) except as otherwise permitted under this Credit Agreement or as set forth on SCHEDULE 6.2, no dividends or other distributions have been declared, paid or made upon the Capital Stock in a Consolidated Party nor has any of the Capital Stock in a Consolidated Party been redeemed, retired, purchased or otherwise acquired for value. 6.3 ORGANIZATION AND GOOD STANDING. Each of the Consolidated Parties (a) is duly organized, validly existing and is in good standing, to the extent applicable, under the laws of the jurisdiction of its incorporation or organization, (b) has the corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged and (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. 6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of the Credit Parties has the corporate or other necessary power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party, and in the case of the Borrower, to obtain extensions of credit hereunder, and has taken all necessary corporate 66 action to authorize the borrowings and other extensions of credit on the terms and conditions of this Credit Agreement and to authorize the execution, delivery and performance of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by or on behalf of any Credit Party in connection with the borrowings or other extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which such Credit Party is a party, except for (i) consents, authorizations, notices and filings described in SCHEDULE 6.4, all of which have been obtained or made or have the status described in such SCHEDULE 6.4 and (ii) filings to perfect the Liens created by the Collateral Documents. This Credit Agreement has been, and each other Credit Document to which any Credit Party is a party will be, duly executed and delivered on behalf of the Credit Parties. This Credit Agreement constitutes, and each other Credit Document to which any Credit Party is a party when executed and delivered will constitute, a legal, valid and binding obligation of such Credit Party enforceable against such party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 6.5 NO CONFLICTS. Neither the execution and delivery of the Credit Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and provisions thereof by such Credit Party will (a) violate or conflict with any provision of its articles or certificate of incorporation or bylaws or other organizational or governing documents of such Person, (b) to the extent it could reasonably be expected to have a Material Adverse Effect violate, contravene or materially conflict with any Requirement of Law or any other law, regulation (including, without limitation, Regulation U or Regulation X), order, writ, judgment, injunction, decree or permit applicable to it, (c) violate, contravene or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound, the violation of which could have a Material Adverse Effect, or (d) result in or require the creation of any Lien (other than those contemplated in or created in connection with the Credit Documents) upon or with respect to its properties. 6.6 NO DEFAULT. No Consolidated Party is in default in any respect under any contract, lease, loan agreement, indenture, mortgage, security agreement or other agreement or obligation to which it is a party or by which any of its properties is bound which default could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred or exists except as previously disclosed in writing to the Lenders. 6.7 OWNERSHIP. Each Consolidated Party is the owner of, and has good and marketable title to, all of its respective assets and none of such assets is subject to any Lien other than Permitted Liens. 67 6.8 LITIGATION. Set forth on Schedule 6.8 is a list of all litigation matters with respect to which any Credit Party is a party as of the Closing Date except for any such matters that, if adversely determined, would not result in liability in excess of $25,000. There are no actions, suits or legal, equitable, arbitration or administrative proceedings, pending or, to the knowledge of any Credit Party, threatened against any Consolidated Party that could be reasonably expected to have a Material Adverse Effect. 6.9 TAXES. Each Consolidated Party has filed, or caused to be filed, all material tax returns (federal, state, local and foreign) required to be filed and paid (a) all amounts of taxes shown thereon to be due (including interest and penalties) and (b) all other material taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except for such taxes (i) which are not yet delinquent or (ii) that are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP. No Credit Party is aware as of the Closing Date of any proposed tax assessments against it or any other Consolidated Party. 6.10 COMPLIANCE WITH LAW. Each Consolidated Party is in compliance with all Requirements of Law and all other laws, rules, regulations, orders and decrees (including without limitation Environmental Laws) applicable to it, or to its properties, unless such failure to comply could not reasonably be expected to have a Material Adverse Effect. 6.11 ERISA. (a) During the five-year period prior to the date on which this representation is made or deemed made: (i) no ERISA Event has occurred, and, to the best knowledge of the Credit Parties, no event or condition has occurred or exists as a result of which any ERISA Event could reasonably be expected to occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan; (iii) each Plan has been maintained, operated, and funded in material compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal or state laws; and (iv) no lien in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan. (b) The actuarial present value of all "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer Plan, as of the last annual valuation date prior to the date on which this representation is made or deemed made (determined, in each case, utilizing the actuarial assumptions used in such Plan's most 68 recent actuarial valuation report), did not exceed as of such valuation date the fair market value of the assets of such Plan. (c) Neither any Consolidated Party nor any ERISA Affiliate has incurred, or, to the best knowledge of the Credit Parties, could be reasonably expected to incur, any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither any Consolidated Party nor any ERISA Affiliate would become subject to any withdrawal liability under ERISA if any Consolidated Party or any ERISA Affiliate were to withdraw completely from all Multiemployer Plans and Multiple Employer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. Neither any Consolidated Party nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit Parties, reasonably expected to be in reorganization, insolvent, or terminated. (d) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or may subject any Consolidated Party or any ERISA Affiliate to any material liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which any Consolidated Party or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability. (e) Neither any Consolidated Party nor any ERISA Affiliates has any material liability with respect to "expected post-retirement benefit obligations" within the meaning of the Financial Accounting Standards Board Statement 106. 6.12 SUBSIDIARIES. Set forth on SCHEDULE 6.12 is a complete and accurate list of all Subsidiaries of each Consolidated Party. Information on SCHEDULE 6.12 includes jurisdiction of incorporation, the number of shares of each class of Capital Stock outstanding, the number and percentage of outstanding shares of each class owned (directly or indirectly) by such Consolidated Party; and the number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and all other similar rights with respect thereto. The outstanding Capital Stock of all such Subsidiaries is validly issued, fully paid and non-assessable and is owned by each such Consolidated Party, directly or indirectly, free and clear of all Liens (other than those arising under or contemplated in connection with the Credit Documents). Neither the Borrower nor any other Consolidated Party, other than as set forth in SCHEDULE 6.12, has outstanding any securities convertible into or exchangeable for its Capital Stock nor does any such Person have outstanding any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to its Capital Stock. SCHEDULE 6.12 may be updated from time to time by the Borrower by giving written notice thereof to the Agent. 69 6.13 GOVERNMENTAL REGULATIONS, ETC. (a) No part of the Letters of Credit or proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation U, or for the purpose of purchasing or carrying or trading in any securities except as contemplated in connection with the purchase of the Acquired Company or the securities of any other Subsidiary of the Borrower. If requested by any Lender or the Agent, the Borrower will furnish to the Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in Regulation U. No indebtedness being reduced or retired out of the proceeds of the Loans was or will be incurred for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U or any "margin security" within the meaning of Regulation T. "Margin stock" within the meaning of Regulation U does not constitute more than 25% of the value of the consolidated assets of the Consolidated Parties. None of the transactions contemplated by this Credit Agreement (including, without limitation, the direct or indirect use of the proceeds of the Loans) will violate or result in a violation of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation T, U or X. (b) No Consolidated Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each as amended. In addition, no Consolidated Party is (i) an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, and is not controlled by such a company, or (ii) a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. (c) No director, executive officer or principal shareholder of any Consolidated Party is a director, executive officer or principal shareholder of any Lender. For the purposes hereof the terms "director", "executive officer" and "principal shareholder" (when used with reference to any Lender) have the respective meanings assigned thereto in Regulation O issued by the Board of Governors of the Federal Reserve System. (d) Each Consolidated Party has obtained and holds in full force and effect, all material franchises, licenses, permits, certificates, authorizations, qualifications, accreditations, easements, rights of way and other rights, consents and approvals which are necessary for the ownership of its respective Property and to the conduct of its respective businesses as presently conducted. (e) To the best of each Consolidated Party's knowledge, each Consolidated Party is current with all material reports and documents, if any, required to be filed with any state or federal securities commission or similar agency and is in full compliance in all material respects with all applicable rules and regulations of such commissions. 70 6.14 PURPOSE OF LOANS AND LETTERS OF CREDIT. The proceeds of the Loans hereunder shall be used solely by the Borrower to (i) finance a portion of the purchase price of the Acquired Company and to pay certain fees and expenses related thereto, (ii) refinance existing Indebtedness and (iii) provide for working capital and other general corporate purposes. The Letters of Credit shall be used only for or in connection with appeal bonds, reimbursement obligations arising in connection with surety and reclamation bonds, reinsurance, domestic or international trade transactions, to secure obligations to Comsat Corporation relating to letters of credit obtained for the benefit of the Acquired Company and obligations not otherwise aforementioned relating to transactions entered into by the applicable account party in the ordinary course of business. 6.15 ENVIRONMENTAL MATTERS. Except any of the following that could not reasonably be expected to have a Material Adverse Effect: (a) Each of the facilities and properties owned, leased or operated by the Consolidated Parties (the "REAL PROPERTIES") and all operations at the Real Properties are in compliance with all applicable Environmental Laws, and there is no violation of any Environmental Law with respect to the Real Properties or the businesses operated by the Consolidated Parties (the "BUSINESSES"), and there are no conditions relating to the Businesses or Real Properties that could give rise to liability under any applicable Environmental Laws. (b) None of the Real Properties contains, or has previously contained, any Materials of Environmental Concern at, on or under the Real Properties in amounts or concentrations that constitute or constituted a violation of, or could give rise to liability under, Environmental Laws. (c) No Consolidated Party has received any written or verbal notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Real Properties or the Businesses, nor does any Consolidated Party have knowledge that any such notice will be received or is being threatened. (d) Materials of Environmental Concern have not been transported or disposed of from the Real Properties, or generated, treated, stored or disposed of at, on or under any of the Real Properties or any other location, in each case by or on behalf of any Consolidated Party in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the best knowledge of any Credit Party, threatened, under any Environmental Law to which any Consolidated Party is or will be named as a party, nor are there any consent 71 decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Consolidated Parties, the Real Properties or the Businesses. (f) There has been no Release or, threat of Release of Materials of Environmental Concern at or from the Real Properties, or arising from or related to the operations (including, without limitation, disposal) of any Consolidated Party in connection with the Real Properties or otherwise in connection with the Businesses, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. 6.16 INTELLECTUAL PROPERTY. Each Consolidated Party owns, or has the legal right to use, all trademarks, tradenames, copyrights, technology, know-how and processes (the "INTELLECTUAL PROPERTY") necessary for each of them to conduct its business as currently conducted except for those the failure to own or have such legal right to use could not be reasonably expected to have a Material Adverse Effect. Set forth on SCHEDULE 6.16 is a list of all patents and patent applications and all federally registered trademarks, trademark applications, copyrights and copyright applications, tradename applications, service marks and service mark applications owned, or applied for, by each Consolidated Party or that any Consolidated Party has licensed (if such license has been federally recorded). Except as provided on SCHEDULE 6.16, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does any Credit Party know of any such claim, and to the Credit Parties' knowledge the use of such Intellectual Property by any Consolidated Party does not infringe on the rights of any Person, except for such claims and infringements that in the aggregate, could not be reasonably expected to have a Material Adverse Effect. SCHEDULE 6.16 may be updated from time to time by the Borrower by giving written notice thereof to the Agent. 6.17 SOLVENCY. Each Credit Party is and, after consummation of the transactions contemplated by this Credit Agreement (including without limitation the acquisition of the Acquired Company by the Borrower), will be Solvent. 6.18 INVESTMENTS. All Investments of each Consolidated Party are Permitted Investments. 6.19 LOCATION OF COLLATERAL. Set forth on SCHEDULE 6.19(A) is a list of all Mortgaged Properties with street address, county and state where located. Set forth on SCHEDULE 6.19(B) is a list of all locations where any tangible personal property of a Consolidated Party is located, including county and state where located. Set forth on SCHEDULE 6.19(C) is the chief executive office and principal place of business of each Consolidated Party. SCHEDULE 6.19(A), 6.19(B) and 6.19(C) may be updated from time to time by the Borrower giving written notice thereof to the Agent, but the Borrower shall not be required to 72 update Schedule 6.19(b) with respect to any location unless the tangible personal property so located has a net book value greater than $100,000 individually or $500,000 in the aggregate. 6.20 DISCLOSURE. Neither this Credit Agreement nor any financial statements delivered to the Lenders nor any other document, certificate or statement furnished to the Lenders by or on behalf of any Consolidated Party in connection with the transactions contemplated hereby, taken as a whole, contains any untrue statement of a material fact or omits to state a material fact known to any Credit Party (or which reasonably should have been known by any Credit Party) necessary in order to make the statements contained therein or herein not misleading. 6.21 NO BURDENSOME RESTRICTIONS. No Consolidated Party is a party to any agreement or instrument or subject to any other obligation or any charter or corporate restriction or any provision of any applicable law, rule or regulation which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 6.22 LABOR MATTERS. There are no collective bargaining agreements or Multiemployer Plans covering the employees of a Consolidated Party as of the Closing Date and none of the Consolidated Parties has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years. 6.23 NATURE OF BUSINESS. As of the Closing Date, the Consolidated Parties are engaged in the business of manufacturing VSAT antennas, systems and products for satellite and terrestrial communications, and products for cellular and other wireless communications applications. 6.24 REPRESENTATIONS AND WARRANTIES FROM PURCHASE AGREEMENT. To the knowledge of the Borrower, as of the Closing Date, each of the representations and warranties made in the Purchase Agreement by each of the parties thereto is true and correct in all material respects. 6.25 YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations (including those affected by suppliers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications used by the Borrower or any of its Subsidiaries (or suppliers and venders) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (ii) developed a plan and timeline for addressing the 73 Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in accordance with such timetable. The Borrower believes that all computer applications (including those of its suppliers and vendors) that are material to its or any of its Subsidiaries' business and operations will on a timely basis be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure to do so could not reasonably be expected to have Material Adverse Effect. SECTION 7 AFFIRMATIVE COVENANTS Each Credit Party hereby covenants and agrees that so long as this Credit Agreement is in effect or any amounts payable hereunder or under any other Credit Document shall remain outstanding, and until all of the Commitments hereunder shall have terminated: 7.1 INFORMATION COVENANTS. The Borrower will furnish, or cause to be furnished, to the Agent and each of the Lenders: (a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event within 120 days after the close of each fiscal year of the Consolidated Parties, a consolidated and consolidating balance sheet of the Consolidated Parties, as of the end of such fiscal year, together with related consolidated and consolidating income statements and statements of retained earnings and of cash flows for such fiscal year, setting forth in comparative form consolidated and consolidating figures for the preceding fiscal year (commencing with the 1999 fiscal year), all such financial information described above to be in reasonable form and detail and, in the case of consolidated financial statements, audited by independent certified public accountants of recognized national standing reasonably acceptable to the Agent and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified as to the status of the Consolidated Parties as a going concern. (b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any event within 60 days after the close of each fiscal quarter of the Consolidated Parties (other than the fourth fiscal quarter, in which case 120 days after the end thereof) a consolidated and consolidating balance sheet of the Consolidated Parties, as of the end of such fiscal quarter, together with related consolidated and consolidating income statements and statements of retained earnings and of cash flows for such fiscal quarter in each case setting forth in comparative form consolidated and consolidating figures for the corresponding period of the preceding fiscal year (commencing with the fifth fiscal quarter ending after the Closing Date) and consolidated budget projections, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Agent, and accompanied by a certificate of the chief financial officer of the Borrower to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the 74 Consolidated Parties and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments and the absence of footnotes. (c) MONTHLY FINANCIAL STATEMENTS. As soon as available, and in any event within 30 days after the close of each month of the Consolidated Parties financial statements as agreed to between the Borrower and the Agent in reasonable form and detail and reasonably acceptable to the Agent, and accompanied by a certificate of the chief financial officer of the Borrower to the effect that such monthly financial statements fairly present in all material respects the financial condition of the Consolidated Parties subject to changes resulting from audit and normal year-end audit adjustments and the absence of footnotes. (d) OFFICER'S CERTIFICATE. At the time of delivery of the financial statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate of the chief financial officer of the Borrower substantially in the form of EXHIBIT 7.1(D), (i) demonstrating compliance with the financial covenants contained in Section 7.11 by calculation thereof as of the end of each such fiscal period and (ii) stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Credit Parties propose to take with respect thereto. At the time of delivery of the financial statements provided for in Section 7.1(c) above, a certificate of the chief financial officer of the Borrower stating that no Default or Event of Default exists, or if any Event of Default does exist, specifying the nature and extent thereof and what action the Credit Parties propose to take with respect thereto. (e) ANNUAL BUSINESS PLAN AND BUDGETS. Not later than 30 days after the end of each fiscal year of the Borrower, beginning with the fiscal year ending November 30, 1998, an annual business plan and budget of the Consolidated Parties containing, among other things, pro forma financial statements for the next fiscal year on a quarterly basis and for the two fiscal years thereafter on an annual basis. (f) COMPLIANCE WITH CERTAIN PROVISIONS OF THE CREDIT AGREEMENT. Within 120 days after the end of each fiscal year of the Borrower, a certificate containing information regarding (i) the calculation of Excess Cash Flow and all payments made pursuant to Section 8.7 and (ii) the amount of all Asset Dispositions, Debt Issuances and Equity Issuances that were made during the prior fiscal year. (g) ACCOUNTANT'S CERTIFICATE. Within the period for delivery of the annual financial statements provided in Section 7.1(a), a certificate of the accountants conducting the annual audit stating that they have reviewed this Credit Agreement and stating further whether, in the course of their audit, they have become aware of any Default or Event of Default and, if any such Default or Event of Default exists, specifying the nature and extent thereof. (h) AUDITOR'S REPORTS. Promptly upon receipt thereof, a copy of any other report or "management letter" submitted by independent accountants to any Consolidated Party in connection with any annual, interim or special audit of the books of such Person. 75 (i) REPORTS. Promptly upon transmission or receipt thereof, (i) copies of any filings and registrations with, and reports to or from, the Securities and Exchange Commission, or any successor agency, and copies of all financial statements, proxy statements and similar information as any Consolidated Party shall send to its shareholders or to a holder of any Indebtedness in excess of $1,000,000 owed by any Consolidated Party in its capacity as such a holder and (ii) upon the request of the Agent, all reports and written information to and from the United States Environmental Protection Agency, or any state or local agency responsible for environmental matters, the United States Occupational Health and Safety Administration, or any state or local agency responsible for health and safety matters, or any successor agencies or authorities concerning environmental, health or safety matters. (j) NOTICES. Upon an Executive Officer of the Borrower obtaining knowledge thereof, the Borrower promptly will give written notice to the Agent of (i) the occurrence of an event or condition consisting of a Default or Event of Default, specifying the nature and existence thereof and what action the Credit Parties propose to take with respect thereto, and (ii) the occurrence of any of the following with respect to any Consolidated Party (A) the pendency or commencement of any litigation, arbitral or governmental proceeding against such Person which if adversely determined is likely to have a Material Adverse Effect, (B) the institution of any proceedings against such Person with respect to, or the receipt of notice by such Person of potential liability or responsibility for violation, or alleged violation of any federal, state or local law, rule or regulation, including but not limited to, Environmental Laws, the violation of which could reasonably be expected to have a Material Adverse Effect, or (C) any notice or determination concerning the imposition of any withdrawal liability by a Multiemployer Plan against such Person or any ERISA Affiliate, the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA or the termination of any Plan. (k) ERISA. Upon an Executive Officer of the Borrower obtaining knowledge thereof, the Borrower promptly will give written notice to the Agent (and in any event within five business days) of: (i) of any event or condition, including, but not limited to, any Reportable Event, that constitutes, or could reasonably be expected to lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against the Borrower or any of its ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which any Consolidated Party or any ERISA Affiliate is required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect thereto; or (iv) any change in the funding status of any Plan that could reasonably be expected to have a Material Adverse Effect, together with a description of any such event or condition or a copy of any such notice and a statement by the chief financial officer of the Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Credit Parties with respect thereto. Promptly upon request, the Credit Parties shall furnish the Agent and the Lenders with such additional information concerning any Plan as 76 may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each "plan year" (within the meaning of Section 3(39) of ERISA). (l) ENVIRONMENTAL. (i) Upon the reasonable written request of the Agent following any material Release of Materials of Environmental Concern or if the Agent shall otherwise determine in its reasonable discretion that cause shall exist, the Credit Parties will furnish or cause to be furnished to the Agent, at the Borrower's expense, a report of an environmental assessment of reasonable scope, form and depth, (including, where appropriate, invasive soil or groundwater sampling) by a consultant reasonably acceptable to the Agent as to the nature and extent of the presence of any Materials of Environmental Concern on any Real Properties (as defined in Section 6.16) and as to the compliance by any Consolidated Party with Environmental Laws at such Real Properties. If the Credit Parties fail to deliver such an environmental report within seventy-five (75) days after receipt of such written request then the Agent may arrange for same, and the Consolidated Parties hereby grant to the Agent and their representatives access to the Real Properties to reasonably undertake such an assessment (including, where appropriate, invasive soil or groundwater sampling). The reasonable cost of any assessment arranged for by the Agent pursuant to this provision will be payable by the Borrower on demand and added to the obligations secured by the Collateral Documents. (ii) The Consolidated Parties will conduct and complete all investigations, studies, sampling, and testing and all remedial, removal, and other actions necessary to address all Materials of Environmental Concern on, from or affecting any of the Real Properties to the extent necessary to be in compliance with all Environmental Laws and with the validly issued orders and directives of all Governmental Authorities with jurisdiction over such Real Properties to the extent any failure could reasonably be expected to have a Material Adverse Effect. (m) ADDITIONAL PATENTS AND TRADEMARKS. At the time of delivery of the financial statements and reports provided for in Section 7.1(a), a report signed by the chief financial officer or treasurer of the Borrower setting forth (i) a list of registration numbers for all patents and all federally registered trademarks, service marks, tradenames and copyrights awarded to any Consolidated Party since the last day of the immediately preceding fiscal year and (ii) a list of all patent applications and all federally registered trademark applications, service mark applications, trade name applications and copyright applications submitted by any Consolidated Party since the last day of the immediately preceding fiscal year and the status of each such application, all in such form as shall be reasonably satisfactory to the Agent. 77 (n) OTHER INFORMATION. With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of any Consolidated Party as the Agent or the Required Lenders may reasonably request. 7.2 PRESERVATION OF EXISTENCE AND FRANCHISES. Except as a result of or in connection with a dissolution, merger or disposition of a Subsidiary permitted under Section 8.4 or Section 8.5, each Credit Party will, and will cause each of its Subsidiaries to, do all things necessary to preserve and keep in full force and effect its corporate existence and material rights, franchises and authority. 7.3 BOOKS AND RECORDS. Each Credit Party will, and will cause each of its Subsidiaries to, keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves). 7.4 COMPLIANCE WITH LAW. Each Credit Party will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its Property if noncompliance with any such law, rule, regulation, order or restriction could reasonably be expected to have a Material Adverse Effect. 7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS. Each Credit Party will, and will cause each of its Subsidiaries to, pay and discharge (a) all taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before they shall become delinquent, (b) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, could reasonably be expected to give rise to a Lien upon any of its properties, and (c) except as prohibited hereunder, all of its other Indebtedness as it shall become due; PROVIDED, HOWEVER, that no Consolidated Party shall be required to pay any such tax, assessment, charge, levy, claim or Indebtedness which is being contested in good faith by appropriate proceedings and as to which adequate reserves therefor have been established in accordance with GAAP, unless the failure to make any such payment (i) could give rise to an immediate right to foreclose on a Lien securing such amounts or (ii) could reasonably be expected to have a Material Adverse Effect. 7.6 INSURANCE. (a) Each Credit Party will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect insurance (including worker's compensation insurance, liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice. The Agent shall be named as loss payee or mortgagee, as its interest may appear, and/or additional insured with respect to any 78 such insurance providing coverage in respect of any Collateral, and each provider of any such insurance shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Agent, that it will give the Agent thirty (30) days prior written notice before any such policy or policies shall be altered or canceled, and that no act or default of any Consolidated Party or any other Person shall affect the rights of the Agent or the Lenders under such policy or policies. The present insurance coverage of the Consolidated Parties is outlined as to carrier, policy number, expiration date, type and amount on SCHEDULE 7.6. (b) In case of any material loss, damage to or destruction of the Collateral of any Credit Party or any part thereof, such Credit Party shall promptly give written notice thereof to the Agent generally describing the nature and extent of such damage or destruction. In case of any loss, damage to or destruction of the Collateral of any Credit Party or any part thereof, such Credit Party, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at such Credit Party's cost and expense, will promptly repair or replace the Collateral of such Credit Party so lost, damaged or destroyed; PROVIDED, HOWEVER, that such Credit Party need not repair or replace the Collateral of such Credit Party so lost, damaged or destroyed to the extent the failure to make such repair or replacement (i) determined by the board of directors of the Borrower to be desirable to the proper conduct of the business of such Credit Party in the ordinary course and otherwise in the best interest of such Credit Party; and (ii) would not materially impair the rights of the Agent or the Lenders under the Collateral Documents, any other Credit Document or any Hedging Agreement. In the event a Credit Party shall receive net proceeds of such insurance in excess of $1,000,000, such Credit Party will immediately pay over such proceeds to the Agent, for payment on the Credit Party Obligations for application as an Asset Disposition as set forth in Section 3.3(b)(iii); PROVIDED, HOWEVER, that the Agent agrees to release such insurance proceeds to such Credit Party for replacement or restoration of the portion of the Collateral of such Credit Party lost, damaged or destroyed (including reimbursement of any Credit Party for expenditures previously made therefore) if, but only if, (A) no Default or Event of Default shall have occurred and be continuing at the time of release, (B) written application for such release is received by the Agent from such Credit Party within 30 days of receipt of such proceeds and (C) the Agent has received evidence reasonably satisfactory to it that the Collateral lost, damaged or destroyed has been or will be replaced or restored to reasonable condition within 180 days after the date such Collateral was lost, damaged or destroyed. 7.7 MAINTENANCE OF PROPERTY. Each Credit Party will, and will cause each of its Subsidiaries to, maintain and preserve its properties and equipment material to the conduct of its business in reasonable repair, working order and condition, normal wear and tear and casualty and condemnation excepted, and will make, or cause to be made, in such properties and equipment from time to time all repairs, renewals, replacements, extensions, additions, betterments and improvements thereto as may be needed or proper in the reasonable conduct of its business, to the extent and in the manner customary for companies in similar businesses. 79 7.8 PERFORMANCE OF OBLIGATIONS. Except as could not reasonably be expected to result in a Material Adverse Effect, each Credit Party will, and will cause each of its Subsidiaries to, perform in all material respects all of its obligations under the terms of all material agreements, indentures, mortgages, security agreements or other debt instruments to which it is a party or by which it is bound. 7.9 USE OF PROCEEDS. The Borrower will use the proceeds of the Loans and will use the Letters of Credit solely for the purposes set forth in Section 6.14. 7.10 AUDITS/INSPECTIONS. Upon reasonable notice, during normal business hours and without undue disruption, each Credit Party will, and will cause each of its Subsidiaries to, permit representatives appointed by the Agent, including, without limitation, independent accountants, agents, attorneys, and appraisers to visit and inspect its property, including its books and records, its accounts receivable and inventory, its facilities and its other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains and shall permit the Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers, employees and representatives of such Person. All information obtained pursuant to this Section 7.10 shall be subject to the provisions of Section 11.16. The Credit Parties agree that the Agent, and its representatives, may conduct an annual audit of the Collateral, at the expense of the Borrower. Notwithstanding the foregoing, the rights of the Lenders and the Agent under this Section 7.10 shall be subject to restrictions on access to the Credit Parties' information and facilities under laws and regulations applicable to the Credit Parties', including without limitations any laws or regulations governing national security matters, security clearances or the like. 7.11 FINANCIAL COVENANTS. (a) INTEREST COVERAGE RATIO. The Interest Coverage Ratio, as of the last day of each fiscal quarter of the Consolidated Parties during the periods shown below, shall be greater than or equal to:
PERIOD RATIO August 31, 1998 through November 30, 1998 2.00 to 1.0 February 28, 1999 2.10 to 1.0 May 31, 1999 2.20 to 1.0 August 31, 1999 through November 30, 1999 2.30 to 1.0 February 29, 2000 through August 31, 2000 2.50 to 1.0 November 30, 2000 through February 28, 2001 2.75 to 1.0 May 31, 2001 and thereafter 3.00 to 1.0
80 (b) LEVERAGE RATIO. The Leverage Ratio, as of the last day of each fiscal quarter of the Consolidated Parties during the periods shown below, shall be less than or equal to:
PERIOD RATIO August 31, 1998 through May 31, 1999 5.35 to 1.0 August 31, 1999 4.75 to 1.0 November 30, 1999 4.50 to 1.0 February 29, 2000 through May 31, 2000 4.25 to 1.0 August 31, 2000 4.00 to 1.0 November 30, 2000 through February 28, 2001 3.75 to 1.0 May 31, 2001 through November 30, 2001 3.50 to 1.0 February 28, 2002 through November 30, 2002 3.25 to 1.0 February 28, 2003 and thereafter 3.00 to 1.0
(c) SENIOR LEVERAGE RATIO. The Senior Leverage Ratio, as of the last day of each fiscal quarter of the Consolidated Parties during the periods shown below, shall be less than or equal to:
PERIOD RATIO August 31, 1998 through May 31, 1999 4.60 to 1.0 August 31, 1999 4.25 to 1.0 November 30, 1999 4.00 to 1.0 February 29, 2000 through May 31, 2000 3.75 to 1.0 August 31, 2000 3.50 to 1.0 November 30, 2000 through February 28, 2001 3.25 to 1.0 May 31, 2001 through November 30, 2001 3.00 to 1.0 February 28, 2001 through November 30, 2002 2.75 to 1.0 February 28, 2003 and thereafter 2.50 to 1.0
(d) CONSOLIDATED NET WORTH. At all times the Consolidated Net Worth of the Borrower shall be greater than or equal to $60,000,000 (decreased by the after-tax losses associated with the Divested Businesses at the time incurred in an aggregate amount not to exceed $4,800,000), increased on a cumulative basis as of the end of each fiscal quarter of the Consolidated Parties, commencing with the fiscal quarter ending August 31, 1998, by an amount equal to 50% of Consolidated Net Income (to the extent positive) for the fiscal quarter then ended. (e) CAPITAL EXPENDITURES. The Credit Parties will not permit Consolidated Capital Expenditures (excluding any capital expenditures made with the proceeds of an Excluded Issuance) for any fiscal year to exceed the amounts set forth below during the periods set forth below:
PERIOD AMOUNT Closing Date through the 1998 fiscal year end $4,000,000
81 Each fiscal year occurring thereafter $6,500,000
provided, however, that the Credit Parties may apply any amounts not utilized in any fiscal year to the amount otherwise available for the next fiscal year only. 7.12 ADDITIONAL CREDIT PARTIES. As soon as practicable and in any event within 30 days after any Person becomes a Subsidiary of any Credit Party, the Borrower shall provide the Agent with written notice thereof setting forth information in reasonable detail describing all of the assets of such Person and shall (a) if such Person is a Domestic Subsidiary of a Credit Party, cause such Person to execute a Joinder Agreement in substantially the same form as EXHIBIT 7.12, (b) cause 100% (if such Person is a Domestic Subsidiary of a Credit Party) or 65% (if such Person is a direct Foreign Subsidiary of the Borrower or a Domestic Subsidiary) of the Capital Stock of such Person to be delivered to the Agent (together with undated stock powers signed in blank (unless, with respect to a Foreign Subsidiary, such stock powers are deemed unnecessary by the Agent in its reasonable discretion under the law of the jurisdiction of incorporation of such Person)) and pledged to the Agent pursuant to an appropriate pledge agreement(s) in substantially the form of the Pledge Agreement and otherwise in form acceptable to the Agent and (c) cause such Person (if such Person is a Domestic Subsidiary) to (i) if such Person owns or leases any real property located in the United States of America or deemed to be material by the Agent or the Required Lenders in its or their sole reasonable discretion, deliver to the Agent with respect to such real property documents, instruments and other items of the types required to be delivered by the Agent all in form, content and scope reasonably satisfactory to the Agent and (ii) deliver such other documentation as the Agent may reasonably request in connection with the foregoing, including, without limitation, appropriate UCC-1 financing statements, real estate title insurance policies, environmental reports, landlord's waivers, certified resolutions and other organizational and authorizing documents of such Person, favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to above and the perfection of the Agent's liens thereunder) and other items of the types required to be delivered pursuant to Section 5.1(f), all in form, content and scope reasonably satisfactory to the Agent. 7.13 PLEDGED ASSETS. Each Credit Party will, and will cause each of its Domestic Subsidiaries to, cause (i) all of its owned real and personal property located in the United States, (ii) to the extent deemed to be material by the Agent or the Required Lenders in its or their sole reasonable discretion, all of its other owned real and personal property and (iii) to the extent deemed material by the Agent or the Required Lenders in its or their sole reasonable discretion all of its leased real property located in the United States, to be subject at all times to first priority, perfected and, in the case of real property (whether leased or owned), title insured Liens in favor of the Agent pursuant to the terms and conditions of the Collateral Documents or, with respect to any such property acquired subsequent to the Closing Date, such other additional security documents as the Agent shall reasonably request; PROVIDED, HOWEVER that upon the Borrower's request, the Agent may in its reasonable discretion, waive certain of the requirements hereunder if it is determined that the 82 costs of compliance with the provisions hereof are excessive in light of the benefit to be obtained in connection therewith. With respect to any real property (whether leased or owned) located in the United States of America acquired by any direct or indirect Domestic Subsidiary of the Borrower subsequent to the Closing Date, such Person will cause to be delivered to the Agent with respect to such real property documents, instruments and other items of the types required to be delivered pursuant to Section 5.1(h) in form acceptable to the Agent. In furtherance of the foregoing terms of this Section 7.13, the Borrower agrees to promptly provide the Agent with written notice of the acquisition by, or the entering into a leasing by, any Credit Party of any asset(s) having a market value greater than $500,000, setting forth in reasonable detail the location and a description of the asset(s) so acquired. Without limiting the generality of the above, the Credit Parties will cause 100% of the Capital Stock of the Borrower and each other direct or indirect Domestic Subsidiaries of the Borrower and 65% of the Capital Stock in each of the direct Foreign Subsidiaries of the Borrower and its Domestic Subsidiaries to be subject at all times to a first priority, perfected Lien in favor of the Agent pursuant to the terms and conditions of the Collateral Documents or such other security documents as the Agent shall reasonably request. If, subsequent to the Closing Date, a Credit Party shall (a) acquire any intellectual property, securities, instruments, chattel paper or other personal property required to be delivered to the Agent as Collateral hereunder or under any of the Collateral Documents or (b) acquire or lease any real property, the Borrower shall promptly (and in any event within three (3) Business Days) after any Executive Officer of a Credit Party acquires knowledge of same notify the Agent of same. Each Credit Party shall, and shall cause each of its Subsidiaries to, take such action (including but not limited to the actions set forth in Sections 5.1(f) and 5.1(i) at its own expense as requested by the Agent to ensure that the Agent has a first priority perfected Lien to secure the Credit Party Obligations in (i) all owned real property and personal property of the Credit Parties located in the United States, (ii) to the extent deemed to be material by the Agent or the Required Lenders in its or their sole reasonable discretion, all other owned real and personal property of the Credit Parties and (iii) to the extent deemed material by the Agent or the Required Lenders in its or their sole reasonable discretion, all leased real property located in the United States, subject in each case only to Permitted Liens. Each Credit Party shall, and shall cause each of its Domestic Subsidiaries to, adhere to the covenants regarding the location of personal property as set forth in the Security Agreements. 7.14 YEAR 2000 COMPLIANCE. The Borrower will promptly notify the Agent in the event that the Borrower discovers or determines that any computer application (including those of its suppliers and vendors) that is material to its or any of its Subsidiaries business and operations will not be Year 2000 compliant (as such term is defined in Section 6.25), except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect. 7.15 ANNUAL MEETING. The Borrower will assist the Agent in organizing an annual bank meeting where members of management will be available to meet with representatives of the Lenders. 83 7.16 NAME CHANGE DOCUMENTATION. As soon as practicable, but in any event within 5 Business Days after the Closing Date, the Credit Parties shall have filed all documentation applicable and/or appropriate in all relevant jurisdictions to effectuate each relevant name change as required under the Purchase Agreement for each of the Designated Corporations. 7.17 IRB FACILITY. As soon as practicable, but in any event within 45 days after the Closing Date, the Credit Parties shall have either (i) obtained the consent of the First National Bank of Maryland, as trustee under the Illinois IRB, to the transfer of the Capital Stock of Mark Antenna Products, Inc. from CRSI, Inc. to the Borrower, in which case, the Credit Parties may maintain and continue the industrial revenue bond facility until October 15, 1998, upon which time, the industrial revenue bond facility shall be terminated and the real and personal property assets securing the loan agreement in connection with the same shall be pledged to secure the Credit Party Obligations or (ii) failed to obtain the consent of the First National Bank of Maryland to the transfer of the Capital Stock of Mark Antenna Products, Inc., terminated the industrial revenue bond facility and pledged the real and personal property assets securing the loan agreement in connection with such facility to secure the Credit Party Obligations. 7.18 NORTH CAROLINA SURVEY. As soon as practicable, but in any event within 45 days after the Closing Date, the Credit Parties shall have provided the Agent with a survey reasonably satisfactory to the Agent of the real property assets owned by any Credit Party located in Catawba County, North Carolina. 7.19 INTEREST RATE PROTECTION. Within 180 days after the Closing Date, the Borrower shall have entered into interest rate protection agreements protecting against fluctuations in interest rates as to which the material terms are reasonably satisfactory to the Agent, which agreements shall provide coverage in an amount and for a duration satisfactory to the Agent. SECTION 8 NEGATIVE COVENANTS Each Credit Party hereby covenants and agrees that, so long as this Credit Agreement is in effect or any amounts payable hereunder or under any other Credit Document shall remain outstanding, and until all of the Commitments hereunder shall have terminated: 84 8.1 INDEBTEDNESS. The Credit Parties will not permit any Consolidated Party to contract, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness arising under this Credit Agreement and the other Credit Documents; (b) Indebtedness of the Borrower and its Subsidiaries set forth in SCHEDULE 8.1 (and renewals, refinancings and extensions thereof on terms and conditions no less favorable to such Person than such existing Indebtedness); (c) purchase money Indebtedness (including Capital Leases) or Synthetic Leases hereafter incurred by the Borrower or any of its Subsidiaries to finance the purchase of fixed assets PROVIDED that (i) the total of all such Indebtedness for all such Persons taken together shall not exceed an aggregate principal amount of $5,000,000 at any one time (including any such Indebtedness referred to in subsection (b) above); (ii) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed; and (iii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing; (d) obligations of the Borrower or any of its Subsidiaries in respect of Hedging Agreements entered into in order to manage existing or anticipated interest rate or exchange rate risks and not for speculative purposes; (e) intercompany Indebtedness arising out of loans and advances permitted under Section 8.6; (f) indebtedness in respect of the Senior Subordinated Notes referred to in Section 3.3(b) and additional Senior Subordinated Notes on the same terms and conditions or on other terms and conditions reasonably acceptable to the Lenders; and (g) in addition to the Indebtedness otherwise permitted by this Section 8.1, other Indebtedness hereafter incurred by the Borrower or any of its Subsidiaries PROVIDED that (A) the loan documentation with respect to such Indebtedness shall be on terms and conditions reasonably satisfactory to the Required Lenders, shall be subordinated to the Credit Party Obligations and shall not contain covenants or default provisions relating to any Consolidated Party that are more restrictive than the covenants and default provisions contained in the Credit Documents, (B) the Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to the incurrence of such Indebtedness and to the concurrent retirement of any other Indebtedness of any Consolidated Party, no Default or Event of Default would exist hereunder. (h) Guarantees by the Borrower or any other Credit Party of any Indebtedness of the Borrower or another Credit Party otherwise permitted hereunder. 85 (i) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business provided that such Indebtedness is extinguished within two Business Days of its incurrence. (j) Indebtedness arising from agreements of the Borrower or any other Credit Party providing for indemnification, adjustment of purchase price or similar obligations, in each case incurred or assumed in connection with the disposition of any business, assets or any Subsidiary. (k) Other Indebtedness of the Borrower in an amount not to exceed $1,000,000 in the aggregate at any time outstanding. 8.2 LIENS. The Credit Parties will not permit any Consolidated Party to contract, create, incur, assume or permit to exist any Lien with respect to any of its Property, whether now owned or after acquired, except for Permitted Liens. 8.3 NATURE OF BUSINESS. The Credit Parties will not permit any Consolidated Party to engage in business substantively different in nature from that set forth in Section 6.23 or reasonable extensions or expansions thereof. 8.4 CONSOLIDATION, MERGER, DISSOLUTION, ETC. Except in connection with an Asset Disposition permitted by the terms of Section 8.5, the Credit Parties will not permit any Consolidated Party to enter into any transaction of merger or consolidation or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); PROVIDED that, notwithstanding the foregoing provisions of this Section 8.4, (a) the Borrower may merge or consolidate with any of its Subsidiaries PROVIDED that (i) the Borrower shall be the continuing or surviving corporation, (ii) the Credit Parties shall cause to be executed and delivered such documents, instruments and certificates as the Agent may reasonably request so as to cause the Credit Parties to be in compliance with the terms of Section 7.13 after giving effect to such transaction and (iii) the Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, no Default or Event of Default would exist, (b) any Credit Party other than the 86 Borrower may merge or consolidate with any other Credit Party other than the Borrower PROVIDED that (i) the Credit Parties shall cause to be executed and delivered such documents, instruments and certificates as the Agent may request so as to cause the Credit Parties to be in compliance with the terms of Section 7.13 after giving effect to such transaction and (ii) the Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, no Default or Event of Default would exist, (c) any Consolidated Party which is not a Credit Party may be merged or consolidated with or into any Credit Party other than the Borrower PROVIDED that (i) such Credit Party shall be the continuing or surviving corporation, (ii) the Credit Parties shall cause to be executed and delivered such documents, instruments and certificates as the Agent may request so as to cause the Credit Parties to be in compliance with the terms of Section 7.13 after giving effect to such transaction and (iii) the Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, no Default or Event of Default would exist, (d) any Consolidated Party which is not a Credit Party may be merged or consolidated with or into any other Consolidated Party which is not a Credit Party PROVIDED the Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, no Default or Event of Default would exist, (e) the Borrower or any of its Subsidiaries may acquire all or a portion of the capital stock or other ownership interest in any Person which is not a Subsidiary or all or any substantial portion of the assets, property and/or operations of a Person which is not a Subsidiary in an aggregate amount not to exceed $5,000,000 in any fiscal year; PROVIDED, HOWEVER, (i) the Borrower shall comply with the provisions of Section 7.12 and (ii) no Default or Event of Default would exist after giving effect to such acquisitions on a Pro Forma Basis, and (f) any Wholly-Owned Subsidiary of the Borrower may dissolve, liquidate or wind up its affairs at any time. 8.5 ASSET DISPOSITIONS. The Credit Parties will not permit any Consolidated Party to make any Asset Disposition (including, without limitation, any Sale and Leaseback Transaction) other than the sale of assets of the Divested Businesses unless (a) the consideration paid in connection therewith is cash, Cash Equivalents or other noncash consideration (PROVIDED that non-cash consideration (excluding liabilities assumed by the acquiror and assets received in a trade-in or similar transaction) shall not comprise in excess of 15% of the total value of proceeds received in connection with any Asset Disposition), (b) if such transaction is a Sale and Leaseback Transaction, such transaction is permitted by the terms of Section 8.13, (c) such transaction does not involve the sale or other disposition of a minority equity interest in any Consolidated Party, (d) the aggregate net book value of all of the assets sold or otherwise disposed of by the Consolidated Parties (excluding for purposes hereof assets sold in connection with the sale of the Divested Businesses) in all such transactions (excluding the sale of real estate no longer used or useful in such Consolidated Parties business) after the Closing Date shall not exceed $5,000,000, (c) the Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, no Default or Event of Default would exist hereunder, and (f) no later than 30 days prior to such Asset Disposition, the Agent and the Lenders shall have received a certificate of an officer of the Borrower specifying the anticipated or actual date of such Asset Disposition, briefly describing the assets to be sold or otherwise disposed of and setting forth the net book value of such assets, the aggregate consideration and the Net Cash Proceeds to be received for such assets in connection with such Asset Disposition, and thereafter the Borrower shall, within the period of 180 days following the consummation of such Asset Disposition (with respect to any such Asset Disposition, the "APPLICATION PERIOD"), apply (or cause to be applied) an amount equal to the Net Cash Proceeds of such Asset Disposition to (i) the purchase, acquisition or, in the case of improvements to real property, construction of Eligible Assets or (ii) to the prepayment of the Loans in accordance with the terms of Section 3.3(b)(iii). 87 Upon a sale or other disposition of assets the Agent shall (to the extent applicable) deliver to the Borrower, upon the Borrower's request and at the Borrower's expense, such documentation as is reasonably necessary to evidence the release of the Agent's security interest, if any, in such assets or Capital Stock, including, without limitation, amendments or terminations of UCC financing statements, if any, the return of stock certificates, if any, and the release of such Subsidiary from all of its obligations, if any, under the Credit Documents. 8.6 INVESTMENTS. The Credit Parties will not permit any Consolidated Party to make Investments in or to any Person, except for Permitted Investments. 8.7 RESTRICTED PAYMENTS. (a) The Credit Parties will not permit any Consolidated Party to, directly or indirectly, declare, order, make or set apart any sum for or pay any Restricted Payment, except (i) to make dividends payable solely in the same class of Capital Stock of such Person, (ii) to make dividends or other distributions payable to the Borrower or a Wholly-Owned Subsidiary of the Borrower (directly or indirectly through Subsidiaries), (iii) as permitted by Section 8.8, (iv), transactions permitted by Section 8.9, (v) provided that no Default or Event of Default has occurred and is continuing at such time or would be directly or indirectly caused as a result thereof, the Borrower may pay dividends or repay the Senior Subordinated Notes during the term of this Agreement in an amount that, together with any dividends and other payments of the Senior Subordinated Notes previously paid during the term of this Agreement, does not exceed the Maximum Payment Amount as of the date of such payment; PROVIDED, however, that no preferred stock shall be redeemed or repurchased nor shall any dividend payments with respect to such preferred stock be declared (other than on a cumulative, compounded basis) until such time as the pending litigation with respect to Anghel Laboratories, Inc. shall have been settled or otherwise concluded to the satisfaction of the Required Lenders and (vi) the Borrower may make payments permitted by the provisos to Sections 3.3(b)(iii) and 3.3(b)(iv). (b) The Credit Parties will not permit any Consolidated Party to engage in any Equity Issuance other than (i) an Equity Issuance made by a Subsidiary of a Credit Party to a Credit Party and (ii) any Equity Issuance made by the Borrower provided that prepayments are made to the extent required by Section 3.3(b)(v). 8.8 PREPAYMENTS OF INDEBTEDNESS, ETC. The Credit Parties will not permit any Consolidated Party to (a) after the issuance thereof, amend or modify (or permit the amendment or modification of) any of the terms of any subordinated Indebtedness if such amendment or modification would add or change any terms in a manner adverse to the issuer of such Indebtedness, or shorten the final maturity or average life to maturity or require any payment to be made sooner than originally scheduled or increase the interest rate applicable thereto (provided, that the Borrower may change the interest rate owing with respect to the Senior Subordinated Notes from a floating rate to a fixed rate on terms and conditions 88 satisfactory to the Agent) or change any subordination provision thereof, or (b) (i) if any Default or Event of Default has occurred and is continuing or would be directly or indirectly caused as a result thereof, make (or give any notice with respect thereto) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due), refund, refinance or exchange of any other subordinated Indebtedness (including without limitation any Indebtedness permitted by Section 8.1(f) or (ii) make (or give any notice with respect thereto) any voluntary or optional payment or prepayment, redemption, acquisition for value or defeasance of (including without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due), refund, refinance or exchange of any subordinated Indebtedness except that the Borrower make payments permitted by the provisos to Sections 3.3(b)(iii) and 3.3(b)(iv). 8.9 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 8.9, the Credit Parties will not permit any Consolidated Party to enter into or permit to exist any transaction or series of transactions with any officer, director, shareholder, Subsidiary or Affiliate of such Person other than (a) advances of working capital to any Credit Party, (b) transfers of cash and assets to any Credit Party other than the Borrower, (c) transactions permitted by Section 8.1, Section 8.4, Section 8.5, Section 8.6, or Section 8.7, (d) normal compensation and reimbursement of expenses of officers and directors, (e) payments pursuant to the Tax Sharing Agreement as in effect on the date hereof and (f) except as otherwise specifically limited in this Credit Agreement, other transactions which are entered into in the ordinary course of such Person's business on terms and conditions substantially as favorable to such Person as would be obtainable by it in a comparable arms-length transaction with a Person other than an officer, director, shareholder, Subsidiary or Affiliate. 8.10 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS. The Credit Parties will not permit any Consolidated Party to change its fiscal year (other than the Acquired Company and its Subsidiaries to conform with the Borrower's fiscal year) or amend, modify or change its articles of incorporation (or corporate charter or other similar organizational document) or bylaws (or other similar document) without the prior written consent of the Required Lenders. 8.11 LIMITATION ON RESTRICTED ACTIONS. Except for conditions and restrictions existing as of the date hereof and described on SCHEDULE 8.11, the Credit Parties will not permit any Consolidated Party to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Person to (a) pay dividends or make any other distributions to any Credit Party on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness or other obligation owed to any Credit Party, (c) make loans or advances to any Credit Party, (d) sell, lease or transfer any of its properties or assets to any Credit Party, or (e) act as a Guarantor and pledge its assets pursuant to the Credit Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any 89 of the matters referred to in clauses (a)-(d) above) for such encumbrances or restrictions existing under or by reason of (i) this Credit Agreement and the other Credit Documents, (ii) the Senior Subordinated Note documentation as in effect as of the Closing Date, (iii) applicable law, (iv) any document or instrument governing Indebtedness incurred pursuant to Section 8.1(c), PROVIDED, HOWEVER, that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (v) any Permitted Lien or any document or instrument governing any Permitted Lien, provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien PROVIDED, FURTHER, that no such lien shall encumber any of the Consolidated Parties' fee simple owned real property or leasehold assets, (vi) customary restrictions and conditions contained in agreements relating to Asset Dispositions otherwise permitted hereunder pending such sale, provided that such restrictions and conditions apply only to the assets which are to be sold (including the assets of a Subsidiary being sold) and (vii) customary provisions in leases, licenses and similar contracts restricting the subletting, assignment or transfer thereof, or any property or asset the subject thereof. 8.12 OWNERSHIP OF SUBSIDIARIES. Notwithstanding any other provisions of this Credit Agreement to the contrary, the Credit Parties will not permit any Consolidated Party to (i) permit any Person (other than the Borrower or any Wholly-Owned Subsidiary of the Borrower) to own any Capital Stock of any Subsidiary of the Borrower, (ii) permit any Subsidiary of the Borrower to issue Capital Stock (except to the Borrower or to a Wholly-Owned Subsidiary of the Borrower), (iii) permit, create, incur, assume or suffer to exist any Lien thereon, in each case except (A) except to qualify directors where required by applicable law or to satisfy other requirements of applicable law with respect to the ownership of Capital Stock of Foreign Subsidiaries, (B) except as a result of or in connection with a dissolution, merger or disposition of a Subsidiary permitted under Section 8.4 or Section 8.5 or (C) except for Permitted Liens and (iv) notwithstanding anything to the contrary contained in clause (ii) above, permit any Subsidiary of the Borrower to issue any shares of preferred Capital Stock. 8.13 SALE LEASEBACKS. Except in connection with a purchase money financing permitted by Section 8.1(c), the Credit Parties will not permit any Consolidated Party to, directly or indirectly, become or remain liable as lessee or as guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any Property (whether real, personal or mixed), whether now owned or hereafter acquired, (a) which such Consolidated Party has sold or transferred or is to sell or transfer to a Person which is not a Consolidated Party or (b) which such Consolidated Party intends to use for substantially the same purpose as any other Property which has been sold or is to be sold or transferred by such Consolidated Party to another Person which is not a Consolidated Party in connection with such lease. 8.14 NO FURTHER NEGATIVE PLEDGES. The Credit Parties will not permit any Consolidated Party to enter into, assume or become subject to any agreement prohibiting or otherwise restricting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or requiring the grant of any 90 security for such obligation if security is given for some other obligation, except (a) pursuant to this Credit Agreement and the other Credit Documents, (b) pursuant to Indebtedness referred to in Section 8.1(f), in each case as in effect as of the Closing Date and (c) pursuant to any document or instrument governing Indebtedness incurred pursuant to Section 8.1(c), PROVIDED, HOWEVER, that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (d) customary restrictions and conditions contained in agreements relating to Asset Dispositions otherwise permitted hereunder pending such sale, provided that such restrictions and conditions apply only to the assets which are to be sold (including the assets of a Subsidiary being sold) and (e) customary provisions in leases, licenses and similar contracts restricting the subletting, assignment or transfer thereof, or any property or asset the subject thereof. SECTION 9 EVENTS OF DEFAULT 9.1 EVENTS OF DEFAULT. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "EVENT OF DEFAULT"): (a) PAYMENT. Any Credit Party shall (i) default in the payment when due of any principal of any of the Loans or of any reimbursement obligations arising from drawings under Letters of Credit, or (ii) default, and such default shall continue for three (3) or more Business Days, in the payment when due of any interest on the Loans or on any reimbursement obligations arising from drawings under Letters of Credit, or of any Fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith or therewith; or (b) REPRESENTATIONS. Any representation, warranty or statement made or deemed to be made by any Credit Party herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was made or deemed to have been made; or (c) COVENANTS. Any Credit Party shall (i) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.2, 7.11 or 8.1 through 8.14, inclusive; 91 (ii) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.1(a), (b), (c) or (d), 7.9, 7.12 or 7.13 and such default shall continue unremedied for a period of at least 5 days after the earlier of a responsible officer of a Credit Party becoming aware of such default or notice thereof by the Agent; or (iii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1) contained in this Credit Agreement and such default shall continue unremedied for a period of at least 30 days after the earlier of a responsible officer of a Credit Party becoming aware of such default or notice thereof by the Agent; or (d) OTHER CREDIT DOCUMENTS. (i) Any Credit Party shall default in the due performance or observance of any term, covenant or agreement in any of the other Credit Documents (subject to applicable grace or cure periods, if any), or (ii) except as a result of or in connection with a dissolution, merger or disposition of a Subsidiary permitted under Section 8.4 or Section 8.5, any Credit Document shall fail to be in full force and effect or to give the Agent and/or the Lenders the Liens, rights, powers and privileges purported to be created thereby, or any Credit Party shall so state in writing; or (e) GUARANTIES. Except as the result of or in connection with a dissolution, merger or disposition of a Subsidiary permitted under Section 8.4 or Section 8.5, the guaranty given by any Guarantor hereunder (including any Additional Credit Party) or any provision thereof shall cease to be in full force and effect, or any Guarantor (including any Additional Credit Party) hereunder or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under such guaranty, or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any guaranty; or (f) BANKRUPTCY, ETC. Any Bankruptcy Event shall occur with respect to any Consolidated Party; or (g) DEFAULTS UNDER OTHER AGREEMENTS. With respect to any Indebtedness (other than Indebtedness outstanding under this Credit Agreement) in excess of $1,000,000 in the aggregate for the Consolidated Parties taken as a whole, (A) any Consolidated Party shall (1) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (2) the occurrence and continuance of a default in the observance or performance relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Indebtedness (or trustee or agent on behalf of such holders) to cause (determined without regard to whether any notice or lapse of time is required), any such Indebtedness to become due prior to its stated maturity; or (B) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or 92 (h) JUDGMENTS. One or more judgments or decrees shall be entered against one or more of the Consolidated Parties involving a liability of $1,000,000 or more in the aggregate (to the extent not paid or fully covered by insurance provided by a carrier who has acknowledged coverage and has the ability to perform) and any such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 30 days from the entry thereof; or (i) ERISA. Any of the following events or conditions, if such event or condition could reasonably be expected to have a Material Adverse Effect: (i) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of any Consolidated Party or any ERISA Affiliate in favor of the PBGC or a Plan; (ii) an ERISA Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion of the Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (iii) an ERISA Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable opinion of the Agent, likely to result in (A) the termination of such Plan for purposes of Title IV of ERISA, or (B) any Consolidated Party or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency or (within the meaning of Section 4245 of ERISA) such Plan; or (iv) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which may subject any Consolidated Party or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which any Consolidated Party or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability; or (j) SENIOR SUBORDINATED NOTES. (i) There shall occur and be continuing any Event of Default under and as defined in the Senior Subordinated Notes or (ii) any of the Credit Party Obligations for any reason shall cease to be "Designated Senior Indebtedness" under and as defined in the Senior Subordinated Notes. (k) OWNERSHIP. There shall occur a Change of Control. (l) DEBARMENT. There shall occur a Debarment Event. (m) LIABILITY LIMIT. Any Consolidated Party individually, or collectively with other Consolidated Parties, shall incur liability (either through a judgment, settlement, order or decree) relating to the "whistleblower suit" against Anghel Laboratories, Inc. (net of proceeds actually obtained from Comsat Corporation under relevant indemnification agreements) in an aggregate amount with respect to all the Consolidated Parties in excess of $7,000,000. 93 9.2 ACCELERATION; REMEDIES. Upon the occurrence of an Event of Default, and at any time thereafter unless and until such Event of Default has been waived by the requisite Lenders (pursuant to the voting requirements of Section 11.6) or cured to the satisfaction of the requisite Lenders (pursuant to the voting procedures in Section 11.6), the Agent may, with the consent of the Required Lenders, and the Agent shall, upon the request and direction of the Required Lenders, by written notice to the Credit Parties take any of the following actions: (a) TERMINATION OF COMMITMENTS. Declare the Commitments terminated whereupon the Commitments shall be immediately terminated. (b) ACCELERATION. Declare the unpaid principal of and any accrued interest in respect of all Loans, any reimbursement obligations arising from drawings under Letters of Credit and any and all other indebtedness or obligations of any and every kind owing by the Borrower to the Agent and/or any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. (c) CASH COLLATERAL. Direct the Borrower to pay (and the Borrower agrees that upon receipt of such notice, or upon the occurrence of an Event of Default under Section 9.1(f), it will immediately pay) to the Agent additional cash, to be held by the Agent, for the benefit of the Lenders, in a cash collateral account as additional security for the LOC Obligations in respect of subsequent drawings under all then outstanding Letters of Credit in an amount equal to the maximum aggregate amount which may be drawn under all Letters of Credits then outstanding. (d) ENFORCEMENT OF RIGHTS. Enforce any and all rights and interests created and existing under the Credit Documents including, without limitation, all rights and remedies existing under the Collateral Documents, all rights and remedies against a Guarantor and all rights of set-off. Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(f) shall occur, then the Commitments shall automatically terminate and all Loans, all reimbursement obligations arising from drawings under Letters of Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and other indebtedness or obligations owing to the Agent and/or any of the Lenders hereunder automatically shall immediately become due and payable without the giving of any notice or other action by the Agent or the Lenders. If an Event of Default occurs, all U.S. and foreign government classified information in possession of any Credit Party shall remain the property of the U.S. Government and the applicable foreign government(s). In the event that the Agent determines to commence foreclosure proceedings under any of the Credit Documents, or the Agent is instructed by the Required Lenders to do so, the Agent will promptly deliver (by hand delivery or facsimile transmission) to the U.S. Department of Defense, Defense Security Service, at 1340 Braddock Place, Alexandria, Virginia, Facsimile No.: (703) 325-1329, Attention: Valerie Heil, notice of such determination, or a copy of such instructions. The 94 Agent will not commence such foreclosure proceedings earlier than the day following the fifth Business Day after the date that such notice was sent to the Defense Security Service (including the date the notice was sent) as provided above unless instructed otherwise by the Required Lenders. Notwithstanding anything to the contrary therein, each Credit Document shall be subject to the foregoing provisions of this Section 9.2. SECTION 10 AGENCY PROVISIONS 10.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent under this Credit Agreement and the other Credit Documents with such powers and discretion as are specifically delegated to the Agent by the terms of this Credit Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. The Agent (which term as used in this sentence and in Section 10.5 and the first sentence of Section 10.6 hereof shall include its Affiliates and its own and its Affiliates' officers, directors, employees, and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Credit Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible to the Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Credit Document or any certificate or other document referred to or provided for in, or received by any of them under, any Credit Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Credit Document, or any other document referred to or provided for therein or for any failure by any Credit Party or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Credit Party or the satisfaction of any condition or to inspect the property (including the books and records) of any Credit Party or any of its Subsidiaries or Affiliates; (d) shall not be required to initiate or conduct any litigation or collection proceedings under any Credit Document; and (e) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Credit Document, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. 10.2 RELIANCE BY AGENT. The Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telecopy) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Credit Party), independent accountants, and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until the Agent receives and accepts an Assignment and Acceptance executed in 95 accordance with Section 11.3(b) hereof. As to any matters not expressly provided for by this Credit Agreement, the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding on all of the Lenders; PROVIDED, HOWEVER, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to any Credit Document or applicable law or unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action. 10.3 DEFAULTS. The Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless the Agent has received written notice from a Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or Event of Default, the Agent shall give prompt notice thereof to the Lenders. The Agent shall (subject to Section 10.2 hereof) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders, PROVIDED THAT, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Lenders. 10.4 RIGHTS AS A LENDER. With respect to its Commitment and the Loans made by it, First Union National Bank (and any successor acting as Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. First Union National Bank (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Credit Party or any of its Subsidiaries or Affiliates as if it were not acting as Agent, and First Union National Bank (and any successor acting as Agent) and its Affiliates may accept fees and other consideration from any Credit Party or any of its Subsidiaries or Affiliates for services in connection with this Credit Agreement or otherwise without having to account for the same to the Lenders. 10.5 INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the extent not reimbursed under Section 11.5 hereof, but without limiting the obligations of the Borrower under such Section) ratably in accordance with their respective Commitments, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including by any Lender) in any way relating to or arising out of any 96 Credit Document or the transactions contemplated thereby or any action taken or omitted by the Agent under any Credit Document; PROVIDED that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs or expenses payable by the Borrower under Section 11.5, to the extent that the Agent is not promptly reimbursed for such costs and expenses by the Borrower. The agreements in this Section 10.5 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. 10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Credit Parties and their Subsidiaries and decision to enter into this Credit Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Credit Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Credit Party or any of its Subsidiaries or Affiliates that may come into the possession of the Agent or any of its Affiliates. 10.7 SUCCESSOR AGENT. The Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a commercial bank organized under the laws of the United States of America having combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 10 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. If the Agent shall become aware that it has become a "foreign interest" (as such term is defined in paragraph 1.231-1 of the Department of Defense Industrial Security Regulation, D.O.D. 5220.22-R (December 1985)) at any time during the term of this Agreement, the Agent shall resign as Agent under this Agreement and 97 the other Credit Documents. If the Required Lenders shall become aware that the Agent shall have become a "foreign interest" (as so defined), then the Required Lenders shall remove the Agent as Agent under this Agreement and the other Credit Documents. If the Agent shall become aware that any subagent, deed of trust trustee or other Person acting in a fiduciary or representative capacity under any of the Credit Documents shall become a "foreign interest" (as so defined), then the Agent shall remove such Person from acting in such capacity. Notwithstanding anything to the contrary contained therein, each Credit Document shall be subject to the foregoing provisions of this Section 10.7. Any successor Agent, or other Person appointed to act in a fiduciary or representative capacity shall not be a "foreign interest" (as so defined). SECTION 11 MISCELLANEOUS 11.1 NOTICES. Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (a) when delivered, (b) when transmitted via telecopy (or other facsimile device) to the number set out below provided that such transmission is made on a Business Day, receipt is confirmed and a copy of such notice is also sent by overnight courier, (c) the Business Day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address, in the case of the Borrower, Guarantors and the Agent, set forth below, and, in the case of the Lenders, set forth on SCHEDULE 2.1(A), or at such other address as such party may specify by written notice to the other parties hereto: if to the Borrower or the Guarantors: Prodelin Holding Corporation 565 Fifth Avenue - 17th Floor New York, New York 10017 Attn: Stephen Green Telephone: (212) 850-8543 Telecopy: (212) 850-8530 if to the Agent: First Union National Bank 301 South College St., DC-5 Charlotte, N.C. 28288-0737 Attn: William R. Goley Telephone: (704) 383-8180 Telecopy: (704) 374-3300 with a copy to: First Union National Bank 98 Agency Services One First Union Center NC-0608 301 South College Street Charlotte, NC 28282 Attn: Nicole Ray Telephone: (704) 383-8452 Telecopy: (704) 383-2802 With respect to any notice delivered to the Agent to the effect that a Default or an Event of Default exists, the Borrower shall promptly deliver a copy thereof (by hand delivery or facsimile transmission) to the U.S. Department of Defense, Defense Security Service, at 1340 Braddock Place, Alexandria, Virginia, Facsimile No.: (703) 325-1329, Attention: Valerie Heil. 11.2 RIGHT OF SET-OFF; ADJUSTMENTS. Upon the occurrence and during the continuance of any Event of Default, each Lender (and each of its Affiliates in connection with Hedging Agreements) is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender (or any of its Affiliates in connection with Hedging Agreements) to or for the credit or the account of any Credit Party against any and all of the obligations of such Person now or hereafter existing under this Credit Agreement, under the Notes, under any other Credit Document or otherwise, irrespective of whether such Lender shall have made any demand under hereunder or thereunder and although such obligations may be unmatured. Each Lender agrees promptly to notify any affected Credit Party after any such set-off and application made by such Lender; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 11.2 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. 11.3 BENEFIT OF AGREEMENT. (a) This Credit Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; PROVIDED that none of the Credit Parties may assign or transfer any of its interests and obligations without prior written consent of the Lenders; PROVIDED FURTHER that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 11.3. (b) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Loans, its Notes, and its Commitment); PROVIDED, HOWEVER, that (i) each such assignment shall be to an Eligible Assignee; 99 (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Credit Agreement, any such partial assignment shall be in an amount at least equal to $5,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) or an integral multiple of $1,000,000 in excess thereof; (iii) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment and Acceptance in the form of Exhibit 11.3(b) hereto, together with any Note subject to such assignment and a processing fee of $3,500. Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Credit Agreement. Upon the consummation of any assignment pursuant to this Section 11.3(b), the assignor, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 3.11. No assignee shall be entitled to receive any greater payment or indemnification under Section 3.11 than the assigning Lender would have been entitled to receive with respect to the rights assigned unless such assignment shall have been made at a time when the circumstances giving rise to such greater payment did not exist. (c) The Agent shall maintain at its address referred to in Section 11.1 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit 11.3(b) hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (e) Each Lender may sell participations to one or more Persons in all or a portion of its rights and obligations under this Credit Agreement (including all or a portion of its Commitment and its Loans); PROVIDED, HOWEVER, that (i) such Lender's 100 obligations under this Credit Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participant shall be entitled to the benefit of the yield protection provisions contained in Sections 3.7 through 3.12 (PROVIDED that the Borrower's liability in aggregate for both the Lender and its participant shall be limited to the amount it would owe the Lender granting the participation), inclusive, and the right of set-off contained in Section 11.2, and (iv) the Borrower shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Credit Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to its Loans and its Notes and to approve any amendment, modification, or waiver of any provision of this Credit Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes, or extending its Commitment). (f) Notwithstanding any other provision set forth in this Credit Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (g) Any Lender may furnish any information concerning the Borrower or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants), subject, however, to the provisions of Section 11.16 hereof. 11.4 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of the Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Agent or any Lender and any of the Credit Parties shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Agent or any Lender would otherwise have. No notice to or demand on any Credit Party in any case shall entitle the Borrower or any other Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Lenders to any other or further action in any circumstances without notice or demand. 11.5 EXPENSES; INDEMNIFICATION. (a) The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the syndication, preparation, execution, delivery, administration, modification, and amendment of this Credit Agreement, the other Credit Documents, and the other documents 101 to be delivered hereunder, including, without limitation, the reasonable fees and expenses of counsel for the Agent (including the reasonable cost of internal counsel) with respect thereto and with respect to advising the Agent as to its rights and responsibilities under the Credit Documents. The Borrower further agrees to pay on demand all costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable attorneys' fees and expenses and the reasonable cost of internal counsel), in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of the Credit Documents and the other documents to be delivered hereunder. (b) The Borrower agrees to indemnify and hold harmless the Agent and each Lender and each of their Affiliates and their respective officers, directors, employees, agents, and advisors (each, an "INDEMNIFIED PARTY") from and against any and all claims, damages, losses, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith) the Credit Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans, except to the extent such claim, damage, loss, liability, cost, or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 11.5 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower agrees not to assert any claim against the Agent, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys, agents, and advisers, on any theory of liability, for special, indirect, consequential, or punitive damages arising out of or otherwise relating to the Credit Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans. (c) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 11.5 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. 11.6 AMENDMENTS, WAIVERS AND CONSENTS. Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, the Required Lenders and the Borrower, PROVIDED, HOWEVER, that: (a) without the consent of each Lender affected thereby, 102 (i) extend the final maturity of any Loan or the time of payment of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit, or extend or waive any Principal Amortization Payment of any Loan, or any portion thereof, (ii) reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereon or Fees hereunder, (iii) reduce or waive the principal amount of any Loan or of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit, (iv) increase the Commitment of a Lender over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default or mandatory reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender), (v) except as the result of or in connection with an Asset Disposition permitted by Section 8.5, release all or substantially all of the Collateral, (vi) except as the result of or in connection with a dissolution, merger or disposition of a Subsidiary permitted under Section 8.4, release the Borrower or substantially all of the other Credit Parties from its or their obligations under the Credit Documents, (vii) except amend, modify or waive any provision of this Section 11.6 or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 9.1(a), 11.2, 11.3, 11.5 or 11.9, (viii) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders, or (ix) consent to the assignment or transfer by the Borrower or all or substantially all of the other Credit Parties of any of its or their rights and obligations under (or in respect of) the Credit Documents except as permitted thereby; (b) without the consent of Lenders holding in the aggregate more than 50% of the outstanding Tranche A Term Loans and more than 50% of the outstanding Tranche B Term Loans, extend the time for or the amount or the manner of application of proceeds of any mandatory prepayment required by Section 3.3(b)(ii), (iii), (iv) or (v) hereof; (c) without the consent of the Agent, no provision of Section 10 may be amended; (d) without the consent of the Issuing Lender, no provision of Section 2.2 may be amended. 103 (e) without the consent of the Swingline Lender, no provision of Section 2.3 may be amended. Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow a Credit Party to use cash collateral in the context of a bankruptcy or insolvency proceeding. 11.7 COUNTERPARTS. This Credit Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart for each of the parties hereto. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Credit Agreement shall be as effective as an original executed counterpart hereof and shall be deemed a representation that an original executed counterpart hereof will be delivered. 11.8 HEADINGS. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement. 11.9 SURVIVAL. All indemnities set forth herein, including, without limitation, in Section 2.2(i), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the issuance of the Letters of Credit, the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder, and all representations and warranties made by the Credit Parties herein shall survive delivery of the Notes and the making of the Loans hereunder. 11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of North Carolina in Mecklenburg County, or of the United States for the Western District of North Carolina, and, by execution and delivery of this Credit Agreement, each of the Credit Parties 104 hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. Each of the Credit Parties further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 11.1, such service to become effective three (3) Business Days after such mailing. Nothing herein shall affect the right of the Agent or any Lender to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against any Credit Party in any other jurisdiction. (b) Each of the Credit Parties hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE LENDERS, THE BORROWER AND THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. 11.11 SEVERABILITY. If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 11.12 ENTIRETY. This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 11.13 BINDING EFFECT; TERMINATION. (a) This Credit Agreement shall become effective at such time on or after the Closing Date when it shall have been executed by the Borrower, the Guarantors and the Agent, and the Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrower, the Guarantors, the Agent and each Lender and their respective successors and assigns. 105 (b) The term of this Credit Agreement shall be until no Loans, LOC Obligations or any other amounts payable hereunder or under any of the other Credit Documents shall remain outstanding, no Letters of Credit shall be outstanding, all of the Credit Party Obligations have been irrevocably satisfied in full and all of the Commitments hereunder shall have expired or been terminated. 11.14 SOURCE OF FUNDS. Each of the Lenders hereby represents and warrants to the Borrower that at least one of the following statements is an accurate representation as to the source of funds to be used by such Lender in connection with the financing hereunder: (a) no part of such funds constitutes assets allocated to any separate account maintained by such Lender in which any employee benefit plan (or its related trust) has any interest; (b) to the extent that any part of such funds constitutes assets allocated to any separate account maintained by such Lender, such Lender has disclosed to the Borrower the name of each employee benefit plan whose assets in such account exceed 10% of the total assets of such account as of the date of such purchase (and, for purposes of this subsection (b), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan); (c) to the extent that any part of such funds constitutes assets of an insurance company's general account, such insurance company has complied with all of the requirements of the regulations issued under Section 401(c)(1)(A) of ERISA; or (d) such funds constitute assets of one or more specific benefit plans which such Lender has identified in writing to the Borrower. As used in this Section 11.14, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 11.15 CONFLICT. To the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of any Credit Document, on the other hand, this Credit Agreement shall control. 11.16 CONFIDENTIALITY. The Agent and each Lender will hold all non-public information, obtained pursuant to the requirements of this Credit Agreement (and including the financial information), in accordance with its customary procedure for handling confidential information of such nature and in accordance with safe and sound commercial lending practices, but may, in any event, make 106 disclosure (i) on a confidential basis to its officers, directors, employees, agents, representatives and advisers (including regular and special accountants and legal counsel), (ii) to any transferee or participant, or prospective transferee or participant, in connection with the contemplated transfer of the Loans and Commitments hereunder or participations thereof; provided such transferees or participants, or prospective transferees or participants, shall consent in writing to be bound by the terms of this Section 11.16, (iii) as required or requested by any governmental agency or representative thereof in the ordinary course of the Lender's regulatory compliance or the National Association of Insurance Commissioners to the extent so required, or (iv) pursuant to legal process; PROVIDED that (A) such party shall, to the extent reasonably possible, give the Borrower five days prior written notice thereof; it being understood, however, that the failure to give any such notice shall not give rise to any action or claim on account of any such failure and (B) neither the Agent, nor any of the Lenders shall have any obligation under this Section 11.16 to the extent that any such information becomes available on a non-confidential basis from a source other than the Borrower or its Subsidiaries, or that any such information becomes publicly available other than by breach of this Section 11.16. 11.17 ARBITRATION; CONSENT TO JURISDICTION AND SERVICE OF PROCESS. (a) Upon demand of any party hereto, whether made before or after institution of any judicial action, any dispute, claim or controversy arising out of or connected herewith or with the Credit Documents ("Disputes") shall be resolved by binding arbitration as provided herein. Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions and claims arising herefrom or from Credit Documents executed in the future. Arbitration shall be conducted under the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association and Title 9 of the U.S. Code. All arbitration hearings shall be conducted in Charlotte, Mecklenburg County, North Carolina, or such other place as agreed to in writing by the parties. A judgment upon the award may be entered in any court having jurisdiction, and all decisions shall be in writing. The panel from which all arbitrators are selected shall be comprised of licensed attorneys having at least ten years' experience representing parties in secured lending transactions. Notwithstanding the foregoing, this arbitration provision does not apply to disputes under or related to interest protection agreements. (b) Notwithstanding the preceding binding arbitration provision, the Agent, on behalf of the Lenders, preserves certain remedies that may be exercised during a Dispute. The Agent, on behalf of the Lenders, shall have the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies, as applicable: (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in the Credit Documents or under applicable law, (ii) all rights of self help including peaceful occupation of real property and collection of rents, set-off and peaceful possession of personal property, (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment and appointment of receiver, and (iv) other remedies. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute. 107 (c) By execution and delivery of this Credit Agreement, each of the parties hereto accepts, for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction relating to any arbitration proceedings conducted under the Arbitration Rules in Charlotte, Mecklenburg County, North Carolina and irrevocably agrees to be bound by any final judgment rendered thereby in connection with this Credit Agreement from which no appeal has been taken or is available. Each of the parties hereto irrevocably agrees that all process in any such arbitration proceedings or otherwise may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address set forth in Section 11.1 or at such other address of which such party shall have been notified pursuant thereto, such service being hereby acknowledged by each party hereto to be effective and binding service in every respect. Each party hereto irrevocably waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have to the bringing of any such action or proceeding in any such jurisdiction. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any party to bring proceedings against the Borrower or any party hereto in any court or pursuant to arbitration proceedings in any other jurisdiction. [Signature Page to Follow] 108 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written. BORROWER: PRODELIN HOLDING CORPORATION a Delaware corporation By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------- SUBSIDIARY GUARANTORS: PRODELIN CORPORATION, - ---------- a North Carolina corporation SATSYSTEMS, INC., a Delaware corporation C&S ANTENNAS, INC., a Delaware corporation MARK ANTENNA PRODUCTS, INC. a Nevada corporation RSI COMMUNICATIONS CORP., a Delaware corporation CRSI, INC., a Delaware corporation ANGHEL LABORATORIES, INC., a Delaware corporation RSI MARYLAND, INC., a Delaware corporation UNIVERSAL ANTENNAS INCORPORATED, a Nevada corporation RADIATION SYSTEMS PRECISION CONTROLS, INC., a Nevada corporation POWER TECHNOLOGIES, INC., a Delaware corporation MEXIA FABRICATORS, INC., a Texas corporation By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------- LENDERS: FIRST UNION NATIONAL BANK, individually in its capacity as a Lender and in its capacity as Agent By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------- ALLSTATE INSURANCE COMPANY By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------- ALLSTATE LIFE INSURANCE COMPANY By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------- HELLER FINANCIAL, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------- IBJ SCHRODER BANK & TRUST COMPANY By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------- JACKSON NATIONAL LIFE INSURANCE COMPANY By: PPM America, Inc., as attorney in fact, on behalf of Jackson National Life Insurance Company By: ---------------------------- Michael DiRe Managing Director PILGRIM AMERICA PRIME RATE TRUST By: -------------------------------- Name: ------------------------------ Title: ------------------------------ SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisors By: -------------------------------- Name: ------------------------------ Title: ------------------------------ TORONTO DOMINION (TEXAS), INC. By: -------------------------------- Name: ------------------------------ Title: ------------------------------ EXHIBIT 3.2(A)(III) NOTICE OF ACCOUNT DESIGNATION Dated _____________, 1998 First Union National Bank One First Union Center, TW-10 301 South College Street Charlotte, North Carolina 28288-0608 Attn: Syndication Agency Services Ladies and Gentlemen: This Notice of Account Designation is delivered to you by Prodelin Holding Corporation (the "Borrower"), a corporation organized under the laws of ______________, under Section 2.1(b)(iii) of the Credit Agreement dated as of ________________, 1998 (as amended, restated or otherwise modified, the "Credit Agreement") by and among the Company, the Guarantors party thereto, the Lenders party thereto and First Union National Bank, as Agent. The Agent is hereby authorized to disburse all Loan proceeds into the following account, unless the Borrower shall designate, in writing to the Agent, one or more other accounts: Bank: First Union National Bank ABA #: ____________________________________ Account: ____________________________________ Notwithstanding the foregoing, on the closing date of the Credit Agreement, funds borrowed under the Credit Agreement shall be sent to the institutions and/or persons designated on the attached payment instructions. IN WITNESS WHEREOF, the undersigned has executed this Notice of Account Designation this ____ day of _____________, 1998. [CORPORATE SEAL] Prodelin Holding Corporation By:_____________________________ Name: Title: EX-99.2(A) 3 EXHIBIT 99.2(A) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF VERTEX COMMUNICATIONS CORPORATION AT $22.00 PER SHARE BY SIGNAL ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF TRIPOINT GLOBAL COMMUNICATIONS INC. - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 16, 1999, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS OF VERTEX COMMUNICATIONS CORPORATION (THE "COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES (AS DEFINED HEREIN). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS. IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's Shares (including shares issuable upon exercise of Company Stock Options) should either (i) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal, have such shareholder's signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such facsimile), or, in the case of a book-entry transfer effected pursuant to the procedure set forth in Section 2, an Agent's Message (as defined herein), and any other required documents to the Depositary (as defined herein) and either deliver the certificates for such Shares to the Depositary along with the Letter of Transmittal (or a facsimile thereof) or deliver such Shares pursuant to the procedure for book-entry transfer set forth in Section 2 or (ii) request such shareholder's broker, dealer, bank, trust company or other nominee to effect the transaction for such shareholder. A shareholder having Shares registered in the name of a broker, dealer, bank, trust company or other nominee must contact such broker, dealer, bank, trust company or other nominee if such shareholder desires to tender such Shares. If a shareholder desires to tender Shares and such shareholder's certificates for Shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis, or time will not permit all required documents to reach the Depositary prior to the expiration of the Offer, such shareholder's tender may be effected by following the procedure for guaranteed delivery set forth in Section 2. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or to the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. THE DEALER MANAGER FOR THE OFFER IS: FIRST UNION SECURITIES, INC. November 18, 1999 TABLE OF CONTENTS
PAGE -------- INTRODUCTION......................................................... 1 1. Terms of the Offer.......................................... 3 2. Procedure for Tendering Shares.............................. 4 3. Withdrawal Rights........................................... 8 4. Acceptance for Payment and Payment.......................... 8 5. Certain Federal Income Tax Consequences..................... 9 6. Price Range of the Shares; Dividends on the Shares.......... 10 7. Effect of the Offer on the Market for the Shares; Continued Listing on the NYSE; Exchange Act Registration; Margin Regulations................................................. 11 8. Certain Information Concerning the Company.................. 12 9. Certain Information Concerning the Purchaser, Parent and TBG Holdings.................................................... 14 10. Source and Amount of Funds.................................. 15 11. Contacts and Transactions with the Company; Background of the Offer................................................... 15 12. Purpose of the Offer, the Merger Agreement; the Shareholder Agreement; Plans for the Company............................ 16 13. Dividends and Distributions................................. 27 14. Certain Conditions of the Offer............................. 27 15. Certain Legal Matters....................................... 29 16. Fees and Expenses........................................... 31 17. Miscellaneous............................................... 32 Schedule I--Directors and Executive Officers
To the Holders of Shares of Vertex Communications Corporation: INTRODUCTION Signal Acquisition Corporation, a Texas corporation (the "Purchaser") and a wholly owned subsidiary of TriPoint Global Communications Inc., a Delaware corporation ("Parent"), hereby offers to purchase all outstanding shares of Common Stock (the "Common Stock"), par value $.10 per share (the "Shares"), of Vertex Communications Corporation, a Texas corporation (the "Company"), at $22.00 per Share (the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). The Offer is being made pursuant to the Agreement and Plan of Merger dated as of November 11, 1999 (the "Merger Agreement"), among Parent, the Purchaser and the Company pursuant to which, as soon as practicable following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent (the "Surviving Corporation"). At the effective time of the Merger (the "Effective Time"), each outstanding Share (other than Shares held by shareholders who perfect their dissent rights under Texas law, Shares owned by the Company as treasury stock, and Shares owned by Parent or any direct or any indirect wholly owned subsidiary of Parent or of the Company) will be converted into the right to receive the Offer Price in cash (the "Per Share Merger Consideration"), without interest thereon. The Merger Agreement provides that the Purchaser may assign any or all of its rights and obligations (including the right to purchase Shares in the Offer) to Parent or any wholly-owned subsidiary of Parent, but no such assignment shall relieve the Purchaser of its obligations under the Merger Agreement. The Merger is subject to a number of conditions, including the approval of the Merger Agreement by shareholders of the Company (the "Company Shareholder Approval") if required by applicable law. In the event the Purchaser acquires 90% or more of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser would be able to effect the Merger pursuant to the short-form merger provisions of the Texas Business Corporation Act (the "TBCA"), without prior notice to, or any action by, any other shareholder of the Company. In such event, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other shareholder of the Company. See Section 12. Simultaneously with entering into the Merger Agreement, Parent and the Purchaser entered into a Company Shareholder Agreement (the "Shareholder Agreement") with each member of the Board of Directors of the Company (the "Board") and William L. Anton (collectively the "Principal Shareholders"), pursuant to which each Principal Shareholder has agreed, among other things, to tender all the Shares that he beneficially owns (including Shares issuable upon the exercise of Company Stock Options (as defined below)) at a price per Share equal to the Offer Price. If the Principal Shareholders fail to tender their Shares pursuant to the Offer, or withdraw their Shares prior to expiration of the Offer, Parent will have the option to purchase such Shares at the Offer Price following consummation of the Offer. The Principal Shareholders collectively own approximately 13.1% of all outstanding Shares (assuming the exercise of all Company Stock Options held by the Principal Shareholders). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. Shareholders who hold their Shares through their broker or bank should consult with such institution as to whether there are any fees applicable to a tender of Shares. Parent will pay all fees and expenses of First Union Securities, Inc., which is acting as Dealer Manager (the "Dealer Manager" or "First Union Securities"), First Union National Bank, which is acting as the Depositary (the "Depositary"), and D.F. King & Co., Inc., which is acting as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. 1 The Board has unanimously approved the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company's shareholders and unanimously recommends that the Company's shareholders accept the Offer and tender their Shares pursuant to the Offer. The factors considered by the Board in arriving at its decision to approve the Offer and the Merger and to recommend that shareholders of the Company accept the Offer and tender their Shares are described in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which also is being mailed to shareholders of the Company. The Company's financial advisor, Frost Securities, Inc. ("Frost Securities"), has delivered its opinion to the Board dated November 11, 1999 that, as of such date, and subject to the conditions and limitations set forth therein, the consideration to be received by holders of Shares in the Offer and the Merger is fair, from a financial point of view. Such opinion is set forth in full as an exhibit to the Schedule 14D-9. The Offer is conditioned upon, among other things, (a) there being validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which would represent at least a majority of all outstanding Shares on a fully diluted basis (the "Minimum Tender Condition"), (b) any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), applicable to the purchase of Shares pursuant to the Offer having expired or been terminated (the "HSR Act Condition") and (c) the period of time for any applicable review process by the Committee on Foreign Investment in the United States ("CFIUS") under Section 721(a) of the Defense Production Act of 1950, as amended (the "Exon-Florio Act") having expired and CFIUS not having taken any action or made any recommendation to the President of the United States to block or to prevent consummation of the Offer or the Merger (the "Exon-Florio Act Condition"). The Purchaser reserves the right (subject to the applicable rules and regulations of the Securities and Exchange Commission (the "SEC")) to waive or reduce the Minimum Tender Condition and to elect to purchase, pursuant to the Offer, fewer than the minimum number of Shares necessary to satisfy the Minimum Tender Condition in the event that either (a) the Company provides the Purchaser with prior written consent to do so or (b) the failure of the Minimum Tender Condition to be satisfied results from the failure of the Principal Shareholders to validly tender their Shares prior to the expiration of the Offer or from the withdrawal of any of their Shares prior to the expiration of the Offer. As used herein, Shares on a fully diluted basis means all outstanding securities entitled generally to vote in the election of directors of the Company on a fully diluted basis, after giving effect to the exercise or conversion of all options, rights and securities exercisable or convertible into such voting securities. See Sections 1 and 14. The Company has informed the Purchaser that, as of November 11, 1999, there were 5,116,314 Shares outstanding and 702,727 Shares authorized for issuance pursuant to the exercise of outstanding options to purchase Shares ("Company Stock Options"). As a result, as of such date, the Minimum Tender Condition would be satisfied if the Purchaser acquired 2,909,521 Shares. Certain Federal income tax consequences of the sale of Shares pursuant to the Offer are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 THE TENDER OFFER 1. TERMS OF THE OFFER Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares validly tendered, including Shares issuable upon exercise of Company Stock Options (the "Option Shares") prior to the Expiration Date and not theretofore withdrawn in accordance with Section 3. The term "Expiration Date" means 12:00 Midnight, New York City time, on Thursday, December 16, 1999, unless and until the Purchaser shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, will expire. The Purchaser expressly reserves the right to modify the terms of the Offer, except that without the consent of the Company, the Purchaser shall not (a) reduce the number of Shares to be subject to the Offer, (b) reduce the Offer Price, (c) modify or add to the conditions to the Offer, (d) waive the Minimum Tender Condition (unless the failure of the Minimum Tender Condition to be satisfied results from the failure of the Principal Shareholders to validly tender their Shares pursuant to the Offer, or from the withdrawal of such Shares) or amend the Offer in any manner materially adverse to the holders of Shares or (e) except as provided in the next paragraph, extend the Offer if all the conditions to the Offer have been satisfied. Notwithstanding the foregoing, the Purchaser may, without the consent of the Company, (a) if at the scheduled initial or any extended expiration date (whether extended pursuant to this clause (a) or otherwise) of the Offer any of the conditions to the Offer shall not have been satisfied or waived, extend the Offer for up to five business days from such scheduled initial or extended expiration date, (b) extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer, (c) if at the scheduled initial or any extended expiration date of the Offer all the conditions to the Offer are satisfied and more than 70% but less than 90% of the outstanding Shares on a fully diluted basis have been validly tendered and not withdrawn in the Offer, extend the Offer up to a maximum of 10 additional business days in the aggregate beyond the latest expiration date that would otherwise be permitted under clause (a) or (b) of this sentence and (d) extend the Offer for any reason for a period of not more than three business days beyond the latest expiration date that would otherwise be permitted under clause (a), (b) or (c) of this sentence. Subject to the terms of the Merger Agreement and applicable rules and regulations of the SEC, the Purchaser reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events or facts set forth in Section 14 hereof shall have occurred, to (a) extend the period of time during which the Offer is open and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (b) except as set forth above, amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. Under no circumstances will interest be paid on the purchase price for tendered Shares, whether or not the Purchaser exercises its right to extend the Offer. If by 12:00 Midnight, New York City time, on Thursday, December 16, 1999 (or any date or time then set as the Expiration Date), any of or all of the conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the SEC, to (a) terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering shareholders, (b) except as set forth above with respect to the Minimum Tender Condition, waive all the unsatisfied conditions and accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (c) extend the Offer and, subject to the right of shareholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (d) amend the Offer. 3 There can be no assurance that the Purchaser will exercise its right to extend the Offer. Any extension, amendment or termination will be followed as promptly as practicable by public announcement in accordance with the announcement requirements of Rule 14d-4(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In the case of an extension, Rule 14e-1(d) under the Exchange Act requires that the announcement be issued no later than 9:00 a.m., New York City time on the next business day after the previously schedule Expiration Date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to shareholders in connection with the Offer be promptly disseminated to shareholders in a manner reasonably designed to inform shareholders of such change), and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If the Purchaser extends the Offer or if the Purchaser is delayed in its acceptance for payment of Shares (whether before or after its acceptance for payment of Shares) or it is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with the terms of the Merger Agreement and Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of a tender offer), the Depositary may nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including a waiver of the Minimum Tender Condition), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in the percentage of securities sought, would depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days is generally required to allow for adequate dissemination to shareholders. The Company has provided or will provide the Purchaser with the Company's shareholder list and security position listing for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and will be furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's shareholder list, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. PROCEDURE FOR TENDERING SHARES VALID TENDER. For a shareholder validly to tender Shares (including Option Shares) pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with any required signature guarantees and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and, except in the case of Option Shares, either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer set forth below (and a confirmation of such delivery, including an Agent's Message (as defined below), must be received by the Depositary), in each case prior to the 4 Expiration Date or (b) the tendering shareholder must comply with the guaranteed delivery procedures set forth below. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing the Book- Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book- entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." Delivery of documents to the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. The method of delivery of Shares, the Letter of Transmittal and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the election and risk of the tendering shareholder. Shares will be deemed delivered only when actually received by the Depositary (including, in the case of a book-entry transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal (a) if the Letter of Transmittal is signed by the registered holder(s) of Shares (which term, for purposes of this Section, includes any participant in any of the Book-Entry Transfer Facility's systems whose name appears on a security position listing as the owner of the Shares) tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (b) if such Shares are tendered for the account of a firm that is a participant in the Security Transfer Agents Medallion Program or the New York Stock Exchange Guarantee Program or the Stock Exchange Medallion Program or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-15 under the Exchange Act (each, an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be returned to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed in the manner described above. See Instructions 1 and 5 to the Letter of Transmittal. GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's certificates for Shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the 5 Depositary prior to the Expiration Date, such shareholder's tender may be effected if all the following conditions are met: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all such Shares), together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the New York Stock Exchange (the "NYSE") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (a) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (c) any other documents required by the Letter of Transmittal. Accordingly, tendering shareholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to such Shares are actually received by the Depositary. Under no circumstances will any interest be paid on the purchase price of the Shares, regardless of any extension of the Offer or any delay in making such payment. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering shareholder and the Purchaser upon the terms and subject to the conditions of the Offer. APPOINTMENT. By executing a Letter of Transmittal as set forth above, the tendering shareholder will irrevocably appoint designees of the Purchaser as such shareholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after November 11, 1999. All such proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such shareholder as provided herein. Upon such appointment, all prior powers of attorney, proxies and consents given by such shareholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights in respect of any annual, special or adjourned meeting of the Company's shareholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares and other securities or rights, including voting at any meeting of shareholders. 6 TENDER OF SHARES ISSUABLE UPON EXERCISE OF COMPANY STOCK OPTIONS. Holders of Company Stock Options who wish to tender Shares for which their Company Stock Options are exercisable may do so either (a) by first exercising their Company Stock Options and delivering to the Depositary certificates for Shares being so tendered or (b) by executing a Letter of Transmittal appointing the Depositary as their agent to exercise if, and only if, the Offer is consummated, their Company Stock Options for the number of Option Shares to be tendered indicated in the Letter of Transmittal. In the case of clause (b), only a number of whole Option Shares may be tendered. The Depositary will, in the event the Offer is consummated, pay to the Company for each Option Share tendered pursuant to clause (b) an amount equal to the exercise price of the related exercised Company Stock Option, and pay to the holder of the Company Stock Option tendered pursuant to clause (b) for each such Option Share tendered an amount equal to the Offer Price minus the exercise price of the exercised Company Stock Option. The amount paid to employees pursuant to clause (b) will be reduced by the amount of any wage and employment withholding taxes required to be deducted and withheld under the Internal Revenue Code of 1986, as amended, or under any provision of state, local or foreign law. In any event, such payments for Option Shares tendered upon exercise of such Company Stock Options that are accepted for payment pursuant to the Offer will only be made after the receipt by the Depositary of such Option Shares as described in Section 4. Holders of Company Stock Options who elect to tender Option Shares pursuant to clause (b) above by executing a Letter of Transmittal, in addition to the matters described under "Appointment" above, will irrevocably appoint the Depositary as such holder's agent and attorney-in-fact in the manner set forth in the Letter of Transmittal, with full power of substitution, to the full extent of such holder's rights, to exercise the Company Stock Options for the Option Shares being tendered. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Option Shares tendered by a holder of Company Stock Options. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in the tender of any Shares of any particular shareholder whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. BACKUP WITHHOLDING. In order to avoid "backup withholding" of Federal income tax on payments of cash pursuant to the Offer, a shareholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such shareholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury that such TIN is correct and that such shareholder is not subject to backup withholding. If a shareholder does not provide such shareholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a $50 penalty on such shareholder and payment of cash to such shareholder pursuant to the Offer may be subject to backup withholding of 31%. All shareholders surrendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Certain shareholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign shareholders should complete and sign a Form W-8, Certificate of Foreign Status, or a Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Withholding, copies of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 to the Letter of Transmittal. 7 3. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 3, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after Sunday, January 16, 2000. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn (or in the case of holders tendering Shares issuable upon the exercise of Company Stock Options, the name of the registered holder of the Company Stock Options that have been tendered for the Shares to be withdrawn), the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedure for book-entry transfer as set forth in Section 2, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date, and not properly withdrawn in accordance with Section 3, promptly after the Expiration Date. All questions as to the satisfaction of such terms and conditions will be determined by the Purchaser in its reasonable discretion, which determination will be final and binding. See Sections 1 and 14. The Purchaser expressly reserves the right, in its reasonable discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law, including, without limitation, the HSR Act and the Exon-Florio Act. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of a tender offer. Thyssen-Bornemisza Continuity Trust (the "Trust"), which ultimately controls Parent, has filed a Notification and Report Form with respect to the Offer under the HSR Act. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on Tuesday, November 30, 1999, the 15th day after the day such form was filed, unless early termination of the waiting period is granted. However, the Antitrust Division of the Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") may extend the waiting period by requesting additional information or documentary material from the Trust. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the 10th day after substantial compliance by the Trust with such request. See Section 15. 8 The Purchaser and the Company have made a filing under the Exon-Florio Act. The time period for CFIUS to determine whether to undertake an investigation will expire on Wednesday, December 15, 1999, the 30th day following the acceptance of such filing by CFIUS. In the event that CFIUS determines to undertake an investigation, such investigation must be completed within forty-five days after such determination. The President has fifteen days following the presentation by CFIUS of its recommendation to the President in which to suspend or prohibit the proposed acquisition or seek other appropriate relief. See Section 15. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book- entry transfer, an Agent's Message, and (c) any other documents required by the Letter of Transmittal. The per Share consideration paid to any shareholder pursuant to the Offer will be the highest per Share consideration paid to any other holder of Shares pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares (which will include all Shares received and Option Shares tendered upon the exercise of Company Stock Options exercised at such time). Payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering shareholders. Under no circumstances will interest be paid on the purchase price of any Shares to be paid by the Purchaser, regardless of any extension of the Offer or any delay in making such payment. If the Purchaser extends the Offer or if the Purchaser is delayed in its acceptance for payment of or payment for Shares (whether before or after its acceptance for payment of Shares) or it is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with the terms of the Merger Agreement and Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of a tender offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. If any tendered Shares are not purchased pursuant to the Offer for any reason, certificates for any such Shares will be returned without expense to the tendering shareholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in Section 2, such Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to any wholly-owned subsidiary of Parent, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following is a general discussion of certain United States Federal income tax consequences of the receipt of cash by a holder of Shares pursuant to the Offer or the Merger. Except as specifically noted, this discussion applies only to a U.S. Holder. 9 A "U.S. Holder" means a holder of Shares that is (i) a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any political subdivision thereof or therein or (iii) an estate or trust, the income of which is subject to United States Federal income taxation regardless of its source. A "Non-U.S. Holder" is a holder of Shares that is not a U.S. Holder. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for Federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for Federal income tax purposes, a U.S. Holder will recognize gain or loss equal to the difference between the amount of cash received by the U.S. Holder pursuant to the Offer or the Merger and the aggregate tax basis in the Shares purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain or loss will be calculated separately for each block of Shares purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain (or loss) will be capital gain (or loss), assuming that such Shares are held as a capital asset. Capital gains of individuals, estates and trusts generally are subject to a maximum Federal income tax rate of (i) 39.6% if, at the time the Purchaser accepts the Shares for payment (or the Shares are canceled pursuant to the Merger) the shareholder held the Shares for not more than one year and (ii) 20% if the shareholder held such Shares for more than one year at such time. Capital gains of corporations generally are taxed at the Federal income tax rates applicable to corporate ordinary income. In addition, under present law, the ability to use capital losses to offset ordinary income is limited. A shareholder that tenders Shares pursuant to the Offer or surrenders Shares pursuant to the Merger may be subject to 31% backup withholding unless the shareholder provides its TIN and certifies, under penalties of perjury, that such number is correct (or properly certifies that it is awaiting a TIN) and that such shareholder is not subject to backup withholding, or unless an exemption applies. A shareholder that does not furnish its TIN may be subject to a penalty imposed by the IRS. See "--Backup Withholding" under Section 2. If backup withholding applies to a shareholder, the Depositary is required to withhold 31% from payments to such shareholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the shareholder upon filing an income tax return. The foregoing discussion is not applicable with respect to Shares received pursuant to the exercise of Company Stock Options or otherwise as compensation. It may not be applicable with respect to holders of Shares who are subject to special tax treatment under the Code, such as Non-U.S. Holders, life insurance companies, tax-exempt organizations, financial institutions, dealers in securities or currencies, persons who hold Shares as a position in a "straddle" or as part of a "hedging" or "conversion" transaction and persons that have a functional currency other than the U.S. dollar, and may not apply to a holder of Shares in light of individual circumstances. Shareholders are urged to consult their own tax advisors to determine the particular tax consequences to them (including the application and effect of any state, local or foreign income and other tax laws) of the Offer and the Merger. 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES The Shares have been listed on the NYSE since March 31, 1999 under the symbol "VTX". The Shares were previously quoted on the Nasdaq National Market under the symbol "VTEX". 10 The following table sets forth the range of high and low sale prices per Share as reported on the NYSE or the Nasdaq National Market for the fiscal periods indicated.
PRICE OF SHARES ------------------- HIGH LOW -------- -------- FISCAL YEAR 1998 First Quarter (ended January 2, 1998)..................... $26.6250 $23.0000 Second Quarter (ended April 3, 1998)...................... 26.6875 24.1250 Third Quarter (ended July 3, 1998)........................ 26.7500 21.0625 Fourth Quarter (ended September 30, 1998)................. 24.0000 18.0000 1999 First Quarter (ended January 1, 1999)..................... $20.5000 $13.0000 Second Quarter (ended April 2, 1999)...................... 18.3750 14.0000 Third Quarter (ended July 2, 1999)........................ 16.5000 11.8125 Fourth Quarter (ended September 30, 1999)................. 13.8750 10.7500 2000 First Quarter (through November 16, 1999)................. $21.1250 $11.1875
On November 11, 1999, the last full trading day before the first public announcement of the execution of the Merger Agreement, the last reported sales price of the Shares on the NYSE was $14.8125 per Share. The Offer Price of $22.00 represents a 48.5% premium over this closing price. On November 17, 1999, the last full trading day before the commencement of the Offer, the last reported sales price of the Shares on the NYSE was $20.9375 per Share. The Purchaser has been advised by the Company that the Company has never paid any cash dividends on the Shares. Shareholders are urged to obtain current market quotations for the Shares. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; CONTINUED LISTING ON THE NYSE; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS MARKET FOR SHARES. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. CONTINUED LISTING ON THE NYSE. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NYSE for continued listing. According to the NYSE's published guidelines, the NYSE would consider delisting the Shares if, among other things, the record holders of at least 100 Shares were to fall below 1,200 and the average monthly trading volume of the Shares were to fall below 100,000, or the number of publicly held Shares (exclusive of management or other concentrated holdings) were to fall below 600,000 and the aggregate market value of publicly held Shares were to not exceed $8,000,000. According to the Company, as of November 11, 1999, there were approximately 2,700 holders of record of Shares and there were 5,116,314 Shares outstanding. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NYSE for continued listing and the Shares are no longer listed, the market for Shares would be adversely affected. In the event that the Shares no longer meet the requirements of the NYSE for continued listing, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interest in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. 11 EXCHANGE ACT REGISTRATION. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the SEC if the Shares are not listed on a national securities exchange, quoted on an automated inter-dealer quotation system or held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its shareholders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with shareholders' meetings and the related requirement of furnishing an annual report to shareholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated. The Purchaser intends to seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If public quotation and registration of the Shares is not terminated prior to the Merger, then the Shares will no longer be quoted and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. MARGIN REGULATIONS. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. In any event, the Shares will cease to be "margin securities" if registration of the Shares under the Exchange Act is terminated. 8. CERTAIN INFORMATION CONCERNING THE COMPANY According to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1998, the Company is a Texas corporation which designs, develops, manufactures and supports an extensive line of precision products for satellite and deep space communications applications. These products include sophisticated earth station antennas ranging in size from 1.2 to 34 meters in diameter (which operate in various relevant frequency bands, including L-, C-, X-, Ku-, and Ka-bands, and are available for commercial and military applications), integrated communications network systems, and optical and radio telescopes. The Company also manufactures state-of-the-art control systems designed to manage and monitor the operation, guidance, tracking, and telemetry capabilities of communications network systems as well as individual antennas, related electronic components used to amplify radio frequency signals, and precision waveguide components for application as component parts of communications systems. The Company also provides custom engineering, turnkey field installation, site testing and after-sale maintenance services, and spare and replacement parts in support of its products. Set forth below is certain selected consolidated financial information with respect to the Company and its subsidiaries. The information for the fiscal years ended September 30, 1997 and 1998 is excerpted from the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1998. The information for the fiscal year ended September 30, 1999 is unaudited and was provided by the Company. More comprehensive financial information is included in such reports and other documents filed by the Company with the SEC, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any 12 related notes) contained therein. Such reports and such other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information". VERTEX COMMUNICATIONS CORPORATION SELECTED CONSOLIDATED FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED SEPTEMBER 30, --------------------------------- 1999 1998 1997 ----------- -------- -------- (UNAUDITED) Sales....................................................... $116,936 $130,017 $ 92,433 Cost of sales............................................... 93,321 92,772 65,785 Research and development.................................... 6,600 5,968 3,775 Marketing................................................... 10,496 6,915 5,050 General and administrative.................................. 10,567 10,916 7,992 Impairment of goodwill...................................... 4,800 -- -- Operating income (loss)..................................... (8,848) 13,446 9,831 Net income (loss)........................................... (6,721) 10,086 7,175 Net income (loss) per common share--basic................... (1.32) 1.98 1.54 Net income (loss) per common share--diluted................. (1.32) 1.90 1.47 Total assets................................................ 103,131 110,771 100,493 Total liabilities........................................... 26,499 26,561 27,003 Total shareholders' equity.................................. 76,632 84,210 73,490
AVAILABLE INFORMATION. The Company is subject to the informational requirements of the Exchange Act and, in accordance therewith, is required to file reports relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options and other matters, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the SEC. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at Seven World Trade Center, 13th Floor, New York, NY 10049 and Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, IL 60661. Copies of such information should be obtainable, by mail, upon payment of the SEC's customary charges, by writing to the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material should also be available for inspection at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The SEC maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. Such reports, proxy and information statements and other information may be found on the SEC's web site address, http://www.sec.gov. Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or based upon publicly available documents on file with the SEC and other publicly available information. Although the Purchaser and Parent do not have any knowledge that any such information is untrue, none of the Purchaser or Parent takes any responsibility for the accuracy or completeness of such information or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information. 13 CERTAIN COMPANY PROJECTIONS. During the course of discussions between representatives of Parent and the Company, the Company provided Parent or its representatives with certain non-public business and financial information about the Company. This information included a projected net income for the Company of $4.2 million in fiscal year 2000. The Company has advised the Purchaser and Parent that it does not as a matter of course make public any projections as to future performance or earnings, and the projections set forth above are included in this Offer to Purchase only because the information was provided to Parent. The projections were not prepared with a view to public disclosure or compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants regarding projections or forecasts. The Company's internal operating projections are, in general, prepared solely for internal use and capital budgeting and other management decisions and are subjective in many respects and thus susceptible to various interpretations and periodic revision based on actual experience and business developments. The projections were based on a number of assumptions that are beyond the control of the Company, the Purchaser or Parent or their respective financial advisors, including economic forecasting (both general and specific to the Company's business), which is inherently uncertain and subjective. None of the Purchaser or Parent or their respective financial advisors assumes any responsibility for the accuracy of any of the projections. The inclusion of the foregoing projections should not be regarded as an indication that the Company, the Purchaser or Parent or any other person who received such information considers it an accurate prediction of future events. None of the Company, the Purchaser or Parent intends to update, revise or correct such projections if they become inaccurate (even in the short term). 9. CERTAIN INFORMATION CONCERNING THE PURCHASER, PARENT AND TBG HOLDINGS The Purchaser, a Texas corporation, was recently incorporated for the purpose of acting as an acquisition vehicle. It has not conducted any unrelated activities since its incorporation. The principal executive office of the Purchaser is located at 565 Fifth Avenue, 17th Floor, New York, NY 10017. All outstanding shares of common stock of Purchaser are owned by Parent. The principal executive office of Parent, a Delaware corporation, is located at 565 Fifth Avenue, 17th Floor, New York, NY 10017. Parent is a leading global supplier of satellite and wireless communications products and services for video, voice and data. The company is comprised of three groups: RSI, Prodelin and CSA Wireless Communications. RSI offers a full range of earth station and base station communications products and services. Prodelin offers VSAT satellite antennae. CSA Wireless Communications offers wireless antenna products. TBG Holdings indirectly owns 80% of the outstanding shares of common stock of Parent. The principal office of TBG Holdings, a Netherlands Antilles corporation, is located at 17 Theaterstraat, Curacao, Netherlands Antilles. The principal business of TBG Holdings is holding operating companies, management companies and investment companies worldwide. Thyssen-Bornemisza Continuity Trust, a Bermuda trust, is the sole shareholder of TBG Holdings and ultimately controls Parent. The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser, Parent and TBG Holdings are set forth in Schedule I hereto. TBG Holdings, through its subsidiaries Thybo Gamma Ltd. and Vulcan Securities Limited, both Bermuda corporations, beneficially owns 157,100 Shares, none of which were acquired during the past 60 days. Except as described in this Offer to Purchase, none of the Purchaser, Parent or TBG Holdings (together, the "Corporate Entities") or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I or any associate or majority-owned subsidiary of the Corporate Entities or any of the persons so listed, beneficially owns any equity security of the Company, and none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the other persons referred to above, or 14 any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. See Section 11. Except as described in this Offer to Purchase, (a) there have not been any contacts, transactions or negotiations between the Corporate Entities, any of their respective subsidiaries or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I, on the one hand and the Company or any of its directors, officers or affiliates, on the other hand, that are required to be disclosed pursuant to the rules and regulations of the SEC and (b) none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I has any contract, arrangement, understanding or relationship with any person with respect to any securities of the Company. Because the only consideration in the Offer and Merger is cash and the Offer covers all outstanding Shares, and in view of the absence of a financing condition and the amount of consideration payable in relation to the financial capability of Parent and its affiliates, the Purchaser believes the financial condition of Parent and its affiliates is not material to a decision by a holder of Shares whether to sell, tender or hold Shares pursuant to the Offer. 10. SOURCE AND AMOUNT OF FUNDS The Purchaser estimates that the amount of funds required to purchase all outstanding Shares pursuant to the Offer, to pay cash to holders of Stock Options pursuant to the Merger Agreement and to pay fees and expenses related to the Offer will be approximately $129 million. The Purchaser will obtain such funds directly or indirectly from Parent. Such funds will be obtained by Parent from existing cash resources or from borrowings pursuant to the Credit Facility dated as of June 25, 1998 (the "Credit Facility Agreement") among Parent, certain of its subsidiaries, First Union National Bank and certain other financial institutions. Parent expects that the Credit Facility Agreement will be amended in connection with the Merger although the terms of such amendment have not yet been negotiated. 11. CONTACTS AND TRANSACTIONS WITH THE COMPANY; BACKGROUND OF THE OFFER On January 8, 1997, Jack Haegele, the Chief Executive Officer and a director of Parent, met with J. Rex Vardeman, Chairman of the Board, President and Chief Executive Officer of the Company, in Kilgore, Texas to discuss a possible acquisition of the Company by Parent. This meeting was followed by a phone call by Mr. Haegele on January 24, 1997 to further discuss this matter. No further discussions between the Company and Parent regarding a possible acquisition occurred until April 19, 1999, Mr. Haegele and Mr. Vardeman met again in Las Vegas, Nevada to discuss the possible acquisition of the Company by Parent. On August 25, 1999, Mr. Haegele and Gary Kanipe, President of RSI Products Inc., a subsidiary of Parent, met with Mr. Vardeman in Dallas, Texas to make a proposal to acquire the Company and to discuss a price range for the transaction. On September 28, 1999, the Company entered into a confidentiality agreement with Parent. Parent then began its due diligence review of the Company's business and financial condition. Concurrently with its due diligence review, Parent engaged in various discussions and meetings with management and employees of the Company, its counsel and Frost Securities to negotiate the terms of the Merger Agreement and the Shareholder Agreement. Parent's counsel provided an initial draft of the proposed merger agreement to the Company's counsel on October 14, 1999. The Supervisory Board of TBG Holdings unanimously approved the proposed transaction at a meeting on October 8, 1999. The Board of Directors of Parent approved the proposed transaction by unanimous written consent on the same day. These approvals were subject to the satisfactory completion of Parent's due diligence review of the Company and negotiation of definitive agreements. 15 On November 4, 1999, the Board met to discuss the proposed Merger. On November 4, 1999, Frost Securities made a presentation to the Board regarding the fairness from a financial point of view of the proposed per Share consideration to be received by holders of Shares in the Offer and the Merger and counsel to the Company explained in detail the terms of the current draft of the merger agreement and the shareholder agreement. On November 10, 1999, Parent completed its due diligence review of the Company and informed representatives of the Company that Parent was willing to proceed with the transaction at a price of $22.00 per Share. On November 11, 1999 Frost Securities delivered its opinion to the Board that, as of such date, and subject to the conditions and limitations set forth therein, the consideration to be received by holders of Shares in the Offer and the Merger is fair, from a financial point of view. On November 11, 1999, the Board of Directors of the Company unanimously approved the Merger Agreement, the Shareholder Agreement, the Offer and the Merger. The parties executed and delivered the Merger Agreement and the Shareholder Agreement on the evening of November 11, 1999 and publicly announced the transaction before the NYSE opened for trading on the morning of November 12, 1999. 12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; THE SHAREHOLDER AGREEMENT; PLANS FOR THE COMPANY PURPOSE. The purpose of the Offer is to acquire control of and the entire equity interest in the Company. Following the Offer, the Purchaser and Parent intend to acquire any remaining equity interest in the Company not acquired in the Offer by consummating the Merger. THE MERGER AGREEMENT. The Merger Agreement provides that following the satisfaction of the conditions described below under "Conditions to the Merger", the Purchaser will be merged with and into the Company, and each outstanding Share (other than Shares held by shareholders who perfect their dissent rights under Texas law, Shares owned by the Company as treasury stock and Shares owned by Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company) will be converted into the right to receive the Per Share Merger Consideration, without interest. (1) VOTE REQUIRED TO APPROVE MERGER. The TBCA requires, among other things, that the adoption of any plan of merger or consolidation of the Company be approved by the Board and generally by two-thirds of the holders of the Company's outstanding voting securities. Article 2.28D of the TCBA, however, provides that a corporation's articles of incorporation may provide that the act of the shareholders on any matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by the TBCA shall be the affirmative vote of the holders of a specified portion, but not less than a majority of the shares entitled to vote on the matter, rather than the affirmative vote otherwise required by the TBCA. Under the Company's articles of incorporation, however, only a majority vote is required to approve the Merger. The Board has approved the Offer and the Merger. Consequently, the only additional action of the Company necessary to effect the Merger is approval by such shareholders if the "short-form" merger procedure described below is not available. If the Purchaser acquires, through the Offer or otherwise, voting power with respect to at least a majority of the outstanding Shares (which would be the case if the Minimum Tender Condition were satisfied and the Purchaser were to accept for payment Shares tendered pursuant to the Offer), it would have sufficient voting power to effect the Merger without the vote of any other shareholder of the Company. However, Article 5.16 of the TBCA also provides that if a purchaser owns at least 90% of each class of outstanding shares (pursuant to the Offer or otherwise), the purchaser, by action of the board of directors of the purchaser and without the action or vote by the shareholders of either corporation, can effect a short-form merger with the target company. Accordingly, if, as a result of the Offer or otherwise, the Purchaser acquires or controls the voting power of at least 90% of the outstanding Shares, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other shareholder of the Company. (2) CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THE MERGER AGREEMENT. The respective obligations of each party to effect the Merger under the Merger Agreement is subject to the satisfaction at or prior to the 16 Closing Date of the following conditions, any or all of which may be waived by Parent and the Purchaser, in whole or in part, to the extent permitted by applicable law: (a) the Merger Agreement shall have been approved by the requisite vote of the shareholders of the Company, if required by applicable law; (b) the waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have been terminated or shall have expired, and the period of time for any applicable review process by CFIUS under the Exon-Florio Act shall have expired and CFIUS shall not have taken any action or made any recommendation to the President of the United States to block or prevent the consummation of the Offer or the Merger; (c) any consents, approvals and filings under any foreign antitrust Law, the absence of which would prohibit the consummation of the Merger, shall have been obtained or made; (d) no temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect and any party asserting this condition shall have used all reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any such injunction or other order that may be entered; and (e) the Purchaser shall have accepted for payment and paid for all Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED that this condition shall be deemed satisfied with respect to the obligation of the Purchaser and Parent to effect the Merger if the Purchaser fails to accept for payment or pay for Shares pursuant to the Offer in violation of the Merger Agreement. (3) TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated and the Offer and the Merger may be abandoned at any time (notwithstanding approval of the Merger by the shareholders of the Company) prior to the Effective Time provided that if the Shares are accepted for payment pursuant to the Offer, neither Parent nor the Purchaser may terminate this Agreement or abandon the Merger except pursuant to the following clause (a), (b)(i) or (b)(iii): (a) by mutual written consent of Parent, the Purchaser and the Company; (b) by either the Parent or the Company (i) if any court of competent jurisdiction or other governmental authority issues an order, decree or ruling or takes any other action permanently enjoining, restraining or otherwise prohibiting the Merger, and such order, decree or ruling or other action shall have become nonappealable; (ii) if (A) as a result of the failure of any of the conditions to the Offer, (1) the Purchaser shall have failed to commence the Offer within 20 days following the date of the Merger Agreement or (2) the Offer shall have terminated or expired in accordance with its terms without the Purchaser having purchased any Shares pursuant to the Offer or (B) Purchaser shall not have accepted for payment any Shares pursuant to the Offer prior to March 11, 2000 (the "Termination Date"), PROVIDED that the right to terminate pursuant to clause (b)(ii) shall not be available (x) to the Company as a result of the occurrence of any event set forth in paragraph (d) under Section 14 or (y) to any party whose failure to fulfill any of its obligations under the Merger Agreement or the Shareholder Agreement (each a "Transaction Agreement" and together the "Transaction Agreements") results in the failure of any condition set forth in Section 14 or if the failure of such condition results from facts or circumstances that constitute a breach of any representation or warranty of such party contained in any Transaction Agreement; or (iii) if, upon a vote at a duly held meeting to obtain the Company Shareholder Approval, such approval is not obtained, PROVIDED, HOWEVER, that the Merger Agreement may not be terminated by Parent pursuant to this clause (b)(iii) if Parent does not cause all Company Shares acquired pursuant to the Offer or otherwise owned by the Purchaser or any other subsidiary of Parent to be voted in favor of the Merger Agreement; (c) by Parent, if the Company breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in any Transaction Agreement, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 14 and (ii) cannot be or has not been cured within 30 days after written notice to the Company of such breach; (d) by Parent or the Purchaser if either Parent or the Purchaser is entitled to terminate the Offer as a result of the occurrence of any event set forth in paragraph (d) of Section 14; or (e) by the Company if the Board withdraws or modifies its approval or recommendation of the Transaction Agreements, the Offer or the Merger in the circumstances described below under the caption "Company Takeover Proposals"; PROVIDED that, in order for termination pursuant to this clause (e) 17 to be deemed effective, the Company shall have complied with all of its obligations as described below under "Company Takeover Proposals", including the notice provisions therein, and with all applicable requirements described below under "Fees and Expenses", including payment of the Termination Fee. (4) COMPANY TAKEOVER PROPOSALS. Pursuant to the Merger Agreement, the Company was required to, and to cause its Representatives (as defined below) to, cease immediately all current discussions and negotiations regarding any proposal that constitutes, or may reasonably be expected to lead to, a Company Takeover Proposal (as defined below). Further, the Company has agreed that it will not, and will not authorize or permit any of its subsidiaries, or any officer, director, employee, investment banker, financial advisor, attorney, accountant or other advisor or representative (collectively, "Representatives") of the Company or any of its subsidiaries to, (i) directly or indirectly solicit, initiate or encourage the submission of any Company Takeover Proposal, (ii) enter into any agreement with respect to any Company Takeover Proposal or (iii) directly or indirectly participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Company Takeover Proposal; PROVIDED, HOWEVER, that prior to the earlier to occur of acceptance for payment of Shares pursuant to the Offer and approval of the Merger Agreement by the Company's shareholders, the Company may, to the extent that a failure to do so would violate the fiduciary obligations of the Company Board under applicable law, as determined in good faith by a majority of the Disinterested Directors (as defined below) based on the advice of outside counsel, in response to a Superior Company Proposal (as defined below) that was not solicited by the Company or its Representatives and that did not otherwise result from a breach or a deemed breach of this provision, and subject to compliance with the notice requirements described below, (x) furnish information with respect to the Company to the person making such Superior Company Proposal pursuant to a confidentiality agreement not less restrictive of the other party than the confidentiality agreement between the Company and Parent and (y) participate in discussions or negotiations regarding such Superior Company Proposal. "Disinterested Director" means, with respect to any Company Takeover Proposal, any member of the Company Board that is not an affiliate or Representative of the person making such Company Takeover Proposal. Without limiting the foregoing, any violation of the restrictions set forth in the preceding sentence by any Representative or affiliate of the Company or any subsidiary of the Company, whether or not such person is purporting to act on behalf of the Company or any subsidiary of the Company or otherwise, would be deemed to be a breach of the Merger Agreement by the Company. The Merger Agreement provides further that, except as described below, neither the Company, nor the Board nor any committee thereof shall (a) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or the Purchaser, the approval or recommendation by the Company Board or any such committee of the Transaction Agreements, the Offer or the Merger, (b) approve or cause the Company or any subsidiary of the Company to enter into any letter of intent, agreement in principle, acquisition agreement or similar agreement (each, an "Acquisition Agreement") relating to any Company Takeover Proposal or (c) approve or recommend, or propose publicly to approve or recommend, any Company Takeover Proposal. Notwithstanding the foregoing, if, prior to the earlier to occur of acceptance for payment of Shares pursuant to the Offer and approval of the Merger Agreement by the shareholders of the Company, the Board receives a Superior Company Proposal which was not solicited by the Company and which did not otherwise result from a breach of the non-solicitation provisions of the Merger Agreement, and the Board determines in good faith, based on the advice of outside counsel, that the failure to do so would violate its fiduciary obligations under applicable law, the Board may withdraw or modify its approval or recommendation of the Transaction Agreements, the Offer or the Merger; PROVIDED that such determination shall be made at a time that is after the third business day following the receipt by Parent of written notice advising Parent that the Board is prepared to accept a Superior Company Proposal, specifying the material terms and conditions of such Superior Company Proposal and identifying the person making such Superior Company Proposal. 18 In addition, under the Merger Agreement, the Company has agreed to promptly advise Parent, orally and in writing, of any Company Takeover Proposal or any inquiry with respect to, or that could reasonably be expected to lead to, any Company Takeover Proposal (including any change to the terms of any such Company Takeover Proposal or inquiry) and the identity of the person making any such Company Takeover Proposal or inquiry. The Company shall (i) keep Parent fully informed of the status of any such Company Takeover Proposal or inquiry (including any change to the terms of any such Company Takeover Proposal or inquiry) and (ii) provide to Parent copies of all correspondence and other written material sent or provided by any third party to the Company, or by the Company to any third party, in connection with any Company Takeover Proposal, as soon as practicable after receipt or delivery thereof. The Merger Agreement provides that the provisions described above will not prohibit the Company from taking and disclosing to its shareholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or making any disclosure to the Company's shareholders if, in the good faith judgment of the Company Board, based on the advice of outside counsel, failure so to disclose would constitute a violation of applicable law; PROVIDED, HOWEVER, that neither the Company, nor the Board nor any committee thereof shall withdraw or modify, or propose publicly to withdraw or modify, its position with respect to the Transaction Agreements, the Offer or the Merger (unless it is permitted to do so as described above) or approve or recommend, or propose publicly to approve or recommend, a Company Takeover Proposal. "Company Takeover Proposal" means any inquiry, proposal or offer for (a) a merger, consolidation, dissolution, recapitalization, liquidation or other business combination involving the Company or any subsidiary of the Company, (b) the acquisition by any person in any manner, directly or indirectly, of a number of shares of any class of equity securities of the Company or any subsidiary of the Company equal to or greater than 20% of the number of such shares outstanding before such acquisition or (c) the acquisition by any person in any manner, directly or indirectly, of assets that constitute 20% or more of the net revenues, net income or assets of the Company or any subsidiary of the Company, in each case other than the Offer, the Merger and the other transactions contemplated by the Transaction Agreements (the "Transactions") and other than the sale of Vertex Satcom Systems, Inc., a subsidiary of the Company, on terms approved by Parent (the "Satcom Sale") (the transactions referred to in clauses (a), (b) and (c) being referred to herein as "Company Takeover Transactions"). "Superior Company Proposal" means any bona fide proposal made by a third party to acquire substantially all the equity securities or assets of the Company, pursuant to a tender or exchange offer, merger, consolidation, liquidation or dissolution, recapitalization, sale of all or substantially all its assets or otherwise, (a) on terms which the Board determines in its good faith judgment to be superior from a financial point of view to the holders of Shares than the Transactions (based on the written opinion, with only customary qualifications, of the Company's independent financial advisor, which has been provided to Parent), taking into account all the terms and conditions of such proposal, the Transaction Agreements and any proposal by Parent to amend the terms of the Transactions, (b) for which financing, to the extent required, is then committed or which, in the good faith judgment of the Board, is reasonably capable of being obtained by such third party and (c) for which, in the good faith judgment of the Board, no regulatory approvals are required, including antitrust approvals, that could not reasonably be expected to be obtained. (5) FEES AND EXPENSES. Except with respect to the circumstances described below, the Merger Agreement provides that each of Parent, the Purchaser and the Company will bear its own fees and expenses in connection with the Merger Agreement regardless of whether the Merger is consummated. The Merger Agreement provides that in the event that (i) (A) a Company Takeover Proposal shall have been made known to the Company or shall have been made directly to its shareholders or any person shall have announced an intention (whether or not conditional) to make a Company Takeover Proposal, (B) thereafter the Merger Agreement is terminated as a result of the failure of the conditions to the Offer, the failure to receive the Company Shareholder Approval or an uncured material breach by the Company 19 and (C) within 12 months after such termination a Company Takeover Transaction is consummated or the Company (or one or more of the Company's subsidiaries representing in the aggregate 20% or more of the net revenues, net income or the assets of the Company and the Company's subsidiaries taken as a whole), enters into an Acquisition Agreement with respect to, approves or recommends a Company Takeover Transaction or (ii) the Merger Agreement is terminated by the Company after receiving a Superior Company Proposal as described above or by Parent or the Purchaser as a result of the failure of the conditions set forth in paragraph (d) of Section 14, then the Company must promptly, but in no event later than, in the case of clause (i), the date of the earliest to occur of such consummation, approval, or recommendation of a Company Takeover Transaction or the entering into of such Acquisition Agreement, or in the case of clause (ii), the date of such termination, pay to Parent a fee equal to $3.84 million (the "Termination Fee"), payable by wire transfer of same day funds. If the Company is required to pay to Parent a fee pursuant to either of the above clauses, the Company will also reimburse Parent and the Purchaser for all their out-of-pocket expenses actually incurred in connection with the Transaction Agreements, the Offer, the Merger and the other Transactions in an amount not to exceed $640,000. Such reimbursement shall be paid upon demand following termination of the Merger Agreement. The payment of any amounts due pursuant to this provision do not constitute the exclusive remedy of Parent and the Purchaser under the Transaction Agreements. Without limiting the generality of the foregoing, in the event of a breach or deemed breach by the Company of the no solicitation provisions of the Merger Agreement, Parent and the Purchaser will be entitled to the other remedies contained in the Merger Agreement, including an injunction, and all other remedies available at law or in equity to which Parent and the Purchaser are entitled. (6) CONDUCT OF BUSINESS OF THE COMPANY. Pursuant to the Merger Agreement, the Company has agreed that from the date of the Merger Agreement to the Effective Time, unless otherwise expressly permitted by the Merger Agreement or agreed to in writing by Parent, it will and will cause each of its subsidiaries to: (a) conduct its business diligently and in the usual, regular and ordinary course of business and in substantially the same manner as previously conducted; (b) use all reasonable efforts to preserve intact its current business organization, keep available the services of its current officers and employees and keep its relationships with customers, suppliers and others having business dealings with it; (c) maintain its assets in as good working order and condition as at present, ordinary wear and tear excepted, consistent with past practices; and (d) maintain in full force and effect current insurance policies or other comparable insurance coverage with respect to the assets and potential liabilities thereof. (7) PROHIBITED ACTIONS BY THE COMPANY. Under the Merger Agreement, the Company has agreed that, except as expressly permitted by the Merger Agreement or otherwise agreed to in writing by Parent, from the date of the Merger Agreement until the Effective Time, it will not, and will not permit any of its subsidiaries to, make any material change in personnel, operations or finance, or do any of the following without the prior written consent of Parent: (i) (A) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than dividends and distributions by a direct or indirect wholly owned subsidiary of the Company to its parent, (B) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (C) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any subsidiary of the Company or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities other than pursuant to the provisions of the Merger Agreement relating to Company Stock Options and the TIW Systems, Inc. Stock Bonus Plan; (ii) issue, deliver, sell, grant, pledge or otherwise encumber or subject to any lien (A) any shares of its capital stock, (B) any voting securities, (C) any securities convertible into or exchangeable for, or any options, warrants or rights to acquire, any such shares, voting securities or convertible or exchangeable securities or (D) any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock-based performance units, other than the issuance of Shares upon the exercise of Company Stock Options outstanding on the date of the Merger Agreement and in accordance with their present terms; (iii) amend the Company charter, the Company by-laws or other comparable charter or organizational 20 documents other than pursuant to the Merger Agreement; (iv) acquire or agree to acquire (A) by merging or consolidating with, or by purchasing the assets of, or by any other manner, any equity interest in or business or any corporation, partnership, company, limited liability company, joint venture, association or other business organization or division thereof or (B) any assets that, individually, are in excess of $100,000 or, in the aggregate, are in excess of $300,000, except purchases of inventory in the ordinary course of business consistent with past practice; (v) (A) grant to any officer or director of the Company or any subsidiary of the Company any increase in compensation, except in the ordinary course of business consistent with past practice or to the extent required under employment agreements filed as exhibits to documents filed by the Company with the SEC and publicly available prior to the date of the Merger Agreement (the "Filed Company SEC Documents"), (B) grant to any employee, officer or director of the Company or any subsidiary of the Company any increase in severance or termination pay, except to the extent required under any agreement filed as an exhibit to the Filed Company SEC Documents, (C) establish, adopt, enter into or amend any Company benefit agreement, (D) establish, adopt, enter into or amend in any material respect any collective bargaining agreement or Company benefit plan or (E) take any action to accelerate any rights or benefits, or make any material determinations not in the ordinary course of business consistent with past practice, under any collective bargaining agreement or Company benefit plan or Company benefit agreement, other than pursuant to the provisions of the Merger Agreement relating to Company Stock Options and the TIW Systems, Inc. Stock Bonus Plan; (vi) make any change in accounting methods, principles or practices materially affecting the reported consolidated assets, liabilities or results of operations of the Company, except insofar as may have been required by a change in generally accepted accounting principles; (vii) sell, lease (as lessor), license or otherwise dispose of or subject to any lien any properties or assets that are material, individually or in the aggregate, to the Company and its subsidiaries, taken as a whole, except (A) sales of inventory and excess or obsolete assets in the ordinary course of business consistent with past practice and (B) the Satcom Sale; (viii) (A) incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any subsidiary of the Company, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings incurred in the ordinary course of business consistent with past practice, or (B) make any loans, advances or capital contributions to, or investments in, any other person, other than to or in the Company or any direct or indirect wholly owned subsidiary of the Company; (ix) make or agree to make any new capital expenditure or expenditures that, individually, is in excess of $100,000 or, in the aggregate, are in excess of $300,000 in any calendar quarter; (x) make or change any material tax election or settle or compromise any material tax liability or refund; (xi) (A) pay, discharge, settle or satisfy any claims, liabilities, obligations or litigation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the unaudited financial statements of the Company for its fiscal year ended September 30, 1999 (the "1999 Company Financial Statements") or incurred since the date of such financial statements in the ordinary course of business consistent with past practice, (B) cancel any indebtedness that is material, individually or in the aggregate, to the Company and its subsidiaries taken as a whole, or waive any claims or rights of substantial value or (C) waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which the Company or any subsidiary of the Company is a party; (xii) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing a liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization other than for the liquidation of any subsidiary of the Company into the Company; (xiii) make or renew, extend, amend, modify, or waive any material provisions of any contract or commitment or relinquish or waive any material contract rights or agree to the termination of any material contract, except in the ordinary course of business consistent with prior practice; (xiv) institute, settle, or agree to settle any action or proceeding pending before any 21 court or other governmental entity; or (xv) authorize, or commit or agree to take, any of the foregoing actions. (8) DIRECTORS. The Merger Agreement provides that, promptly upon the acceptance for payment of, and payment by the Purchaser for, any Shares pursuant to the Offer, the Purchaser will be entitled to designate such number of directors on the Board as will give the Purchaser, subject to compliance with Section 14(f) of the Exchange Act, representation on the Board equal to at least that number of directors, rounded up to the next whole number, which is the product of (a) the total number of directors on the Board (giving effect to the directors elected pursuant to this sentence) multiplied by (b) the percentage that (i) such number of Shares so accepted for payment and paid for by the Purchaser plus the number of Shares otherwise owned by the Purchaser or any other subsidiary of Parent bears to (ii) the number of such Shares outstanding, and the Company will, at such time, cause the Purchaser's designees to be so elected; PROVIDED that in the event that the Purchaser's designees are appointed or elected to the Board, until the Effective Time the Board will have at least two directors who were directors on the date of the Merger Agreement and who are not officers of the Company (the "Independent Directors"); and PROVIDED FURTHER that in such event, if the number of Independent Directors is reduced below two for any reason whatsoever, the remaining Independent Director will be entitled to designate a person to fill such vacancy who will be deemed to be an Independent Director or, if no Independent Directors then remain, the other directors will designate two persons to fill such vacancies who are not current or former officers, shareholders or affiliates of the Company, Parent or the Purchaser, and such persons will be deemed to be Independent Directors. Subject to applicable law, the Company will take all action requested by Parent necessary to effect any such election, including mailing to its shareholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company will make such mailing with the mailing of the Schedule 14D-9 (provided that the Purchaser shall have provided to the Company on a timely basis all information required to be included in the Information Statement with respect to the Purchaser's designees). In connection with the foregoing, the Company will promptly, at the option of the Purchaser, either increase the size of the Board or obtain the resignation of such number of its current directors as is necessary to enable the Purchaser's designees to be elected or appointed to the Board as provided above. (9) STOCK OPTIONS. The Merger Agreement provides that, as soon as practicable following the date of the Merger Agreement, the Board (or, if appropriate, any committee administering the Company Stock Plans (as defined below)) shall adopt such resolutions or take such other actions as are required to adjust the terms of all outstanding Company Stock Options and all outstanding Company SARs (as defined below) to provide that (i) each outstanding Company Stock Option may be exercised, whether or not such Company Stock Option is vested, immediately prior to the acceptance for payment of Shares pursuant to the Offer, contingent on and subject to the consummation of the Offer, PROVIDED that the Shares issued upon such exercise are tendered into the Offer and not withdrawn and (ii) each Company Stock Option and Company SAR outstanding that is not exercised prior to the acceptance for payment of Shares pursuant to the Offer shall be canceled effective immediately prior to the acceptance for payment of Shares pursuant to the Offer with the holder thereof becoming entitled to receive an amount of cash equal to the product of (x) the excess, if any, of (A) the Per Share Merger Consideration over (B) the exercise price per Share subject to such Company Stock Option or Company SAR, multiplied by (y) the number of Shares issuable pursuant to the unexercised portion of such Company Stock Option or Company SAR; PROVIDED, HOWEVER, that no cash payment will be made with respect to any Company SAR that is related to a Company Stock Option in respect of which such a cash payment is made. All amounts payable pursuant to this paragraph will be subject to any required withholding of taxes or proof of eligibility of exemption therefrom and will be paid at or as soon as practicable following the Effective Time, but in any event within one business day following the Effective Time, without interest. The Company will use its best efforts to obtain all consents of the holders of the Company Stock Options if such consents are determined to be necessary to effectuate the foregoing as mutually agreed by Parent and the Company. The cancelation of a Company Stock Option in exchange for the cash payment 22 described in the preceding paragraph will be deemed a release of any and all rights the holder of such Company Stock Option had or may have had in respect thereof, and any necessary consents from all such holders shall so provide. Notwithstanding anything to the contrary contained in the Merger Agreement, payment shall, at Parent's request, be withheld in respect of any Company Stock Option until all necessary consents are obtained. As soon as practicable following the date of the Merger Agreement, the Board (or, if appropriate, any committee administering the Company Stock Plans) will take or cause to be taken such actions as are required to cause (x) the Company Stock Plans to terminate as of the Effective Time and (y) the provisions in any other Company benefit plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company to be deleted as of the Effective Time. The Company will ensure that following the Effective Time no holder of a Company Stock Option or Company SAR or any participant in any Company Stock Plan or other Company benefit plan will have any right thereunder to acquire any capital stock of the Company or the Surviving Corporation. The Company will take or cause to be taken all actions required to cause the TIW Systems, Inc. Stock Bonus Plan to be amended as of immediately prior to the Effective Time to provide that, in the event the Company Common Stock ceases to be readily tradable (within the meaning of Q/A-2(d)(1)(iv)(A) of Treas. Reg. Section 1.411(d)-4), distributions of benefits under such plan will be in the form of cash; PROVIDED that the foregoing will not apply in the event that prior to the Effective Time (i) such plan has received a favorable determination letter from the Internal Revenue Service in respect of the termination of the plan, (ii) such plan has been terminated and (iii) all benefits payable under such plan have been paid in full to each plan participant and beneficiary entitled to receive benefits in respect of the termination of such plan. "Company Stock Option" means any option to purchase Common Stock granted under any Company Stock Plan. "Company SAR" means any stock appreciation right linked to the price of Common Stock and granted under any Company Stock Plan. "Company Stock Plans" means the Company's 1995 Stock Compensation Plan, the Company's Stock Option Plan for Key Employees, the Company's Non-Employee Directors Stock Option Plan and the Company's Outside Directors Stock Option Plan, in each case as amended from time to time. (10) INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) For six years after the Effective Time, the Surviving Corporation (or any successor to the Surviving Corporation) will honor all the Company's obligations to indemnify, defend and hold harmless the present and former officers and directors of the Company and its subsidiaries and certain other individuals (each an "Indemnified Party") against losses, claims, damages, liabilities, costs, fees and expenses (including reasonable fees and disbursements of counsel and judgments, fines, losses, claims, liabilities and amounts paid in settlement provided that any such settlement is effected with the written consent of Parent or the Surviving Corporation, which consent shall not unreasonably be withheld) arising out of actions or omissions occurring at or prior to the Effective Time ("Losses") to the extent such obligations of the Company exist under the TBCA, the terms of the Company charter or the Company by-laws, in each case as in effect on the date of the Merger Agreement, or under any indemnification agreement between the Company or any subsidiary of the Company, as applicable, and the Indemnified Party that has been filed as an exhibit to the Filed Company SEC Documents or that has been previously identified and delivered to Parent; PROVIDED that in the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until disposition of any and all such claims. In the event that the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, proper provision will be made so that the successors and assigns of the Surviving Corporation shall expressly assume the obligations set forth in this paragraph. The provisions described in this paragraph are (i) intended to be for the benefit of, and to be enforceable by, each Indemnified Party, his or her heirs and his or her representatives and (ii) in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. 23 (11) REASONABLE EFFORTS. Upon the terms and subject to the conditions set forth in the Merger Agreement, each of the parties will use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger and the other Transactions, including (i) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from governmental entities and the making of all necessary registrations and filings (including filings with governmental entities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental entity, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging the Transaction Agreements or the consummation of the Transactions, including seeking to have any stay or temporary restraining order entered by any court or other governmental entity vacated or reversed and (iv) the execution and delivery of any additional instruments necessary to consummate the Transactions and to fully carry out the purposes of the Transaction Agreements; PROVIDED, HOWEVER, that Parent will not be required to consent to any action described in paragraph (a) of Section 14. In connection with and without limiting the foregoing, the Company and the Board will (i) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to any Transaction or the Transaction Agreements, (ii) if any state takeover statute or similar statute or regulation becomes applicable to the Transaction Agreements, take all action necessary to ensure that the Offer, the Merger and the other Transactions may be consummated as promptly as practicable on the terms contemplated by the Transaction Agreements and otherwise to minimize the effect of such statute or regulation on the Offer, the Merger and the other Transactions and (iii) cooperate with Parent and the Purchaser in the arrangements for obtaining the financing required to consummate the Offer and the Merger, and to pay related fees and expenses. Nothing in the Merger Agreement will require Parent to waive any substantial rights or agree to any substantial limitation on its operations or to dispose of any asset or collection of assets of the Company, Parent or any of their respective subsidiaries or affiliates. Notwithstanding the foregoing, the Company is not prohibited from taking any action permitted by the non-solicitation provisions of the Merger Agreement described under "Company Takeover Proposals" above. (12) DIRECTORS AND OFFICERS. The directors of the Purchaser immediately prior to the Effective Time will be the directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified. (13) REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary representations and warranties. (14) PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. Termination or amendment of, or extensions or waivers under, the Merger Agreement, in order to be effective, require in the case of Parent, the Purchaser or the Company, action by its Board of Directors or the duly authorized designee of its Board of Directors. In the event the Purchaser's designees are elected to the Board as described above, after such election and prior to the Effective Time, (i) the affirmative vote of a majority of the Independent Directors will be required in addition to any required approval by the full Board to (A) amend or terminate the Merger Agreement on behalf of the Company, (B) waive any of the Company's rights, benefits or remedies under the Merger Agreement or (C) extend the time for performance of the Purchaser's obligations under the Merger Agreement and (ii) the Independent Directors will have the power, acting together, to exercise any right of the Company under the Merger Agreement that the Company otherwise fails to exercise to the extent that the failure to exercise such right would materially adversely affect the holders of Shares other than Parent, the Purchaser and their respective subsidiaries and affiliates. 24 THE SHAREHOLDER AGREEMENT. Pursuant to the Shareholder Agreement, each Principal Shareholder has agreed, among other things, to tender all the Shares that he owns (or has the right to acquire upon the exercise of Company Stock Options) pursuant to the Offer. In addition, each Principal Shareholder has granted the Purchaser an option to purchase all his Shares at a price per Share equal to the Offer Price in the event that such Principal Shareholder fails to tender such Shares pursuant to the Offer, or withdraws such Shares prior to expiration of the Offer. The Shareholder Agreement and all rights and obligations of the parties to the Shareholder Agreement will terminate on the earlier to occur of the Effective Time and the termination of the Merger Agreement in accordance with its terms. Each Principal Shareholder severally has agreed that prior to the termination of the Shareholder Agreement, except as otherwise provided therein: (a) such Principal Shareholder will not (i) sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option or other arrangement (including any profit sharing arrangement) with respect to the sale, transfer, pledge, assignment or other disposition of such Principal Shareholder's Shares to any person other than pursuant to the Offer and the Merger, (ii) enter into any voting arrangement, whether by proxy, voting agreement or otherwise, with respect to such Principal Shareholder's Shares or (iii) commit or agree to take any of the foregoing actions, (b) until the Merger is consummated or the Merger Agreement is terminated, such Principal Shareholder will not, nor will such Principal Shareholder permit any investment banker, attorney or other advisor or representative of such Principal Shareholder to (i) directly or indirectly solicit, initiate or encourage the submission of any Company Takeover Proposal, (ii) enter into any agreement with respect to any Company Takeover Proposal or (iii) directly or indirectly participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, any Company Takeover Proposal; PROVIDED, HOWEVER, that the Principal Shareholder may furnish information with respect to the Company to a person and participate in discussions or negotiations with such person regarding a Superior Company Proposal if at such time the Company is permitted to furnish information and engage in discussions or negotiations with, and is actually furnishing information to and engaging in discussions or negotiations with, such person regarding such Superior Company Proposal pursuant to the nonsolicitation provisions of the Merger Agreement, (c) at any meeting of shareholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, such Principal Shareholder will, including by executing a written consent solicitation if requested by Parent, vote (or cause to be voted) such Principal Shareholder's Shares in favor of the Merger Agreement and (d) at any meeting of shareholders of the Company or at any adjournment thereof or in any other circumstances upon which such Principal Shareholder's vote, consent or other approval is sought, such Principal Shareholder will vote (or cause to be voted) such Principal Shareholder's Shares against (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company, (ii) any Company Takeover Proposal and (iii) any amendment of the Company's charter or bylaws or other proposal or transaction involving the Company or any of its subsidiaries, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent, delay or nullify the Offer, the Merger, the Merger Agreement or any of the other Transaction or change in any manner the voting rights of any class of capital stock of the Company. The Shareholder Agreement provides that each Principal Shareholder executed the Shareholder Agreement solely in his or her capacity as the record holder and beneficial owner of such Principal Shareholder's Shares and nothing therein shall limit or affect any actions taken by a Principal Shareholder in his capacity as an officer or director of the Company or any subsidiary of the Company to the extent specifically permitted by the Merger Agreement. Under the Shareholder Agreement each Principal Shareholder has, subject to termination of the Shareholder Agreement, irrevocably granted to, and appointed, Parent, Stephen Green and Jack Haegele, or any of them, and any individual designated by any of them, and each of them, such Principal 25 Shareholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Principal Shareholder, to vote such Principal Shareholder's Shares, or grant a consent or approval in respect of such Shares, in the manner specified above. THE CONFIDENTIALITY AGREEMENT. Pursuant to the Confidentiality Agreement dated September 28, 1999, between the Company and Parent (the "Confidentiality Agreement"), the Company and Parent agreed to keep confidential certain information exchanged between such parties. The Confidentiality Agreement also contains customary standstill provisions. The Merger Agreement provides that certain information exchanged pursuant to the Merger Agreement will be subject to the Confidentiality Agreement. DISSENT RIGHTS. Holders of Shares do not have dissenters' rights as a result of the Offer alone. However, if the Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Articles 5.11, 5.12, 5.13 and 5.16 of the TBCA to dissent from the Merger Agreement and to demand payment in cash of the fair value of their Shares. If the statutory procedures are complied with, such rights can lead to a judicial determination of the fair value required to be paid in cash to such dissenting holders for their shares. Any such judicial determination of the fair value of Shares, in the case where the proposed corporate action is submitted to a vote of the shareholders, will be the value of the Shares as of the day immediately preceding the Shareholder meeting, excluding any appreciation or depreciation in anticipation of the proposed action. In the case where the proposed corporate action is approved without a meeting, the fair value of the Shares will be the value of the Shares as of the date the written consent authorizing the action was delivered to the Company, excluding any appreciation or depreciation in anticipation of the action. If any holder of Shares who demands appraisal under the TBCA fails to perfect, or effectively withdraws or loses his right to appraisal, as provided in the TBCA, the Shares of such holder will be converted into the Per Share Merger Consideration in accordance with the Merger Agreement. The foregoing discussion is not a complete statement of law pertaining to appraisal rights under the TBCA and is qualified in its entirety by the full text of Articles 5.11, 5.12, 5.13 and 5.16 of the TBCA. FAILURE TO FOLLOW THE STEPS REQUIRED BY ARTICLES 5.11, 5.12, 5.13 AND 5.16 OF THE TBCA FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. GOING PRIVATE TRANSACTIONS. The Merger would have to comply with any applicable Federal law operative at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger unless the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger and the consideration offered to minority shareholders be filed with the SEC and disclosed to minority shareholders prior to consummation of the Merger. PLANS FOR THE COMPANY. Parent intends to conduct a detailed review of the Company and its assets, corporate structure, dividend policy, capitalization, operations, properties, policies, management and personnel and to consider, subject to the terms of the Merger Agreement, what, if any, changes would be desirable in light of the circumstances then existing, and reserves the right to take such actions or effect such changes as it deems desirable. Such changes could include changes in the Company's business, corporate structure, capitalization, management or dividend policy. Except as otherwise described in this Offer to Purchase, none of the Purchaser, Parent or TBG Holdings have any current plans or proposals that would relate to, or result in, any extraordinary corporate transaction involving the Company or any of its subsidiaries, such as a merger, reorganization or liquidation involving the Company, a sale or transfer of a material amount of assets of the Company or any 26 of its subsidiaries, any change in the Company's capitalization or dividend policy or any other material change in the Company's business, corporate structure or personnel. 13. DIVIDENDS AND DISTRIBUTIONS Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the following actions without the prior written consent of Parent: (i) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock other than dividends and distributions by a direct or indirect wholly owned subsidiary of the Company to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iii) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any subsidiary of the Company or any other securities or (iv) issue, deliver, sell, grant, pledge or otherwise encumber or subject to any lien (a) any shares of its capital stock, (b) other voting securities, (c) any securities convertible into or exchangeable for, or any options, warrants or rights to acquire, any such shares, voting securities or convertible or exchangeable securities or (d) any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock-based performance units, other than pursuant to the provisions of the Merger Agreement relating to Company Stock Options and the TIW Systems, Inc. Stock Bonus Plan. Nothing herein shall constitute a waiver by the Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. If, on or after November 11, 1999, the Company should take any of the actions described in clause (ii), (iii) or (iv) in the above paragraph, then, subject to the provisions of Section 14, the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, on or after November 11, 1999, the Company should declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock other than dividends and distributions by a direct or indirect wholly owned subsidiary of the Company to its parent, then, subject to the provisions of Section 14, (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering shareholders will (i) be received and held by the tendering shareholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering shareholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation or transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other term of the Offer or the Merger Agreement, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which would represent at least a majority of the outstanding Shares on a fully diluted basis, (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated and (iii) the period of time for any applicable review process by CFIUS under the Exon-Florio Act shall have expired and CFIUS shall not have taken any action or made any recommendation to the President of the United States to block or prevent the 27 consummation of the Offer or the Merger. Furthermore, notwithstanding any other term of the Offer or the Merger Agreement, the Purchaser shall not be required to commence the Offer, accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate or amend the Offer, (x) with the consent of the Company or (y) without the consent of the Company if, at any time on or after the date of the Merger Agreement and before the acceptance of such shares for payment or the payment therefor, any of the following conditions exists: (a) there shall be pending or threatened any suit, action or proceeding by any Governmental Entity (as defined in the Merger Agreement), or by any other person that has a reasonable likelihood of success, (i) challenging the acquisition by Parent or the Purchaser of any Common Stock, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or any other Transaction, or seeking to obtain from the Company, Parent or the Purchaser or any of their respective subsidiaries or affiliates any damages that are material in relation to the Company and the Company Subsidiaries (as defined in the Merger Agreement) taken as whole, (ii) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective subsidiaries of any material portion of the business or assets of the Company, Parent or any of their respective subsidiaries or affiliates, or to compel the Company, Parent or any of their respective subsidiaries or affiliates to dispose of or hold separate any material portion of the business or assets of the Company, Parent or any of their respective subsidiaries or affiliates, as a result of the Offer, the Merger or any other Transaction, (iii) seeking to impose limitations on the ability of Parent or the Purchaser to acquire or hold, or exercise full rights of ownership of, any Shares, including the right to vote the Company Common Stock purchased by it on all matters properly presented to the shareholders of the Company, or (iv) seeking to prohibit Parent or any of its subsidiaries from effectively controlling in any material respect the business or operations of the Company and the Company Subsidiaries; (b) any statute, rule, regulation, legislation, interpretation, judgment, order or injunction shall be enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, or any consent or approval withheld with respect to, (i) Parent, the Company or any of their respective subsidiaries or affiliates or (ii) the Offer, the Merger or any other Transaction, in either such case by any Governmental Entity that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in paragraph (a) above; (c) since the date of execution of the Merger Agreement, there shall have been any event, change, effect or development that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect (as defined in the Merger Agreement), other than any event, change, effect or development to the extent attributable to (i) the economy or the securities markets in general, (ii) the Merger Agreement or the transactions contemplated hereby or the announcement thereof or (iii) the Company's industry in general, and not specifically relating to the Company or the Company Subsidiaries; (d)(i) it shall have been publicly disclosed or Parent shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of more than 35% of the outstanding Shares has been acquired by another person or (ii)(A) the Company or any of its directors or officers shall have breached Section 5.02 of the Merger Agreement (other than an immaterial breach), (B) the Board shall have withdrawn or modified its approval or recommendation of the Transaction Agreements, the Offer or the Merger, (C) the Company or any of its directors or officers shall have made any disclosure to the shareholders of the Company permitted pursuant to Section 5.02(d) of the Merger Agreement that has the effect of (x) withdrawing, modifying or changing the approval or recommendation of the Board or any committee thereof of the Transaction Agreements, the Offer, the Merger or the other Transactions in a manner adverse to Parent or the Purchaser, (y) approving or recommending to the shareholders of the Company a Company Takeover Proposal or (z) approving or recommending that the shareholders of the Company tender their Shares into any tender offer or exchange offer that is a Company 28 Takeover Proposal or is related thereto, or (D) the Board shall have failed to reaffirm publicly and unconditionally its recommendation to the Company's shareholders that they accept the Offer and give the Company Shareholder Approval by midnight, New York City time, on the third business day following Parent's written request to do so (which request may be made at any time that a Company Takeover Proposal is pending), which public reaffirmation must also include the unconditional rejection of such Company Takeover Proposal; (e) any representation or warranty of the Company in any Transaction Agreement that is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, as of the date of the Merger Agreement and as of the scheduled or extended expiration of the Offer, except to the extent such representation or warranty expressly relates to an earlier date (in which case on and as of such earlier date); (f) the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under any Transaction Agreement; or (g) the Merger Agreement shall have been terminated in accordance with its terms. The foregoing conditions are for the sole benefit of the Purchaser and Parent and may be asserted by the Purchaser or Parent regardless of the circumstances giving rise to such condition or may be waived by the Purchaser and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent, the Purchaser or any other affiliate of Parent at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 15. CERTAIN LEGAL MATTERS Except as described in this Section 15, based on a review of publicly available filings made by the Company with the SEC and other publicly available information concerning the Company, none of the Purchaser, Parent or TBG Holdings is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries), as contemplated herein or of any approval or other action by any governmental entity that would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser, Parent and TBG Holdings currently contemplate that such approval or action will be sought, except as described below under "State Takeover Laws". While, except as otherwise expressly described in this Section 15, the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could, subject to the terms and conditions of the Merger Agreement, decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer. STATE TAKEOVER LAWS. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, shareholders, executive offices or places of business in such states. In Edgar v. 29 MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that make the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining shareholders, provided that such laws were applicable only under certain circumstances. Subsequently, a number of Federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment. Article 13.03 of the TBCA limits the ability of a Texas corporation to engage in business combinations with "affiliated shareholders" (defined generally as any beneficial owner of 20% or more of the outstanding voting stock of the corporation) for a period of three years from the time such affiliated shareholders became the holders of 20% or more of such Shares unless, among other things, the corporation's board of directors had given its prior approval to either the business combination or the transaction which resulted in the shareholder becoming an "affiliated shareholder". The Board has approved the Merger Agreement and the Shareholder Agreement and the Purchaser's acquisition of Shares pursuant to the Offer and, therefore, Section 13.03 of the TBCA is inapplicable to the Merger. Except as described herein, the Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer. The Purchaser reserves the right to challenge the validity or applicability of any state law allegedly applicable to the Offer and nothing in this Offer to Purchaser nor any action taken in connection with the Offer or the Merger is intended as a waiver of that right. In the event that any state takeover statute is found applicable to the Offer or the Merger, the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer or the Merger. In such case, the Purchaser might not be obligated to accept for payment or pay for any Shares tendered. See Section 14. ANTITRUST. UNITED STATES ANTITRUST LAW. Under the provisions of the HSR applicable to the Offer, the acquisition of Shares under the Offer may be consummated following the expiration of a 15-calendar day waiting period following the filing by the Trust of a Notification and Report Form with respect to the Offer, unless the Trust receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. The Trust has made such filing. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or material from the Trust concerning the Offer, the waiting period will be extended and would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by the Trust with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of the Trust. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. Expiration or termination of the applicable waiting period under the HSR Act is a condition to the Purchaser's obligation to accept for payment and pay for Shares tendered pursuant to the Offer. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's acquisition of Shares pursuant to the Offer, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the 30 divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of the Company or its subsidiaries or the Trust or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. Based upon a preliminary examination of information provided by the Company relating to the businesses in which the Trust and the Company are engaged, Parent and the Purchaser believe that the acquisition of Shares by Purchaser will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the result thereof. OTHER LAWS. EXON-FLORIO ACT. The Exon-Florio Act applies to all acquisitions proposed or pending by or with foreign persons which could result in foreign control of persons engaged in interstate commerce in the United States. The Exon-Florio Act empowers the President of the United States to prohibit or suspend mergers, acquisitions or takeovers by or with foreign persons if the President finds, after investigation, credible evidence that the foreign person might take action that threatens to impair the national security of the United States and that other provisions of existing law do not provide adequate and appropriate authority to protect the national security. The President has designated CFIUS as the agency authorized under the Exon-Florio Act to receive notices and other information and to conduct a review process, which consists of a determination whether an investigation should be undertaken and making any such investigation. Any determination by CFIUS that an investigation is called for must be made within thirty days after its acceptance of written notification concerning a proposed transaction. In the event that CFIUS determines to undertake an investigation, such investigation must be completed within forty-five days after such determination. Upon completion or termination of any such investigation, CFIUS must report to the President and present its recommendation. The President then has fifteen days in which to suspend or prohibit the proposed transaction or to seek other appropriate relief. In order for the President to exercise his authority to suspend or prohibit a proposed transaction, the President must make two findings: (i) that there is credible evidence that leads the President to believe that the foreign interest exercising control might take action that threatens to impair national security and (ii) that provisions of law other than the Exon-Florio Act and the International Emergency Economic Powers Act do not in the President's judgment provide adequate and appropriate authority for the President to protect the national security in connection with the acquisition. Such findings are not subject to judicial review. If the President makes such findings, he may take action for such time as he considers appropriate to suspend or prohibit the relevant acquisition. The President may direct the Attorney General to seek appropriate relief, including divestment relief, in the District Courts of the United States in order to implement and enforce the Exon-Florio Act. The Exon-Florio Act does not obligate the parties to a proposed acquisition to notify CFIUS of a proposed transaction. However, if notice of a proposed acquisition is not submitted to CFIUS, then the transaction remains indefinitely subject to review by the President under the Exon-Florio Act, unless it is determined that CFIUS does not have jurisdiction over the transaction. The Purchaser and the Company have made a filing under the Exon-Florio Act. There can be no assurance that CFIUS will not determine to conduct an investigation of the proposed acquisition of the Company and, if an investigation is commenced, there can be no assurance regarding the outcome of such investigation. If the results of such investigation are adverse to the Purchaser, the Purchaser will not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. 16. FEES AND EXPENSES First Union Securities is acting as Dealer Manager in connection with the Purchaser's acquisition of the Company. First Union Securities will receive customary compensation for its services as Dealer Manager in connection with the Offer. Parent has also agreed to reimburse First Union Securities for its reasonable out-of-pocket expenses related to such services, including the reasonable fees and expenses of 31 its counsel, and to indemnify First Union Securities and certain related persons against certain liabilities and expenses, including certain liabilities and expenses under the Federal securities laws. The Purchaser has retained D.F. King & Co., Inc., to act as the Information Agent and First Union National Bank to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities and expenses under the Federal securities laws. None of the Purchaser, Parent or TBG Holdings will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. To the extent the Purchaser, Parent or TBG Holdings becomes aware of any state law that would limit the class of offerees in the Offer, the Purchaser reserves the right to amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. In any jurisdiction the securities, blue sky or other laws of which require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER, PARENT OR TBG HOLDINGS NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. The Purchaser, Parent and TBG Holdings have filed with the SEC a Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with exhibits, furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, the Company has filed a Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting forth its recommendation with respect to the Offer and the reasons for such recommendation and furnishing such additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Section 8 (except that such material will not be available at the regional offices of the SEC). SIGNAL ACQUISITION CORPORATION November 18, 1999 32 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF TBG HOLDINGS, PARENT AND THE PURCHASER MEMBERS OF THE SUPERVISORY BOARD AND EXECUTIVE OFFICERS OF TBG HOLDINGS NV The following table sets forth the name, business address, citizenship, present principal occupation or employment and five-year employment history of each of the executive officers and members of the Supervisory Board of TBG Holdings NV.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME, TITLE AND BUSINESS ADDRESS CITIZENSHIP FIVE-YEAR EMPLOYMENT HISTORY - -------------------------------- ----------- ---------------------------------------------- Georg Heinrich Thyssen-Bornemisza Switzerland Mr. Thyssen-Bornemisza is Chairman and Chief Chairman, Chief Executive Officer and Executive Officer of TBG Holdings N.V. Member of Supervisory Board c/o TBG Management SAM 29, Bd. Princesse Charlotte B.P. 89 MC 98007 MONACO CEDEX Michael von Staudt Germany Mr. von Staudt is Executive Vice President of Executive Vice President TBG Holdings N.V. Prior to 1997, he was c/o TBG Management SAM Managing Director of Bayerische Vereinsbank 29, Bd. Princesse Charlotte AG. B.P. 89 MC 98007 MONACO CEDEX Peter H. Frank United Mr. Frank is Senior Vice President and Senior Vice President and Corporate Kingdom Corporate Secretary of TBG Holdings N.V. Secretary c/o TBG Management SAM 29, Bd. Princesse Charlotte B.P. 89 MC 98007 MONACO CEDEX Johannes A.M. Vijverberg Holland Mr. Vijverberg is Senior Vice President of TBG Senior Vice President Holdings N.V. c/o TBG Management SAM 29, Bd. Princesse Charlotte B.P. 89 MC 98007 MONACO CEDEX C. Michael Armstrong United Mr. Armstrong is Chairman and Chief Executive Member of Supervisory Board States Officer of AT&T Corp. Prior to January of c/o AT&T Corp. 1998, he was Chairman and Chief Executive 295 North Maple Avenue Officer of Hughes Electronics Corporation. Basking Ridge, New Jersey 07920
I-1
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME, TITLE AND BUSINESS ADDRESS CITIZENSHIP FIVE-YEAR EMPLOYMENT HISTORY - -------------------------------- ----------- ---------------------------------------------- Roger J. Holtback Sweden Mr. Holtback is President and Chief Executive Member of Supervisory Board Officer of Investment AB Bure. c/o Investment AB Bure Massans Gata 8 40229 GOTEBORG Sweden Hans-Joerg Rudloff Germany Mr. Rudloff is Chairman of the Executive Member of Supervisory Board Committee of Barclays Capital. Prior to May c/o Barclays Capital 1998, he was President of MC Securities 5, The North Colonnade Limited. Canary Wharf, London E14 4BB England Gerhard Schulmeyer Germany Mr. Schulmeyer is President and Chief Member of Supervisory Board Executive Officer of Siemens Corporation. c/o Siemens Corporation Prior to January of 1999, he was President and 1301 Avenue of the Americas Chief Executive Officer of Siemens Nixdorf New York, NY 10019 Informationssyteme AG. Jerre L. Stead United Mr. Stead is Chairman and Chief Executive Member of Supervisory Board States Officer of Ingram Micro Inc. Prior to August c/o Ingram Micro Inc. 1996, he was Chairman of Legent Corporation. 1600 East St. Andrew Place P.O. Box 25125 Santa Ana, CA 92799-5125 Heinrich Weiss Germany Mr. Weiss is President and Chief Executive Member of Supervisory Board Officer of SMS Aktiengesellschaft c/o SMS Aktiengesellschaft Eduard-Schloemann Strasse 4 D-40237 DUSSELDORF Postfach 23 03 29, D-40088 Dusseldorf Germany
I-2 DIRECTORS AND EXECUTIVE OFFICERS OF TRIPOINT GLOBAL COMMUNICATIONS, INC. The following table sets forth the name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of TriPoint Global Communications, Inc. All the directors and officers listed below are citizens of the United States.
NAME AND TITLE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY - -------------- --------------------------------------------------------------------------- Jack Haegele, Mr. Haegele has been Chairman and Chief Executive Officer of TBG Industries Chief Executive Officer and Director Inc., the majority shareholder of Parent, since 1997. He was President and Chief Operating Officer of TBG Holdings NV from 1992 to 1997. Stephen Green, Mr. Green has been Vice President and General Counsel of TBG Services Inc., Vice President and Director an affiliate of Parent, since 1997. Prior to 1997, he was Assistant General Counsel with TBG Services Inc. and affiliated companies. Donald Hofmann, Mr. Hofmann has been a General Partner of Chase Capital Partners since Director 1992. Chase Capital Partners is an affiliate of Chase Manhattan Bank and is a minority shareholder of Parent. Robert B. Levine, Mr. Levine is Vice President-Taxes of TBG Services Inc., an affiliate of Vice President Parent.
The business address for Messrs. Haegele, Green and Levine is 565 5th Avenue, 17th Floor, New York, New York 10017. The business address for Mr. Hofmann is 380 Madison Avenue, 12th Floor, New York, New York 10017. I-3 DIRECTORS AND EXECUTIVE OFFICERS OF SIGNAL ACQUISITION CORPORATION The following table sets forth the name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Signal Acquisition Corporation. All the directors and officers listed below are citizens of the United States.
NAME AND TITLE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY - -------------- --------------------------------------------------------------------------- Jack Haegele, Mr. Haegele is the Chief Executive Officer and a Director of Parent. He has Chief Executive Officer and Director been Chairman and Chief Executive Officer of TBG Industries Inc., the majority shareholder of Parent, since 1997. He was President and Chief Operating Officer of TBG Holdings NV from 1992 to 1997. Stephen Green, Mr. Green is a Vice President and a Director of Parent. He has been Vice Vice President, Treasurer, Secretary President and General Counsel of TBG Services Inc., an affiliate of Parent, and Director since 1997. Prior to 1997, he was Assistant General Counsel with TBG Services Inc. and affiliated companies.
The business address for Messrs. Haegele and Green is 565 5th Avenue, 17th Floor, New York, New York 10017. I-4 Manually signed facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each shareholder of the Company or such shareholder's broker, dealer, bank, trust company or other nominee to the Depositary at one of its addresses set forth below. THE DEPOSITARY FOR THE OFFER IS: FIRST UNION NATIONAL BANK BY OVERNIGHT COURIER: BY MAIL OR HAND DELIVERY: Corporate Trust--Reorganization Department Corporate Trust--Reorganization Department 1525 West W.T. Harris Blvd., 3C3 1525 West W.T. Harris Blvd., 3C3 Charlotte, North Carolina 28262-1153 Charlotte, North Carolina 28288-1153
BY FACSIMILE TRANSMISSION: (FOR ELIGIBLE INSTITUTIONS ONLY) (704) 590-7628 FOR CONFIRMATION OF FACSIMILE TRANSMISSIONS: (704) 590-7400 FOR INFORMATION: (800) 829-8432 Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. You may also contact your broker, dealer, bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: D.F. KING & CO., INC. 77 Water Street New York, New York 10005-4495 Banks and Brokers Call Collect: (212) 269-5550 ALL OTHERS CALL TOLL-FREE: (800) 488-8095 THE DEALER MANAGER FOR THE OFFER IS: FIRST UNION SECURITIES, INC. 901 E. Byrd Street, 3rd Floor Richmond, Virginia 23219 CALL TOLL FREE: (800) 532-2916 EX-99.(2)(B) 4 EXHIBIT 99.(2)(B) CONFORMED COPY - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF MERGER Dated as of November 11, 1999, among TRIPOINT GLOBAL COMMUNICATIONS INC., SIGNAL ACQUISITION CORPORATION and VERTEX COMMUNICATIONS CORPORATION - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ARTICLE I THE OFFER AND THE MERGER SECTION 1.01. The Offer.......................................................2 SECTION 1.02. Company Actions.................................................4 SECTION 1.03. The Merger......................................................5 SECTION 1.04. Closing.........................................................5 SECTION 1.05. Effective Time..................................................5 SECTION 1.06. Effects.........................................................6 SECTION 1.07. Articles of Incorporation and By-laws...................................................6 SECTION 1.08. Directors.......................................................6 SECTION 1.09. Officers........................................................6 ARTICLE II EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES SECTION 2.01. Effect on Capital Stock.........................................6 SECTION 2.02. Exchange of Certificates........................................8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 3.01. Organization, Standing and Power...............................11 SECTION 3.02. Company Subsidiaries; Equity Interests....................................................12 SECTION 3.03. Capital Structure..............................................12 SECTION 3.04. Authority; Execution and Delivery; Enforceability...............................................14 SECTION 3.05. No Conflicts; Consents.........................................15 SECTION 3.06. SEC Documents and Financial Statements.........................17 SECTION 3.07. Information Supplied...........................................18 SECTION 3.08. Absence of Certain Changes or Events....................................................19 SECTION 3.09. Taxes..........................................................20 SECTION 3.10. Absence of Changes in Benefit Plans............................21 SECTION 3.11. ERISA Compliance; Excess Parachute Payments.....................................................22 ii SECTION 3.12. Litigation.....................................................25 SECTION 3.13. Compliance with Applicable Laws................................26 SECTION 3.14. Environmental Matters..........................................27 SECTION 3.15. Contracts......................................................28 SECTION 3.16. Title to Properties............................................30 SECTION 3.17. Intellectual Property..........................................31 SECTION 3.18. Labor Matters..................................................32 SECTION 3.19. Brokers........................................................32 SECTION 3.20. Opinion of Financial Advisor...................................32 SECTION 3.21. Year 2000 Compliance...........................................32 SECTION 3.22. Potential Conflicts of Interest................................33 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB SECTION 4.01. Organization, Standing and Power...............................34 SECTION 4.02. Sub............................................................34 SECTION 4.03. Authority; Execution and Delivery; Enforceability...............................................34 SECTION 4.04. No Conflicts; Consents.........................................35 SECTION 4.05. Information Supplied...........................................36 SECTION 4.06. Brokers........................................................36 SECTION 4.07. Financing......................................................37 ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS SECTION 5.01. Conduct of Business............................................37 SECTION 5.02. No Solicitation................................................41 ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Preparation of Proxy Statement; Shareholders Meeting.........................................44 SECTION 6.02. Access to Information; Confidentiality..............................................46 SECTION 6.03. Reasonable Efforts; Notification...............................47 SECTION 6.04. Stock Options..................................................48 SECTION 6.05. Indemnification................................................50 SECTION 6.06. Fees and Expenses..............................................53 SECTION 6.07. Public Announcements...........................................54 SECTION 6.08. Transfer Taxes.................................................54 SECTION 6.09. Directors......................................................55 SECTION 6.10. Shareholder Litigation.........................................56 iii SECTION 6.11. Compliance of Sub..............................................56 ARTICLE VII CONDITIONS PRECEDENT SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger............................................56 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. Termination....................................................58 SECTION 8.02. Effect of Termination..........................................60 SECTION 8.03. Amendment......................................................60 SECTION 8.04. Extension; Waiver..............................................61 SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver..........................................61 ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Nonsurvival of Representations and Warranties...............................................61 SECTION 9.02. Notices........................................................61 SECTION 9.03. Definitions....................................................63 SECTION 9.04. Interpretation; Disclosure Letters.............................63 SECTION 9.05. Severability...................................................64 SECTION 9.06. Counterparts...................................................64 SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries................................................64 SECTION 9.08. GOVERNING LAW..................................................65 SECTION 9.09. Assignment.....................................................65 SECTION 9.10. Enforcement....................................................65 EXHIBIT A Conditions of the Offer...........................A-1 CONFORMED COPY AGREEMENT AND PLAN OF MERGER dated as of November 11, 1999 among TRIPOINT GLOBAL COMMUNICATIONS INC., a Delaware corporation ("PARENT"), SIGNAL ACQUISITION CORPORATION, a Texas corporation and a wholly owned subsidiary of Parent ("SUB"), and VERTEX COMMUNICATIONS CORPORATION, a Texas corporation (the "COMPANY"). WHEREAS the respective Boards of Directors of Parent, Sub and the Company have approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement; WHEREAS, in furtherance of such acquisition, Parent proposes to cause Sub to make a tender offer (as it may be amended from time to time as permitted under this Agreement, the "OFFER") to purchase all the outstanding shares of common stock, par value $.10 per share, of the Company (the "COMPANY COMMON STOCK"), at a price per share of Company Common Stock of $22.00, net to the seller in cash (such amount, or any greater amount per share paid pursuant to the Offer, the "OFFER PRICE"), on the terms and subject to the conditions set forth in this Agreement; WHEREAS the respective Boards of Directors of Parent, Sub and the Company have approved the merger (the "MERGER") of Sub into the Company on the terms and subject to the conditions set forth in this Agreement, whereby each issued share of Company Common Stock not owned directly or indirectly by Parent or the Company shall be converted into the right to receive an amount in cash equal to the Offer Price; WHEREAS, simultaneously with the execution and delivery of this Agreement, Parent and certain shareholders of the Company (the "PRINCIPAL SHAREHOLDERS") are entering into an agreement (the "SHAREHOLDER AGREEMENT", and together with this Agreement, the "TRANSACTION AGREEMENTS") pursuant to which the Principal Shareholders will agree to take specified actions in furtherance of the Offer and the Merger; and WHEREAS Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger 2 and also to prescribe various conditions to the Offer and the Merger. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I The Offer and the Merger SECTION 1.01. THE OFFER. (a) Provided that this Agreement shall not have been terminated in accordance with Article VIII hereof and subject to the conditions set forth in Exhibit A hereto (the "TENDER OFFER CONDITIONS"), as promptly as practicable but in no event later than five business days after the date of the public announcement by Parent and the Company of this Agreement (the "ANNOUNCEMENT DATE"), Sub shall, and Parent shall cause Sub to, commence the Offer within the meaning of Rule 3 14d-2 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), for all the outstanding shares of Company Common Stock at the Offer Price. The obligation of Sub to, and of Parent to cause Sub to, commence the Offer and accept for payment, and pay for, any shares of Company Common Stock tendered pursuant to the Offer are subject only to the provisions of Article VIII and the Tender Offer Conditions (any of which may be waived by Sub in its sole discretion, except as otherwise provided herein). Sub expressly reserves the right to modify the terms of the Offer, except that, without the prior written consent of the Company, Sub shall not (i) reduce the number of shares of Company Common Stock subject to the Offer, (ii) reduce the price per share of Company Common Stock to be paid pursuant to the Offer, (iii) modify or add to the Tender Offer Conditions, (iv) waive the Minimum Tender Condition (except that Sub may waive the Minimum Tender Condition if the failure of such condition to be satisfied results from the failure of the Principal Shareholders to validly tender any Subject Shares, as defined in the Shareholder Agreement, prior to the expiration of the Offer, or from the withdrawal of any Subject Shares prior to the expiration of the Offer) or amend any other term of the Offer in any manner materially adverse to the holders of Company Common Stock or (v) except as provided below, extend the Offer if all the Tender Offer Conditions have been satisfied. Subject to the terms and conditions hereof, the Offer shall remain open until midnight, New York City time, on the date that is 20 business days after the Offer is commenced (within the meaning of Rule 14d-2 of the Exchange Act); PROVIDED, HOWEVER, that without the prior written consent of the Company, Sub may (A) if at the scheduled initial or any extended expiration date (whether extended pursuant to this clause (A) or otherwise) of the Offer any of the Tender Offer Conditions shall not have been satisfied or waived, extend the Offer for up to five business days from such scheduled initial or extended expiration date, (B) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer, (C) if at the scheduled initial or any extended expiration date of the Offer all the Tender Offer Conditions are satisfied and more than 70% but less than 90% of the Fully Diluted Shares (as defined in Exhibit A) have been validly tendered and not withdrawn in the Offer, extend the Offer up to a maximum of 10 additional business days in the aggregate beyond the latest expiration date that would otherwise be permitted under clause (A) or (B) of this sentence and (D) extend the Offer for any reason for a period of not more than three business days beyond the latest expiration date that would otherwise be permitted under clause (A), (B) or (C) of this sentence. On the terms and subject to the conditions of the Offer and this Agreement, Parent shall cause Sub to, and Sub shall, accept for payment and pay for all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer that Sub becomes obligated to purchase pursuant to the Offer as soon as practicable after the expiration of the Offer. (b) On the date of commencement of the Offer, Parent and Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and summary advertisement (such Schedule 14D-1 and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "OFFER DOCUMENTS"). Each of Parent, Sub and the Company shall promptly correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and each of Parent and Sub shall take all steps necessary to amend or supplement the Offer Documents and to cause the Offer Documents as so amended or supplemented to be filed with the SEC and to be disseminated to the Company's shareholders, in each case as and to the extent required by applicable Federal securities laws. Parent and Sub shall provide the 4 Company and its counsel in writing with any comments Parent, Sub or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. (c) Parent shall provide or cause to be provided to Sub on a timely basis the funds sufficient to accept for payment, and pay for, any and all shares of Company Common Stock that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer. Parent and Sub shall comply with the obligations respecting prompt payment pursuant to Rule 14e-1(c) under the Exchange Act. SECTION 1.02. COMPANY ACTIONS. (a) The Company hereby approves of and consents to the Offer, the Merger and the other transactions contemplated by the Transaction Agreements (collectively, the "TRANSACTIONS"), subject, in the case of the Merger, to receipt of the Company Shareholder Approval and subject to withdrawal of such approval and consent if permitted by Section 5.02(b). (b) On the date the Offer Documents are filed with the SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended or supplemented from time to time, the "SCHEDULE 14D-9") containing the recommendations described in Section 3.04(b) and shall mail the Schedule 14D-9 to the holders of Company Common Stock. Each of the Company, Parent and Sub shall promptly correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company shall take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Company's shareholders, in each case as and to the extent required by applicable Federal securities laws. The Company shall provide Parent and its counsel in writing with any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. (c) In connection with the Offer, the Company shall cause its transfer agent to furnish Sub promptly with mailing labels containing the names and addresses of the record holders of Company Common Stock as of a recent date and of those persons becoming record holders 5 subsequent to such date, together with copies of all lists of shareholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Company Common Stock, and shall furnish to Sub such information and assistance (including updated lists of shareholders, security position listings and computer files) as Parent may reasonably request in communicating the Offer to the Company's shareholders. Subject to the requirements of applicable Law (as defined in Section 3.05(a)), and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Transactions, Parent and Sub shall hold in confidence the information contained in any such labels, listings and files, shall use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, shall deliver to the Company all copies of such information then in their possession. SECTION 1.03. THE MERGER. On the terms and subject to the conditions set forth in this Agreement, and in accordance with the Texas Business Corporation Act (the "TBCA"), Sub shall be merged with and into the Company at the Effective Time (as defined in Section 1.05). At the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation (the "SURVIVING CORPORATION"). SECTION 1.04. CLOSING. The closing (the "CLOSING") of the Merger shall take place at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York 10019 at 10:00 a.m. on the second business day following the satisfaction (or, to the extent permitted by Law, waiver by all parties) of the conditions set forth in Section 7.01, or at such other place, time and date as shall be agreed in writing between Parent and the Company. The date on which the Closing occurs is referred to in this Agreement as the "CLOSING DATE". SECTION 1.05. EFFECTIVE TIME. Prior to the Closing, the Company shall prepare, and on the Closing Date the Company shall file with the Secretary of State of the State of Texas, articles of merger (the "ARTICLES OF MERGER") executed in accordance with the relevant provisions of the TBCA and shall make all other filings or recordings required under the TBCA. The Merger shall become effective upon issuance of the certificate of merger by the Secretary of State of the State of Texas, or at such later time as Parent and the Company shall 6 agree and specify in the Articles of Merger in accordance with Section 10.03 of the TBCA (the time the Merger becomes effective being the "EFFECTIVE TIME"). SECTION 1.06. EFFECTS. The Merger shall have the effects set forth in Article 5.06 of the TBCA. SECTION 1.07. ARTICLES OF INCORPORATION AND BYLAWS. (a) The Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended at the Effective Time so that Article Four, Section 1 of such Articles of Incorporation reads in its entirety as follows: "The total number of shares of all classes of stock which the Corporation shall have authority to issue is 1,000 shares of Common Stock, par value $0.01 per share." and, as so amended, such Articles of Incorporation shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law. (b) The By-laws of Sub as in effect immediately prior to the Effective Time shall be the By-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law. SECTION 1.08. DIRECTORS. The directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. SECTION 1.09. OFFICERS. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be. ARTICLE II EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES SECTION 2.01. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger and without any 7 action on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Sub: (a) CAPITAL STOCK OF SUB. Each issued and outstanding share of capital stock of Sub shall be converted into and become one fully paid and non assessable share of common stock, par value $0.01 per share, of the Surviving Corporation. (b) CANCELATION OF TREASURY STOCK AND PARENT- OWNED STOCK. Each share of Company Common Stock that is owned by the Company, Parent or Sub shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and no Parent Common Stock or other consideration shall be delivered or deliverable in exchange therefor. Each share of Company Common Stock that is owned by any subsidiary of the Company or Parent (other than Sub) shall automatically be converted into one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. (c) CONVERSION OF COMPANY COMMON STOCK. (i) Subject to Sections 2.01(b) and 2.01(d), each issued share of Company Common Stock shall be converted into the right to receive an amount in cash equal to the Offer Price, without interest (the "PER SHARE MERGER CONSIDERATION"). (ii) The cash payable upon the conversion of shares of Company Common Stock pursuant to this Section 2.01(c) is referred to collectively as the "MERGER CONSIDERATION". As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate formerly representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive cash in an amount equal to the Per Share Merger Consideration multiplied by the number of shares of Company Common Stock formerly represented by such certificate, without interest, upon surrender of such certificate in accordance with Section 2.02, subject to Section 2.01(d) hereof. (d) DISSENT RIGHTS. Notwithstanding anything in this Agreement to the contrary, shares (the "DISSENT SHARES") of Company Common Stock that are outstanding immediately prior to the Effective Time 8 and that are held by any person who is entitled to dissent from and properly dissents from this Agreement pursuant to, and who complies in all respects with, Articles 5.11, 5.12, 5.13 and 5.16 of the TBCA, in each case to the extent applicable (the "DISSENT STATUTES"), shall not be converted into Merger Consideration as provided in Section 2.01(c), but rather the holders of Dissent Shares shall be entitled to payment of the fair value of such Dissent Shares in accordance with the Dissent Statutes; PROVIDED, HOWEVER, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to receive payment of fair value under the Dissent Statutes, then the right of such holder to be paid the fair value of such holder's Dissent Shares shall cease and such Dissent Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for the right to receive, Merger Consideration as provided in Section 2.01(c). The Company shall serve prompt notice to Parent of any objections or demands for payment of fair value of Company Common Stock pursuant to the Dissent Statutes received by the Company, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such objections or demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such objections or demands, or agree to do any of the foregoing. SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Prior to the Effective Time, Parent shall select a bank or trust company reasonably acceptable to the Company to act as paying agent (the "PAYING AGENT") for the payment of the Merger Consideration upon surrender of certificates representing Company Common Stock. At the Effective Time, Parent shall provide to the Paying Agent the aggregate cash necessary to pay for the shares of Company Common Stock converted into the right to receive cash pursuant to Section 2.01(c) (such cash being hereinafter referred to as the "EXCHANGE FUND"). (b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a certificate or certificates (the "CERTIFICATES") that immediately prior to the Effective Time represented outstanding shares of Company Common Stock whose shares 9 were converted into the right to receive Merger Consideration pursuant to Section 2.01, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions, not inconsistent with this Agreement, as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for Merger Consideration. Upon surrender of a Certificate for cancelation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, and such other documents, not inconsistent with this Agreement, as may reasonably be required by Parent, Parent shall cause the Paying Agent to pay the holder of such Certificates in exchange therefor cash in an amount equal to the Per Share Merger Consideration multiplied by the number of shares of Company Common Stock formerly represented by such Certificate (other than Certificates representing Dissent Shares, Certificates representing shares of Company Common Stock held by Parent or Sub or in the treasury of the Company and Certificates representing shares of Company Common Stock held by any subsidiary of the Company or Parent (other than Sub)), without interest, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, payment may be made to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of Parent that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the shares of Company Common Stock theretofore represented by such Certificate have been converted pursuant to Section 2.01. No interest shall be paid or shall accrue on the cash payable upon surrender of any Certificate. (c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The Merger Consideration paid in accordance with the terms of this Article II upon conversion of any shares of Company Common Stock shall be 10 deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Common Stock. After the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any certificates formerly representing shares of Company Common Stock are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be canceled and exchanged as provided in this Article II. (d) LOST CERTIFICATES. In the event any Certificate shall have been lost, stolen or destroyed, the Paying Agent shall be required to pay the Per Share Merger Consideration for each share of Company Common Stock formerly represented by such lost, stolen or destroyed certificate; PROVIDED, HOWEVER, Sub may require the owner of such lost, stolen or destroyed certificate to execute and deliver to the Paying Agent a form of affidavit claiming such Certificate to be lost, stolen or destroyed in form and substance reasonably satisfactory to Sub and the posting by such owner of a bond in such amount as Sub may determine is reasonably necessary as indemnity against any claim that may be made against Sub, Parent, the Company, the Surviving Corporation or the Paying Agent in connection with the Certificate alleged to have been lost, stolen or destroyed. (e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that remains undistributed to the holders of Company Common Stock for six months after the Effective Time shall be delivered to Parent, upon demand, and any holder of Company Common Stock who has not theretofore complied with this Article II shall thereafter look only to Parent for payment of its claim for Merger Consideration. (f) NO LIABILITY. None of Parent, Sub, the Company or the Paying Agent shall be liable to any person in respect of any cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Certificate has not been surrendered prior to five years after the Effective Time (or immediately prior to such earlier date on which Merger Consideration in respect of such Certificate would otherwise escheat to or become the 11 property of any Governmental Entity (as defined in Section 3.05(b)), any such shares, cash, dividends or distributions in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. (g) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall invest any cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any interest and other income resulting from such investments shall be paid to Parent. (h) WITHHOLDING RIGHTS. Parent or the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of Company Common Stock pursuant to this Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Code (as defined in Section 3.11(b)), or under any applicable provision of state, local or foreign tax Law. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Sub as follows: SECTION 3.01. ORGANIZATION, STANDING AND POWER. The Company and each of its subsidiaries (the "COMPANY SUBSIDIARIES") are duly organized, validly existing and in good standing under the laws of the jurisdiction in which they are organized and have all requisite corporate power and authority and possess all governmental franchises, licenses, permits, authorizations and approvals necessary to enable them to own, lease or otherwise hold their properties and assets and to conduct their businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually and in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect (as defined below). The Company and each Company Subsidiary are duly qualified to do business in each jurisdiction where the nature of their businesses or their ownership or leasing of their properties make such qualification necessary, except for failures to be so qualified which, individually and in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. The term "COMPANY MATERIAL ADVERSE EFFECT," as used in this Agreement, means a material adverse effect on the business, assets, condition 12 (financial or otherwise) or results of operations of the Company and the Company Subsidiaries, taken as a whole, on the ability of the Company to perform its obligations under the Transaction Agreements or on the ability of the Company to consummate the Offer, the Merger and the other Transactions. The Company has made available to Parent true and complete copies of the articles of incorporation of the Company, as amended to the date of this Agreement (as so amended, the "COMPANY CHARTER"), and the By-laws of the Company, as amended to the date of this Agreement (as so amended, the "COMPANY BY-LAWS"), and the comparable charter and organizational documents of each Company Subsidiary, in each case as amended through the date of this Agreement. SECTION 3.02. COMPANY SUBSIDIARIES; EQUITY INTERESTS. (a) The letter, dated as of the date of this Agreement, from the Company to Parent and Sub (the "COMPANY DISCLOSURE LETTER") lists each Company Subsidiary and its jurisdiction of organization. All the outstanding shares of capital stock of each Company Subsidiary have been validly issued and are fully paid and nonassessable and, except as set forth in the Company Disclosure Letter, are owned by the Company, by another Company Subsidiary or by the Company and another Company Subsidiary, free and clear of all pledges, liens, charges, mortgages, encumbrances and security interests of any kind or nature whatsoever (collectively, "LIENS"). (b) Except for its interests in the Company Subsidiaries and except for the ownership interests set forth in the Company Disclosure Letter, the Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person. SECTION 3.03. CAPITAL STRUCTURE. (a) The authorized capital stock of the Company consists of 20,000,000 shares of Company Common Stock. At the close of business on November 11, 1999, (i) 5,116,314 shares of Company Common Stock were issued and outstanding, (ii) 119,437 shares of Company Common Stock were held by the Company in its treasury, (iii) 15,000 shares of Company Common Stock were subject to outstanding Company Stock Options (as defined in Section 6.04(e)) under the Company's Outside Directors Stock Option Plan, (iv) 65,800 shares of Company Common Stock were subject to outstanding Company Stock Options under the Company's Stock Option Plan for Key Employees, (v) 589,927 shares of Company Common Stock were subject to outstanding 13 Company Stock Options under the Company's 1995 Stock Compensation Plan, (vi) 32,000 shares of Company Common Stock were subject to outstanding Company Stock Options under the Company's Non-Employee Directors Stock Option Plan and (vii) 401,800 additional shares of Company Common Stock were reserved for issuance pursuant to the Company Stock Plans (as defined in Section 6.04(e)). Except as set forth above, at the close of business on the date of this Agreement, no shares of capital stock or other voting securities of the Company were issued, reserved for issuance or outstanding. There are no outstanding Company SARs (as defined in Section 6.04(e)) that were not granted in tandem with a related Company Stock Option. All outstanding shares of Company capital stock are, and all such shares that may be issued prior to the Effective Time will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the TBCA, the Company Charter, the Company By-laws or any contract, lease, license, indenture, note, bond, agreement, permit, concession, franchise or other instrument (a "CONTRACT") to which the Company is a party or otherwise bound. There are not any bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Company Common Stock may vote ("VOTING COMPANY DEBT"). Except as set forth above, as of the date of this Agreement, there are not any options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which the Company or any Company Subsidiary is a party or by which any of them is bound (i) obligating the Company or any Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, the Company or of any Company Subsidiary or any Voting Company Debt, (ii) obligating the Company or any Company Subsidiary to issue, grant, extend or enter into any such option, warrant, right, security, unit, commitment, Contract, arrangement or undertaking or (iii) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of Company capital stock. As of the date of this Agreement, there are not any 14 outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any Company Subsidiary. Except as set forth in the Company Disclosure Letter or the Filed Company SEC Documents (as defined in Section 3.08), no person is entitled to registration rights with respect to any shares of Company Common Stock. (b) The Company Board or a committee administering the Company Stock Plans has the power and authority to cause (x) the Company Stock Plans to terminate as of the Effective Time and (y) the provisions in any other Company Benefit Plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company to be deleted as of the Effective Time. Following the Effective Time no holder of a Company Stock Option or Company SAR or any participant in any Company Stock Plan or other Company Benefit Plan will have any right thereunder to acquire any capital stock of the Company or the Surviving Corporation. SECTION 3.04. AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. (a) The Company has all requisite corporate power and authority to execute and deliver this Agreement and, subject to receipt of the Company Shareholder Approval, to consummate the Transactions. The execution and delivery by the Company of this Agreement and, except as set forth in the next sentence, the consummation by the Company of the Transactions have been duly authorized by all necessary corporate action on the part of the Company, subject, in the case of the consummation of the Merger, to receipt of the Company Shareholder Approval. The Company has duly executed and delivered this Agreement and, assuming due and valid authorization, execution and delivery hereof by Parent and Sub, this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws, now or hereafter in effect, affecting creditor rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought. (b) The Board of Directors of the Company (the "COMPANY BOARD"), at a meeting duly called and held, duly 15 and unanimously adopted resolutions (i) approving the Transaction Agreements, the Offer, the Merger and the other Transactions, (ii) determining that the terms of the Offer and the Merger and the other Transactions are fair to and in the best interests of the Company's shareholders, (iii) recommending that the holders of Company Common Stock accept the Offer and tender their shares of Company Common Stock pursuant to the Offer, (iv) directing that this Agreement be submitted to the Company's shareholders for approval and (v) recommending that the Company's shareholders approve this Agreement; PROVIDED, HOWEVER, that the Company Board may subsequently withdraw its recommendations referred to in this Section 3.04(b) if it is permitted to do so under Section 5.02(b). Such resolutions are sufficient to render the provisions of Article 13.03 of the TBCA inapplicable to Parent and Sub and the Transaction Agreements, the Offer, the Merger and the other Transactions. To the Company's knowledge, no other state takeover statute or similar statute or regulation applies or purports to apply to the Company with respect to the Transaction Agreements, the Offer, the Merger or any other Transaction. (c) The only vote of holders of any class or series of Company capital stock necessary to approve and adopt this Agreement and the Merger is the approval of this Agreement by the affirmative vote of the holders of at least a majority of the outstanding Company Common Stock (the "COMPANY SHAREHOLDER APPROVAL") and is only necessary in the event that the number of shares of Company Common Stock tendered pursuant to the Offer represents less than 90% of the issued and outstanding shares of Company Common Stock. The affirmative vote of the holders of Company capital stock, or any of them, is not necessary to approve any Transaction Agreement other than this Agreement or to consummate the Offer or any Transaction other than the Merger. SECTION 3.05. NO CONFLICTS; CONSENTS. (a) Except as set forth in the Company Disclosure Letter, the execution and delivery by the Company of this Agreement do not, and the consummation of the Offer, the Merger and the other Transactions and compliance with the terms of this Agreement will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any material obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or 16 result in the creation of any Lien upon any of the properties or assets of the Company or any Company Subsidiary under, any provision of (i) the Company Charter, the Company By-laws or the comparable charter or organizational documents of any Company Subsidiary, (ii) any Contract to which the Company or any Company Subsidiary is a party or by which any of their respective properties or assets is bound or (iii) subject to the filings and other matters referred to in Section 3.05(b) and the receipt of the Company Shareholder Approval, any judgment, order or decree ("JUDGMENT") or statute, law (including common law), ordinance, rule or regulation ("LAW") applicable to the Company or any Company Subsidiary or their respective properties or assets, except in the case of clause (ii) or (iii) where such conflicts, violations or defaults, individually and in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. (b) No consent, approval, license, permit, order or authorization ("CONSENT") of, or registration, declaration or filing with, or permit from, any Federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (a "GOVERNMENTAL ENTITY") is required to be obtained or made by or with respect to the Company or any Company Subsidiary in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions, other than (i) compliance with and filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), (ii) the filing of a joint notification pursuant to Section 721(a) of the Defense Production Act of 1950, as amended (the "EXON-FLORIO ACT"), (iii) the filing with the SEC of (A) the Schedule 14D-9, (B) a proxy or information statement relating to the approval of this Agreement by the Company's shareholders (the "PROXY STATEMENT"), if such approval is required by Law, (C) any information statement (the "INFORMATION STATEMENT") required under Rule 14f-1 in connection with the Offer and (D) such reports under Sections 13 and 16 of the Exchange Act as may be required in connection with the Transaction Agreements, the Offer, the Merger and the other Transactions, (iv) the filing of the Articles of Merger with the Secretary of State of the State of Texas and appropriate documents with the relevant authorities of the other jurisdictions in which the Company is qualified to do business, (v) compliance with and such filings as may be required under applicable Environmental Laws (as 17 defined in Section 3.14(a)), (vi) such filings as may be required in connection with the taxes described in Section 6.08 and (vii) such other consents and filings (the "OTHER COMPANY FILINGS") the failure of which to obtain or make, individually and in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect or in any manner impede, frustrate, prevent, delay or nullify the consummation of the Transactions. SECTION 3.06. SEC DOCUMENTS AND FINANCIAL STATEMENTS. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company with the SEC since September 30, 1997 (the "COMPANY SEC DOCUMENTS"). As of its respective date, each Company SEC Document complied in all material respects with the requirements of the Exchange Act or the Securities Act of 1933, as amended (the "SECURITIES ACT"), as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Document, and did not, at the time such Company SEC Document was filed with the SEC, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Company SEC Document has been revised or superseded by a later-filed Company SEC Document, none of the Company SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The unaudited financial statements of the Company for its fiscal year ended September 30, 1999 (the "1999 COMPANY FINANCIAL STATEMENTS") are set forth in Section 3.06 of the Company Disclosure Letter. The 1999 Company Financial Statements and the consolidated financial statements of the Company included in the Company SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles ("GAAP") (except as otherwise noted therein including in the related notes and except, in the case of quarterly unaudited statements, as permitted by Form 10-Q of the SEC and, in the case of 1999 Company Financial Statements, the absence of notes that would substantially duplicate disclosure contained in the Filed Company SEC Documents) applied on a consistent basis 18 during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of quarterly unaudited statements, to normal year-end audit adjustments). Except as set forth in the 1999 Company Financial Statements and except for liabilities and obligations incurred since the date of the 1999 Company Financial Statements in the ordinary course of business or as set forth in the Company Disclosure Letter, neither the Company nor any Company Subsidiary has any material liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet or in the notes thereto. None of the Company Subsidiaries is, or has at any time since September 30, 1997 been, subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act. SECTION 3.07. INFORMATION SUPPLIED. None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in (i) the Offer Documents, the Schedule 14D-9, the Other Filings (as defined in Section 4.04) or the Information Statement will, at the time such document is filed with the SEC or other Governmental Entity, at any time it is amended or supplemented or at the time it is first published, sent or given to the Company's shareholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Proxy Statement will, at the date it is first mailed to the Company's shareholders or at the time of the Company Shareholders Meeting (as defined in Section 6.01(b)), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Sub for inclusion or incorporation by reference therein. The Schedule 14D-9, the Information Statement and the Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. 19 SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Company SEC Documents filed and publicly available prior to the date of this Agreement (the "FILED COMPANY SEC DOCUMENTS") or in the Company Disclosure Letter, since September 30, 1999, the Company has conducted its business only in the ordinary course of business, and there has not been: (i) any event, change, effect or development that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect, other than any event, change, effect or development to the extent attributable to (A) the economy or the securities markets in general, (B) this Agreement or the transactions contemplated hereby or the announcement thereof or (C) the Company's industry in general, and not specifically relating to the Company or the Company Subsidiaries; (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any Company capital stock or any repurchase for value by the Company of any Company capital stock; (iii) any split, combination or reclassification of any Company capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of Company capital stock; (iv) (A) any granting by the Company or any Company Subsidiary to any director or officer of the Company or any Company Subsidiary of any increase in compensation, except in the ordinary course of business consistent with past practice or as was required under employment agreements filed as exhibits to the Filed Company SEC Documents, (B) any granting by the Company or any Company Subsidiary to any such director or officer of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements filed as exhibits to the Filed Company SEC Documents, or (C) any entry by the Company or any Company Subsidiary into, or any amendment of, any employment, consulting, deferred compensation, indemnification, severance or termination agreement or arrangement with any such director or officer; 20 (v) any change in accounting methods, principles or practices by the Company or any Company Subsidiary materially affecting the consolidated assets, liabilities or results of operations of the Company, except insofar as may have been required by a change in GAAP; or (vi) any material elections with respect to Taxes (as defined in Section 3.09(g)) by the Company or any Company Subsidiary or settlement or compromise by the Company or any Company Subsidiary of any material Tax liability or refund. SECTION 3.09. TAXES. (a) The Company and each Company Subsidiary have timely filed, or have caused to be timely filed (taking into account any extension of time within which to file) on their behalf, all Tax Returns required to be filed by them, other than those the failure of which to file, individually and in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, and all such Tax Returns are true, complete and accurate in all material respects. All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, other than failures to pay which, individually and in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. (b) The most recent financial statements contained in the Filed Company SEC Documents reflect an adequate reserve for all Taxes payable by the Company and the Company Subsidiaries for all Taxable periods and portions thereof through the date of such financial statements. To the knowledge of the Company and the Company Subsidiaries, no deficiency with respect to any Taxes has been threatened, proposed, asserted or assessed against the Company or any Company Subsidiary, and no requests for waivers of the time to assess any such Taxes are pending. (c) The Federal income Tax Returns of the Company and each Company Subsidiary consolidated in such Returns have been examined by and settled with the United States Internal Revenue Service for all years through the fiscal year ended September 30, 1994. All assessments for Taxes due with respect to such completed and settled examinations or any concluded litigation have been fully paid. (d) There are no material Liens for Taxes (other than for current Taxes not yet due and payable and 21 Liens for Taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves are provided in accordance with GAAP in the 1999 Company Financial Statements) on the assets of the Company or any Company Subsidiary. Neither the Company nor any Company Subsidiary is bound by any tax sharing agreement with another person with respect to Taxes. (e) Other than the consolidated group in which the Company is the parent, neither the Company nor any Company Subsidiary has any liability for the payment of Taxes of any other entity as a result of being a member of an affiliated, consolidated, combined or unitary group or as a result of any express or implied obligation to indemnify any other person with respect to the payment of any Taxes. (f) Neither the Company nor any Company Subsidiary has engaged in any transactions giving rise to deferred gain under Treas. Reg. Section 1.1502-13 that has not actually been included in taxable income for Federal income Tax purposes by the date hereof. (g) For purposes of this Agreement: "TAXES" includes all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, governmental, state, foreign, Federal or other Governmental Entity, or in connection with any agreement with respect to Taxes, including all interest, penalties and additions imposed with respect to such amounts. "TAX RETURN" means any Federal, state, local, provincial or foreign Tax return, declaration, statement, report, schedule, form or information return or any amended Tax return relating to Taxes. SECTION 3.10. ABSENCE OF CHANGES IN BENEFIT PLANS. Except as disclosed in the Filed Company SEC Documents or in the Company Disclosure Letter, since September 30, 1998, there has not been any adoption or amendment in any material respect by the Company or any Company Subsidiary of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, thrift, savings, stock bonus, restricted stock, cafeteria, paid time off, perquisite, fringe benefit, vacation, severance, disability, death benefit, 22 hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of the Company or any Company Subsidiary (collectively, "COMPANY BENEFIT PLANS"). Except as disclosed in the Filed Company SEC Documents or in the Company Disclosure Letter, there are not any employment, consulting, deferred compensation, indemnification, severance or termination agreements or arrangements between the Company or any Company Subsidiary and any current or former employee, officer or director of the Company or any Company Subsidiary (collectively, "COMPANY BENEFIT AGREEMENTS"). SECTION 3.11. ERISA COMPLIANCE; EXCESS PARACHUTE PAYMENTS. (a) The Company Disclosure Letter contains a list and brief description of all "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein as "COMPANY PENSION PLANS"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA) and all other Company Benefit Plans and Company Benefit Agreements maintained, or contributed to, by the Company or any Company Subsidiary, or to which the Company or any Company Subsidiary is a party, for the benefit of any current or former employees, officers or directors of the Company or any Company Subsidiary. The Company has made available to Parent true, complete and correct copies of (i) each Company Benefit Plan and Company Benefit Agreement (or, in the case of any unwritten Company Benefit Plan or Company Benefit Agreement a description thereof), (ii) the most recent annual report on Form 5500 filed with the Internal Revenue Service with respect to each Company Benefit Plan (if any such report was required), (iii) the most recent summary plan description for each Company Benefit Plan for which such summary plan description is required and (iv) each trust agreement and group annuity contract relating to any Company Benefit Plan. (b) Except as disclosed in the Company Disclosure Letter, all Company Pension Plans have received favorable determination letters from the Internal Revenue Service with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), to the effect that such Company Pension Plans are qualified and exempt from Federal income taxes under Sections 401(a) and 501(a), respectively, of the Internal Revenue Code of 1986, as amended (the "CODE"), and no such determination letter has been revoked nor, to the knowledge of the 23 Company, has revocation been threatened, nor has any such Company Pension Plan been amended since the date of its most recent determination letter or application therefor in any respect that would adversely affect its qualification or materially increase its costs. There is no material pending or, to the knowledge of the Company, threatened litigation relating to the Company Benefit Plans. (c) Except as disclosed in the Company Disclosure Letter, no Company Pension Plan, other than any Company Pension Plan that is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a "COMPANY MULTIEMPLOYER PENSION PLAN"), had, as of the respective last annual valuation date for each such Company Pension Plan, any "unfunded benefit liabilities" (as such term is defined in Section 4001(a)(18) of ERISA), based on actuarial assumptions that have been furnished to Parent, and there has been no material adverse change in the financial condition of any Company Pension Plan since its last such annual valuation date. No liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by the Company or any Company Subsidiary with respect to any ongoing, frozen or terminated "single-employer plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA AFFILIATE"). None of the Company, any Company Subsidiary, any officer of the Company or any Company Subsidiary or any of the Company Benefit Plans which are subject to ERISA, including the Company Pension Plans, any trusts created thereunder or any trustee or administra tor thereof, has engaged in a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any other breach of fiduciary responsibility that could subject the Company, any Company Subsidiary or any officer of the Company or any Company Subsidiary to the tax or penalty on prohibited transactions imposed by such Section 4975 or to any liability under Section 502(i) or 502(l) of ERISA. None of such Company Benefit Plans and trusts has been terminated, nor has there been any "reportable event" (as that term is defined in Section 4043 of ERISA) for which the 30-day reporting requirement has not been waived with respect to any Company Benefit Plan during the last five years, and no notice of a reportable event will be required to be filed in connection with the Transactions. Neither the Company nor any Company Subsidiary has incurred a "complete 24 withdrawal" or a "partial withdrawal" (as such terms are defined in Sections 4203 and 4205, respectively, of ERISA) since the effective date of such Sections 4203 and 4205 with respect to any Company Multiemployer Pension Plan. All contributions and premiums required to be made under the terms of any Company Benefit Plan as of the date hereof have been timely made or have been reflected on the most recent consolidated balance sheet filed or incorporated by reference in the Filed Company SEC Documents. Neither any Company Pension Plan nor any single-employer plan of an ERISA Affiliate has an "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived. (d) With respect to any Company Benefit Plan that is an employee welfare benefit plan, except as disclosed in the Company Disclosure Letter, (i) no such Company Benefit Plan is unfunded or funded through a "welfare benefit fund" (as such term is defined in Section 419(e) of the Code), (ii) each such Company Benefit Plan that is a "group health plan" (as such term is defined in Section 5000(b)(1) of the Code), complies with the applicable requirements of Section 4980B(f) of the Code and (iii) each such Company Benefit Plan (including any such Plan covering retirees or other former employees) may be amended or terminated without material liability to the Company and the Company Subsidiary on or at any time after the Effective Time. Neither the Company nor any Company Subsidiary has any obligations for retiree health and life benefits under any Company Benefit Plan or Company Benefit Agreement. (e) Except as disclosed in the Company Disclosure Letter, the consummation of the Offer, the Merger or any other Transaction will not (x) entitle any employee, officer or director of the Company or any Company Subsidiary to severance pay, (y) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the Company Benefit Plans or Company Benefit Agreements other than pursuant to the provisions of Section 6.04 hereof or (z) result in any breach or violation of, or a default under, any of the Company Benefit Plans or Company Benefit Agreements. (f) Other than payments that may be made to the persons listed in the Company Disclosure Letter (the "PRIMARY COMPANY EXECUTIVES"), any amount or economic 25 benefit that could be received (whether in cash or property or the vesting of property) as a result of the Offer, the Merger or any other Transaction (including as a result of termination of employment on or following the Effective Time) by any employee, officer or director of the Company or any of its affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any Company Benefit Plan or Company Benefit Agreement or otherwise would not be characterized as an "excess parachute payment" (as defined in Sec tion 280G(b)(1) of the Code), and no disqualified individual is entitled to receive any additional payment from the Company or any Company Subsidiary or any other person in the event that the excise tax under Section 4999 of the Code is imposed on such disqualified individual. Set forth in the Company Disclosure Letter is (i) the estimated maximum amount that could be paid to each Primary Company Executive as a result of the Offer, the Merger and the other Transactions under all Company Benefit Plans and Company Benefit Agreements and (ii) the "base amount" (as defined in Section 280G(b)(3) of the Code) for each Primary Company Executive calculated as of the date of this Agreement. SECTION 3.12. LITIGATION. The Company Disclosure Letter sets forth a true and complete description of all pending, or, to the knowledge of the Company, threatened, material suits, actions, proceedings or Judgments against or affecting the Company or any Company Subsidiary and a summary of the status of and potential liabilities arising from each such suit, action, proceeding and Judgment. Except as set forth in the Company Disclosure Letter or in the Filed Company SEC Documents, there is (i) no investigation or review by any Governmental Entity or self-regulatory authority with respect to the Company or any Company Subsidiary or any of their respective employees or representatives (insofar as any such investigation or review relates to their activities with the Company or any Company Subsidiary) actually pending or, to the knowledge of the Company, threatened, nor has any Governmental Entity or self-regulatory authority indicated to the Company or any Company Subsidiary an intention to conduct the same, (ii) no material claim, action, suit or proceeding (including any claim, action, suit or proceeding pertaining to product liability, patent infringement or bodily injury) pending, or, to the knowledge of the Company, threatened against or affecting the Company or any Company Subsidiary, the business or assets of the Company or any Company Subsidiary or any of the directors, shareholders, 26 employees or representatives of the Company or any Company Subsidiary (insofar as any such matters relate to their activities with the Company or any Company Subsidiary) at law or in equity, or before any Governmental Entity, arbitrator or arbitration panel and (iii) no outstanding Judgment by which the Company or any Company Subsidiary or their respective business is bound or by which any of the employees or representatives of the Company or any Company Subsidiary is prohibited or restricted from engaging in or otherwise conducting the business of the Company or any Company Subsidiary as presently conducted, except where such investigations, reviews, claims, actions, suits, proceedings or Judgments, individually and in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. SECTION 3.13. COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in the Filed Company SEC Documents or in the Company Disclosure Letter, the Company and the Company Subsidiaries are in compliance in all material respects with all applicable Laws (including the Truth-In-Negotiations- Act, the Procurement Integrity Act, the Foreign Corrupt Practices Act, the Cost Accounting Standards, the Regulations of applicable Governmental Entities governing foreign military sales, export controls, illegal boycotts, national security and any other Laws or orders incorporated expressly, by reference or by operation of Law into, or otherwise applicable to, any Contract or other agreement made with the United States of America (a "GOVERNMENT CONTRACT")). Except as set forth in the Filed Company SEC Documents or in the Company Disclosure Letter, neither the Company nor any Company Subsidiary has received any written notice: (i) since September 30, 1997, of any administrative, civil or criminal investigation or audit (other than Tax audits) by any Governmental Entity (including any qui tam action brought under the Civil False Claims Act alleging any irregularity, misstatement or omission arising under or relating to any Government Contract) relating to the Company or any Company Subsidiary or (ii) during the past two years, from any Governmental Entity alleging that the Company or a Company Subsidiary is not in compliance in any material respect with any applicable Law. Except as set forth in the Company Disclosure Letter, since September 30, 1997, to the knowledge of the Company, neither the Company nor any Company Subsidiary nor any of their respective officers or directors is or has been the subject of any criminal investigation in respect of any Government Contract. Each of the Company, the Company Subsidiaries and their respective employees has in effect 27 all approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights of or with all Governmental Entities ("PERMITS") necessary for it to own, lease or operate its properties and assets and to carry on its business and operations as now conducted, except for the failure to have such Permits that, individually and in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. There have occurred no defaults under, or violations of, any such Permit, except for such defaults and violations that, individually and in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. Neither the Offer nor the Merger, in and of itself, would cause the revocation or cancelation of any such Permit that individually or in the aggregate would reasonably be expected to have a Company Material Adverse Effect. This Section 3.13 does not relate to matters with respect to Taxes, which are the subject of Section 3.09, or to environmental matters, which are the subject of Section 3.14. SECTION 3.14. ENVIRONMENTAL MATTERS. (a) Except as disclosed in the Filed Company SEC Documents or in the Company Disclosure Letter, (i) the Company and the Company Subsidiaries are in compliance in all material respects with Environmental Laws, (ii) the Company and the Company Subsidiaries hold and are in compliance in all material respects with all Permits required to conduct their respective businesses and operations under the Environmental Laws, (iii) during the past three years, neither the Company nor any Company Subsidiary has received any written communication from a Governmental Entity that alleges that the Company or a Company Subsidiary is not in compliance in any material respect with, or has or may have material liability under, any Environmental Law, (iv) neither the Company nor any Company Subsidiary has entered into or agreed to any Governmental Entity decree, order or agreement and is not subject to any judgment relating to compliance with, or to investigation or cleanup, or to liability, under any Environmental Law, and (v) neither the Company nor any Company Subsidiary, nor, to the knowledge of either the Company or any Company Subsidiary, any predecessor of or former subsidiaries of same, has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any Hazardous Substance, or owned or operated any property or facility in a manner that has given or would reasonably be expected to give rise to material liabilities, including any material liability for response costs, corrective 28 action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to any Environmental Laws. "ENVIRONMENTAL LAWS" means any applicable Federal, state or local statutes, regulations, ordinances and other provisions having the force or effect of law, all judicial and administrative orders and determinations, and all common law concerning health and safety, pollution or protection of the environment or the handling, release, remediation or exposure to Hazardous Substances. "HAZARDOUS SUBSTANCE" means all explosive or radioactive substances or wastes, hazardous or toxic substances or wastes, pollutants and contaminants including petroleum or any fraction thereof and all other substances or wastes of any nature regulated pursuant to any Environmental Law. (b) Except as set forth in the Company Disclosure Letter, no Environmental Law imposes any obligation upon the Company or any Company Subsidiary arising out of or as a condition to the Offer, the Merger or any other Transaction, including any requirement to modify or to transfer any permit or license, any requirement to file any notice or other submission with any Governmental Entity, the placement of any notice, acknowledgment or covenant in any land records, or the modification of or provision of notice under any agreement, consent order or consent decree. No Lien has been placed upon any of the Company's or any of the Company Subsidiaries' properties under any Environmental Law. SECTION 3.15. CONTRACTS. (a) Except as filed as an exhibit to the Filed Company SEC Documents or as set forth in the Company Disclosure Letter, there are no Contracts that are material to the business, assets, condition (financial or otherwise) or results of operations of the Company and the Company Subsidiaries taken as a whole. Neither the Company nor any Company Subsidiary is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that, individually and in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. Except as set forth in the Company Disclosure Letter or filed as an exhibit to the Filed Company SEC Documents, neither the Company nor any Company Subsidiary is a party to any: 29 (i) Contract that involves performance of services or delivery of goods, materials, supplies or equipment by the Company or any Company Subsidiary with a remaining cost to complete in excess of $250,000; (ii) employee collective bargaining agreement or other Contract with any labor union or employment agreement or employment Contract; (iii) covenant of the Company or a Company Subsidiary not to compete (other than pursuant to any radius restriction contained in any lease, reciprocal easement or development, construction, operating or similar agreement) or other covenant of the Company or a Company Subsidiary restricting the development, manufacture, marketing or distribution of the products and services of the Company or any Company Subsidiary; (iv) Contract or other arrangement with any current or former officer, director or employee of the Company or a Company Subsidiary (other than employment agreements covered by clause (ii) above); (v) (A) continuing Contract for the future purchase of materials, supplies or equipment (other than purchase Contracts and orders for inventory in the ordinary course of business consistent with past practice), (B) management, service, consulting or other similar type of Contract or (C) advertising agreement or arrangement, in any such case which has an aggregate future liability to any person (other than the Company or a Company Subsidiary) in excess of $100,000 and is not terminable by the Company or a Company Subsidiary by notice of not more than 60 days for a cost of less than $50,000; (vi) material license, option or other agreement relating in whole or in part to Intellectual Property (as defined in Section 3.17), including any license or other agreement under which the Company or a Company Subsidiary is licensee or licensor of any such Intellectual Property, except for agreements relating to computer software licensed to the Company or a Company Subsidiary in the ordinary course of business; or (vii) other Contract or commitment to which the Company or any Company Subsidiary is a party or by or to which it or any of its assets or business is 30 bound or subject which has an aggregate future liability to any person (other than the Company or a Company Subsidiary) in excess of $100,000 and is not terminable by the Company or a Company Subsidiary by notice of not more than 60 days for a cost of less than $50,000. (b) Except as disclosed in the Filed Company SEC Documents or set forth in the Company Disclosure Letter, there are no outstanding claims against the Company or any Company Subsidiary, either by the U.S. government or by any prime contractor, subcontractor, vendor or other third party, relating to any Government Contract arising under the Contracts Disputes Act or otherwise. Neither the Company nor any Company Subsidiary has any pending default termination action, open written cure notice or show cause notice (as defined in the Federal Acquisition Regulations Part 49, P. 49.607(a) and (b), respectively) in respect of any Government Contract. Except as disclosed in the Filed Company SEC Documents or set forth in the Company Disclosure Letter, there are no pending written claims or requests for equitable adjustment under any Government Contracts by any Governmental Entities. Neither the Company nor any Company Subsidiary nor any of their respective directors and officers is (or during the past five years has been) suspended or debarred from doing business with the U.S. government or is (or during such period was) the subject of a finding of nonresponsibility or ineligibility for U.S. government contracting. The Company and each Company Subsidiary are in compliance in all material respects with all their obligations relating to any equipment or fixtures owned by any Governmental Entity and loaned, bailed or otherwise furnished to or held by the Company or any Company Subsidiary. SECTION 3.16. TITLE TO PROPERTIES. (a) Except as set forth in the Company Disclosure Letter, the Company and each Company Subsidiary have good and marketable title to, or valid leasehold interests in, all their properties and assets except for such as are no longer used or useful in the conduct of their businesses or as have been disposed of in the ordinary course of business and except for defects in title, easements, restrictive covenants and similar encumbrances or impediments that, in the aggregate, do not and will not materially interfere with their ability to conduct their businesses as currently conducted. All such assets and properties, other than assets and properties in which the Company or any Company Subsidiary has leasehold interests, are free and clear of all Liens other than 31 those set forth in the Company Disclosure Letter and except for Liens that, in the aggregate, do not and will not materially interfere with the ability of the Company and the Company Subsidiaries to conduct their businesses as currently conducted. (b) Except as set forth in the Company Disclosure Letter, the Company and each Company Subsidiary have complied in all material respects with the terms of all material leases to which they are parties and under which they are in occupancy, and all such leases are in full force and effect. The Company and each Company Subsidiary enjoy peaceful and undisturbed possession under all such material leases. SECTION 3.17. INTELLECTUAL PROPERTY. Except as set forth in the Company Disclosure Letter, the Company and the Company Subsidiaries own, or are validly licensed or otherwise have the right to use, without payment to any other person, all the patents, trademarks (registered or unregistered), trade names, service marks, copyrights and applications therefor, other proprietary intellectual property rights and computer programs (collectively, "INTELLECTUAL PROPERTY") that is, individually or in the aggregate, material to the conduct of the business of the Company and the Company Subsidiaries taken as a whole, and the consummation of the Transactions will not conflict with, alter or impair any such rights. All Intellectual Property held by the Company and the Company Subsidiaries is valid and enforceable and (i) neither the Company nor any Company Subsidiary is, nor will the Company or any Company Subsidiary be as a result of the execution and delivery of this Agreement or the performance of the Company's obligations hereunder, infringing on or in violation of, and no claims are pending or, to the knowledge of the Company, threatened that the Company or any Company Subsidiary is infringing on or otherwise violating, the rights of any person with regard to any Intellectual Property and (ii) to the knowledge of the Company, no person is infringing on or otherwise violating any right of the Company or any Company Subsidiary with respect to any Intellectual Property owned by or licensed to the Company or any of the Company Subsidiaries, in each case other than such failures to be valid and enforceable, infringements, violations or claims that, individually and in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary is bound by or a party to any options, licenses or agreements of any kind relating to the Intellectual Property of any 32 other person, except as set forth in the Company Disclosure Letter and except for agreements relating to computer software licensed to the Company or a Company Subsidiary in the ordinary course of business. SECTION 3.18. LABOR MATTERS. Except as set forth in the Company Disclosure Letter, there are no collective bargaining or other labor union agreements to which the Company or any Company Subsidiary is a party or by which any of them is bound. To the knowledge of the Company, since September 30, 1997, neither the Company nor any Company Subsidiary has encountered any labor union organizing activity, or had any actual or threatened employee strikes, work stoppages, slowdowns or lockouts. SECTION 3.19. BROKERS. No broker, investment banker, financial advisor or other person, other than Frost Securities, Inc., the fees and expenses of which will be paid by the Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the Offer, the Merger and the other Transactions based upon arrangements made by or on behalf of the Company. The Company has furnished to Parent a true and complete copy of all agreements between the Company and Frost Securities, Inc. relating to the Offer, the Merger and the other Transactions. SECTION 3.20. OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of Frost Securities, Inc., dated the date of this Agreement, to the effect that, as of such date, the consideration to be received in the Offer and the Merger by the holders of Company Common Stock is fair from a financial point of view, a signed copy of which opinion has been delivered to Parent. SECTION 3.21. YEAR 2000 COMPLIANCE. (a) Except as set forth in the Company Disclosure Letter, the computer systems of the Company and the Company Subsidiaries are Year 2000 Compliant (as defined below). All inventory of the Company and the Company Subsidiaries that is, consists of, includes or uses computer software is Year 2000 Compliant. The best current estimates of the Company of capital expenditures to be Year 2000 Compliant are set forth in the Company Disclosure Letter. To the knowledge of the Company, any failure on the part of the customers of and suppliers to the Company and the Company Subsidiaries to be Year 2000 Compliant will not have a Company Material Adverse Effect. 33 (b) The term "YEAR 2000 COMPLIANT", with respect to a computer system or software program, means that such computer system or program will: (i) recognize, process, manage, represent, interpret and manipulate correctly date- related data for dates earlier and later than January 1, 2000; (ii) provide date recognition for any data element without limitation; (iii) function automatically into and beyond the year 2000 without human intervention and without any change in operations associated with the advent of the year 2000; (iv) interpret data, dates and time correctly into and beyond the year 2000; (v) not produce noncompliance in existing data, nor otherwise corrupt such data, into and beyond the year 2000; (vi) process correctly after January 1, 2000, data containing dates before that date; and (vii) recognize all "leap year" dates, including February 29, 2000. SECTION 3.22. POTENTIAL CONFLICTS OF INTEREST. Except as disclosed in the Filed Company SEC Documents or set forth in the Company Disclosure Letter, since September 30, 1997 there have been no transactions, agreements, arrangements or understandings between the Company or any Company Subsidiary, on the one hand, and their respective affiliates, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act. Except as disclosed in the Filed Company SEC Documents or set forth in the Company Disclosure Letter, (i) no officer of the Company or any Company Subsidiary owns, directly or indirectly, any interest in (except stock holdings of publicly held and traded companies solely for investment purposes and not in excess of 1% of the outstanding shares of any such class of securities) or is an officer, director, employee or consultant of any person which is a competitor, lessor, lessee, customer or supplier of the Company and (ii) no officer or director of the Company or any Company Subsidiary (A) owns, directly or indirectly, in whole or in part, any Intellectual Property which the Company or any Company Subsidiary is using or the use of which is necessary for the business of the Company or the Company Subsidiaries; (B) has any claim, charge, action or cause of action against the Company or any Company Subsidiary, except for claims for accrued vacation pay, accrued benefits under the employee benefit plans maintained by the Company or a Company Subsidiary and similar matters and agreements existing on the date hereof; (C) has made, on behalf of the Company or any Company Subsidiary, any payment or commitment to pay any commission, fee or other amount to, or to purchase or obtain or otherwise contract to purchase or obtain any 34 goods or services from, any other person of which any officer or director of the Company or any Company Subsidiary, or, to the Company's knowledge, a relative of any of the foregoing, is a partner or shareholder (except stock holdings solely for investment purposes in securities of publicly held and traded companies); or (D) owes any money to the Company or any Company Subsidiary. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and Sub, jointly and severally, represent and warrant to the Company as follows: SECTION 4.01. ORGANIZATION, STANDING AND POWER. Each of Parent and Sub is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has all requisite corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually and in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on the ability of Parent or Sub to perform their obligations under the Transaction Agreements or a material adverse effect on the ability of Parent or Sub to consummate the Offer, the Merger and the other Transactions (a "PARENT MATERIAL ADVERSE EFFECT"). SECTION 4.02. SUB. (a) Since the date of its incorporation, Sub has not carried on any business or conducted any operations other than the execution of the Transaction Agreements, the performance of its obligations hereunder and matters ancillary thereto. (b) The authorized capital stock of Sub consists of 1,000 shares of common stock, par value $0.01 per share, all of which have been validly issued, are fully paid and nonassessable and are owned by Parent free and clear of any Lien. SECTION 4.03. AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. Each of Parent and Sub has all requisite corporate power and authority to execute and deliver each Transaction Agreement to which it is a party and to consummate the Transactions. The execution and delivery by each of Parent and Sub of each Transaction Agreement to which it is a party 35 and the consummation by it of the Transactions have been duly authorized by all necessary corporate action on the part of Parent and Sub. Parent, as sole shareholder of Sub, has approved the Transaction Agreements. Each of Parent and Sub has duly executed and delivered each Transaction Agreement to which it is a party and, assuming due and valid authorization, execution and delivery thereof by the Company, each such Transaction Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws, now or hereafter in effect, affecting creditor rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought. SECTION 4.04. NO CONFLICTS; CONSENTS. (a) The execution and delivery by each of Parent and Sub of each Transaction Agreement to which it is a party do not, and the consummation of the Offer, the Merger and the other Transactions and compliance with the terms of each Transaction Agreement to which it is a party will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, any provision of (i) the charter or organizational documents of Parent or any of its subsidiaries, (ii) any Contract to which Parent or any of its subsidiaries is a party or by which any of their respective properties or assets is bound or (iii) subject to the filings and other matters referred to in Section 4.04(b), any Judgment or Law applicable to Parent or any of its subsidiaries or their respective properties or assets, except in the case of clause (ii) and (iii) where such conflicts, violations and defaults, individually and in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect. (b) No Consent of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Parent or any of its subsidiaries in connection with the execution, delivery and performance of any Transaction Agreement to which Parent or Sub is a party or the consummation of the Transactions, other than (i) compliance with and filings under the HSR Act, (ii) the filing of a joint 36 notification pursuant to the Exon-Florio Act, (iii) the filing with the SEC of (A) the Offer Documents and (B) such reports under Sections 13 and 16 of the Exchange Act as may be required in connection with the Transaction Agreements, the Offer, the Merger and the other Transactions, (iv) the filing of the Articles of Merger with the Secretary of State of the State of Texas, (v) compliance with and such filings as may be required under applicable Environmental Laws, (vi) such filings as may be required in connection with the Taxes described in Section 6.08, (vii) such of the foregoing as may be required in connection with the financing required to consummate the Offer and the Merger, and to pay related fees and expenses (the "FINANCING"), and (viii) such other consents and filings (the "OTHER PARENT FILINGS", and together with the Other Company Filings, the "OTHER FILINGS") the failure of which to obtain or make, individually and in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect or in any manner impede, frustrate, prevent, delay or nullify the consummation of the Transactions. SECTION 4.05. INFORMATION SUPPLIED. None of the information supplied or to be supplied by Parent or Sub for inclusion or incorporation by reference in (i) the Offer Documents, the Schedule 14D-9, the Other Filings or the Information Statement will, at the time such document is filed with the SEC or other Governmental Entity, at any time it is amended or supplemented or at the time it is first published, sent or given to the Company's shareholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Proxy Statement will, at the date it is first mailed to the Company's shareholders or at the time of the Company Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by Parent or Sub with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by reference therein. The Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. SECTION 4.06. BROKERS. No broker, investment banker, financial advisor or other person is entitled to 37 any broker's, finder's, financial advisor's or other similar fee or commission in connection with the Offer, the Merger and the other Transactions based upon arrangements made by or on behalf of Parent. SECTION 4.07. FINANCING. Parent and Sub will have available all the funds necessary for the acquisition of all shares of Company Common Stock pursuant to the Offer and the Merger, as and when needed, and to perform their respective obligations under the Transaction Agreements. ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS SECTION 5.01. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY THE COMPANY. Except for matters set forth in the Company Disclosure Letter or otherwise expressly permitted by this Agreement or agreed to in writing by Parent, from the date of this Agreement to the Effective Time, the Company shall, and shall cause each Company Subsidiary to, conduct its business diligently and in the usual, regular and ordinary course of business and in substantially the same manner as previously conducted and use all reasonable efforts to preserve intact its current business organization, keep available the services of its current officers and employees and keep its relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with them to the end that its goodwill and ongoing business shall be unimpaired at the Effective Time. The Company and each Company Subsidiary shall maintain its assets and all parts thereof in as good working order and condition as at present, ordinary wear and tear excepted, consistent with past practices, and shall maintain in full force and effect current insurance policies or other comparable insurance coverage with respect to the assets and potential liabilities thereof. In addition, and without limiting the generality of the foregoing, except for matters set forth in the Company Disclosure Letter or otherwise expressly permitted by this Agreement or agreed to in writing by Parent, from the date of this Agreement to the Effective Time, the Company shall not, and shall not permit any Company Subsidiary to, make any material change in personnel, operations or finance, or do any of the following without the prior written consent of Parent: 38 (i) (A) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than dividends and distri butions by a direct or indirect wholly owned subsidiary of the Company to its parent, (B) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (C) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any Company Subsidiary or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities other than pursuant to the provisions of Section 6.04 hereof including any payment of cash pursuant thereto; (ii) issue, deliver, sell, grant, pledge or otherwise encumber or subject to any Lien (A) any shares of its capital stock, (B) any Voting Company Debt or other voting securities, (C) any securities convertible into or exchangeable for, or any options, warrants or rights to acquire, any such shares, Voting Company Debt, voting securities or convertible or exchangeable securities or (D) any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock-based performance units, other than the issuance of Company Common Stock upon the exercise of Company Stock Options outstanding on the date of this Agreement and in accordance with their present terms. (iii) amend the Company Charter, the Company By-laws or other comparable charter or organizational documents other than pursuant to Section 1.07 hereof; (iv) acquire or agree to acquire (A) by merging or consolidating with, or by purchasing the assets of, or by any other manner, any equity interest in or business or any corporation, partnership, company, limited liability company, joint venture, association or other business organization or division thereof or (B) any assets that, individually, are in excess of $100,000 or, in the aggregate, are in excess of $300,000, except purchases of inventory in the ordinary course of business consistent with past practice; (v) (A) grant to any officer or director of the Company or any Company Subsidiary any increase in 39 compensation, except in the ordinary course of business consistent with past practice or to the extent required under employment agreements filed as exhibits to the Filed Company SEC Documents, (B) grant to any employee, officer or director of the Company or any Company Subsidiary any increase in severance or termination pay, except to the extent required under any agreement filed as an exhibit to the Filed Company SEC Documents, (C) establish, adopt, enter into or amend any Company Benefit Agreement, (D) establish, adopt, enter into or amend in any material respect any collective bargaining agreement or Company Benefit Plan or (E) take any action to accelerate any rights or benefits, or make any material determinations not in the ordinary course of business consistent with past practice, under any collective bargaining agreement or Company Benefit Plan or Company Benefit Agreement, other than pursuant to the provisions of Section 6.04 hereof including any payment of cash pursuant thereto; (vi) make any change in accounting methods, principles or practices materially affecting the reported consolidated assets, liabilities or results of operations of the Company, except insofar as may have been required by a change in GAAP; (vii) sell, lease (as lessor), license or otherwise dispose of or subject to any Lien any properties or assets that are material, individually or in the aggregate, to the Company and the Company Subsidiaries, taken as a whole, except (A) sales of inventory and excess or obsolete assets in the ordinary course of business consistent with past practice and (B) the sale of Vertex Satcom Systems, Inc. on terms, and pursuant to a definitive agreement, approved in writing by Parent (the "SATCOM SALE"); (viii) (A) incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any Company Subsidiary, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings incurred in the ordinary 40 course of business consistent with past practice, or (B) make any loans, advances or capital contributions to, or investments in, any other person, other than to or in the Company or any direct or indirect wholly owned subsidiary of the Company; (ix) make or agree to make any new capital expendi ture or expenditures that, individually, is in excess of $100,000 or, in the aggregate, are in excess of $300,000 in any calendar quarter; (x) make or change any material Tax election or settle or compromise any material Tax liability or refund; (xi) (A) pay, discharge, settle or satisfy any claims, liabilities, obligations or litigation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the 1999 Company Financial Statements or incurred since the date of such financial statements in the ordinary course of business consistent with past practice, (B) cancel any indebtedness that is material, individually or in the aggregate, to the Company and the Company Subsidiaries taken as a whole, or waive any claims or rights of substantial value or (C) waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which the Company or any Company Subsidiary is a party; (xii) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing a liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization other than for the liquidation of any Company Subsidiary into the Company; (xiii) make or renew, extend, amend, modify, or waive any material provisions of any Contract or commitment or relinquish or waive any material Contract rights or agree to the termination of any material Contract, except in the ordinary course of business consistent with prior practice; 41 (xiv) institute, settle, or agree to settle any action or proceeding pending before any court or other Governmental Entity; or (xv) authorize, or commit or agree to take, any of the foregoing actions. (b) OTHER ACTIONS. The Company and Parent shall not, and shall not permit any of their respective subsidiaries to, take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of such party set forth in any Transaction Agreement to which it is a party that is qualified as to materiality becoming untrue, (ii) any of such representations and warranties that is not so qualified becoming untrue in any material respect or (iii) except as otherwise permitted by Section 5.02, any Tender Offer Condition, or any condition to the Merger set forth in Article VII, not being satisfied. (c) ADVICE OF CHANGES. The Company shall promptly advise Parent orally and in writing of any change or event that has had or would reasonably be expected to have a Company Material Adverse Effect other than any change or event in (i) the economy or the securities markets in general or (ii) the Company's industry in general, and not specifically relating to the Company or the Company Subsidiaries. SECTION 5.02. NO SOLICITATION. (a) The Company shall, and shall cause its Representatives (as defined below) to, cease immediately all current discussions and negotiations regarding any proposal that constitutes, or may reasonably be expected to lead to, a Company Takeover Proposal (as defined in Section 5.02(e)). The Company shall not, nor shall it authorize or permit any Company Subsidiary to, nor shall it authorize or permit any officer, director or employee of, or any investment banker, financial advisor, attorney, accountant or other advisor or representative (collectively, "REPRESENTATIVES") of, the Company or any Company Subsidiary to, (i) directly or indirectly solicit, initiate or encourage the submission of any Company Takeover Proposal, (ii) enter into any agreement with respect to any Company Takeover Proposal or (iii) directly or indirectly participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Company Takeover Proposal; PROVIDED, 42 HOWEVER, that prior to the earlier to occur of acceptance for payment of shares of Company Common Stock pursuant to the Offer and approval of this Agreement by the shareholders of the Company, the Company may, to the extent that a failure to do so would violate the fiduciary obligations of the Company Board under applicable Law, as determined in good faith by a majority of the Disinterested Directors based on the advice of outside counsel, in response to a Superior Company Proposal (as defined in Section 5.02(e)) that was not solicited by the Company or its Representatives and that did not otherwise result from a breach or a deemed breach of this Section 5.02(a), and subject to compliance with Section 5.02(c), (x) furnish information with respect to the Company to the person making such Superior Company Proposal pursuant to a confidentiality agreement not less restrictive of the other party than the Confidentiality Agreement (as defined in Section 6.02) and (y) participate in discussions or negotiations regarding such Superior Company Proposal. "DISINTERESTED DIRECTOR" means, with respect to any Company Takeover Proposal, any member of the Company Board that is not an affiliate or Representative of the person making such Company Takeover Proposal. Without limiting the foregoing, any violation of the restrictions set forth in the preceding sentence by any Representative or affiliate of the Company or any Company Subsidiary, whether or not such person is purporting to act on behalf of the Company or any Company Subsidiary or otherwise, shall be deemed to be a breach of this Section 5.02(a) by the Company. (b) Neither the Company, nor the Company Board nor any committee thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or Sub, the approval or recommendation by the Company Board or any such committee of the Transaction Agreements, the Offer or the Merger, (ii) approve or cause the Company or any Company Subsidiary to enter into any letter of intent, agreement in principle, acquisition agreement or similar agreement (each, an "ACQUISITION AGREEMENT") relating to any Company Takeover Proposal or (iii) approve or recommend, or propose publicly to approve or recommend, any Company Takeover Proposal. Notwithstanding the foregoing, if, prior to the earlier to occur of acceptance for payment of shares of Company Common Stock pursuant to the Offer and approval of this Agreement by the shareholders of the Company, the Company Board receives a Superior Company Proposal which was not solicited by the Company and which did not otherwise result from a breach of Section 5.02(a), and the Company Board determines in good faith, 43 based on the advice of outside counsel, that the failure to do so would violate its fiduciary obligations under applicable Law, the Company Board may withdraw or modify its approval or recommendation of the Transaction Agreements, the Offer or the Merger; PROVIDED that such determination shall be made at a time that is after the third business day following the receipt by Parent of written notice advising Parent that the Company Board is prepared to accept a Superior Company Proposal, specifying the material terms and conditions of such Superior Company Proposal and identifying the person making such Superior Company Proposal. (c) The Company promptly shall advise Parent orally and in writing of any Company Takeover Proposal or any inquiry with respect to, or that could reasonably be expected to lead to, any Company Takeover Proposal (including any change to the terms of any such Company Takeover Proposal or inquiry) and the identity of the person making any such Company Takeover Proposal or inquiry. The Company shall (i) keep Parent fully informed of the status of any such Company Takeover Proposal or inquiry (including any change to the terms of any such Company Takeover Proposal or inquiry) and (ii) provide to Parent copies of all correspondence and other written material sent or provided by any third party to the Company, or by the Company to any third party, in connection with any Company Takeover Proposal, as soon as practicable after receipt or delivery thereof. (d) Nothing contained in Section 5.02(a) or 5.02(b) shall prohibit the Company from (x) taking and disclosing to its shareholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or (y) making any disclosure to the Company's shareholders if, in the good faith judgment of the Company Board, based on the advice of outside counsel, failure so to disclose would constitute a violation of applicable Law; PROVIDED, HOWEVER, that neither the Company, nor the Company Board nor any committee thereof shall withdraw or modify, or propose publicly to withdraw or modify, its position with respect to the Transaction Agreements, the Offer or the Merger (unless it is permitted to do so under Section 5.02(b)) or approve or recommend, or propose publicly to approve or recommend, a Company Takeover Proposal. (e) For purposes of this Agreement: "COMPANY TAKEOVER PROPOSAL" means any inquiry, proposal or offer for (i) a merger, consolidation, dissolution, recapitalization, liquidation or other 44 business combination involving the Company or any Company Subsidiary, (ii) the acquisition by any person in any manner, directly or indirectly, of a number of shares of any class of equity securities of the Company or any Company Subsidiary equal to or greater than 20% of the number of such shares outstanding before such acquisition or (iii) the acquisition by any person in any manner, directly or indirectly, of assets that constitute 20% or more of the net revenues, net income or assets of the Company or any Company Subsidiary, in each case other than the Transactions or the Satcom Sale (the transactions referred to in clauses (i), (ii) and (iii) being referred to herein as "COMPANY TAKEOVER TRANSACTIONS"). "SUPERIOR COMPANY PROPOSAL" means any bona fide proposal made by a third party to acquire substantially all the equity securities or assets of the Company, pursuant to a tender or exchange offer, merger, consolidation, liquidation or dissolution, recapitalization, sale of all or substantially all its assets or otherwise, (i) on terms which the Company Board determines in its good faith judgment to be superior from a financial point of view to the holders of Company Common Stock than the Transactions (based on the written opinion, with only customary qualifications, of the Company's independent financial advisor, which has been provided to Parent), taking into account all the terms and conditions of such proposal, the Transaction Agreements and any proposal by Parent to amend the terms of the Transactions, (ii) for which financing, to the extent required, is then committed or which, in the good faith judgment of the Company Board, is reasonably capable of being obtained by such third party and (iii) for which, in the good faith judgment of the Company Board, no regulatory approvals are required, including antitrust approvals, that could not reasonably be expected to be obtained. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. PREPARATION OF PROXY STATEMENT; SHAREHOLDERS' MEETING. (a) If the approval of this Agreement by the Company's shareholders is required by Law, the Company shall, as soon as practicable following the acceptance for payment and purchase of the shares of 45 Company Common Stock by Sub pursuant to the Offer, prepare and file with the SEC the Proxy Statement in preliminary form, and each of the Company and Parent shall use its reasonable efforts to respond as promptly as practicable to any comments of the SEC with respect thereto. The Company shall notify Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and shall supply Parent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement. If at any time prior to receipt of the Company Shareholder Approval there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company shall promptly prepare and mail to its shareholders such an amendment or supplement. No filing of, or amendment to, the Proxy Statement will be made by the Company without providing Parent the opportunity to review and comment thereon. The Company shall not mail any Proxy Statement, or any amendment or supplement thereto, to which Parent reasonably objects. The Company shall use its reasonable efforts to cause the Proxy Statement to be mailed to the Company's shareholders as promptly as practicable after filing with the SEC. (b) If the approval of this Agreement by the Company's shareholders is required by Law, the Company shall, as soon as practicable following the acceptance for payment and purchase of the shares of Company Common Stock by Sub pursuant to the Offer, duly call, give notice of, convene and hold a meeting of its shareholders (the "COMPANY SHAREHOLDERS' MEETING") for the purpose of seeking the Company Shareholder Approval. The Company shall, through the Company Board, recommend to its shareholders that they vote in favor of the approval of this Agreement and the Company Board shall not condition its submission to the shareholders of this Agreement on any basis; PROVIDED, HOWEVER, that the Company Board may withdraw such recommendation if it is permitted to do so under Section 5.02(b). Without limiting the generality of the foregoing, the Company agrees that its obligations pursuant to the first sentence of this Section 6.01(b) shall not be affected by the commencement, public proposal, public disclosure or communication to the Company of any Company Takeover Proposal. Notwithstanding the foregoing, if Sub or any other subsidiary of Parent shall acquire at least 90% of the outstanding shares of Company Common Stock, the parties 46 shall, at the request of Parent, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a shareholders' meeting in accordance with Article 5.16 of the TBCA. (c) Parent shall cause all shares of Company Common Stock purchased pursuant to the Offer and all other shares of Company Common Stock owned by Sub or any other subsidiary of Parent to be voted in favor of the approval of this Agreement. SECTION 6.02. ACCESS TO INFORMATION; CONFIDENTIALITY. From the date hereof until the earlier of the Effective Time or the termination of this Agreement, upon reasonable notice the Company shall, and shall cause each Company Subsidiary to, afford to Parent, and to Parent's officers, employees, accountants, counsel, financial advisors and other representatives, reasonable access during reasonable business hours to (i) all their respective properties, books, contracts, commitments, personnel and records and other information and business documents, (ii) customers of the Company or any Company Subsidiary as may reasonably be designated by Parent and (iii) the premises of the Company and the Company Subsidiaries for the purpose of inspecting the assets and facilities of any such entity and the condition thereof, provided that access to the premises shall be permitted only with the prior consent of the Company (which consent shall not be unreasonably withheld). During the period prior to the Effective Time, the Company shall, and shall cause each Company Subsidiary to, furnish promptly to Parent (a) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of Federal or state securities laws and (b) consistent with its legal obligations, all other information concerning its business, properties and personnel as Parent may reasonably request. Without limiting the generality of the foregoing, the Company shall, within two business days of request therefor, provide to Parent the information described in Rule 14a-7(a)(2)(ii) under the Exchange Act and any information to which a shareholder of the Company would be entitled under Article 2.44 of the TBCA (assuming such holder met the requirements of such section). During the period prior to the Effective Time, Parent will have the reasonable cooperation of the Company in confirming the nature of the relationships between the Company or any Company Subsidiary and their respective customers and suppliers, including whether or not such relationships are satisfactory and whether or not such relationships 47 are expected to continue after the Merger. The Company shall have the right to have a representative present at all times of any such inspections, interviews and communications conducted by Parent or its representatives. Neither any investigation conducted by Parent or its representatives pursuant to this Section 6.02 nor the results thereof shall affect any representation or warranty of the Company contained in this Agreement or the ability of Parent to rely thereon. All information exchanged pursuant to this Section 6.02 shall be subject to the confidentiality agreement dated September 28, 1999, between the Company and Parent (the "CONFIDENTIALITY AGREEMENT"). SECTION 6.03. REASONABLE EFFORTS; NOTIFICATION. (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties shall use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger and the other Transactions, including (i) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging the Transaction Agreements or the consummation of the Transactions, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed and (iv) the execution and delivery of any additional instruments necessary to consummate the Transactions and to fully carry out the purposes of the Transaction Agreements; PROVIDED, HOWEVER, that Parent shall not be required to consent to any action described in paragraph (a) of Exhibit A to this Agreement. In connection with and without limiting the foregoing, the Company and the Company Board shall (i) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to any Transaction or the Transaction Agreements, (ii) if any state takeover statute or similar statute or 48 regulation becomes applicable to the Transaction Agreements, take all action necessary to ensure that the Offer, the Merger and the other Transactions may be consummated as promptly as practicable on the terms contemplated by the Transaction Agreements and otherwise to minimize the effect of such statute or regulation on the Offer, the Merger and the other Transactions and (iii) cooperate with Parent and Sub in the arrangements for obtaining the Financing. Nothing in this Agreement shall be deemed to require Parent to waive any substantial rights or agree to any substantial limitation on its operations or to dispose of any asset or collection of assets of the Company, Parent or any of their respective subsidiaries or affiliates. Notwithstanding the foregoing, the Company shall not be prohibited under this Section 6.03(a) from taking any action permitted by Section 5.02. (b) The Company shall give prompt notice to Parent, and Parent or Sub shall give prompt notice to the Company, of (i) any representation or warranty made by it contained in any Transaction Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under any Transaction Agreement; PROVIDED, HOWEVER, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under the Transaction Agreements. SECTION 6.04. STOCK OPTIONS. (a) As soon as practicable following the date of this Agreement, the Company Board (or, if appropriate, any committee administering the Company Stock Plans) shall adopt such resolutions or take such other actions as are required to adjust the terms of all outstanding Company Stock Options and all outstanding Company SARs to provide that (i) each outstanding Company Stock Option may be exercised, whether or not such Company Stock Option is vested, immediately prior to the acceptance for payment of shares of Company Common Stock pursuant to 49 the Offer, contingent on and subject to the consummation of the Offer, PROVIDED that the shares of Company Common Stock issued upon such exercise are tendered into the Offer and not withdrawn and (ii) each Company Stock Option and Company SAR outstanding that is not exercised prior to the acceptance for payment of shares of Company Common Stock pursuant to the Offer shall be canceled effective immediately prior to the acceptance for payment of shares of Company Common Stock pursuant to the Offer with the holder thereof becoming entitled to receive an amount of cash equal to the product of (x) the excess, if any, of (A) the Per Share Merger Consideration over (B) the exercise price per share of Company Common Stock subject to such Company Stock Option or Company SAR, multiplied by (y) the number of shares of Company Common Stock issuable pursuant to the unexercised portion of such Company Stock Option or Company SAR; PROVIDED, HOWEVER, that no cash payment shall be made with respect to any Company SAR that is related to a Company Stock Option in respect of which such a cash payment is made. All amounts payable pursuant to this Section 6.04 shall be subject to any required withholding of Taxes or proof of eligibility of exemption therefrom and shall be paid at or as soon as practicable following the Effective Time, but in any event within one business day following the Effective Time, without interest. (b) The Company shall use its best efforts to obtain all consents of the holders of the Company Stock Options, if such consents are determined to be necessary to effectuate the foregoing as mutually agreed by Parent and the Company. The cancelation of a Company Stock Option in exchange for the cash payment described in this Section 6.04 shall be deemed a release of any and all rights the holder of such Company Stock Option had or may have had in respect thereof, and any necessary consents from all such holders shall so provide. Notwithstanding anything to the contrary contained in this Agreement, payment shall, at Parent's request, be withheld in respect of any Company Stock Option until all necessary consents are obtained. (c) As soon as practicable following the date of this Agreement, the Company Board (or, if appropriate, any committee administering the Company Stock Plans) shall take or cause to be taken such actions as are required to cause (x) the Company Stock Plans to terminate as of the Effective Time and (y) the provisions in any other Company Benefit Plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company to be deleted as of the Effective Time. The Company shall ensure that following the Effective Time no holder of a Company Stock Option or Company SAR or any participant in any Company Stock Plan or other Company Benefit Plan shall have any right thereunder to 50 acquire any capital stock of the Company or the Surviving Corporation. (d) The Company shall take or cause to be taken all actions required to cause the TIW Systems, Inc. Stock Bonus Plan to be amended as of immediately prior to the Effective Time to provide that, in the event the Company Common Stock ceases to be readily tradable (within the meaning of Q/A-2(d)(1)(iv)(A) of Treas. Reg. Section 1.411(d)-4), distributions of benefits under such plan shall be in the form of cash; PROVIDED that the foregoing shall not apply in the event that prior to the Effective Time (i) such plan has received a favorable determination letter from the Internal Revenue Service in respect of the termination of the plan, (ii) such plan has been terminated and (iii) all benefits payable under such plan have been paid in full to each plan participant and beneficiary entitled to receive benefits in respect of the termination of such plan. (e) In this Agreement: "COMPANY STOCK OPTION" means any option to purchase Company Common Stock granted under any Company Stock Plan. "COMPANY SAR" means any stock appreciation right linked to the price of Company Common Stock and granted under any Company Stock Plan. "COMPANY STOCK PLANS" means the Company's 1995 Stock Compensation Plan, the Company's Stock Option Plan for Key Employees, the Company's Non-Employee Directors Stock Option Plan and the Company's Outside Directors Stock Option Plan, in each case as amended from time to time. SECTION 6.05. INDEMNIFICATION. (a) For six years after the Effective Time, the Surviving Corporation (or any successor to the Surviving Corporation) shall honor all the Company's obligations to indemnify, defend and hold harmless the present and former officers and directors] of the Company and the Company Subsidiaries and the other individual identified as an indemnified party in the Company Disclosure Letter (each an "INDEMNIFIED PARTY") against losses, claims, damages, liabilities, costs, fees and expenses (including reasonable fees and disbursements of counsel and judgments, fines, losses, claims, liabilities and amounts paid in settlement PROVIDED that any such settlement is effected with the written consent of Parent or the 51 Surviving Corporation, which consent shall not unreasonably be withheld) arising out of actions or omissions occurring at or prior to the Effective Time ("LOSSES") to the extent such obligations of the Company exist under the TBCA, the terms of the Company Charter or the Company By-laws, in each case as in effect on the date of this Agreement, or under any Indemnification Agreement between the Company or any Company Subsidiary, as applicable, and the Indemnified Party that has been filed as an exhibit to the Filed Company SEC Documents or that has been previously delivered to Parent and is listed in the Company Disclosure Letter; PROVIDED that in the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until disposition of any and all such claims. (b) (i) Promptly after the receipt by any Indemnified Party of notice of any claim, the Indemnified Party will give the Surviving Corporation written notice of such claim or the commencement of such action or proceeding and shall permit the Surviving Corporation to assume the defense of any such claim or any proceeding or litigation resulting from such claim, unless the action or proceeding seeks an injunction or other similar relief against the Indemnified Party or there is a conflict of interest (requiring separate representation under applicable principles of professional responsibility) between the Indemnified Party and the Surviving Corporation in the conduct of the defense of such action. Failure by the Surviving Corporation to notify the Indemnified Party of the Surviving Corporation's election to defend any such proceeding or action within a reasonable time, but in no event more than 10 days after written notice thereof shall have been given to the Surviving Corporation, shall be deemed a waiver by the Surviving Corporation of its right to defend such action. Failure by the Indemnified Party to notify the Surviving Corporation of any claim for indemnification shall not relieve the Surviving Corporation of any liability that the Surviving Corporation may have to the Indemnified Party, except to the extent the Surviving Corporation demonstrates that the defense of such claim or action has been prejudiced thereby. (ii) If the Surviving Corporation assumes the defense of any such claim or litigation resulting therefrom with counsel reasonably acceptable to the Indemnified Party, the obligations of the Surviving Corporation as to such claim shall be limited to the defense or settlement of such claim or litigation 52 resulting therefrom and to holding the Indemnified Party harmless against any Losses to the extent required by this Section 6.05. The Indemnified Party may participate, at the Indemnified Party's expense, in the defense of such claim or litigation PROVIDED that the Surviving Corporation shall direct and control the defense of such claim or litigation. The Indemnified Party shall cooperate and make available all books and records reasonably necessary and useful in connection with the defense. The Surviving Corporation shall not, in the defense of such claim or any litigation resulting therefrom, consent to entry of any judgment or enter into any settlement, unless the Indemnified Party shall be fully released and discharged, except with the written consent of the Indemnified Party. (iii) If the Surviving Corporation shall not assume the defense of any such claim or litigation resulting therefrom, the Indemnified Party may defend against such claim or litigation in such manner as the Indemnified Party may deem appropriate and reasonably satisfactory to the Surviving Corporation. The Surviving Corporation shall promptly reimburse the Indemnified Party for the amount of all reasonable expenses, legal or otherwise, incurred by the Indemnified Party in connection with the defense against or settlement of such claim or litigation; PROVIDED, HOWEVER, that the Surviving Corporation shall be required to reimburse such amounts only after receiving an undertaking from the Indemnified Party to repay such amounts if it is determined that the Indemnified Party is not entitled to indemnification therefor. The Surviving Corporation shall not be liable for any Losses resulting from any settlement or compromise of, or offer to settle or compromise, any claim or litigation or other action without the prior written consent of the Surviving Corporation, which consent shall not be unreasonably withheld. (c) In the event that the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, proper provision will be made so that the successors and assigns of the Surviving Corporation shall expressly assume the obligations set forth in this Section 6.05. 53 (d) The provisions of this Section 6.05 are (i) intended to be for the benefit of, and to be enforceable by, each Indemnified Party, his or her heirs and his or her representatives and (ii) in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. SECTION 6.06. FEES AND EXPENSES. (a) Except as provided below, all fees and expenses incurred in connection with the Merger and the other Transactions shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated. (b) In the event that (1) (A) a Company Takeover Proposal shall have been made known to the Company or shall have been made directly to its shareholders or any person shall have announced an intention (whether or not conditional) to make a Company Takeover Proposal, (B) thereafter this Agreement is terminated pursuant to Section 8.01(b)(ii), 8.01(b)(iii) or 8.01(c) and (C) within 12 months after such termination a Company Takeover Transaction is consummated or the Company (or one or more Company Subsidiaries representing in the aggregate 20% or more of the net revenues, net income or the assets of the Company and the Company Subsidiaries, taken as a whole) enters into an Acquisition Agreement with respect to, approves or recommends a Company Takeover Transaction or (2) this Agreement is terminated by the Company pursuant to Section 8.01(e) or by Parent or Sub pursuant to Section 8.01(d), then the Company shall promptly, but in no event later than, in the case of clause (1), the date of the earliest to occur of such consummation, approval or recommendation of a Company Takeover Transaction or the entering into of such Acquisition Agreement, or in the case of clause (2), the date of such termination, pay to Parent a fee equal to $3,840,000 (three million eight hundred forty thousand dollars) (the "TERMINATION FEE"), payable by wire transfer of same day funds. (c) If the Company is required to pay to Parent a fee pursuant to Section 6.06(b), the Company shall reimburse Parent and Sub for all their out-of-pocket expenses actually incurred in connection with the Transaction Agreements, the Offer, the Merger and the other Transactions in an amount not to exceed $640,000 (six hundred forty thousand dollars). Such reimbursement shall be paid upon demand following termination of this Agreement. 54 (d) The Company acknowledges that the agreements contained in this Section 6.06 are an integral part of the Transactions, and that, without these agreements, Parent and Sub would not enter into the Transaction Agreements. Accordingly, if the Company fails promptly to make a payment due pursuant to this Section 6.06, and, in order to obtain such payment, Parent or Sub commences a suit which results in a judgment against the Company, the Company shall pay to Parent and Sub their reasonable costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amount set forth in this Section 6.06 at the prime rate of First Union National Bank in effect on the date such payment was required to be made. The Company acknowledges and agrees that the payment of any amounts due pursuant to this Section 6.06 shall not constitute the exclusive remedy of Parent and Sub under the Transaction Agreements. Without limiting the generality of the foregoing, in the event of a breach or deemed breach by the Company of Section 5.02, Parent and Sub shall be entitled to the remedies set forth in Section 9.10, including an injunction, and all other remedies available at law or in equity to which Parent and Sub are entitled. SECTION 6.07. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and the Company, on the other hand, shall consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the Offer, the Merger and the other Transactions and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange. Within three business days after the Announcement Date, the Company shall issue a press release, in the form previously delivered to Parent, reporting its results for the fiscal year ended September 30, 1999, and, as promptly as practicable but in no event later than three business days after the Announcement Date, the Company shall file such press release with the SEC as an exhibit to a Current Report on Form 8-K. SECTION 6.08. TRANSFER TAXES. All stock transfer, real estate transfer, documentary, stamp, recording and other similar Taxes (including interest, penalties and additions to any such Taxes) ("TRANSFER TAXES") incurred in connection with the Transactions shall be paid by either Sub or the Surviving Corporation, 55 and the Company shall cooperate with Sub and Parent in preparing, executing and filing any Tax Returns with respect to such Transfer Taxes, including supplying in a timely manner a complete list of all real property interests held by the Company and any information with respect to such property that is reasonably necessary to complete such Tax Returns. SECTION 6.09. DIRECTORS. Promptly upon the acceptance for payment of, and payment by Sub for, any shares of Company Common Stock pursuant to the Offer, Sub shall be entitled to designate such number of directors on the Company Board as will give Sub, subject to compliance with Section 14(f) of the Exchange Act, representation on the Company Board equal to at least that number of directors, rounded up to the next whole number, which is the product of (a) the total number of directors on the Company Board (giving effect to the directors elected pursuant to this sentence) multiplied by (b) the percentage that (i) such number of shares of Company Common Stock so accepted for payment and paid for by Sub plus the number of shares of Company Common Stock otherwise owned by Sub or any other subsidiary of Parent bears to (ii) the number of such shares outstanding, and the Company shall, at such time, cause Sub's designees to be so elected; PROVIDED that in the event that Sub's designees are appointed or elected to the Company Board, until the Effective Time the Company Board shall have at least two directors who are Directors on the date of this Agreement and who are not officers of the Company (the "INDEPENDENT DIRECTORS"); and PROVIDED FURTHER that in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall be entitled to designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of this Agreement or, if no Independent Directors then remain, the other directors shall designate two persons to fill such vacancies who are not current or former officers, shareholders or affiliates of the Company, Parent or Sub, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Subject to applicable Law, the Company shall take all action requested by Parent necessary to effect any such election, including mailing to its shareholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company shall make such mailing with the mailing of the Schedule 14D-9 (PROVIDED that Sub shall have provided to the Company on a timely basis all information required to be included in the 56 Information Statement with respect to Sub's designees). In connection with the foregoing, the Company shall promptly, at the option of Sub, either increase the size of the Company Board or obtain the resignation of such number of its current directors as is necessary to enable Sub's designees to be elected or appointed to the Company Board as provided above. Notwithstanding anything in this Agreement to the contrary, in the event Sub's designees are elected to the Company Board, after such election and prior to the Effective Time, (i) the affirmative vote of a majority of the Independent Directors shall be required in addition to any required approval by the full Company Board to (A) amend or terminate this Agreement on behalf of the Company, (B) waive any of the Company's rights, benefits or remedies under this Agreement or (C) extend the time for performance of Sub's obligations hereunder and (ii) the Independent Directors shall have the power, acting together, to exercise any right of the Company under this Agreement that the Company otherwise fails to exercise to the extent that the failure to exercise such right would materially adversely affect the holders of shares of Company Common Stock other than Parent, Sub and their respective subsidiaries and affiliates. SECTION 6.10. SHAREHOLDER LITIGATION. The Company shall give Parent the opportunity to participate in the defense or settlement of any shareholder litigation against the Company and its directors relating to any Transaction and the Company shall not agree to any such settlement without Parent's consent. SECTION 6.11. COMPLIANCE OF SUB. Parent shall cause Sub to comply with all of Sub's obligations under the Transaction Agreements. Parent hereby guarantees the performance of Sub's obligations under the Transaction Agreements. ARTICLE VII Conditions Precedent SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligation of each party to effect the Merger is subject 57 to the satisfaction or waiver on or prior to the Closing Date of the following conditions: 58 (a) SHAREHOLDER APPROVAL. If required by Law, the Company shall have obtained the Company Shareholder Approval. (b) ANTITRUST. The waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have been terminated or shall have expired, and the period of time for any applicable review process by the Committee on Foreign Investment in the United States ("CFIUS") under the Exon-Florio Act shall have expired and CFIUS shall not have taken any action or made any recommendation to the President of the United States to block or prevent the consummation of the Offer or the Merger. Any consents, approvals and filings under any foreign antitrust Law, the absence of which would prohibit the consummation of the Merger, shall have been obtained or made. (c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; PROVIDED, HOWEVER, that prior to asserting this condition, subject to Section 6.03, the party asserting such condition shall have used all reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any such injunction or other order that may be entered. (d) PURCHASE OF COMMON STOCK. Sub shall have previously accepted for payment and paid for all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer; provided that this condition shall be deemed satisfied with respect to the obligation of Parent and Sub to effect the Merger if Sub fails to accept for payment or pay for shares of Company Common Stock pursuant to the Offer in violation of this Agreement. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, whether before or after receipt of Company Shareholder Approval PROVIDED that if shares of Company Common Stock 59 are accepted for payment pursuant to the Offer, neither Parent nor Sub may terminate this Agreement or abandon the Merger except pursuant to clause (a), (b)(i) or (b)(iii) below: (a) by mutual written consent of Parent, Sub and the Company; (b) by either Parent or the Company: (i) if any court of competent jurisdiction or other Governmental Entity issues an order, decree or ruling or takes any other action permanently enjoining, restraining or otherwise prohibiting the Merger, and such order, decree, ruling or other action shall have become final and nonappealable; (ii) if (A) as a result of the failure of any of the Tender Offer Conditions, (1) Sub shall have failed to commence the Offer within 20 days following the date of this Agreement or (2) the Offer shall have terminated or expired in accordance with its terms without Sub having purchased any shares of Company Common Stock pursuant to the Offer or (B) Sub shall not have accepted for payment any shares of Company Common Stock pursuant to the Offer prior to March 11, 2000; PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to this clause (ii) shall not be available (x) to the Company as a result of the occurrence of any event set forth in paragraph (d) of Exhibit A to this Agreement or (y) to any party whose failure to fulfill any of its obligations under the Transaction Agreements results in the failure of any Tender Offer Condition or if the failure of such condition results from facts or circumstances that constitute a breach of any representation or warranty of such party contained in any Transaction Agreement; or (iii) if, upon a vote at a duly held meeting to obtain the Company Shareholder Approval, the Company Shareholder Approval is not obtained; PROVIDED, HOWEVER, that this Agreement may not be terminated by Parent pursuant to this clause (iii) if Parent or Sub is in breach of Section 6.01(c); 60 (c) by Parent, if the Company breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in any Transaction Agreement, which breach or failure to perform (i) would give rise to the failure of a Tender Offer Condition and (ii) cannot be or has not been cured within 30 days after the giving of written notice to the Company of such breach; (d) by Parent or Sub if either Parent or Sub is entitled to terminate the Offer as a result of the occurrence of any event set forth in paragraph (d) of Exhibit A to this Agreement; or (e) by the Company if the Company Board withdraws or modifies its approval or recommendation of the Transaction Agreements, the Offer or the Merger in accordance with Section 5.02(b); PROVIDED that, in order for the termination of this Agreement pursuant to this paragraph (e) to be deemed effective, the Company shall have complied with all the provisions of Section 5.02, including the notice provisions therein, and with all applicable requirements, including payment of the Termination Fee, of Section 6.06. SECTION 8.02. EFFECT OF TERMINATION. In the event of termination of this Agreement by either the Company or Parent as provided in Section 8.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Parent, Sub or the Company or their respective officers or directors, other than Section 3.19, Section 4.06, the last two sentences of Section 6.02, Section 6.06, this Section 8.02 and Article IX, which provisions shall survive such termination, and except to the extent that such termination results from the material breach by a party of any representation, warranty or covenant set forth in any Transaction Agreement. SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties at any time before or after receipt of the Company Shareholder Approval; PROVIDED, HOWEVER, that after receipt of the Company Shareholder Approval, there shall be made no amendment that by Law requires further approval by the shareholders of the Company without the further approval of such shareholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. 61 SECTION 8.04. EXTENSION; WAIVER. At any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 8.03 and except as otherwise specifically provided in this Agreement, waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. SECTION 8.05. PROCEDURE FOR TERMINATION, AMEND MENT, EXTENSION OR WAIVER. Except as otherwise provided in Section 6.09 hereof, termination of this Agreement pursuant to Section 8.01, an amendment of this Agreement pursuant to Section 8.03 or an extension or waiver pursuant to Section 8.04 shall, in order to be effective, require in the case of Parent, Sub or the Company, action by its Board of Directors or the duly authorized designee of its Board of Directors. ARTICLE IX GENERAL PROVISIONS SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 9.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. Without limiting the generality of the foregoing, the covenants and agreements set forth in Section 2.01(d) (Dissent Rights), Section 2.02 (Exchange of Certificates) and Section 6.05 (Indemnification) shall survive the Effective Time to the extent specified therein). SECTION 9.02. NOTICES. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the parties at the following addresses 62 (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Sub, to: TriPoint Global Communications Inc. 565 Fifth Avenue New York, New York 10017 Attention: Jack Haegele Telephone: (212) 850-8500 Facsimile: (212) 850-8503 with a copy to: TriPoint Global Communications Inc. 565 Fifth Avenue New York, New York 10017 Attention: Stephen Green, Esq. Telephone: (212) 850-8500 Facsimile: (212) 850-8503 and to: Cravath, Swaine & Moore 825 Eighth Avenue New York, New York 10019 Attention: Faiza J. Saeed, Esq. Telephone: (212) 474-1454 Facsimile: (212) 765-0995 (b) if to the Company, to: Vertex Communications Corporation 2600 N. Longview Street Kilgore, Texas 75662 Attention: J. Rex Vardeman Telephone: (903) 984-0555 Facsimile: (903) 984-2090 with a copy to: Thompson & Knight L.L.P. 1700 Pacific Avenue, Suite 3300 Dallas, Texas 75201 Attention: William F. Pyne, Esq. Telephone: (214) 969-1771 Facsimile: (214) 969-1751 63 SECTION 9.03. DEFINITIONS. For purposes of this Agreement: An "AFFILIATE" of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person. "IN THE ORDINARY COURSE OF BUSINESS", with respect to any action, means such action is: (a) consistent with the past practices of such person and is taken in the ordinary course of the normal day-to-day operations of such person; (b) not required to be authorized by the Board of Directors of such person; and (c) similar in nature and magnitude to actions customarily taken, without any authorization by the Board of Directors, in the ordinary course of the normal day-to-day operations of other persons that are in the same line of business as such person. A "PERSON" means any individual, firm, corporation, partnership, company, limited liability company, trust, joint venture, association, Governmental Entity or other entity. A "SUBSIDIARY" of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least 50% of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person. SECTION 9.04. INTERPRETATION; DISCLOSURE LETTERS. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "INCLUDE", "INCLUDES" or "INCLUDING" are used in this Agreement, they shall be deemed to be followed by the words "WITHOUT LIMITATION". Any matter disclosed in any section of the Company Disclosure Letter shall be deemed disclosed only for the purposes of the specific Section of this Agreement to which such section 64 relates. If the same item is required to be disclosed in more than one section of the Company Disclosure Letter, such item may be fully described in the principal section to which such item relates and incorporated into another section by a specific cross reference in such other section to the section in which such item is fully described. Nothing in the Company Disclosure Letter shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Company Disclosure Letter identifies the exception with reasonable particularity. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty concerns the existence of the document or other item itself or the copy adequately describes the matter at issue). SECTION 9.05. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to the extent possible. SECTION 9.06. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. SECTION 9.07. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, taken together with the Company Disclosure Letter, (a) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the Transactions and (b) except for the provisions of Article II, and Section 6.05, is not intended to confer upon any person other than the parties any rights or remedies. 65 SECTION 9.08. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof, except to the extent the laws of Texas are mandatorily applicable to the Merger and to the rights of dissenting Company shareholders, if any. SECTION 9.09. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by opera tion of law or otherwise by any of the parties without the prior written consent of the other parties, except that (i) Sub may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to Parent or any assignee of Parent pursuant to clause (ii) of this sentence, or to any direct or indirect wholly owned subsidiary of Parent or such assignee, but no such assignment shall relieve Sub of any of its obligations under this Agreement and (ii) Parent may assign, upon notice to the Company prior to or immediately following such assignment, its rights and obligations hereunder to any of its corporate affiliates, but no such assignment shall relieve Parent of its obligations hereunder if its assignee does not perform such obligations. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. SECTION 9.10. ENFORCEMENT. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of any Transaction Agreement in any New York state court or any Federal court located in the State of New York, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any New York state court or any Federal court located in the State of New York in the event any dispute arises out of this Agreement or any Transaction, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for 66 leave from any such court, (c) agrees that it will not bring any action relating to this Agreement or any Transaction in any court other than any New York state court or any Federal court sitting in the State of New York and (d) waives any right to trial by jury with respect to any action related to or arising out of any Transaction Agreement or any Transaction. IN WITNESS WHEREOF, Parent, Sub and the Company have duly executed this Agreement, all as of the date first written above. TRIPOINT GLOBAL COMMUNICATIONS INC., by /s/ Jack Haegele ------------------------------ Name: Jack Haegele Title: Chief Executive Officer SIGNAL ACQUISITION CORPORATION, by /s/ Jack Haegele ------------------------------ Name: Jack Haegele Title: Chief Executive Officer VERTEX COMMUNICATIONS CORPORATION, by /s/ J. Rex Vardeman ------------------------------ Name: J. Rex Vardeman Title: President and Chief Executive Officer EXHIBIT A CONDITIONS OF THE OFFER Notwithstanding any other term of the Offer or this Agreement, Sub shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Sub's obligation to pay for or return tendered shares of Company Common Stock promptly after the termination or withdrawal of the Offer), to pay for any shares of Company Common Stock tendered pursuant to the Offer unless (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer that number of shares of Company Common Stock which would represent at least a majority of the Fully Diluted Shares (the "MINIMUM TENDER CONDITION"), (ii) any waiting period under the HSR Act applicable to the purchase of shares of Company Common Stock pursuant to the Offer shall have expired or been terminated and (iii) the period of time for any applicable review process by CFIUS under the Exon-Florio Act shall have expired and CFIUS shall not have taken any action or made any recommendation to the President of the United States to block or prevent the consummation of the Offer or the Merger. The term "FULLY DILUTED SHARES" means all outstanding securities entitled generally to vote in the election of directors of the Company on a fully diluted basis, after giving effect to the exercise or conversion of all options, rights and securities exercisable or convertible into such voting securities. Furthermore, notwithstanding any other term of the Offer or this Agreement, Sub shall not be required to commence the Offer, accept for payment or, subject as aforesaid, to pay for any shares of Company Common Stock not theretofore accepted for payment or paid for, and may terminate or amend the Offer, (x) with the consent of the Company or (y) without the consent of the Company if, at any time on or after the date of this Agreement and before the acceptance of such shares for payment or the payment therefor, any of the following conditions exists: (a) there shall be pending or threatened any suit, action or proceeding by any Governmental Entity, or by any other person that has a reasonable likelihood of success, (i) challenging the acquisition by Parent or Sub of any Company Common Stock, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or any other Transaction, or seeking to obtain from the Company, Parent or Sub or any of their respective subsidiaries or affiliates any damages that are 2 material in relation to the Company and the Company Subsidiaries taken as whole, (ii) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective subsidiaries of any material portion of the business or assets of the Company, Parent or any of their respective subsidiaries or affiliates, or to compel the Company, Parent or any of their respective subsidiaries or affiliates to dispose of or hold separate any material portion of the business or assets of the Company, Parent or any of their respective subsidiaries or affiliates, as a result of the Offer, the Merger or any other Transaction, (iii) seeking to impose limitations on the ability of Parent or Sub to acquire or hold, or exercise full rights of ownership of, any shares of Company Common Stock, including the right to vote the Company Common Stock purchased by it on all matters properly presented to the shareholders of the Company, or (iv) seeking to prohibit Parent or any of its subsidiaries from effectively controlling in any material respect the business or operations of the Company and the Company Subsidiaries; (b) any statute, rule, regulation, legislation, interpretation, judgment, order or injunction shall be enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, or any consent or approval withheld with respect to, (i) Parent, the Company or any of their respective subsidiaries or affiliates or (ii) the Offer, the Merger or any other Transaction, in either such case by any Governmental Entity that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in paragraph (a) above; (c) since the date of execution of the Agreement, there shall have been any event, change, effect or development that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect, other than any event, change, effect or development to the extent attributable to (i) the economy or the securities markets in general, (ii) this Agreement or the transactions contemplated hereby or the announcement thereof or (iii) the Company's industry in general, and not specifically relating to the Company or the Company Subsidiaries; 3 (d)(i) it shall have been publicly disclosed or Parent shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of more than 35% of the outstanding shares of the Company Common Stock has been acquired by another person or (ii)(A) the Company or any of its directors or officers shall have breached Section 5.02 of this Agreement (other than an immaterial breach), (B) the Company Board shall have withdrawn or modified its approval or recommendation of the Transaction Agreements, the Offer or the Merger, (C) the Company or any of its directors or officers shall have made any disclosure to the shareholders of the Company permitted pursuant to Section 5.02(d) of this Agreement that has the effect of (x) withdrawing, modifying or changing the approval or recommendation of the Company Board or any committee thereof of the Transaction Agreements, the Offer, the Merger or the other Transactions in a manner adverse to Parent or Sub, (y) approving or recommending to the shareholders of the Company a Company Takeover Proposal or (z) approving or recommending that the shareholders of the Company tender their shares of Company Common Stock into any tender offer or exchange offer that is a Company Takeover Proposal or is related thereto, or (D) the Company Board shall have failed to reaffirm publicly and unconditionally its recommendation to the Company's shareholders that they accept the Offer and give the Company Shareholder Approval by midnight, New York City time, on the third business day following Parent's written request to do so (which request may be made at any time that a Company Takeover Proposal is pending), which public reaffirmation must also include the unconditional rejection of such Company Takeover Proposal; (e) any representation or warranty of the Company in any Transaction Agreement that is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, as of the date of this Agreement and as of the scheduled or extended expiration of the Offer, except to the extent such representation or warranty expressly relates to an earlier date (in which case on and as of such earlier date); 4 (f) the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under any Transaction Agreement; or (g) this Agreement shall have been terminated in accordance with its terms. The foregoing conditions are for the sole benefit of Sub and Parent and may be asserted by Sub or Parent regardless of the circumstances giving rise to such condition or may be waived by Sub and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent, Sub or any other affiliate of Parent at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. EX-99.(2)(C) 5 EXHIBIT 99.(2)(C) CONFORMED COPY COMPANY SHAREHOLDER AGREEMENT dated as of November 11, 1999, among TRIPOINT GLOBAL COMMUNICATIONS INC., a Delaware corporation ("PARENT"), SIGNAL ACQUISITION CORPORATION, a Texas corporation ("SUB"), and the individuals and other parties listed in Schedule A hereto (each, a "SHAREHOLDER" and, collectively, the "SHAREHOLDERS"). WHEREAS Parent, Sub, and Signal Acquisition Corporation, a Texas corporation (the "COMPANY"), propose to enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented, the "MERGER AGREEMENT"; capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement); WHEREAS each Shareholder is the record and beneficial owner (as defined in Rule 13d-3 under the Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT") of the number of shares of Company Common Stock set forth opposite such Shareholder's name in Schedule A hereto (such shares of Company Common Stock, together with any other shares of capital stock of the Company acquired by such Shareholder after the date hereof and during the term of this Agreement or that such Shareholder has or will have the right to acquire during the term of this Agreement upon the exercise of Company Stock Options, being collectively referred to herein as the "SUBJECT SHARES" of such Shareholder); and WHEREAS, as a condition to its willingness to enter into the Merger Agreement, Parent has requested that each Shareholder enter into this Agreement. NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER. Each Shareholder hereby, severally and not jointly, represents and warrants to Parent as of the date hereof in respect of himself, herself or itself as follows: (a) AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. The Shareholder has all requisite power and authority to execute and deliver this 2 Agreement and to consummate the transactions contemplated hereby. The execution and delivery by the Shareholder of this Agreement and consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Shareholder. The Shareholder has duly executed and delivered this Agreement, and this Agreement constitutes the legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws, now or hereafter in effect, affecting creditor rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought. The execution and delivery by the Shareholder of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, any provision of any Contract to which the Shareholder is a party or by which any properties or assets of the Shareholder are bound or, subject to the filings and other matters referred to in the next sentence, any provision of any Judgment or Law applicable to the Shareholder or the properties or assets of the Shareholder. No Consent of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to the Shareholder in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than such reports under Sections 13(d) and 16 of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, compliance with and filings under the HSR Act, and the filing of a joint notification pursuant to the Exon-Florio Act. The Shareholder has complied with any applicable community property law and no spousal signature or consent is required from any party other than the signatories hereto with respect to the Shareholder in connection with entering into this Agreement or performing the obligations of the Shareholder hereunder. The Shareholder shall execute a power of attorney in favor of at least two other Shareholders 3 with respect to the matters covered by Sections 3(a) and 3(b) in the event of incapacity of the Shareholder. (b) THE SUBJECT SHARES. The Shareholder is the record and beneficial owner of, or is the trustee of a trust that is the record holder of, and whose beneficiaries are the beneficial owners of, and has good and marketable title to, the Subject Shares set forth opposite such Shareholder's name in Schedule A attached hereto, free and clear of any Liens other than as set forth in Schedule A, which Liens will be released upon payment for such Subject Shares pursuant to the Offer or Section 4. The Shareholder does not own, of record or beneficially, any shares of capital stock of the Company other than the Subject Shares set forth opposite such Shareholder's name in Schedule A attached hereto. The Shareholder has the sole right to vote such Subject Shares, and none of such Subject Shares is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Subject Shares, except as contemplated by this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby represents and warrants to each Shareholder as follows: Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by Parent of this Agreement and consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Parent. Parent has duly executed and delivered this Agreement, and this Agreement constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws, now or hereafter in effect, affecting creditor rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought. The execution and delivery by Parent of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, any provision of (i) the charter or organizational documents of Parent or 4 any of its subsidiaries, (ii) any material Contract to which Parent or any of its subsidiaries is a party or by which any of their respective properties or assets is bound or (iii) subject to the filings and other matters referred to in Section 4.04(b) of the Merger Agreement, any Judgment or Law applicable to Parent or any of its subsidiaries or their respective properties or assets, other than, in the case of clause (iii) above, any such items that, individually and in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. No Consent of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Parent in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than such reports under Sections 13(d) and 16 of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, compliance with and filings under the HSR Act, and the filing of a joint notification pursuant to the Exon-Florio Act. SECTION 3. COVENANTS OF EACH SHAREHOLDER. Each Shareholder, severally and not jointly, covenants and agrees as follows: (a)(1) At any meeting of the shareholders of the Company called to seek the Company Shareholder Approval or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger Agreement, this Agreement, the Offer, the Merger or any other Transaction is sought, the Shareholder shall, including by executing a written consent solicitation if requested by Parent, vote (or cause to be voted) the Subject Shares of the Shareholder in favor of granting the Company Shareholder Approval. (2) IRREVOCABLE PROXY. Subject to the last sentence of this paragraph, the Shareholder hereby irrevocably grants to, and appoints, Parent, Stephen Green and Jack Haegele, or any of them, and any individual designated in writing by any of them, and each of them individually, as the Shareholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of the Shareholder, to vote the Subject Shares of the Shareholder, or grant a consent or approval in respect of the Subject Shares of the Shareholder prior to the Termination Date (i) in favor of 5 granting the Company Shareholder Approval or the approval of this Agreement, the Offer, the Merger or any other Transaction and (ii) against (A) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company, (B) any Company Takeover Proposal and (C) any amendment of the Company Charter or the Company By-laws or other proposal or transaction involving the Company or any Company Subsidiary, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent, delay or nullify any provision of the Merger Agreement or this Agreement, the Offer, the Merger or any other Transaction or change in any manner the voting rights of any class of Company capital stock. The Shareholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the Shareholder's execution and delivery of this Agreement. The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 3(a) is given in connection with the agreement of Parent to purchase the Subject Shares of the Shareholder, and the agreement of the Shareholder to vote the Subject Shares of the Shareholder, pursuant to this Agreement. The Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked, except as otherwise provided in this Agreement. The Shareholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable prior to the Termination Date in accordance with the provisions of Article 2.29.C of the TBCA. The irrevocable proxy granted hereunder shall automatically terminate upon the termination of this Agreement. (b) At any meeting of shareholders of the Company or at any adjournment thereof or in any other circumstances upon which the Shareholder's vote, consent or other approval is sought, the Shareholder shall vote (or cause to be voted) the Subject Shares of the Shareholder in the manner specified in Section 3(a)(2). The Shareholder shall not commit or agree to take any action inconsistent with the foregoing. 6 (c)(1) The Shareholder shall tender all the Subject Shares of the Shareholder pursuant to the Offer. Such tender shall be made promptly, and in any event no later than the third business day following commencement of the Offer. The Shareholder shall not withdraw any Subject Shares tendered pursuant to the Offer prior to the Termination Date (as defined below). The obligation of the Shareholder to tender and not withdraw Shares is conditioned only upon lawful commencement of the Offer and otherwise is unconditioned. (2) Prior to the termination of this Agreement, except as otherwise provided herein, the Shareholder shall not (A) sell, transfer, pledge, assign or otherwise dispose of (including by gift) (collectively, "TRANSFER"), or enter into any Contract, option or other arrangement (including any profit sharing arrangement) with respect to the Transfer of, any Subject Shares to any person other than pursuant to the Offer and the Merger or (B) enter into any voting arrangement, whether by proxy, voting agreement or otherwise, with respect to any Subject Shares and shall not commit or agree to take any of the foregoing actions. (d) The Shareholder shall not, nor shall it authorize or permit any officer, director or employee of, or any investment banker, attorney or other adviser or representative of, the Shareholder to, (i) directly or indirectly solicit, initiate or encourage the submission of any Company Takeover Proposal, (ii) enter into any agreement with respect to any Company Takeover Proposal or (iii) directly or indirectly participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Company Takeover Proposal; PROVIDED, HOWEVER, that the Shareholder may furnish information with respect to the Company to a person and participate in discussions or negotiations with such person regarding a Superior Company Proposal if at such time the Company is permitted to furnish information and engage in discussions or negotiations with, and is actually furnishing information to and engaging in discussions or negotiations with, such person regarding such Superior Company Proposal pursuant to Section 5.02(a) of the Merger Agreement. The 7 Shareholder promptly shall advise Parent orally and in writing of any Company Takeover Proposal or inquiry made to the Shareholder with respect to or that could reasonably be expected to lead to any Company Takeover Proposal (including any change to the terms of any such Company Takeover Proposal or inquiry), the identity of the person making any such Company Takeover Proposal or inquiry, and the material terms of any such Company Takeover Proposal or inquiry. (e) The Shareholder shall use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger and the other Transactions, provided that in doing so the Shareholder shall not be required to relinquish any right or benefit that the Shareholder may have under any written employment agreement with the Company or any Company Subsidiary that has been filed as an exhibit to the Filed Company SEC Documents. The Shareholder shall not issue any press release or make any other public statement with respect to any Transaction Agreement, the Merger or any other Transaction without the prior consent of Parent, except as may be required by applicable Law. SECTION 4. OPTION. (a) Each Shareholder hereby severally grants to Parent an irrevocable option (the "OPTION") to purchase any of or all the Subject Shares of such Shareholder that have not been validly tendered prior to the expiration of the Offer, or that have been withdrawn prior to the expiration of the Offer, at a purchase price per share equal to the Offer Price in cash. The Option shall become exercisable, in whole or in part, only when the Offer has expired and Sub has accepted shares of Company Common Stock for purchase pursuant to the Offer. If the Option becomes exercisable, the Option may be exercised by giving the notice referred to in Section 4(b) any time during the period commencing with the acceptance by Sub of shares of Company Common Stock for purchase pursuant to the Offer and ending 30 days thereafter (the "OPTION PERIOD"); PROVIDED, HOWEVER, that if, on the expiration of the Option Period, (i) any waiting period under the HSR Act applicable to the purchase of shares of Company Common Stock pursuant to the Option shall not have expired or been terminated, (ii) the period of time for any 8 applicable review process by CFIUS under the Exon-Florio Act shall not have expired or (iii) there shall be in effect any preliminary or permanent injunction or other order issued by any Governmental Entity prohibiting the exercise of the Option pursuant to this Agreement, then the Option Period shall be extended until five business days after the later of the date of expiration or termination of any applicable waiting period under the HSR Act, the expiration of the period of time for any applicable review process under the Exon-Florio Act, and the date of removal or lifting of any such injunction or order. (b) If Parent wishes to exercise the Option, it may do so by giving written notice (the date of such notice being herein called the "NOTICE DATE") to each Shareholder specifying that the Subject Shares are to be purchased and specifying the place, time and date (which shall not be earlier than one trading day, nor later than 10 trading days, from the Notice Date) for the closing of the Purchase by Parent pursuant to such exercise. SECTION 5. TERMINATION. Notwithstanding any other provision contained herein, this Agreement and all rights and obligations of the parties hereunder shall terminate upon the Termination Date, other than with respect to the liability of any party for breach hereof prior to such termination. As used herein, the term "TERMINATION DATE" shall mean the earlier to occur of (i) the Effective Time and (ii) the termination of the Merger Agreement in accordance with its terms. SECTION 6. ADDITIONAL MATTERS. (a) Each Shareholder shall, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Parent may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement. (b) No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein in his or her capacity as a director or officer of the Company. Each Shareholder signs solely in such Shareholder's capacity as the record holder and beneficial owner of, or the trustee of a trust whose beneficiaries are the beneficial owners of, such Shareholder's Subject Shares and nothing herein shall limit or affect any actions taken by any Shareholder in his capacity as an officer, director or affiliate of the 9 Company to the extent specifically permitted by the Merger Agreement. SECTION 7. GENERAL PROVISIONS. (a) AMENDMENTS. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. (b) NOTICE. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Parent in accordance with Section 9.02 of the Merger Agreement and to the Shareholders at their respective addresses set forth in Schedule A hereto (or at such other address for a party as shall be specified by like notice). (c) INTERPRETATION. When a reference is made in this Agreement to Sections, such reference shall be to a Section to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever the words "INCLUDE", "INCLUDES" and "INCLUDING" are used in this Agreement, they shall be deemed to be followed by the words "WITHOUT LIMITATION". (d) SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. (e) COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement. This Agreement shall become effective between Parent and any Shareholder when a counterpart has been signed by Parent and delivered to such Shareholder and a counterpart has been executed by such Shareholder and delivered to Parent. Each party need not sign the same counterpart. 10 (f) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (g) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof, except to the extent the laws of Texas are mandatorily applicable to Section 3. (h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by Parent without the prior written consent of each Shareholder or by any Shareholder without the prior written consent of Parent, and any purported assignment without such consent shall be void; PROVIDED, HOWEVER, that Parent may assign, upon notice to the Company prior to or immediately following such assignment, its rights and obligations hereunder to any of its corporate affiliates, but no such assignment shall relieve Parent of its obligations hereunder if its assignee does not perform such obligations. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. (i) ENFORCEMENT. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any New York state court or any Federal court located in the State of New York, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any New York state court or any Federal court located in the State of New York in the event any dispute arises out of this Agreement or any Transaction, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that it will not 11 bring any action relating to this Agreement or any Transaction in any court other than a New York state court or any Federal court sitting in the State of New York and (iv) waives any right to trial by jury with respect to any claim or proceeding related to or arising out of this Agreement or any Transaction. IN WITNESS WHEREOF, each party has duly executed this Agreement, all as of the date first written above. TRIPOINT GLOBAL COMMUNICATIONS INC., by /s/ Jack Haegele ------------------------------ Name: Jack Haegele Title: Chief Executive Officer SIGNAL ACQUISITION CORPORATION, by /s/ Jack Haegele ------------------------------ Name: Jack Haegele Title: Chief Executive Officer /s/ William L. Anton ----------------------------------- WILLIAM L. ANTON /s/ A. Don Branum ----------------------------------- A. DON BRANUM /s/ James D. Carter ----------------------------------- JAMES D. CARTER /s/ John G. Farmer ----------------------------------- JOHN G. FARMER /s/ Donald E. Heitzman, Sr. ----------------------------------- DONALD E. HEITZMAN, SR. /s/ Rein Luik ----------------------------------- REIN LUIK /s/ J. Rex Vardeman ----------------------------------- J. REX VARDEMAN 13 /s/ Bill R. Womble ----------------------------------- BILL R. WOMBLE SCHEDULE A
NUMBER OF SHARES OF COMPANY NUMBER OF SHARES OF COMPANY COMMON STOCK SUBJECT TO NAME AND ADDRESS OF SHAREHOLDER COMMON STOCK OWNED COMPANY STOCK OPTIONS* HELD - ------------------------------- ------------------ --------------------------- William L. Anton 90,930** 21,400 2600 Longview Street Kilgore, Texas 75662 A. Don Branum 47,000** 65,000 2600 Longview Street Kilgore, Texas 75662 James D. Carter 66,833** 60,000 2600 Longview Street Kilgore, Texas 75662 John G. Farmer 0 13,000 300 Crescent Court, 5th Floor Dallas, Texas 75201 Donald E. Heitzman, Sr. 5,000 19,000 1309 Cartwright Drive Cedar Hill, Texas 75104 Rein Luik 69,630 0 10439 Lone Oak Lane Los Altos Hills, California 94024 J. Rex Vardeman 152,570 65,000 2600 Longview Street Kilgore, Texas 75662 Bill R. Womble 15,550** 15,000 1700 Pacific Avenue, Suite 3300 Dallas, Texas 75201 Total 447,513 258,400 ======= =======
- ----------------------- *No representations or warranties regarding the Shareholders' record ownership of and/or title to the Company Stock Options held are made hereby. **Includes 87,930 shares, 32,000 shares, 11,000 shares and 6,000 shares held by brokers in margin accounts for the benefit of Messrs. Anton, Branum, Carter and Womble, respectively. -----END PRIVACY-ENHANCED MESSAGE-----