-----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, NrqTztKIadO5+mvUP1Dgg0oSzTulGOQ9BfWfZWVQBEMrHxyJtSl7/wIMTS1ijNcu Kf+H8wl8Ow6xTAn58okwqw== 0000912057-97-026867.txt : 19970812 0000912057-97-026867.hdr.sgml : 19970812 ACCESSION NUMBER: 0000912057-97-026867 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970627 FILED AS OF DATE: 19970811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NU KOTE HOLDING INC /DE/ CENTRAL INDEX KEY: 0000812423 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [3950] IRS NUMBER: 161296153 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20287 FILM NUMBER: 97655132 BUSINESS ADDRESS: STREET 1: 17950 PRESTON RD STE 690 CITY: DALLAS STATE: TX ZIP: 75252 BUSINESS PHONE: 2142502785 MAIL ADDRESS: STREET 1: 17950 PRESTON ROAD SUITE 690 CITY: DALLAS STATE: TX ZIP: 75252 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended JUNE 27, 1997 --------------- Commission file number 0-20287 -------- NU-KOTE HOLDING, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 16-1296153 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 17950 PRESTON ROAD, SUITE 690, DALLAS, TEXAS 75252 -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (972) 250-2785 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Number of shares of common stock of registrant outstanding at August 7, 1996: Class Outstanding ----- ----------- Class A common stock $.01 par value 21,775,302 NU-KOTE HOLDING, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- PART I - FINANCIAL INFORMATION - ------------------------------ Consolidated Balance Sheets as of June 27, 1997 and March 31, 1997 3 Consolidated Statements of Operations and Retained Earnings (Accumulated Deficit) for the Three Month Periods Ended June 27, 1997 and June 28, 1996 4 Consolidated Statements of Cash Flows for the Three Month Periods Ended June 27, 1997 and June 28, 1996 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II - OTHER INFORMATION - --------------------------- Other Information 17 Signature Page 19 2 NU-KOTE HOLDING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) June 27, March 31, 1997 1997 ---------- ---------- ASSETS Current assets: Cash and cash equivalents $ 7,556 $ 12,275 Accounts receivable, net 71,818 71,024 Receivables from related party 3,715 3,694 Inventories, net 99,895 93,770 Prepaid expenses 9,067 10,452 Deferred income taxes 2,400 1,573 ---------- ---------- Total current assets 194,451 192,788 Property, plant, and equipment, net 74,030 75,683 Other assets and deferred charges 4,750 4,386 Assets held for sale 4,482 4,482 Intangibles, net 19,221 19,698 ---------- ---------- Total assets $ 296,934 $ 297,037 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank loans and current portion of long-term debt $ 986 $ 1,135 Accounts payable 52,966 51,035 Compensation related liabilities 6,406 6,500 Other accrued liabilities 38,567 37,726 ---------- ---------- Total current liabilities 98,925 96,396 Long-term debt, net of current maturities 137,545 134,677 Other liabilities 11,228 9,995 Deferred income taxes 6,646 6,541 ---------- ---------- Total liabilities 254,344 247,609 ---------- ---------- Shareholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued Class A common stock, $.01 par value, 40,000,000 shares authorized; 22,325,302 and 22,325,302 shares issued 223 223 Class B common stock, $.01 par value, 15,000,000 shares authorized; none issued Additional paid-in capital 91,605 91,605 Accumulated deficit (42,582) (36,610) Foreign currency translation adjustments (6,430) (5,564) Treasury stock, at cost, 550,000 shares (226) (226) ---------- ---------- Total shareholders' equity 42,590 49,428 ---------- ---------- Total liabilities and shareholders' equity $ 296,934 $ 297,037 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of the consolidated financial statements. 3 NU-KOTE HOLDING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT) FOR THE THREE MONTH PERIODS ENDED JUNE 27, 1997 AND JUNE 28, 1996 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) June 27, June 28, 1997 1996 ------------ ------------ Net sales $ 79,727 $ 87,457 Cost of sales 63,944 62,230 ------------ ------------ Gross margin 15,783 25,227 Selling, general and administrative expenses 14,690 17,370 Research and development expenses 1,788 2,560 Restructuring expense 1,623 1,145 ------------ ------------ Operating income (loss) (2,318) 4,152 Interest expense 2,965 1,868 Other expense (income) items, net 689 (711) ------------ ------------ Income (loss) before income taxes (5,972) 2,995 Provision for income taxes 1,200 ------------ ------------ Net income (loss) (5,972) 1,795 Retained earnings (accumulated deficit) - Beginning of period (36,610) 13,042 ------------ ------------ Retained earnings (accumulated deficit) - End of period $ (42,582) $ 14,837 ------------ ------------ ------------ ------------ Net income (loss) per share of common stock $ (0.27) $ 0.08 ------------ ------------ ------------ ------------ Weighted average shares outstanding 21,775,302 22,498,935 ------------ ------------ ------------ ------------
The accompanying notes are an integral part of the consolidated financial statements. 4 NU-KOTE HOLDING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED JUNE 27, 1997 AND JUNE 28, 1996 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) June 27, June 28, 1997 1996 ---------- ---------- Cash flows from operating activities: Net income (loss) $ (5,972) $ 1,795 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Exchange (gains) losses 200 (859) Depreciation and amortization 3,480 2,997 Deferred income taxes (1,751) Tax benefit from exercise of stock options 75 Other (11) (675) Changes in working capital: Accounts receivable (815) 7,638 Inventories (6,125) (14,403) Prepaid expenses 1,385 (3,280) Accounts payable 1,931 2,437 Compensation related liabilities (94) 1,051 Other accrued liabilities 2,256 286 Cash paid for restructuring (1,415) (1,313) ---------- ---------- Net cash used in operating activities (5,180) (6,002) ---------- ---------- Cash flows from investing activities: Purchase of property, plant and equipment (1,449) (3,353) Sale of property, plant and equipment 317 ---------- ---------- Net cash used in investing activities (1,449) (3,036) ---------- ---------- Cash flows from financing activities: Borrowings on long-term debt and other loans 7,868 34,529 Payments on long-term debt and other loans (5,149) (21,673) Exercise of stock options 320 ---------- ---------- Net cash provided by financing activities 2,719 13,176 ---------- ---------- Effect of exchange rate changes on cash (809) (480) ---------- ---------- Net increase (decrease) in cash (4,719) 3,658 Cash and cash equivalents at beginning of period 12,275 6,540 ---------- ---------- Cash and cash equivalents at end of period $ 7,556 $ 10,198 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of the consolidated financial statements. 5 NU-KOTE HOLDING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) 1. THE COMPANY Nu-kote Holding, Inc. ("Nu-kote") and its wholly-owned subsidiaries are referred to collectively as the "Company". The Company is one of the leading independent manufacturers and distributors of impact and non- impact imaging supplies for office and home printing devices, including the manufacture and distribution of a full line of typewriter and printer ribbons, thermal fax ribbons, cartridges and toners for laser printers, facsimile machines and copiers, cartridges and ink for ink jet printers, specialty papers, calculator ink rolls, and carbon paper. The Company sells products primarily in the United States and Europe, directly to wholesale and retail markets, and also to original equipment manufacturers and distributors for resale under their brand names or private labels. The Company distributes through virtually all major office supply marketing channels, including wholesale distributors, office products dealers, direct mail catalogs, office supply "super stores", warehouse clubs, information processing specialists, value added resellers, and mass market retailers. The consolidated balance sheet as of June 27, 1997 and the related consolidated statements of operations and retained earnings (accumulated deficit) and consolidated statements of cash flows for the three month periods ended June 27, 1997 and June 28, 1996 are unaudited. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of such financial statements have been included. Interim results are not necessarily indicative of results for a full year. The financial statements and notes are presented as permitted by Form 10- Q, and do not contain certain information included in the Company's annual financial statements and notes. 2. NET INCOME PER SHARE OF COMMON STOCK Net income (loss) per share of common stock for the three month periods ended June 27, 1997 and June 28, 1996 is based on the weighted average number of common shares outstanding during the period and the effect of considering common stock equivalents (stock options) under the treasury stock method. Primary and fully diluted net income per share of common stock are the same and, therefore, are not shown separately. 6 3. ACCOUNTS RECEIVABLE Accounts receivable are reflected net of allowances for doubtful accounts of $4,372 and $3,741 at June 27, 1997 and March 31, 1997, respectively. 4. INVENTORIES Inventories consist of the following: June 27, March 31, 1997 1997 ------- -------- Raw materials $41,810 $36,847 Work-in-process 13,629 12,354 Finished goods 44,456 44,569 ------- ------- Total $99,895 $93,770 ------- ------- ------- ------- Since physical inventories taken during the year do not necessarily coincide with the end of a quarter, management has estimated the composition of inventories with respect to raw materials, work-in-process and finished goods. It is management's opinion that this estimate represents a reasonable approximation of the inventory levels at June 27, 1997. The amounts at March 31, 1997 are based upon the audited balance sheet at that date. 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost and consist of the following components: June 27, March 31, 1997 1997 -------- -------- Land $ 4,477 $ 4,477 Buildings and improvements 19,645 19,417 Machinery and equipment 81,265 80,490 -------- -------- 105,387 104,384 Less accumulated depreciation (31,357) (28,701) -------- -------- Total $ 74,030 $ 75,683 -------- -------- -------- -------- Depreciation expense amounted to $2,845 and $2,311 for the three month periods ended June 27, 1997 and June 28, 1996, respectively. 7 6. INTANGIBLE ASSETS Intangible assets consist of amounts allocated as a result of purchases of existing businesses and are summarized as follows: Amortization June 27, March 31, Period 1997 1997 ------------ -------- --------- Goodwill 20 years $ 9,880 $ 9,880 Covenants-not-to-compete 3-5 years 5,636 5,636 Trademark 40 years 9,269 9,269 Technology license 8 years 1,272 1,272 ------- ------- 26,057 26,057 Less accumulated amortization (6,836) (6,359) ------- ------- Total $19,221 $19,698 ------- ------- ------- -------
Covenant-not-to-compete agreements have been recorded at their net present value using estimated discount rates of 7% and 16%. The trademark has been recorded at its estimated value based upon royalty rates charged for its use, discounted at an estimated rate of return of 35%. The technology license has been recorded at its estimated fair value based on forecasted discounted cash flows using a 16% discount rate. 7. LINE OF CREDIT The Company has a line of credit in Colombia in the amount of $1,450. Borrowings against the line of credit amounted to $522 and $603 at June 27, 1997 and March 31, 1997, respectively. The line bears interest at the prevailing Colombia interest rate plus 2 percentage points. Average interest rates at June 27, 1997 and March 31, 1997 were 17.0% and 17.5%, respectively. 8. LONG-TERM DEBT Long-term debt of the Company consists of the following: June 27, March 31, 1997 1997 -------- -------- Revolving lines of credit $136,785 $133,917 Other items 1,224 1,292 -------- -------- 138,009 135,209 Less current portion (464) (532) -------- -------- Long-term debt, net of current portion $137,545 $134,677 -------- -------- -------- -------- 8 9. INCOME TAXES Following are the approximate effective blended tax rates for significant jurisdictions: North America 40% Switzerland 22% Germany 64% United Kingdom 33% The above resulted in a worldwide effective blended tax rate of 40% for the quarter ended June 28, 1996. For the quarter ended June 27, 1997, no tax benefit has been provided with respect to any tax jurisdiction as it is currently not considered more likely than not that resulting deferred tax assets will be realized. 10. CONTINGENCIES Three original equipment manufacturers ("OEMs") filed lawsuits against Nu- kote International, Inc. ("NII") alleging that certain NII ink jet replacement cartridges, refill inks and packaging infringe their trademarks, trade dress and patents and alleging, among other things, unfair competition and misleading representations. The plaintiffs are seeking injunctive relief, monetary damages, court costs and attorney's fees. The complaint in one of the cases has been amended to name Nu-kote and Pelikan Produktions A.G. as defendants. All of the lawsuits are in the discovery stage, and in management's opinion the potential losses related to these cases are not reasonably estimable. All of the cases are being vigorously contested, and in each case the Company or NII has asserted affirmative defenses and counterclaims and has requested damages and affirmative injunctive relief. In one of the cases NII's Motion for Summary Judgment of the unenforceablilty of four of the plaintiff's utility patents was granted although a Motion for Reconsideration with respect to the ruling is pending before the court that granted the motion. On May 9, 1997 Daniel M. Kerrane, an officer and director of the Company, filed suit against the Company in Texas State District Court. He alleges that his Supplemental Employment Agreement with the Company entitled him to terminate his employment and receive a lump sum severance payment because the Company "substantially reduced" his authorities, powers and duties in April 1997. Mr. Kerrane is seeking damages of $8,000, and injunctive relief. The Company is vigorously defending this lawsuit. In addition, the Company is involved in various routine legal matters. In the opinion of management, all matters discussed above are covered by insurance or are without merit or the disposition is not anticipated to have a material effect on the Company's financial position; however, one or more of these matters could have a material effect on future quarterly or annual results of operations or cash flow when resolved. 9 In connection with Nu-kote's acquisition of the Office Supplies Division and the International Business Forms Division of Unisys Corporation ("Unisys"), Unisys agreed to retain all liabilities resulting from or arising out of any environmental conditions existing on or before January 16, 1987 at the Company's Rochester, Macedon and Bardstown facilities and, additionally, to indemnify the Company for such. State environmental agencies have alleged that environmental contamination exists at all three sites. To date Unisys has handled all remediation efforts related to these properties. In connection with Nu-kote's acquisition of the worldwide hardcopy supplies business of Pelikan, Pelikan agreed to indemnify Nu-kote for certain pre-closing environmental liabilities. The Company has found environmental contamination at former Pelikan facilities in Derry, Pennsylvania and Franklin, Tennessee, and has asserted a claim for indemnification. As a result of the indemnifications from Unisys and Pelikan, in the opinion of management, the ultimate cost to resolve these environmental matters will not have a material adverse effect on the Company's financial position, results of future operations or liquidity. This note contain various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934, which represent the Company's expectations or beliefs concerning the possible outcome of the various litigation matters described herein and estimates of the Company's liabilities associated with identified environmental matters. The Company cautions that the actual outcome of the various litigation matters could be affected by a number of factors beyond its control, including, without limitation, judicial interpretations of applicable laws, rules and regulations, the uncertainties and risks inherent in any litigation, particularly a jury trial, the nature and extent of any counter claims, and the scope of insurance coverage, and that the final resolution of such matters could differ materially from the Company's current evaluation of such matters. The Company further cautions that the statements regarding identified environmental matters are qualified by important factors that could cause the Company's actual liabilities to differ materially from those in the forward looking statements, including, without limitation, the following: (i) the actual nature and extent of contamination, if any; (ii) the remedial action selected; (iii) the actual cleanup level required; (iv) changes in regulatory requirements; (v) the ability of other responsible parties, if any, to pay their respective shares; and (vi) any insurance recoveries. 10 11. RESTRUCTURING EXPENSE Restructuring activities commenced during fiscal 1997 (the "1997 Restructuring") related primarily to the consolidation of impact product production into Scotland, Mexico and China; centralization of distribution primarily into Franklin, Tennessee and Duren, Germany; and the closure of one toner facility, and consolidation of toner manufacturing into Connellsville, Pennsylvania and Egg, Switzerland. Activity related to accrued restructuring costs for the 1997 Restructuring during the quarter ended June 27, 1997 is as follows: Amount Amount Accrued at Amount Current Accrued at Description of Beginning of Paid in Period End of Restructuring Expense Quarter Quarter Accrual Quarter --------------------- ------------ ------- -------- ---------- Quarter Ended June 27, 1997: Severance $1,204 $ 718 $ 940 $1,426 Lease cancellations 430 430 Facility maintenance and other 247 697 683 233 ------ ------ ------ ------ $1,881 $1,415 $1,623 $2,089 ------ ------ ------ ------ ------ ------ ------ ------
The Company estimates that an additional $3,400 of restructuring expenses will be recognized in the remainder of fiscal 1998. Most of this amount relates to expected severance and relocation costs related to continuing consolidation efforts. Management currently anticipates completion in fiscal 1998. During fiscal 1996, the Company substantially completed the merger of its operations with those of the Pelikan Hardcopy Division, which was acquired in February 1995. That plan included, among other things, the closure of the Company's manufacturing, distribution and administration facility in Bardstown, Kentucky and merger of its operations into the Pelikan Hardcopy Division's facility in Franklin, Tennessee; the termination of contract manufacturing and other contracts; closure of the Company's manufacturing facility in Deeside, Wales and merger of its operations with the Pelikan Hardcopy Division's operations in Scotland; consolidation of certain toner manufacturing operations of ICMI's Connellsville, Pennsylvania facility and the Pelikan Hardcopy Division's Derry, Pennsylvania facility; and consolidation of sales and administrative organizations of the two companies. The Company completed the merger activities in fiscal 1997. 11 Activity related to accrued restructuring costs for the Pelikan merger during the quarters ended June 28, 1996 is as follows: Amount Amount Accrued at Amount Accrued at Description of Beginning of Paid in End of Restructuring Expense Quarter Quarter Quarter --------------------- ------------ ------- ---------- Quarter Ended June 28, 1996: Severance $ 71 $ 71 $ 0 Lease cancellations 425 425 Facility maintenance and other 384 97 287 ---- ---- ---- $880 $168 $712 ---- ---- ---- ---- ---- ---- 12. NEW ACCOUNTING STANDARDS During March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which establishes standards for computing and presenting earnings per share. The disclosure requirements of SFAS No. 128 will be effective for the Company's financial statements in periods ending after December 15, 1997. The Company's analysis of this new standard indicates that the standard will not have a material impact on the Company's calculation of fully diluted earnings per share. During March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure", which establishes standards for disclosing information about an entity's capital structure. The disclosure requirements of SFAS No. 129 will be effective for the Company's financial statements in periods ending after December 15, 1997. During June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information". Preliminary analysis of these new standards by the Company indicates that the standards will not have a material impact on the Company. The standards are effective for financial statements for fiscal years beginning after December 15, 1997. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS QUARTER ENDED JUNE 27, 1997 COMPARED TO QUARTER ENDED JUNE 28, 1996 Net sales for the quarter ended June 27, 1997 were $79.7 million, a decline of $7.7 million (8.8%) over the quarter ended June 28, 1996. For the quarter ended June 27, 1997, sales by North American entities were $42.0 million, an increase of $0.3 million, as compared to sales in the previous year period. Sales by European entities declined $8.1 million, or 18.0%, as compared to the previous year period and were $36.8 million. Sales of impact products in North America were up slightly as compared to the previous year period. Sales of toner products in North America declined by nearly 20%, but the decline in sales of theses products was offset by increases in sales of ink jet and laser printer products. Approximately $0.9 million of the decline in sales in Europe was due to exchange rate fluctuations. The balance of the decline in sales in Europe was due largely to the continuing decline in sales of impact products of $5.0 million and an across the board decline in sales of non-impact products, principally in the German market place, of $2.2 million over the previous year period. Worldwide sales of non-impact supplies accounted for approximately 59% of total sales for the quarter ended June 27, 1997, compared to 57% of total sales in the quarter ended June 28, 1996. Sales of non-impact products as a percentage of worldwide sales increased largely because sales of impact products declined by $5.0 million (13.3%). In North America, sales of non-impact supplies amounted to $24.1 million in the quarter ended June 27, 1997, the same as in the previous year period, and represented 57% of total North American sales. Sales of non- impact supplies in Europe were $23.0 million in the quarter ended June 27, 1997 as compared to $25.8 million in the previous year period. Approximately $0.5 million of the decline in sales of non-impact products in Europe was due to exchange rate fluctuations. The balance of the decrease, $2.2 million, was due largely to a decline in sales of ink jet products in the German market place. Cost of sales were $63.9 million (80.2% of net sales) for the quarter ended June 27, 1997, compared to $62.2 million (71.2% of net sales) in the previous year period. Included in cost of sales for the quarter ended June 27, 1997 were $1.5 million (1.9% of net sales) of expenses resulting the transition of impact product production from the Company's German facility to the Company's facilities in Scotland, Mexico or China. In addition, gross margin was adversely impacted during the quarter by $1.9 million (2.4% of net sales), associated with increased customer allowances, rebates and outbound freight, principally in North America. 13 For the quarter ended June 27, 1997, research and development expenses amounted to $1.8 million, (2.2% of net sales), as compared to $2.6 million (2.9% of net sales ) in the previous year period. All of the decline in this expense category occurred in Europe where the Company has implemented an expense reduction program to maintain research and development expenses at approximately 2% of net sales. Selling, general and administrative expenses were $14.7 million in the quarter ended June 27, 1997 as compared to $17.4 million in the previous year period. All of the reduction in these expenses resulted from the Company's implementation of worldwide expense reduction programs. Restructuring expenses amounted to $1.6 million in the current period and were in line with previous projections. These expenses related primarily to: (1) consolidating impact product production into Scotland, Mexico and China; (2) centralizing distribution primarily into Franklin, Tennessee and Duren, Germany; and (3) closing one toner facility and consolidating toner manufacturing into Connellsville, Pennsylvania and Egg, Switzerland. Interest expense for the current fiscal quarter was $3.0 million, compared to $1.9 million for the previous year period. The increase is the result of higher outstanding borrowings and higher interest rates. For the quarter ended June 27, 1997, the Company provided a tax valuation allowance of approximately $2.4 million against certain deferred tax assets pursuant to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under the provisions of SFAS 109, the Company will recognize an income tax benefit when the deferred tax assets are actually realized or at such time as it is determined that realization of the deferred tax assets is more likely than not. The Company reported tax expense of $1.2 million in the previous year period. For the quarter ended June 27, 1997, the Company recognized a net loss of $6.0 million compared to net income of $1.8 million in the previous year period. The decrease in net income is directly attributable to the decrease in sales and the increased cost of goods sold as a percentage of sales combined with the restructuring charges and income tax valuation allowances discussed above. EFFECT OF CURRENCY EXCHANGE RATES AND EXCHANGE RATE RISK MANAGEMENT Because the Company conducts business in many countries, fluctuations in foreign currency exchange rates affect the Company's financial position and results of operations. It is the Company policy to monitor currency exposures and enter into hedging arrangements to manage the company's exposure to currency fluctuations. The Company reported $0.2 million in exchange losses in the quarter ended June 27, 1997 as compared to $0.9 million in exchange gains in the previous year period. 14 LIQUIDITY AND CASH FLOW For the quarter ended June 27, 1997 cash used by operations, primarily to fund increased inventory requirements amounted to $5.2 million. Capital expenditures, primarily related to manufacturing equipment were $1.4 million. As of August 4, 1997, borrowings outstanding under the Company's credit facilities amounted to $136.0 million, up $2.1 million from March 31, 1997. The Company had approximately $9.0 million available for future borrowings under the credit facilities. Management believes that working capital provided by operations and borrowings under the facilities will provide the Company with adequate cash flow to meet its obligations. However, if the Company fails to reduce its expenses as planned, incurs any unexpected costs, or fails to meet its revenue projections the Company could experience severe liquidity problems. In this regard it should be noted that the Company has been experiencing declining revenues for five of the last six fiscal quarters. If the Company experiences liquidity problems, it could be forced to delay its restructuring efforts which are critical to returning the Company to profitability, reduce its capital expenditures and/or reduce its research and development expenditures. Additionally, the Company could go into default under the bank loan agreements. No assurances can be given that the Company will be successful in efforts to address its cost structure issues or operate on a profitable basis in the long term. NEW ACCOUNTING STANDARDS During March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which establishes standards for computing and presenting earnings per share. The disclosure requirements of SFAS No. 128 will be effective for the Company's financial statements in periods ending after December 15, 1997. The Company's analysis of this new standard indicates that the standard will not have a material impact on the Company's calculation of fully diluted earnings per share. During March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure", which establishes standards for disclosing information about an entity's capital structure. The disclosure requirements of SFAS No. 129 will be effective for the Company's financial statements in periods ending after December 15, 1997. During June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information". Preliminary analysis of these new standards by the Company indicates that the standards will not have a material impact on the 15 Company. The standards are effective for financial statements for fiscal years beginning after December 15, 1997. CAUTIONARY STATEMENT The foregoing "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contains various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which represent the Company's expectations or beliefs concerning, among other things, future operating results and various components thereof and the adequacy of future operations to provide sufficient liquidity. The Company cautions that such matters necessarily involve significant risks and uncertainties that could cause actual operating results and liquidity needs to differ materially from such statements, including, without limitation, general economic conditions, product demand and industry capacity, competitive products and pricing, manufacturing efficiencies, new product development, availability of raw materials and critical manufacturing equipment, new plant startups and the regulatory and trade environment. 16 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS See Item 3 - Legal Proceedings in the registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997 and Note 10 of Notes to Consolidated Financial Statements for the three month periods ended June 27, 1997 and June 28, 1996 included elsewhere in this report. ITEM 2 - INAPPLICABLE ITEM 3 - DEFAULTS UPON SENIOR SECURITIES As of June 27, 1997, the Registrant was in technical default of its Amended and Restated Credit Agreement. The technical default involved the failure to meet certain financial covenants, for which the Registrant obtained waivers. On July 31, 1997 the Registrant entered into Second Amended and Restated Credit Agreements, as described in Item 5 below and in Note 8 of Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the fiscal year ended March 31, 1997, and is no longer in default upon its senior securities. ITEM 4 - INAPPLICABLE ITEM 5 - OTHER INFORMATION As reported in the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997, on July 31, 1997 the Registrant entered into Amended and Restated Credit Agreements with its lenders. These agreements are attached herein as Exhibits 10.1 through 10.5. 17 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit 10.1 - Second Amended and Restated Credit Agreement dated as of July 31, 1997 by and among Nu-kote International, Inc. as borrower, Nu-kote Holding, Inc. as Guarantor, the lenders listed on the signature page thereto as Lenders, and NationsBank of Texas, N.A. as Administrative Agent and Collateral Agent. Exhibit 10.2 - L6,275,000 - Third Amended and Restated Revolving Credit Agreement dated July 31, 1997 between Pelikan Scotland Limited as borrower, Barclays Bank PLC as Agent, NationsBank of Texas, N.A. as Collateral Agent and NationsBank of Texas, N.A. as Documentation Agent and Others. Exhibit 10.3 - CHF 50,000,000 - Third Amended and Restated Revolving Credit Agreement dated July 31, 1997 between Pelikan Produktions AG and Pelikan Hardcopy (International) AG as borrower, Barclays Bank PLC as Agent, NationsBank of Texas, N.A. as Collateral Agent and NationsBank of Texas, N.A. as Documentation Agent and Others. Exhibit 10.4 - Warrant Agreement between Nu-kote Holding, Inc. and the Warrantholders on the signature page thereof, dated as of July 31, 1997. Exhibit 10.5 - Registration Rights Agreement dated as of July 31, 1997 by and among Nu-kote Holding, Inc. and the Warrantholders listed on the signature page thereto. Exhibit 11.1 - Statement regarding computation of per share earnings. Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K. The registrant filed no reports on Form 8-K during the quarterly period ended June 27, 1997. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date August 8, 1997 /s/ Patrick E. Howard --------------------- ---------------------------------- Patrick E. Howard Chief Executive Officer and Chief Operating Officer Date August 8, 1997 /s/ Anthony G. Schmeck --------------------- ---------------------------------- Anthony G. Schmeck Senior Vice President, Finance Corporate Controller and Secretary 19 EX-10.1 2 EX-10.1 ============================================================================== SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JULY 31, 1997 by and among NU-KOTE INTERNATIONAL, INC. as Borrower, NU-KOTE HOLDING, INC. as Guarantor, THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF, as Lenders, BARCLAYS BANK PLC, as Documentation Agent and NATIONSBANK OF TEXAS, N.A. as Administrative Agent and Collateral Agent ============================================================================== NU-KOTE INTERNATIONAL, INC. NU-KOTE HOLDING, INC. CREDIT AGREEMENT Dated as of July 31, 1997 TABLE OF CONTENTS PAGE ---- SECTION 1. DEFINITIONS 1.1 Certain Defined Terms...................................... 2 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement; Calculations; Computations... 23 1.3 Other Definitional Provisions.............................. 24 SECTION 2. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS AND REVOLVING CREDIT LOANS 2.1 Revolving Credit Loans..................................... 24 2.2 Interest on the Revolving Credit Loans..................... 27 2.3 Fees....................................................... 28 2.4 Prepayments and Payments of Revolving Credit Loans; Reductions in Revolving Credit Loan Commitments............ 29 2.5 Use of Proceeds............................................ 32 2.6 Capital Adequacy Adjustment................................ 33 2.7 Letters of Credit.......................................... 34 2.8 Tax Certificates........................................... 40 SECTION 3. CONDITIONS TO REVOLVING CREDIT LOANS AND LETTERS OF CREDIT 3.1 Conditions to Initial Revolving Credit Loans and Letters of Credit.................................................. 41 3.2 Conditions to All Revolving Credit Loans................... 46 3.3 Conditions to Letters of Credit............................ 47 SECTION 4. REPRESENTATIONS AND WARRANTIES 4.1 Organization, Powers, Good Standing, Business and Subsidiaries............................................... 48 4.2 Authorization of Borrowing, etc. .......................... 48 4.3 Financial Condition........................................ 49 4.4 No Material Adverse Change; No Stock Payments.............. 50 4.5 Title to Properties; Liens................................. 50 4.6 Litigation; Adverse Facts.................................. 50 4.7 Payment of Taxes........................................... 51 4.8 Materially Adverse Agreements; Performance of Agreements... 51 4.9 Governmental Regulation.................................... 51 4.10 Securities Activities...................................... 52 4.11 Employee Benefit Plans..................................... 52 4.12 Disclosure................................................. 53 4.13 Licenses, Permits and Authorizations....................... 53 4.14 Intangible Property........................................ 53 4.15 Environmental Matters...................................... 54 SECTION 5. AFFIRMATIVE COVENANTS 5.1 Financial Statements and Other Reports..................... 55 5.2 Corporate Existence, etc................................... 59 5.3 Payment of Taxes and Claims; Tax Consolidation............. 59 5.4 Maintenance of Properties; Insurance; Sales of Certain Assets..................................................... 60 5.5 Inspection; Lender Meeting................................. 60 5.6 No Further Negative Pledges................................ 61 5.7 Compliance with Laws, etc.................................. 61 5.8 Environmental Disclosure and Inspection.................... 61 5.9 Hazardous Materials; Remedial Action....................... 62 5.10 Further Assurances; New Subsidiaries; Intellectual Property; Landlord Waivers................................. 63 5.11 Notice of Asset Transfers.................................. 64 5.12 Deposit Accounts........................................... 65 5.13 Additional Collateral...................................... 65 5.14 Delivery of Greif Shares................................... 66 SECTION 6. NEGATIVE COVENANTS 6.1 Indebtedness............................................... 66 6.2 Liens...................................................... 68 6.3 Investments................................................ 69 6.4 Contingent Obligations..................................... 72 6.5 Restricted Junior Payments................................. 73 6.6 Financial Covenants........................................ 74 6.7 Restriction on Fundamental Changes......................... 77 6.8 Sales and Leasebacks....................................... 80 6.9 Sale or Discount of Receivables............................ 80 6.10 Transactions with Shareholders, Affiliates and Subsidiaries............................................... 80 6.11 Disposal of Subsidiary Stock............................... 81 6.12 Conduct of Business........................................ 81 6.13 Restructuring and Affiliate Reorganizations................ 82 SECTION 7. GUARANTY OF HOLDING 7.1 Guaranty by Holding........................................ 82 7.2 Terms of Guaranty.......................................... 82 SECTION 8. EVENTS OF DEFAULT 8.1 Failure to Make Payments when Due.......................... 85 8.2 Default in Other Agreements................................ 85 8.3 Breach of Certain Covenants................................ 86 8.4 Breach of Warranty......................................... 86 8.5 Other Defaults Under Agreement or Loan Documents........... 86 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. ..... 86 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. ....... 87 8.8 Judgments and Attachments.................................. 87 8.9 Dissolution................................................ 88 8.10 ERISA...................................................... 88 8.11 Withdrawal Liability Under Multiemployer Plan.............. 89 8.12 Invalidity of Guaranties................................... 89 8.13 Change of Control.......................................... 89 8.14 Impairment of Collateral................................... 90 8.15 Eurocurrency Credit Agreement.............................. 90 8.16 ERISA Lien................................................. 90 SECTION 9. AGENT 9.1 Appointment................................................ 91 -ii- 9.2 Powers; General Immunity................................... 92 9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness.............................. 93 9.4 Right to Indemnity......................................... 94 9.5 Registered Persons Treated as Owner........................ 94 9.6 Collateral Documents; Appointment of Collateral Agent; Successor Collateral Agent................................. 94 9.7 Successor Agents........................................... 95 SECTION 10. MISCELLANEOUS 10.1 Representation of Lenders.................................. 96 10.2 Assignments and Participations in Revolving Credit Loans; Letters of Credit.......................................... 96 10.3 Expenses................................................... 98 10.4 Indemnity.................................................. 98 10.5 Set Off.................................................... 99 10.6 Ratable Sharing............................................ 99 10.7 Amendments and Waivers..................................... 100 10.8 Notices.................................................... 101 10.9 Survival of Warranties and Certain Agreements.............. 101 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative...... 102 10.11 Severability............................................... 102 10.12 Obligations Several; Independent Nature of Lenders' Rights. 102 10.13 Headings................................................... 102 10.14 Applicable Law............................................. 102 10.15 Successors and Assigns..................................... 102 10.16 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial................................................. 103 10.17 Confidentiality............................................ 103 10.18 Interest and Charges....................................... 104 10.19 Amendment, Restatement, Extension, Renewal and Increase.... 104 10.20 Counterparts; Effectiveness................................ 105 10.21 Waivers.................................................... 105 -iii- EXHIBITS I FORM OF NOTICE OF BORROWING II FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT III FORM OF OPINIONS OF COMPANY'S COUNSEL IV FORM OF OPINION OF WINSTEAD SECHREST & MINICK P.C. V FORM OF CONFIDENTIALITY AGREEMENT VI FORM OF COMPLIANCE CERTIFICATE VII FORM OF ASSIGNMENT AGREEMENT VIII FORM OF REVOLVING CREDIT NOTE IX FORM OF ACKNOWLEDGEMENT -iv- SCHEDULES 1.1 LENDER'S ORIGINAL REVOLVING CREDIT COMMITMENTS AND PRO RATA SHARES 4.1-C SUBSIDIARIES 4.5 LEASED LOCATIONS 4.6 EXISTING LITIGATION 4.14 TRADEMARKS AND TRADE NAMES 5.13 SUBSIDIARIES TO DELIVER COLLATERAL 6.3 EXISTING INVESTMENTS 6.7B PROPOSED CLOSED FACILITIES -v- NU-KOTE INTERNATIONAL, INC. NU-KOTE HOLDING, INC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of July 31, 1997, and entered into by and among NU-KOTE HOLDING, INC., a Delaware corporation ("Holding"), NU-KOTE INTERNATIONAL, INC., a Delaware corporation ("Company"), THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (together with each financial institution that may become a party to this Credit Agreement as a Lender as herein provided, referred to herein individually as a "Lender" and collectively as "Lenders"), BARCLAYS BANK PLC, in its capacity as documentation agent ("Documentation Agent"), and NATIONSBANK OF TEXAS, N.A., as administrative agent for Lenders (hereinafter, in such capacity, together with any successors thereto in such capacity, referred to as "Agent") and as collateral agent for Lenders (hereinafter, in such capacity, together with any successors thereto in such capacity, referred to as "Collateral Agent"). R E C I T A L S WHEREAS, Holding, Company, Lenders, Documentation Agent and Agent were parties to that certain Credit Agreement, dated as of February 24, 1995 (said Credit Agreement, as amended or modified, the "Original Credit Agreement"); WHEREAS, Holding, Company, Lenders, Collateral Agent, Documentation Agent and Agent heretofore restructured, increased, extended, and renewed the indebtedness under the Original Credit Agreement to provide for one revolving line of credit in the aggregate amount of $150,000,000 pursuant to that certain Amended and Restated Credit Agreement dated as of October 15, 1996 (said Amended and Restated Credit Agreement, as amended or modified prior to the date hereof, the "First Restatement"); and WHEREAS, Holding, Company, Lenders, Collateral Agent, Documentation Agent and Agent desire to restructure the indebtedness under the First Restatement as hereinafter set forth. A G R E E M E N T NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Holding, Company, Lenders, Agent, Documentation Agent and Collateral Agent agree that (i) all obligations under the First Restatement, as modified herein, shall, after the Closing Date, be evidenced by the Notes (as defined herein), this Agreement and the other Domestic Loan Documents, and shall be secured by, among other things, the Collateral as granted pursuant to the Collateral Documents (as defined herein) and (ii) the First Restatement shall be amended and restated in its entirety as follows: SECTION 1. DEFINITIONS 1.1 Certain Defined Terms The following terms used in this Agreement shall have the following meanings: "ACKNOWLEDGEMENT" to be executed and delivered by Holding, Company, ICMI, Future Graphics, Nu-kote Imaging, and Nu-kote Imperial on the Closing Date, substantially in the form annexed hereto as EXHIBIT IX, as such may be amended, amended and restated, supplemented or otherwise modified from time to time. "AFFILIATE," as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "AGENT" has the meaning assigned to that term in the introductory paragraph to this Agreement. "AGGREGATE AMOUNTS DUE" has the meaning assigned to that term in subsection 10.6. "AGREEMENT" means this Second Amended and Restated Credit Agreement as it may be amended, amended and restated, supplemented or otherwise modified from time to time. "APPLICABLE LAW" means (a) in respect of any Person, all provisions of constitutions, statutes, rules, regulations and orders of governmental bodies or regulatory agencies applicable to such Person and its properties, including, without limiting the foregoing, all orders and decrees of all courts and arbitrators in proceedings or actions to which the Person in question is a party, and (b) in respect of contracts relating to interest or finance charges that are made or performed in the State of Texas, "Applicable Law" shall mean the laws of the United States of America, including without limitation 12 USC 85 and 86, as amended from time to time, and any other statute of the United States of America now or at any time hereafter prescribing the maximum rates of interest on loans and extensions of credit, and the laws of the State of Texas, including, without limitation, Article 5069-1.04, Title 79, Revised Civil Statutes of Texas, 1925, as amended ("Art. 1.04"), and any other statute of the State of Texas now or at any time hereafter prescribing maximum rates of interest on loans and extensions of credit; provided that the parties hereto agree that the provisions of Chapter 15, Title 79, Revised Civil Statutes of Texas, 1925, as amended, shall not apply to Revolving Credit Loans, this Agreement, or any other Loan Documents. "ASSET SALE" means the sale, lease, assignment, exchange, disposition or other transfer for value by Holding, Company or any Subsidiary (including, without limitation, any sale/leaseback) to any Person other than Holding, Company or any Subsidiary thereof of (i) any of the stock of any of Holding's Subsidiaries, (ii) all or substantially all of the assets of any division or line of business of Holding, Company or any Subsidiary, or (iii) any other assets or rights, or related group of assets or rights, of Holding, Company or any Subsidiary. "ASSET TRANSFER" means (i) the transfer of property or assets of Company or any of its Subsidiaries from one state, jurisdiction or country to another state, jurisdiction or country or (ii) the -2- sale, lease, assignment, exchange, disposition or other transfer for value or otherwise (including by way of dividend or distribution on its capital stock) by Holding, Company or any Subsidiary (including, without limitation, any sale/leaseback) to Holding, Company or any Subsidiary of (a) all or substantially all of the assets of any division or line of business of Holding, Company or any Subsidiary or (b) any other assets or rights, or related group of assets or rights, of Holding, Company or any Subsidiary. "BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy" from time to time in effect, or any successor statute. "BASE RATE" means the sum of, from the date hereof through and including June 30, 1998, one percent (1%) per annum, and thereafter two percent (2%) per annum, PLUS the greater of: (i) the rate that NationsBank announces from time to time as its prime lending rate (which rate may not necessarily be the lowest or best rate actually charged to any customer), as in effect from time to time, or (ii) the rate publicly announced from time to time as the Federal Funds Rate, as in effect from time to time, PLUS .50% per annum. "BUSINESS DAY" means any day excluding Saturday, Sunday and any day which either is a legal holiday under the laws of either the State of Texas or the State of New York or is a day on which banking institutions located in either state are authorized or required by law or other governmental action to close. "CAPITAL LEASE," as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "CASH EQUIVALENTS" means (i) marketable securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (ii) demand deposits, certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers acceptances, each with maturities of one year or less from the date of the acquisition thereof, of any Lender identified on SCHEDULE 1.1 or any other commercial bank having capital and surplus in excess of $500,000,000 ("QUALIFYING BANKS"), (iii) commercial paper of the Qualifying Banks or any of their Affiliates or of a domestic issuer rated at least A-1 by Standard & Poor's Ratings Group, a Division of Mc-Graw Hill, Inc., a New York corporation, or any successor thereto ("S&P"), or at least P-1 by Moody's Investors Service, Inc., or any successor thereto ("MOODY'S"); PROVIDED, that if such commercial paper is rated by both S&P and Moody's, such ratings shall be at least A-1 and P-1, respectively and (iv) with respect to investments by a Eurocurrency Borrower, (a) securities issued or fully guaranteed or insured by the government of the United Kingdom, Switzerland, Scotland or Germany or any agency thereof or any of those exempted persons referred to in paragraphs 2, 5, 6, 8, 12 and 13 of Schedule 2 to the Banking Act 1987, (b) certificates of deposit, sterling time deposits, overnight bank deposits and bankers acceptances, each with maturities of one year or less from the date of the acquisition thereof, of any Lender identified on SCHEDULE 1.1 or any Qualifying Bank (but using the equivalent of $500,000,000 in the case of a bank whose capital is not denominated in Dollars), (c) commercial paper of the Qualifying Banks or any of their Affiliates or of a United Kingdom, Switzerland, Scotland or Germany issuer rated at least A-1 by S&P or at least P-1 by Moody's, subject to the proviso referred to in (iii) above or a comparable rating of a foreign rating agency and (d) investments of the type described in clauses (i) through (iii) above. "CERTIFICATE OF EXEMPTION" has the meaning assigned to that term in subsection 2.8. "CLOSING DATE" means the date on or before July 31, 1997 on which the initial Revolving Credit Loans are made and the conditions to initial Revolving Credit Loans are satisfied. -3- "COLLATERAL" means all property made subject to a Lien pursuant to the Collateral Documents and/or the Eurocurrency Security Documents. "COLLATERAL AGENT" means NationsBank, in its capacity as collateral agent under subsection 9.6 and the Collateral Documents, or any successor thereto appointed in accordance with Section 9.6 hereof. "COLLATERAL DOCUMENTS" means the Company Security Documents, the Holding Security Documents, the Subsidiary Security Documents, the Acknowledgement and all other instruments or documents heretofore, now or hereafter granting Liens on property of Holding, Company or any Subsidiary to Collateral Agent, for the benefit of Agent and Lenders and for the benefit of the Eurocurrency Administrative Agent and the Eurocurrency Lenders. "COMMITMENT FEE PERCENTAGE" means 0.750% per annum. "COMMITMENT FEES" has the meaning assigned to that term in subsection 2.3E. "COMPANY" has the meaning assigned to that term in the introductory paragraph to this Agreement. "COMPANY PATENT SECURITY AGREEMENT" means the Patent Security Agreement executed and delivered by Company as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT XI thereto, as amended as of October 15, 1996, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "COMPANY PLEDGE AGREEMENT" means, collectively, the Pledge Agreement executed and delivered by Company as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT IXB thereto, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time, and such other pledge agreements executed and delivered by Company as of February 24, 1995 with respect to the capital stock of any Foreign Subsidiary, as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time. "COMPANY SECURITY AGREEMENT" means the Security Agreement executed and delivered by Company as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT VII thereto, as amended as of October 15, 1996, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "COMPANY SECURITY DOCUMENTS" means all of the Company Security Agreement, the Company Pledge Agreement, the Company Trademark Pledge and the Company Patent Security Agreement. "COMPANY TRADEMARK PLEDGE" means the Trademark Security Agreement executed and delivered by Company as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT VIII thereto, as amended as of October 15, 1996, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "COMPLIANCE CERTIFICATE" means a certificate substantially in the form annexed hereto as EXHIBIT VI delivered to Lenders by Holding and Company pursuant to subsection 5.1(v). "CONSOLIDATED EBITDAR" means, for any period, the sum (without duplication) of -4- (i) Consolidated Net Income, (ii) provisions for taxes based on income, (iii) Consolidated Interest Expense, (iv) to the extent Consolidated Net Income has been reduced thereby, amortization expense, depreciation expense and other non-cash expenses, (v) losses on Asset Sales, (vi) extraordinary losses, (vii) Restructuring Charges incurred, including without limitation nonrecurring charges included in the cost of goods sold and selling, general and administrative, with respect to European operations, and (viii) other non-cash items reducing Consolidated Net Income (excluding write-offs of Inventory and accounts receivable) LESS the sum (without duplication) of (w) gains on Asset Sales (net of the tax impact thereof), (x) Consolidated Interest Income, (y) extraordinary gains (net of the tax impact thereof), and (z) other non-cash items increasing Consolidated Net Income, all as determined on a consolidated basis for Holding and its Subsidiaries in conformity with GAAP. "CONSOLIDATED FUNDED DEBT" means, as of any date of determination, the sum, without duplication, of the total debt owed to the Lenders and the Eurocurrency Lenders under the Loan Documents. "CONSOLIDATED GAAP CAPITAL EXPENDITURES" means, for any period, the sum of all expenditures (whether paid in cash or accrued as liabilities) by Holding, Company and its Subsidiaries during that period that are for items that would be classified as "property, plant and equipment" or comparable items on the consolidated balance sheet of Holding and its Subsidiaries in conformity with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest expense (excluding amortization of loan restructuring fees and expenses), whether paid or accrued as liabilities, with respect to Consolidated Funded Debt determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST INCOME" means, for any period, total interest income earned by Holding and its Subsidiaries on cash or Cash Equivalents for such period. "CONSOLIDATED NET INCOME" means, for any period, the net income (or loss) of Holding and its Subsidiaries, after provisions for taxes and extraordinary items, on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; PROVIDED that there shall be excluded therefrom, the income (or loss) of any Person that becomes a Subsidiary of Holding or is merged into or consolidated with Holding or any of its Subsidiaries the assets of which are acquired by Holding or any of its Subsidiaries, to the extent such income (or loss) accrued prior to the date of such merger, consolidation or acquisition. "CONSOLIDATED NET CURRENT ASSETS" means, as of any date of determination, the sum of (i) all accounts receivable of Holding and its Subsidiaries on a consolidated basis which are not more than 90 days past due, PLUS (ii) all inventory of Holding and its Subsidiaries on a consolidated basis net of all reserves therefor. "CONSOLIDATED TANGIBLE NET WORTH" means, as at any date of determination, the excess of Consolidated Total Assets over Consolidated Total Liabilities, PLUS or MINUS any foreign currency translation adjustments, of Holding and its Subsidiaries on a consolidated basis in conformity with GAAP, MINUS goodwill, patents, trademarks, trade names, copyrights, franchises, and all similar assets that would be classified as intangible assets. "CONSOLIDATED TOTAL ASSETS" means, as of any date of determination, all property, whether real, personal, tangible, intangible or otherwise, which in accordance with GAAP would be included in determining total assets as shown on the assets portion of a consolidated balance sheet of Holding and its Subsidiaries. -5- "CONSOLIDATED TOTAL LIABILITIES" means, as of any date of determination, the total liabilities which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a consolidated balance sheet of Holding and its Subsidiaries. "CONTINGENT OBLIGATION," as applied to any Person, means, without duplication, any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof or (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings. Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) any interest rate or currency agreement and (c) any liability of such Person for the obligations of another through any agreement (contingent or otherwise) (x) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), (y) to maintain the solvency or any balance sheet item, level of income or financial condition of another, or (z) to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, if in the case of any agreement described under subclauses (x) or (y) of this sentence the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation to the extent so guaranteed or otherwise supported. "CONTRACTUAL OBLIGATION," as applied to any Person, means any provision of any material security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any material amount of its properties is bound or to which it or any material amount of its properties is subject. "CURRENT RATIO" means, as of any date of determination, the ratio of (i) all amounts which, in conformity with GAAP, would be included as current assets on a consolidated balance sheet of Holding and its Subsidiaries, to (ii) all amounts which, in conformity with GAAP, would be included as current liabilities on a consolidated balance sheet of Holding and its Subsidiaries on a consolidated basis (excluding Indebtedness to Lenders). "DISCONTINUED OPERATIONS" means the discontinued operations consisting of Interfas Holding S.A., a corporation organized under the laws of France and a Subsidiary of Holding, Interfas S.A., a corporation organized under the laws of France and a Subsidiary of Holding, Nu-kote Canada, Inc., a corporation organized under the laws of Canada and a Subsidiary of Holding, Nu-kote Canada Holding, Inc., a corporation organized under the laws of Canada and a Subsidiary of Holding, N-K Interface Limited, a corporation organized under the laws of England and a Subsidiary of Holding, Nu-kote Quality Imaging GmbH, a corporation organized under the laws of Germany and a Subsidiary of Holding, Nu-Kote Italia s.r.l., a corporation organized under the laws of Italy and a Subsidiary of Holding, Nu-kote de Colombia S.A., a corporation organized under the laws of Colombia and a Subsidiary of Company, Mercantiles S.A., a corporation organized under the laws of Colombia and a Subsidiary of Nu-Kote de Colombia S.A., and Compania Manufactura Onix S.A., a corporation organized under the laws of Colombia and a Subsidiary of Nu-kote de Colombia S.A. "DOCUMENTARY LETTERS OF CREDIT" means a commercial documentary Letter of Credit under -6- which Issuing Lender agrees to make payments for the account of Company, on behalf of the Company or any Domestic Subsidiary, in respect of the obligation of Company or any Domestic Subsidiary in connection with the purchase of goods or services in the ordinary course of business. "DOCUMENTATION AGENT" has the meaning assigned to that term in the introductory paragraph to this Agreement. "DOLLAR EQUIVALENT" shall mean, with respect to an amount of any foreign currency on any date, the amount of Dollars that may be purchased with such amount of such foreign currency at the spot exchange rate with respect to such foreign currency on such date. "DOLLARS" and the sign "$" means the lawful money of the United States of America. "DOMESTIC LOAN DOCUMENTS" means this Agreement (including the Holding Guaranty set forth herein), the Notes, the Letters of Credit, any Interest Hedge Agreements entered into with any Lender, the Warrant Agreement, the Registration Rights Agreement and the Collateral Documents. "DOMESTIC SUBSIDIARY" means a Subsidiary of Holding organized under the laws of any state within the United States of America or the District of Columbia. "ELIGIBLE ASSIGNEE" means (a) a commercial bank organized under the laws of the United States of America, or any State thereof, and having a combined capital and surplus in excess of $50,000,000, (b) a commercial bank organized under the laws of any other country which is a member of OECD, or a political subdivision of any such country, and having a combined capital and surplus in excess of $50,000,000; PROVIDED THAT such bank is acting through a branch or agency located in (x) the United States or the country in which it is organized or another country which is also a member of the OECD or (y) the Cayman Islands, (c) the central bank of any country which is a member of the OECD, (d) a commercial finance company or finance subsidiary of a corporation organized under the laws of the United States of America, or any State thereof, and having a combined capital and surplus in excess of $50,000,000, (e) an insurance company organized under the laws of the United States of America (or any State thereof) and having a combined capital and surplus in excess of $50,000,000, (f) a savings bank or savings and loan association organized under the laws of the United States of America, or any State thereof, and having a combined capital and surplus in excess of $50,000,000, (g) a pension fund, mutual fund, or other institutional lender or investor, or (h) any Lender party to this Agreement on the Closing Date or any Affiliate of any thereof. "EMPLOYEE BENEFIT PLAN" means any Pension Plan, any employee welfare benefit plan or any other employee benefit plan which is described in Section 3(3) of ERISA and which is maintained, or contributed to, by Company or any ERISA Affiliate of Company for employees of Company and any ERISA Affiliate of Company. "ENVIRONMENTAL CLAIM" means any written accusation, allegation, notice of violation, claim, demand, abatement, compliance or other order or direction (conditional or otherwise) by any governmental authority or any Person for personal injury (including sickness, disease or death), tangible or intangible property damage, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restrictions, resulting from or based upon (i) the existence, or the continuation of the existence, of a Release (whether sudden or non-sudden or accidental or non-accidental), of, or exposure to, any Hazardous Material, in, into or onto the environment at, in, by, from or related to any Facility, (ii) the transportation, storage, treatment or disposal of Hazardous Materials in connection with the operation of any Facility, or (iii) the violation, or alleged violation, of any statutes, ordinances, orders, rules, regulations, permits or licenses of or -7- from any governmental authority, agency or court relating to Hazardous Materials with respect to the Facilities. "ENVIRONMENTAL LAWS" means all domestic and foreign laws relating to fines, orders, injunctions, penalties, damages, contribution, cost recovery compensation, losses or injuries resulting from the Release or threatened Release of Hazardous Materials and to the generation, storage, transportation, or disposal of Hazardous Materials, in any manner applicable to Holding or any of its Subsidiaries or any of their respective Facilities, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Hazardous Material Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), the Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 ET SEQ.), each as amended or supplemented, and any analogous future or present local, state and federal statutes and regulations promulgated pursuant thereto, each as in effect as of the date of determination. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. "ERISA AFFILIATE", as applied to any Person, means any trade or business (whether or not incorporated) that is a member of a group of which that Person is a member and that is under common control with that Person within the meaning of the regulations promulgated under Sections 414(b) and (c) of the Internal Revenue Code. "EUROCURRENCY ADMINISTRATIVE AGENT" means Barclays Bank PLC in its capacity as agent under the Eurocurrency Credit Agreements; PROVIDED that "Eurocurrency Administrative Agent" shall also include any successor of Eurocurrency Administrative Agent pursuant to the Eurocurrency Credit Agreements. "EUROCURRENCY BORROWER" means each of Produktions, Pelikan Scotland, Pelikan Hardcopy, and any other Foreign Subsidiary that is a borrower under any Eurocurrency Credit Agreement. "EUROCURRENCY COLLATERAL AGENT" means NationsBank of Texas, N.A. in its capacity as collateral agent under the Eurocurrency Credit Agreements, and any successor thereto. "EUROCURRENCY CREDIT AGREEMENTS" means, collectively, the Swiss Facility Agreement and the U.K. Facility Agreement, as each may have been or may be amended, amended and restated, supplemented or otherwise modified from time to time. "EUROCURRENCY DOCUMENTATION AGENT" means NationsBank of Texas, N.A., in its capacity as documentation agent under the Eurocurrency Credit Agreements, and any successor thereto. "EUROCURRENCY GUARANTIES" means the "Nu-kote Guarantees" as defined in the Eurocurrency Credit Agreements. "EUROCURRENCY GUARANTY OBLIGATIONS" means all obligations of Holding, Company and the Subsidiaries under the Eurocurrency Guaranties. "EUROCURRENCY LENDER" means any lender under any Eurocurrency Credit Agreement. -8- "EUROCURRENCY LOAN" means one or more of the Advances (as defined below) made under any Eurocurrency Credit Agreement. For purposes of this definition, the term "Advance" shall have the meaning ascribed thereto in each such Eurocurrency Credit Agreement. "EUROCURRENCY LOAN DOCUMENTS" means the Eurocurrency Credit Agreements, the Eurocurrency Security Documents, any Interest Hedge Agreements entered into with any Eurocurrency Lender, and the Eurocurrency Guaranties. "EUROCURRENCY SECURITY DOCUMENTS" means the "Security Documents" as defined in the Eurocurrency Credit Agreements. "EVENT OF DEFAULT" means each of the events set forth in Section 8. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "EXCLUDED TAXES" means all taxes imposed on or by reference to the receipts, income or profit of any Lender or its applicable lending offices and all franchise taxes, taxes on doing business or taxes measured by capital or net worth imposed on any Lender or its applicable lending office, in each case, imposed: (i) by the jurisdiction in which the applicable lending office or other branch of such Lender is located or in which such Lender is organized or has its principal or registered office; (ii) by reason of any connection between the jurisdiction imposing such tax and such Lender other than a connection arising solely from this Agreement or any transaction contemplated hereby; (iii) by the United States of America or any political subdivision thereof or therein including without limitation, branch profits taxes imposed by the United States or similar taxes imposed by any subdivision thereof; or (iv) by reason of the failure of any Lender to provide accurate documentation required to be provided by such Lender pursuant to subsection 2.8 hereof. "EXECUTIVE OFFICER" of any Person means the Chairman of the Board, President, Chief Operating Officer, Chief Financial Officer, any Executive Vice President, Senior Vice President-Finance, Corporate Controller, Treasurer or General Counsel of such Person. "EXISTING LETTERS OF CREDIT" means any Letter of Credit existing on the Closing Date which was an outstanding Letter of Credit under the First Restatement. "EXISTING SELLER NOTES" means (i) the 10% Subordinated Promissory Note due February 24, 1997 in the original principal amount of $665,000, dated February 24, 1992, issued by Company in favor of Robert W. Blair and (ii) the 10% Subordinated Promissory Note due February 24, 1997 in the original principal amount of $285,000, dated February 24, 1992, issued by Company in favor of John W. Ridenour. "FACILITIES" means any and all real property (including all buildings, fixtures or other improvements located thereon) owned, leased or operated by Holding, Company or any Subsidiary. -9- "FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of Dallas, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. "FIRST RESTATEMENT" has the meaning assigned to that term in the Recitals to this Agreement. "FISCAL YEAR" means the fiscal year of Holding and its Subsidiaries. "FOREIGN LENDER" shall have the meaning assigned that term in subsection 2.8. "FOREIGN SUBSIDIARY" means a Subsidiary of Holding that is not organized under the laws of any state within the United States of America or the District of Columbia. "FUNDING DATE" means the date of the funding of a Revolving Credit Loan. "FUTURE GRAPHICS" means Future Graphics, Inc., a California corporation and a wholly-owned Subsidiary of Company. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncement of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination. For purposes of certain calculations, GAAP shall be modified by the requirements set forth in subsection 1.2. "GERMAN ASSET TRANSFER" means any Asset Transfer involving fixtures, machinery and equipment in which such assets are located in Germany immediately before the Asset Transfer and are located in Switzerland or in the United Kingdom immediately after the Asset Transfer. "GOVERNMENT ACTS" has the meaning assigned thereto in subsection 2.7H. "GREIF" means Greif-Werke GmbH, a German limited liability company and wholly-owned Subsidiary of Company. "HARDCOPY DEUTSCHLAND" means Pelikan Hardcopy Deutschland GmbH, a German limited liability company and wholly-owned Subsidiary of Greif. "HAZARDOUS MATERIALS" means (i) any oil, petroleum or petroleum derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any hazardous wastes or substances, any toxic wastes or substances or any other pollutants, which cause any Facility to be in violation of any Environmental Laws; (ii) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, or any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million; and (iii) any chemical, material or substance defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous waste", "restricted hazardous waste", or "toxic substances" or words of similar import under any applicable local, state or federal law or under the -10- regulations adopted or publications promulgated pursuant thereto, including, without limitation, the statutes referenced in the definition of "Environmental Laws." "HIGHEST LAWFUL RATE" means at the particular time in question the maximum rate of interest which, under Applicable Law, the Lenders are then permitted to charge on the Obligations. If the maximum rate of interest which, under Applicable Law, Lenders are permitted to charge on the Obligations shall change after the date hereof, the Highest Lawful Rate shall be automatically increased or decreased, as the case may be, from time to time as of the effective time of each change in the Highest Lawful Rate without notice to Company. For purposes of determining the Highest Lawful Rate under the Applicable Law of the State of Texas, the applicable rate ceiling shall be (a) the indicated rate ceiling described in and computed in accordance with the provisions of Section (a)(1) of Art. 1.04, or (b) if the parties subsequently contract as allowed by Applicable Law, the quarterly ceiling or the annualized ceiling computed pursuant to Section (d) of Art. 1.04; provided, however, that at any time the indicated rate ceiling, the quarterly ceiling or the annualized ceiling shall be less than 18% per annum or more than 24% per annum, the provisions of Sections (b)(1) and (2) of said Art. 1.04 shall control for purposes of such determination, as applicable. "HOLDING" has the meaning assigned to that term in the introductory paragraph to this Agreement. "HOLDING COMMON STOCK" means the common stock and non-voting common stock of Holding, par value $.01 per share. "HOLDING GUARANTY" means the guaranty of Holding set forth in Section 7. "HOLDING PATENT SECURITY AGREEMENT" means the Patent Security Agreement executed and delivered by Holding as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT XI thereto, as amended as of October 15, 1996, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "HOLDING PLEDGE AGREEMENT" means the Pledge Agreement executed and delivered by Holding as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT IXA thereto, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "HOLDING SECURITY AGREEMENT" means the Security Agreement executed and delivered by Holding as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT XVII thereto, as amended as of October 15, 1996, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "HOLDING SECURITY DOCUMENTS" means all of the Holding Guaranty, the Holding Patent Security Agreement, the Holding Pledge Agreement, the Holding Security Agreement and the Holding Trademark Pledge. "HOLDING TRADEMARK PLEDGE" means the Trademark Security Agreement executed and delivered by Holding as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT VIII thereto, as amended as of October 15, 1996, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "ICMI" means International Communication Materials, Inc., a Pennsylvania corporation and a wholly-owned Subsidiary of Company. -11- "INDEBTEDNESS", as applied to any Person, means, without duplication, (i) all indebtedness for borrowed money whether or not evidenced by a promissory note, draft or similar instrument, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit, (iv) any obligation owed for all or any part of the deferred purchase price of property or services, which purchase price is due more than six months from the date of incurrence of the obligation in respect thereof, and (v) all indebtedness to the extent secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. "INTEREST COVERAGE RATIO" means, for any period, the ratio of Consolidated EBITDAR to Consolidated Interest Expense. "INTEREST HEDGE AGREEMENTS" means any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap, swap or collar protection agreements, and forward rate currency or interest rate options, as the same may be amended or modified and in effect from time to time, and any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter. "INVENTORY" means, on a consolidated basis, all goods, merchandise and other personal property which are held for sale or lease by Holding and its Subsidiaries, including those held for display or demonstration or out on lease or consignment or to be furnished under a contract of service, or those which are raw materials, components, work in process or materials used or consumed, or to be used or consumed, in the business of Holding or any of its Subsidiaries. "INVESTMENT," as applied to any Person, means any direct or indirect purchase or other acquisition by that Person of, or of a beneficial interest in, capital stock or other Securities of any other Person, or any direct or indirect loan (including intercompany loans), advance (other than loans or advances to employees for moving, travel and entertainment expenses, drawing accounts and similar expenditures made in the ordinary course of business) or capital contribution by that Person to any other Person, including all indebtedness and accounts receivable from that other Person other than indebtedness and accounts receivable that are current assets or arose from sales of goods or services to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto and minus the amount of any portion of such Investment repaid to such Person in cash (including as a return of capital), but without any other adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "ISSUING LENDER" means, with respect to any Letter of Credit, the Lender that issues or causes its Affiliate to issue such Letter of Credit, determined as provided in subsection 2.7; PROVIDED, however, that Company shall first request that NationsBank issue each Letter of Credit. "LATIN AMERICAN SUBSIDIARIES" means Nu-kote Internacional de Mexico, S.A. de C.V., a corporation organized under the laws of Mexico and a Subsidiary of Company, and Nu-kote Latin -12- America. "LENDER" and "LENDERS" have the meanings assigned to such terms in the introduction to this Agreement; PROVIDED that "Lender" and "Lenders" shall also include the successors and permitted assignees of Lenders pursuant to subsection 10.2. "LETTER OF CREDIT" means any of the letters of credit issued, deemed to be issued, or to be issued by Issuing Lender for the account of Company, on behalf of Company or any Subsidiary, pursuant to subsection 2.7 and for the purposes described in subsection 2.5B (and shall include the Existing Letters of Credit); PROVIDED that, notwithstanding anything to the contrary contained herein, any such Letter of Credit may be issued by an Affiliate of a Lender; PROVIDED, FURTHER, that to the extent that a Letter of Credit is issued by an Affiliate of a Lender, such Lender shall, for all purposes under this Agreement, the Loan Documents and all other instruments and documents referred to herein and therein be deemed to be the "Issuing Lender" with respect to such Letter of Credit. Letters of Credit shall include Documentary Letters of Credit and Standby Letters of Credit. "LETTER OF CREDIT USAGE" means, with respect to any Letter of Credit, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawings under such Letter of Credit then outstanding PLUS (ii) the aggregate amount of all drawings under such Letter of Credit honored by Issuing Lender and not theretofore reimbursed by Company. "LETTER OF DOMESTIC ORGANIZATION" has the meaning assigned to that term in subsection 2.8. "LETTER OF NON-EXEMPTION" has the meaning assigned to that term in subsection 2.8. "LIEN" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "LOAN DOCUMENTS" means the Domestic Loan Documents and the Eurocurrency Loan Documents. "MARGIN STOCK" has the meaning assigned to that term in Regulations G and U of the Board of Governors of the Federal Reserve System as in effect from time to time. "MAXIMUM AMOUNT" means the maximum amount of interest which, under Applicable Law, Lenders are permitted to charge on the Obligations. "MIT" means Modular Ink Technology i Stockholm AB, a Swedish corporation and a wholly-owned Subsidiary of Holding. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is maintained for employees of Company or any ERISA Affiliate of Company or to which Company or any ERISA Affiliate of Company has, at any time within the preceding five years, made, or been obligated to make, contributions. "N-K INTERNATIONAL LIMITED" means N-K International Limited, a corporation organized under the laws of England. "NATIONSBANK" means NationsBank of Texas, N.A., a national banking association. -13- "NET CASH PROCEEDS" means, with respect to any Asset Sale by any Person, the cash and readily marketable cash equivalents received by such Person in connection with such transaction (including cash proceeds of any property received in consideration of any such Asset Sale) after deducting therefrom reasonable costs and expenses (including without limitation brokerage commissions, legal fees, accounting fees, investment banking and underwriting fees and other similar commissions and fees) and, without duplication, (i) taxes paid or payable by such Person as a result of such Asset Sale, (ii) liabilities of such Person secured by any assets subject to such Asset Sale other than Liens to secure the Obligations or the Eurocurrency Loans, and (iii) amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale and retained by Holding or any Subsidiary after such Asset Sale (to the extent such reserves are not subsequently reversed); PROVIDED, HOWEVER, that in the event that any consideration for an Asset Sale is required to be held in escrow pending determination of whether a purchase price adjustment will be made, such consideration (or any portion thereof) shall become Net Cash Proceeds only at such time as it is released to Holding or its Subsidiaries from escrow. "NON-COMPETITION AGREEMENTS" mean the Non-Competition Agreement, dated February 26, 1993, between Laurie Goldstein and Future Graphics. "NOTICE OF BORROWING" means a notice substantially in the form annexed hereto as EXHIBIT I with respect to a proposed borrowing of Revolving Credit Loans. "NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice substantially in the form annexed hereto as EXHIBIT II with respect to a proposed issuance of a Letter of Credit. "NU-KOTE IMPERIAL" means Nu-kote Imperial, Ltd., a Delaware corporation and wholly-owned Subsidiary of Holding. "NU-KOTE IMAGING" means Nu-kote Imaging International, Inc., a Delaware corporation and wholly-owned Subsidiary of Company. "NU-KOTE LATIN AMERICA" means Nu-kote Latin America, Inc., a Delaware corporation and a wholly-owed Subsidiary of Company. "OBLIGATIONS" means all obligations and liabilities of every nature of Holding, and/or Company, and the Subsidiaries from time to time owed to (i) Agent or Lenders or any of them under this Agreement, or any of the other Domestic Loan Documents or reimbursement obligations with respect to the Letters of Credit, including, without limitation, all liability of the Company for principal and interest on the Revolving Credit Loans or reimbursement obligations owed to Agent or Lenders with respect to the Letters of Credit and all interest thereon or for fees or expenses, reimbursements and indemnifications and other amounts due or to become due hereunder or thereunder, or (ii) to any Lender arising out of any losses incurred in the cash management services provided to Holding or any of its Subsidiaries resulting from such Lender having given credit for deposits or other credits to Holdings' or its Subsidiaries' accounts which deposit(s) or credit(s) is/are later reversed due to the failure of final collection, provided that such liabilities shall not constitute Obligations hereunder to the extent that they exceed $3,000,000. "OECD" means the Organization for Economic Cooperation and Development. "OFFICERS' CERTIFICATE" means, as applied to any corporation, a certificate executed on behalf of such corporation by its Chief Executive Officer, its President, its Chief Financial Officer, its Corporate -14- Controller or its Treasurer; PROVIDED, that every Officers' Certificate with respect to the compliance with a condition precedent to the making of any Revolving Credit Loans hereunder shall include (i) a statement that the officer or officers making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Agreement and the other Loan Documents relating thereto, (ii) a statement that, in the opinion of the signers, they have made or have caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signers, such condition has been complied with. "OPERATING LEASE" means, as applied to any Person, any lease (including, without limitation, leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) that is not a Capital Lease other than any such lease under which that Person is the lessor. "ORIGINAL CREDIT AGREEMENT" has the meaning assigned to that term in the Recitals to this Agreement. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor thereto). "PELIKAN HARDCOPY" means Pelikan Hardcopy (International) AG, a Swiss stock company and wholly-owned (other than directors' qualifying shares) Subsidiary of Produktions. "PELIKAN SCOTLAND" means Pelikan Scotland Ltd., a limited liability company organized under the laws of England and Wales and a wholly-owned Subsidiary of Company. "PENSION PLAN" means any employee pension benefit plan described in Section 3(2) of ERISA which is subject to Section 412 of the Internal Revenue Code and which is maintained by Company or any ERISA Affiliate of Company for employees of Company or any ERISA Affiliate of Company, other than a Multiemployer Plan. "PERMITTED ENCUMBRANCES" means the following types of Liens: (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not at the time required by subsection 5.3A; (ii) Statutory Liens of landlords, Liens of carriers, warehousemen, mechanics, materialmen, repairmen and suppliers, and other Liens incurred in the ordinary course of business for sums not yet delinquent for a period of more than 60 days, or being contested in good faith if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (iii) Liens (other than any Lien imposed by ERISA) incurred or deposits made in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds, trade contracts (other than for borrowed money), self-retention, reimbursement or indemnity agreements as to insurance policies and other similar obligations incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (iv) Any attachment, judgment or similar Lien unless the writ, judgment or other process it secures shall, within 60 days after the entry thereof, not have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 60 days after -15- the expiration of any such stay, and shall not be a matter that is adequately covered by insurance and with respect to which the insurer has acknowledged coverage in writing and any lis pendens provided the litigation related thereto is being contested in good faith; (v) Easements, rights-of-way, restrictions, covenants, conditions, licenses, zoning requirements, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of Holding and its Subsidiaries or materially adversely affecting the value of the relevant property; (vi) Any interest or title of a lessor or lessee under any lease permitted by this Agreement (including any Lien granted by such lessor or lessee); (vii) unperfected purchase-money Liens on Inventory incurred in the ordinary course of business and Liens on goods for sale on consignment or a similar basis; (viii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods and Liens to secure an existing letter of credit in the amount of 30,000 Deutschmarks which was issued in support of German customs authorities; (ix) Liens on Inventory of Foreign Subsidiaries arising out of retention of title arrangements for the supply of Inventory in the ordinary course; and (x) Licenses, shop rights and covenants not to sue and options therefor entered into in the ordinary course with respect to patents, trademarks and other intellectual property (including all registrations thereof and applications to register therefor). "PERSON" means and includes natural persons, corporations, limited liability companies, limited liability partnerships, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, vehicle trusts, business trusts, or other organizations, whether or not legal entities, agencies, governments and political subdivisions thereof. "POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "PRO RATA SHARE" means in relation to any Lender as of any date of determination, as applicable, the percentage obtained by dividing the aggregate amount of such Lender's Revolving Credit Commitment by the aggregate amount of the Revolving Credit Commitments of all Lenders. "PRODUKTIONS" means Pelikan Produktions AG, a Swiss stock company and wholly-owned Subsidiary of Company (other than directors' qualifying shares). "PROPOSED CLOSED FACILITIES" means those Facilities and related assets owned by Company and/or its Subsidiaries on February 24, 1995 and which were proposed to be closed after February 24, 1995 as described in writing specifically addressed to Lenders prior to February 24, 1995 and items listed on Schedule 6.7B hereto. "QUALIFYING BANKS" has the meaning assigned to that term in the definition of Cash Equivalents set forth above in this subsection 1.1. -16- "RECALCULATION DATE" has the meaning assigned to that term in subsection 5.11A. "REGISTER" has the meaning assigned to that term in subsection 2.1D. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement executed and delivered by Holding as of July 31, 1997, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "REGULATION D" means Regulation D of the Board of Governors of the Federal Reserve System as in effect from time to time. "RELEASE" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration of any Hazardous Material in, by, from or related to any Facility into the indoor or outdoor environment, including through the air, soil, surface water or groundwater. "REQUISITE LENDERS" means, at any time, Lenders and Eurocurrency Lenders having 66-2/3% or more of the combined aggregate amount at such time of (i) the aggregate amount of the Revolving Credit Commitments or, in case the Revolving Credit Commitments have been terminated, the outstanding principal amount of the Revolving Credit Loans, if any, made thereunder and (ii) the aggregate of the sum of the Commitments (as defined in the relevant Eurocurrency Credit Agreement). For purposes of determining the Requisite Lenders, any amounts denominated in (a) Pounds Sterling shall be translated into Dollars utilizing the same exchange rate pursuant to which the aggregate amount as of the Closing Date of the Commitments in such currency under the U.K. Credit Agreement was determined and (b) Swiss Francs shall be translated into Dollars utilizing the same exchange rate pursuant to which the aggregate amount as of the Closing Date of the Commitments in such currency under the Swiss Credit Agreement was determined. "RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Holding now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Holding now or hereafter outstanding, (iii) any payment or prepayment of principal of, premium, if any, or interest on, redemption, purchase, repurchase, retirement, defeasance, sinking fund or similar payment or deposit for payment with respect to, any Subordinated Debt, and (iv) 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 stock of Holding, Company or any of their Subsidiaries now or hereafter outstanding (other than any such rights held by Holding or a Subsidiary thereof). "RESTRUCTURING CHARGES" means, as of any date of determination, restructuring costs incurred to the extent that such restructuring costs are actually deducted in arriving at earnings (including but not limited to severance costs and write-off of unamortized debt issuance costs originally incurred with respect to the First Restatement). "REVOLVING CREDIT COMMITMENT" or "REVOLVING CREDIT COMMITMENTS" has the meaning set forth in subsection 2.1A, as the same shall be reduced from time to time in accordance with this Agreement. "REVOLVING CREDIT COMMITMENT TERMINATION DATE" means January 4, 1999, or such earlier -17- date, if any, upon which the Commitments are terminated and all Obligations are paid in full or become immediately due and payable. "REVOLVING CREDIT LOANS" means the Revolving Credit Loans made by Lenders to Company pursuant to subsection 2.1A. "REVOLVING CREDIT NOTE" means each promissory note of Company evidencing the obligation to repay Revolving Credit Loans hereunder, substantially in the form annexed hereto as EXHIBIT VIII, as amended, amended and restated, supplemented, extended, renewed or otherwise modified from time to time, and any substitution therefor. "SALE/LEASEBACK" has the meaning assigned to that term in subsection 6.8. "SECURITIES" means any capital stock or shares thereof, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness (other than accounts receivable), secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities". "SOLVENT" means, with respect to any Person, that as of the date of determination (i) the then fair value of the property of such Person is greater than the total amount of liabilities (including Contingent Obligations) of such Person and the then fair saleable value of the assets of such Person is greater than the amount that will be required to pay the probable liabilities on such Person's then existing debts as they become absolute and matured, considering all financing alternatives and potential asset sales reasonably available to such Person; (ii) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or believe or reasonably should believe that it will incur, debts beyond its ability to pay such debts as they become due. "STANDBY LETTERS OF CREDIT" means a letter of credit under which Issuing Lender agrees to make payments for the account of Company, on behalf of Company or any Domestic Subsidiary, in respect of obligations of Company or any Domestic Subsidiary incurred pursuant to contracts made or performances undertaken or to be undertaken or like matters relating to contracts to which Company or any Domestic Subsidiary is or proposes to become a party in the ordinary course of its business, including, without limiting the foregoing, for insurance purposes or in respect of advance payments or as bid or performance bonds or for any other purpose for which a standby letter of credit might customarily be issued. "SUBORDINATED DEBT" means any Indebtedness of Holding or its Subsidiaries subordinated in right of payment to the Obligations pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance reasonably satisfactory to Agent and Requisite Lenders. "SUBSIDIARY" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of stock generally entitled (other than only by reason of the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. References herein to Subsidiaries shall mean references to the direct or indirect Subsidiaries of Holding unless otherwise specified, and references herein (other than in subsection 4.1C and subsection 6.12) to the Subsidiaries of Holding and Company shall not include the Subsidiaries identified on Schedule 5.13-B so long as no breach of subsection 4.1C or subsection 6.12 exists. -18- "SUBSIDIARY GUARANTY" means each Subsidiary Guaranty executed and delivered by ICMI, Future Graphics, Nu-kote Imaging, and Nu-kote Imperial as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT XIII thereto, as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time. "SUBSIDIARY PATENT SECURITY AGREEMENT" means each Patent Security Agreement executed and delivered by ICMI, Future Graphics, Nu-kote Imaging and Nu-kote Imperial as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT XI thereto, as amended as of October 15, 1996, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "SUBSIDIARY SECURITY AGREEMENT" means each Security Agreement executed and delivered by ICMI, Future Graphics, Nu-kote Imaging and Nu-kote Imperial as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT XII thereto, as amended as of October 15, 1996, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "SUBSIDIARY SECURITY DOCUMENTS" means any or all of the Subsidiary Security Agreements, the Subsidiary Guaranties, the Subsidiary Trademark Pledges and the Subsidiary Patent Security Agreements. "SUBSIDIARY TRADEMARK PLEDGE" means each Trademark Security Agreement executed and delivered by ICMI, Future Graphics, Nu-kote Imaging and Nu-kote Imperial as of February 24, 1995, substantially in the form annexed to the Original Credit Agreement as EXHIBIT VIII thereto, as amended as of October 15, 1996, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "SWISS FACILITY AGREEMENT" means that certain Third Amended and Restated Revolving Credit Facility Agreement, dated as of July 31, 1997, among Eurocurrency Administrative Agent, Eurocurrency Documentation Agent, the Eurocurrency Collateral Agent, the lenders party thereto and Produktions and Pelikan Hardcopy, as amended, amended and restated, supplemented or otherwise modified from time to time. "SWISS/U.K. TRANSFER" means any Asset Transfer involving fixtures, machinery and equipment in which such assets are located in Switzerland immediately before the Asset Transfer and are located in the United Kingdom immediately after the Asset Transfer. "TERMINATION EVENT" means (i) a "Reportable Event' described in Section 4043 of ERISA and the regulations issued thereunder other than any such Event with respect to which the 30-day notice requirement has been waived by regulations of the PBGC and other than an event described in Section 4043(c)(9) of ERISA, or (ii) the withdrawal of Company or any of its ERISA Affiliates from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) or 4062(e) of ERISA, or (iii) the provision to affected parties of a notice or intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Pension Plan by the -19- PBGC, or (v) any other event or condition that would reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or (vi) the imposition of a lien pursuant to Section 412(n) of the Internal Revenue Code. "TOTAL UTILIZATION OF REVOLVING CREDIT COMMITMENTS" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Credit Loans, and (ii) the aggregate Letter of Credit Usage. "U.K. FACILITY AGREEMENT" means that certain Third Amended and Restated Revolving Credit Facility Agreement, dated as of July 31, 1997, among Eurocurrency Administrative Agent, the Eurocurrency Collateral Agent, Eurocurrency Documentation Agent, the lenders party thereto and Pelikan Scotland, as amended, amended and restated, supplemented or otherwise modified from time to time. "U.K. HOLDING" means N-K International Holding Limited, a corporation organized under the laws of England. "U.K. SUBSIDIARIES" means U.K. Holding and N-K International. "U.K./SWISS TRANSFER" means any Asset Transfer involving fixtures, machinery and equipment in which such assets are located in the United Kingdom immediately before the Asset Transfer and are located in Switzerland immediately after the Asset Transfer. "UNISYS ACQUISITION AGREEMENT" means the Acquisition Agreement between Unisys Corporation and Company, dated as of November 20, 1987, as amended by the letter agreement, dated January 14, 1987, and the Release Agreement, dated as of January 25, 1990. "U.S. ASSET SALE" means any Asset Sale transaction involving assets located in the United States described in Section 6.7B(ii)(E), and shall not include any Asset Sale transactions described in Section 6.7B(ii)(B), (C), (D) or (F) or in the second PROVISO to Section 6.7(B)(ii). "U.S./FOREIGN TRANSFER" means any Asset Transfer involving fixtures, machinery and equipment in which such assets are located in the United States immediately before the Asset Transfer and are located outside the United States immediately after the Asset Transfer. "U.S./U.S. TRANSFER" means any Asset Transfer involving fixtures, machinery and equipment in which such assets, both immediately before and after the Asset Transfer, are and remain in the United States. "WARRANT AGREEMENT" means that certain Warrant Agreement executed and delivered by Holding and Lenders of even date herewith, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. -20- 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement; Calculations; Computations For purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to clauses (i), (ii) and (iii) of subsection 5.1 shall be prepared in accordance with GAAP as in effect on the date of such financial statements; amounts used for determining compliance with the financial covenants set forth in subsection 6.6 shall be computed in accordance with GAAP as in effect on March 31, 1997. To the extent that the determination of compliance with any covenant contained in subsections 6.1, 6.2, 6.3, 6.4 and 6.7B hereof requires the conversion to Dollars of foreign currency amounts, such Dollar amount shall be the Dollar Equivalent of the amount of such foreign currency at the time such item is to be or originally was incurred, created or suffered or permitted to exist or assumed or transferred or sold for purposes of this Agreement (except if such item was incurred, created or assumed, or suffered or permitted to exist or transferred or sold prior to the date hereof, such conversion shall be made based on the Dollar Equivalent of the amounts of such foreign currency at the date hereof). 1.3 Other Definitional Provisions References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided. Any of the terms defined in subsection 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. -21- SECTION 2. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS AND REVOLVING CREDIT LOANS 2.1 Revolving Credit Loans A. REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, each Lender hereby severally agrees to lend to Company from time to time on or after the Closing Date to but excluding the Revolving Credit Commitment Termination Date such additional amounts which would not cause the outstanding principal amount of its Revolving Credit Loans to at any time exceed its Pro Rata Share of the aggregate Revolving Credit Commitments (as defined below) to be used for the purposes identified in subsection 2.5A. Each Lender's commitment to make Revolving Credit Loans to Company pursuant to this subsection 2.1A is herein called its "REVOLVING CREDIT COMMITMENT" and such commitments of all Lenders in the aggregate are herein called the "REVOLVING CREDIT COMMITMENTS". The original amount of each Lender's Revolving Credit Commitment is set forth on SCHEDULE 1.1 annexed hereto and the aggregate initial amount of the Revolving Credit Commitments is $100,000,000. Each Lender's Revolving Credit Commitment shall expire on the Revolving Credit Commitment Termination Date and all Revolving Credit Loans and all other amounts owed hereunder with respect to the Revolving Credit Loans shall be paid in full no later than that date. The amount of the Revolving Credit Commitments shall be reduced by the amount of all reductions thereof made pursuant to subsection 2.4E through the date of determination. In no event shall the aggregate outstanding principal amount of the Revolving Credit Loans from any Lender at any time exceed its Revolving Credit Commitment then in effect. All Revolving Credit Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their Pro Rata Shares of the Revolving Credit Commitments, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make Revolving Credit Loans hereunder nor shall the Revolving Credit Commitment of any Lender be increased or decreased as a result of the default by any other Lender in that other Lender's obligation to make Revolving Credit Loans hereunder. Amounts borrowed by Company under this subsection 2.1A may be repaid and, to but excluding the Revolving Credit Commitment Termination Date, reborrowed. Notwithstanding the foregoing provisions of this subsection 2.1A and the provisions of subsection 2.1B, the extensions of credit under the Revolving Credit Commitments shall be subject to the following limitations in the amounts and during the periods indicated: (a) The amount otherwise available for borrowing under the Revolving Credit Commitment as of any time of determination (other than to reimburse Issuing Lender for the amount of any drawings under any Letters of Credit honored by Issuing Lender and not theretofore reimbursed by Company) shall be reduced by the aggregate Letter of Credit Usage as of such time of determination; -22- (b) At no time shall the Total Utilization of Revolving Credit Commitments exceed $100,000,000; and (c) In no event shall any Lender's Pro Rata Share of the Total Utilization of Revolving Credit Commitments as of any date of determination exceed its Revolving Credit Commitment then in effect. B. NOTICE OF BORROWING. Subject to subsection 2.1A, whenever Company desires to borrow Revolving Credit Loans under this subsection 2.1 it shall deliver to Agent a Notice of Borrowing no later than 12:00 noon (Dallas time) on the date of the proposed Funding Date. The Notice of Borrowing shall specify (a) the proposed Funding Date (which shall be a Business Day), (b) the amount of the proposed Revolving Credit Loan, and (c) that the Total Utilization of Revolving Credit Commitments (after giving effect to the Revolving Credit Loans then requested) will not exceed the Revolving Credit Commitments then in effect. Revolving Credit Loans shall be made in an aggregate minimum amount of $500,000 and integral multiples of $500,000 in excess of that amount. In lieu of delivering the above-described Notice of Borrowing, Company may give Agent telephonic notice by the required time of any proposed borrowing of Revolving Credit Loans under this subsection 2.1; PROVIDED that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Agent on or prior to the Funding Date of the requested Revolving Credit Loans. Neither Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B and upon funding of Revolving Credit Loans by Lenders in accordance with this Agreement pursuant to any such telephonic notice, Company shall have effected Revolving Credit Loans hereunder. C. DISBURSEMENT OF FUNDS. Promptly after receipt of a Notice of Borrowing relating to a Revolving Credit Loan pursuant to subsection 2.1B (or telephonic notice thereof), Agent shall notify each Lender of the proposed borrowing. Each Lender shall make the amount of its Revolving Credit Loan available to Agent, in same day funds, at the office of Agent located at NationsBank Plaza, 901 Main Street, 66th Floor, Dallas, Texas 75202 not later than 1:00 P.M. (Dallas time) on the Funding Date. Upon satisfaction or waiver of the conditions precedent specified in subsection 3.1 and 3.2, Agent shall make the proceeds of such Revolving Credit Loans available to Company on such Funding Date by causing an amount of same day funds equal to the proceeds of all such Revolving Credit Loans received by Agent to be credited to the account of Company at such office of Agent, Account Number 1291369149, ABA #111000025. Unless Agent shall have been notified by any Lender prior to any Funding Date in respect of any Revolving Credit Loans that such Lender does not intend to make available to Agent the amount of such Lender's Revolving Credit Loan to be funded on such Funding Date (which such notice, if so received by Agent, shall promptly be communicated to Company), Agent may assume that such Lender has made such amount available to Agent on such Funding Date and Agent in its sole discretion may, but shall not be obligated to, make available to Company a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to Agent by such Lender, -23- Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Agent, at the Federal Funds Rate in effect from time to time for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Agent's demand therefor, (i) Agent shall promptly notify Company, and Company shall immediately pay such corresponding amount to Agent and (ii) notwithstanding subsection 6.1, Company may borrow a like amount on an unsecured basis from any Person for a period ending on the date upon which such Lender does in fact make such amount of such Lender's Revolving Credit Loan available. Nothing in this subsection 2.1C (and no such borrowing by Company) shall be deemed to relieve any Lender from its obligation to fulfill its Revolving Credit Commitment hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder, and such unsecured borrowing shall not be deemed to increase the amount of Lenders' Revolving Credit Commitments hereunder. D. REGISTER. (i) Agent shall maintain a register (the "REGISTER") on which it will record the Commitments from time to time of each of the Lenders, the Revolving Credit Loans maintained or made by each of the Lenders and each repayment in respect of the principal amount of the Revolving Credit Loans of each Lender. Any such recordation shall be conclusive and binding, absent manifest error. (ii) Each Lender will record on its internal records the amount of each Revolving Credit Loan maintained or made by it and each payment in respect thereof. Failure to make any such recordation, or any error in such recordation, shall not affect the Obligations of Company in respect of such Revolving Credit Loans. Any such recordation shall be conclusive and binding, absent manifest error. 2.2 Interest on the Revolving Credit Loans A. RATE OF INTEREST. Subject to the provisions of subsections 2.2C and 2.8, each Revolving Credit Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at the lesser of (i) the Base Rate or (ii) the Highest Lawful Rate. If the amount of interest payable in respect of any interest computation pursuant to clause (i) above is reduced to Highest Lawful Rate and the amount of interest payable in respect of any subsequent interest computation period would be less than the Maximum Amount, then the amount of interest payable in respect of such subsequent interest computation period shall be automatically increased to the Maximum Amount; PROVIDED that at no time shall the aggregate amount by which interest paid has been increased pursuant to this sentence exceed the aggregate amount by which interest has been reduced pursuant to clause (i) above of this subsection 2.2A. B. INTEREST PAYMENTS. Subject to subsection 2.2C, interest shall be payable on the Revolving Credit Loans in arrears on and to (but not including) the last Business Day of each month -24- commencing on the first such date to occur after the Closing Date, and at maturity. C. DEFAULT RATE; POST MATURITY INTEREST. Any principal payments on the Revolving Credit Loans not paid when due and, to the extent permitted by Applicable Law, any interest payments on the Revolving Credit Loans, Commitment Fees and compensation payable in respect of Letters of Credit pursuant to subsection 2.7E not paid when due and any other fees and other amounts payable hereunder not paid within 10 days of the date when due (the "DUE DATE"), in each case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall upon delivery of written notice to Company from Agent bear interest from and after the Due Date payable upon demand at a rate that is three percent (3%) per annum in excess of the rate of interest otherwise payable under this Agreement (or, in the case of fees and other amounts due hereunder, at the Base Rate PLUS 3%), but in any case not in excess of the Highest Lawful Rate. The payment or acceptance of the increased rate provided by this subsection 2.2C shall not constitute a waiver of any Event of Default or an amendment to this Agreement or otherwise prejudice or limit any rights or remedies of Agent or any Lender. D. COMPUTATION OF INTEREST. Subject to subsection 10.18, interest on the Revolving Credit Loans shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues. In computing interest on any Revolving Credit Loan, the date of the making of such Revolving Credit Loan shall be included; and the date of payment shall be excluded; PROVIDED that if a Revolving Credit Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Revolving Credit Loan. 2.3 Fees A. Subject to subsection 10.18, Company agrees to pay to Agent on the Closing Date, for the account of each Lender, a facility fee equal to the product of (i) 0.50% times (ii) the sum of (x) such Lender's Revolving Credit Commitment on the Closing Date plus (y) such Lender's Commitments under and as defined in the Eurocurrency Credit Agreements on the Closing Date, MINUS $200,000. B. Subject to subsection 10.18, Company agrees to pay to Agent, for the account of each Lender, a facility fee equal to the product of (i) 1.0% times (ii) the sum of (x) such Lender's Revolving Credit Commitment on the Closing Date minus the mandatory reductions thereof required on or before June 30, 1998, by subsection 2.4E(ii) of this Agreement to the extent actually made, PLUS (y) such Lender's Commitments under the Eurocurrency Credit Agreements on the Closing Date. Provided that payment of such fee shall be deferred until June 30, 1998, or the Revolving Credit Commitment Termination Date, whichever is earlier, although such fee shall be earned and payable as of the Closing Date. C. Subject to subsection 10.18, Company agrees to pay to Agent, for the account of each Lender, a facility fee equal to the product of (i) 1.0% times (ii) the sum of (x) such Lender's Revolving Credit Commitment on the Closing Date minus the mandatory reductions thereof required on or before January 1, 1999, by subsection 2.4E(ii) of this Agreement to the extent actually made, PLUS (y) such Lender's Commitments under the Eurocurrency Credit Agreements on the Closing Date; PROVIDED that -25- although such fee shall be earned and payable as of the Closing Date, payment of such fee shall be deferred until the Revolving Credit Termination Date, and if all Obligations shall have been repaid in full and all commitments of the Lenders and the Eurocurrency Lenders shall have been terminated prior to January 1, 1999, this fee shall not be payable. To induce the Lenders to agree to waive payment of such fee as aforementioned, Company agrees to use its reasonable best efforts to access available capital markets and use all other reasonable means at its disposal for the purpose of repaying the Revolving Credit Loans and the Eurocurrency Loans before the Revolving Credit Termination Date. D. Such fees shall be fully-earned upon the Closing Date, subject to subsection 10.18, non-refundable when paid, and shall be payable in Dollars. For the purposes of calculating such fees, any amounts denominated in (a) Pounds Sterling shall be translated into Dollars utilizing the same exchange rate pursuant to which the aggregate amount as of the Closing Date of Commitments in such currency under the U.K. Credit Agreement was determined and (b) Swiss Francs shall be translated into Dollars utilizing the same exchange rate pursuant to which the aggregate amount as of the Closing Date of Commitments in such currency under the Swiss Credit Agreement was determined. E. Company agrees to pay to Agent for distribution to each Lender in proportion to that Lender's Pro Rata Share of the Revolving Credit Commitments commitment fees ("COMMITMENT FEES") for the period from and including the Closing Date to but excluding the Revolving Credit Commitment Termination Date equal to the average of the daily unused portion of the Revolving Credit Commitments MULTIPLIED by the Commitment Fee Percentage, such Commitment Fees to be calculated, subject to subsection 10.18, on the basis of a 360-day year and the actual number of days elapsed and to be payable in arrears on and to (but not including) the last Business Day of each fiscal quarter of each year, commencing on the first such date to occur after the Closing Date, and upon the Revolving Credit Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, for purposes of calculating the Commitment Fees payable by Company pursuant to this subsection 2.3 the "unused portion of the Revolving Credit Commitments," as of any date of determination, shall be an amount equal to the aggregate amount of Revolving Credit Commitments (as the same may have been reduced pursuant to subsection 2.4E) as of such date MINUS the aggregate principal amount of all outstanding Revolving Credit Loans on such date, and the unused portion of the Revolving Credit Commitments shall not be reduced by reason of the issuance of Letters of Credit or by any limitation of the amount available for borrowing thereunder set forth in the numbered paragraphs of subsection 2.1A. F. Company agrees to pay to Agent, for its own account, an annual agent's administrative fee in the amount of $100,000 per annum, payable quarterly in advance commencing on October 15, 1997, and on the 15th day of each January, April, July, and October thereafter, in compensation for its services as agent under this Agreement. G. Company agrees to pay to Eurocurrency Administrative Agent, for its own account, an agent's administrative fee in the amount of 50,000 Pounds Sterling, payable on March 1, 1998, in compensation for its services as agent under the Eurocurrency Credit Agreements. 2.4 Prepayments and Payments of Revolving Credit Loans; Reductions in Revolving Credit Loan Commitments -26- A. PREPAYMENTS. (i) VOLUNTARY REPAYMENTS OF REVOLVING CREDIT LOANS. Company may, upon prior written or telephonic notice by no later than 12:00 noon (Dallas time) on the date of repayment confirmed in writing to Agent (which notice Agent will promptly transmit by telegram, telex or telephone to each Lender, any such telephonic notice to be promptly confirmed by Agent in writing) at any time and from time to time repay Revolving Credit Loans. Notice of repayment having been given as aforesaid, the principal amount of the Revolving Credit Loans specified in such notice shall become due and payable on the repayment date. (ii) MANDATORY PREPAYMENT OF REVOLVING CREDIT LOANS FROM ASSET SALES. The Company shall, promptly on the date of receipt of any Net Cash Proceeds from any Asset Sale, prepay an aggregate principal amount of the Revolving Credit Loans in an amount equal to the amount of such Net Cash Proceeds, with each such prepayment constituting a permanent reduction in the Revolving Credit Commitments, until such time as such Net Cash Proceeds received by Lenders shall equal $5,000,000 and the Revolving Credit Commitments shall have been reduced by such amount. Thereafter the Company shall, promptly on the date of receipt of any Net Cash Proceeds from any Asset Sale, prepay an aggregate principal amount of the Revolving Credit Loans in an amount equal to 85% of such Net Cash Proceeds, which amount shall constitute a permanent reduction in the Revolving Credit Commitments, until such time as the Lenders shall have received an additional $5,000,000 in Net Cash Proceeds. Thereafter the Company shall, promptly on the receipt of any Net Cash Proceeds from any Asset Sale, prepay an aggregate principal amount of the Revolving Credit Loans or Eurocurrency Loans as elected by Requisite Lenders in an amount equal to 75% of such Net Cash Proceeds, which amount shall constitute a permanent reduction in the Revolving Credit Commitments or the Commitments of the Eurocurrency Lenders under the Eurocurrency Credit Agreements (whichever is prepaid with such proceeds). Notwithstanding the foregoing, subject to the provisions of subsection 6.7, the Company shall, promptly on the date of receipt of any Net Cash Proceeds from the sale of MIT or any Asset Sale with respect to assets of MIT, prepay an aggregate principal amount of the Revolving Credit Loans or Eurocurrency Loans as elected by Requisite Lenders in an amount equal to 100% of such Net Cash Proceeds, which amount shall constitute a permanent reduction in the Revolving Credit Commitments or the Commitments of the Eurocurrency Lenders under the Eurocurrency Credit Agreements (whichever is prepaid with such proceeds). Any amount retained by the Company under this subsection (ii) shall be used for working capital and other general corporate purposes. (iii) OTHER MANDATORY PREPAYMENT OF REVOLVING CREDIT LOANS. In addition to any amounts due under subsection 2.4A(ii) above, the Company shall: (a) On January 2, 1998, April 1, 1998, July 1, 1998, and October 1, 1998, prepay an aggregate principal amount of the Revolving Credit Loans in the amount, if any, necessary to reduce the sum of the aggregate principal amount of all Revolving Credit Loans on such date PLUS the Letter of Credit Usage on such date, to an amount which does not exceed the aggregate Revolving Credit -27- Commitments. On each such date the Company shall also prepay all accrued and unpaid interest on the principal amount so prepaid. (b) On each date after April 1, 1998, when no Event of Default exists and Holding issues any equity securities when the aggregate Revolving Credit Commitments and the Commitments of Eurocurrency Lenders equal less than $140,000,000, EXCEPT issuances resulting from the exercise of employee stock options, Company shall make a mandatory prepayment of the Obligations and the obligations under the Eurocurrency Credit Agreements, as Requisite Lenders may elect in their sole discretion, in an amount equal to 50% of the cash proceeds of any such equity issuances net of all ordinary reasonable legal expenses, commissions and other fees and expenses paid or to be paid to Persons not Affiliates of the Company. When the aggregate Revolving Credit Commitments and the Commitments of Eurocurrency Lenders equal or exceed $140,000,000, 100% of such cash proceeds shall be paid as a mandatory prepayment of the Obligations and the obligations under the Eurocurrency Credit Agreements, as Requisite Lenders may elect in their sole discretion until such commitments are reduced to $140,000,000. All such proceeds shall be applied to permanently reduce the Revolving Credit Commitments or the Commitments of the Eurocurrency Lenders under the Eurocurrency Credit Agreements (whichever is prepaid with such proceeds). At such time the Company shall also prepay all accrued and unpaid interest on the principal amount so prepaid. (c) On each date Holding or the Company issues any Indebtedness, other than as permitted by subsection 6.1, with the consent and upon terms and conditions satisfactory to Requisite Lenders, Borrower shall make a mandatory prepayment of the Obligations and the obligations under the Eurocurrency Credit Agreements, as Requisite Lenders may elect in their sole discretion, in an amount EQUAL to 100% of the cash proceeds of any such Indebtedness issuances net of all ordinary reasonable legal expenses, commissions and other fees and expenses paid or to be paid to Persons not Affiliates of the Company. All such proceeds shall be applied to permanently reduce the Revolving Credit Commitments or the Commitments of the Eurocurrency Lenders under the Eurocurrency Credit Agreements (whichever is prepaid with such proceeds). At such time the Company shall prepay all accrued and unpaid interest on the principal amount so prepaid. B. MANNER AND TIME OF PAYMENT. All payments of principal, interest and fees hereunder by Company shall be made without defense, set-off or counterclaim and in same day funds and delivered to Agent not later than 12:00 noon (Dallas time) on the date due at its office located at 901 Main Street, 67th Floor, Dallas, Texas 75202 for the account of Lenders; funds received by Agent after that time shall be deemed to have been paid by Company on the next succeeding Business Day. C. APPORTIONMENT OF PAYMENTS. Aggregate principal and interest payments shall be -28- apportioned ratably to Lenders, proportionately to Lenders' respective Pro Rata Shares. Agent shall promptly distribute to each Lender at its primary address set forth below its name on the appropriate signature page hereof or such other address as any Lender may request its share of all such payments received by Agent and the commitment fees of such Lender when received by Agent pursuant to Section 2.3. D. PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment and other fees hereunder, as the case may be. E. REDUCTIONS OF REVOLVING CREDIT COMMITMENTS. (i) Company shall have the right, at any time and from time to time, to terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Credit Commitments in an amount up to the amount by which the Revolving Credit Commitments exceed the Total Utilization of Revolving Credit Commitments. Company shall give not less than three Business Days' prior written notice to Agent designating the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction. Promptly after receipt of a notice of such termination or partial reduction, Agent shall notify each Lender of the proposed termination or reduction. Such termination or partial reduction of the Revolving Credit Commitments shall be effective on the date specified in Company's notice and shall reduce the Revolving Credit Commitment of each Lender proportionately to its Pro Rata Share of the Revolving Credit Commitments. Any such partial reduction of the Revolving Credit Commitments shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $500,000 in excess of that amount unless the remaining amount of such Commitments is less than $5,000,000 in which case such reduction shall be in the amount of the then remaining Revolving Credit Commitments. The Revolving Credit Commitments shall be permanently reduced by the amount of any mandatory prepayment of the Revolving Credit Loans that shall be required to be made pursuant to subsections 2.4A(ii) and 2.4A(iii). (ii) In addition to the reductions specified in subsection 2.4E(i) above, the Revolving Credit Commitments shall automatically and permanently reduce by the amount of $2,500,000 on each of January 2, 1998, April 1, 1998, July 1, 1998, and October 1, 1998. 2.5 Use of Proceeds A. REVOLVING CREDIT LOANS. The proceeds of the Revolving Credit Loans shall be applied by Company for its general corporate purposes, which may include, without limitation, (i) working capital, (ii) the refinancing of the debt outstanding under the First Restatement and certain other debt, (iii) capital expenditures and certain other expenditures permitted hereby, including the payment of restructuring costs and the making of Investments in Subsidiaries as permitted by subsection 6.3, and (iv) reimbursement to any Issuing Lender of any amounts drawn under any Letter of Credit as provided in subsection 2.7C. -29- B. LETTERS OF CREDIT. The Letters of Credit shall only be requested for the following general corporate purposes: (i) supporting workers' compensation liabilities, (ii) supporting obligations to third party insurers, (iii) supporting performance, payment, deposit or surety obligations under law or governmental rule or regulation or in accordance with industry custom and practice, or (iv) supporting obligations incurred in connection with the purchase of goods and services in the ordinary course of business. C. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under this Agreement shall be used by Company to purchase or carry any Margin Stock in any manner that might cause the borrowing or the application of such proceeds to violate Regulation G, Regulation U, Regulation T, or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of the Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. -30- 2.6 Capital Adequacy Adjustment In the event that any Lender shall have reasonably determined that the adoption or implementation after the date hereof of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, including, without limitation, any change in the regulations set forth at 12 C.F.R. Part 208 (Appendix A) and 12 C.F.R. Part 225 (Appendix A), or any change therein or in the interpretation or application thereof, or compliance by any Lender with any request or directive regarding capital adequacy (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from any central bank or governmental agency or body having jurisdiction, does or shall have the effect of increasing the amount of capital required to be maintained by such Lender or any corporation controlling such Lender and thereby reducing the rate of return on such Lender's or such other corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such other corporation would have achieved but for the occurrence of such circumstances, then Company shall from time to time, within ten (10) Business Days of written notice and demand from such Lender (with a copy to the Agent) claiming compensation pursuant to this subsection 2.6, including a certificate (x) stating that one of the events described in this subsection 2.6 has occurred and describing in reasonable detail the nature of such event, (y) stating the amount of the reduction in the rate of return on such Lender's or such other corporation's capital reasonably determined by such Lender to be allocable to the existence of such Lender's commitment to lend hereunder and (z) setting forth in reasonable detail the manner of calculation of the reduction in the rate of return on such Lender's or such other corporation's capital and such allocated amount thereof, pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender or such other corporation for such allocated reduction. Such certificate as to the amount of such compensation, submitted to Company and Agent by such Lender, shall, absent manifest error, be final, conclusive and binding for all purposes. In determining such amount, a Lender may use any averaging and attribution method; PROVIDED, HOWEVER, that such method shall be reasonable. Notwithstanding the foregoing, nothing in this subsection 2.6 is intended to provide and this subsection 2.6 shall not provide to Holding, Company or any Domestic Subsidiary entering into a Domestic Loan Document the right to inspect the records, files or books of any Lender. For the avoidance of doubt, no amount shall be required to be paid to any Lender or Agent under this subsection 2.6 in respect of any increased cost or reduced return arising from the implementation of, or compliance by any Lender with, any rule, regulation, guideline, order or other request or directive regarding capital adequacy which is in existence at the date hereof. -31- 2.7 Letters of Credit A. LETTERS OF CREDIT. In addition to Company requesting that Lenders make Revolving Credit Loans pursuant to subsection 2.1, Company may request, in accordance with the provisions of this subsection 2.7A and subsection 2.7B, on and after the date on which all of the conditions set forth in subsection 3.1 are satisfied to and excluding the Revolving Credit Commitment Termination Date, that NationsBank (or, if NationsBank is unwilling to provide such Letters of Credit, one or more Lenders; PROVIDED that, if no other Lender is willing to provide any Letter of Credit, NationsBank shall, if each of the conditions to issuance of such Letter of Credit in this Agreement is met, issue such Letter of Credit) issue Letters of Credit for the account of Company, on behalf of Company or any Material Domestic Subsidiary; PROVIDED that (i) Company shall not request that any Lender issue (and no Lender shall issue) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Revolving Credit Commitments would exceed the aggregate of all Revolving Credit Commitments, and (ii) Company shall not request that any Lender issue any Letter of Credit if, after giving effect to such issuance, the aggregate Letter of Credit Usage would exceed $10,000,000. In no event shall any Lender issue any Letter of Credit having an expiration date later than the earlier of (y) the Revolving Credit Commitment Termination Date, as in effect on the date of issuance of such Letter of Credit, or (z) the date which is eighteen months from the date of issuance of such Letter of Credit; PROVIDED, that this clause (z) shall not prevent any Issuing Lender from agreeing that a Letter of Credit will automatically be extended annually for a period not to exceed one year unless such Issuing Lender elects not to extend for such additional period. The issuance or extension of any Letter of Credit in accordance with the provisions of this subsection 2.7 shall require the satisfaction of each condition set forth in subsection 3.3; PROVIDED, HOWEVER, the obligation of each Issuing Lender to issue or extend any Letter of Credit is subject to the condition that (i) such Issuing Lender believed in good faith that all conditions under subsections 2.7A and 3.3 to the issuance or extension of such Letter of Credit were satisfied at the time such Letter of Credit was issued or extended or (ii) the satisfaction of any such condition not satisfied had been waived by Requisite Lenders prior to or at the time such Letter of Credit was issued or extended; PROVIDED FURTHER that Issuing Lender shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, including, without limitation, an Officer's Certificate from Company as to the satisfaction of the conditions under subsection 3.3, in determining the satisfaction of any conditions to the issuance or extension of any Letter of Credit or the Total Utilization of Revolving Credit Commitments or aggregate Letter of Credit Usage then in effect. Immediately upon the issuance of each Letter of Credit (or with respect to the Existing Letters of Credit, upon the Closing Date and satisfaction of the conditions set forth in subsections 3.1 and 3.3), each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and drawings thereunder in an amount equal to such Lender's Pro Rata Share of the Revolving Credit Commitments of the maximum amount which is or at any time may become available to be drawn thereunder. Each Letter of Credit supporting the payment of Indebtedness may provide that, upon the occurrence of an Event of Default and the acceleration of the maturity of the Revolving Credit Loans, -32- the Issuing Lender shall pay the beneficiary thereof if (and only if) payment is then due by the terms of such Letter of Credit to such beneficiary, or if such payment is not then due to such beneficiary, may provide (as and to the extent contemplated by the "THEN" clause of Section 8) for the deposit of funds in an account of Issuing Lender to secure payment to such beneficiary and that any funds so deposited shall be paid to such beneficiary if all conditions to such payment under such Letter of Credit are satisfied or returned to the Issuing Lender for distribution to Lenders (or, if all Obligations shall have been indefeasibly paid in full, to Company) if no payment to such beneficiary has been made and the final date available for drawings under such Letter of Credit has passed. Each payment or deposit of funds by the Issuing Lender as provided in this paragraph shall be treated for all purposes of this Agreement as a drawing duly honored by the Issuing Lender under the related Letter of Credit. B. NOTICE OF ISSUANCE. Whenever Company desires to cause a Lender to issue a Letter of Credit, it shall deliver to that Lender and Agent a Notice of Issuance of Letter of Credit in the form annexed hereto as EXHIBIT II no later than 12:00 noon (Dallas time) at least four Business Days in advance of the proposed date of issuance or such shorter time as may be acceptable to the Issuing Lender. The Notice of Issuance of Letter of Credit shall specify (i) the proposed Issuing Lender (which shall be NationsBank unless NationsBank declines to issue such Letter of Credit), (ii) the proposed date of issuance (which shall be a Business Day), (iii) the face amount of the Letter of Credit, (iv) the expiration date of the Letter of Credit, (v) the name and address of the beneficiary, and (vi) such other documents or materials as such Issuing Lender may reasonably request; PROVIDED that the Issuing Lender, in its sole judgment, may require changes in any such documents and materials; PROVIDED further that the Issuing Lender shall not be required to issue any Letter of Credit that on its terms requires payment thereunder prior to the third Business Day following receipt by the Issuing Lender of such documents and materials. In determining whether to pay any Letter of Credit, the Issuing Lender shall be responsible only to use reasonable care to determine that the documents and materials required to be delivered under that Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit. Promptly upon the issuance of a Letter of Credit, the Issuing Lender shall notify each Lender of the issuance and the amount of each such other Lender's respective participation therein determined in accordance with subsection 2.7D. C. PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. In the event of any request for drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall immediately notify Company and Agent, and Company shall reimburse the Issuing Lender on the day on which such drawing is honored in an amount in same day funds equal to the amount of such drawing, plus accrued interest, if any, on such amount at the rate set forth in subsection 2.7E(4). D. PAYMENT BY LENDERS. If Company shall fail to reimburse the Issuing Lender, for any reason, as provided in subsection 2.7C in an amount equal to the amount of any drawing honored by the Issuing Lender under a Letter of Credit issued by it, the Issuing Lender shall promptly notify each Lender of the unreimbursed amount of such drawing and of such Lender's respective participation therein based on such Lender's Pro Rata Share of the Revolving Credit Commitments. Each Lender shall make available to the Issuing Lender an amount equal to its respective participation, in same day funds, at the office of the Issuing Lender specified in such notice, not later than 12:00 noon (Dallas time) on the Business Day after the date notified by the Issuing Lender. If any Lender fails to make available to the Issuing Lender the amount of such Lender's participation in such Letter of Credit as -33- provided in this subsection 2.7D, the Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest at the customary rate set by the Issuing Lender for the correction of errors among banks for one Business Day and thereafter at the Base Rate. Nothing in this subsection 2.7 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 subsection 2.7D, or any rights of Company, if it is determined in a final judgment by a court of competent jurisdiction that the payment with respect to a Letter of Credit by the Issuing Lender in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of the Issuing Lender. The Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under this subsection 2.7D with respect to any Letter of Credit issued by the Issuing Lender such other Lender's Pro Rata Share of the Revolving Credit Commitments of all payments received by the Issuing Lender from Company or pursuant to the last paragraph of subsection 2.7A in reimbursement of drawings honored by the Issuing Lender under such Letter of Credit when such payments are received. E. COMPENSATION. Company agrees to pay the following amounts to the Issuing Lender with respect to each Letter of Credit issued by it: (1) an administrative fee equal to .125% per annum of the maximum amount available from time to time to be drawn under such Letter of Credit payable in arrears on and to (but not including) the last Business Day of each fiscal quarter of each year, commencing on the first such date to occur after the Closing Date; (2) a commission on each Documentary Letter of Credit with an initial expiration date of less than one year equal to 0.625% per annum of the weighted average maximum amount available from time to time to be drawn under such Letter of Credit, payable in arrears on and to (but not including) the last Business Day of each fiscal quarter of each year, commencing on the first such date to occur after the Closing Date. (3) a commission on each (A) Standby Letter of Credit and (B) Documentary Letter of Credit with an initial expiration date of one year or more at a per annum rate equal to the product of (y) 3.00% times (z) the weighted average maximum amount available from time to time to be drawn during such period under such Letter of Credit, payable in arrears on and to (but not including) the last Business Day of each fiscal quarter of each fiscal year, commencing on the first such date to occur after the Closing Date; (4) with respect to drawings made under any Letter of Credit, interest, payable on demand, on the amount paid by the Issuing Lender in respect of each such drawing from the date of the drawing through the date such amount is reimbursed by Company at a rate which is equal to the Base Rate; PROVIDED that if such amount is not paid within three Business Days, such amount shall bear interest thereafter at a rate which is equal to 3.00% per annum in excess of the Base Rate which such rate shall not thereafter be increased pursuant to subsection 2.2C, in each case subject to the Highest Lawful Rate; and (5) with respect to the issuance, amendment or transfer of each Letter of Credit -34- and each drawing made thereunder, reasonable documentary and processing charges in accordance with the Issuing Lender's standard schedule for such charges in effect at the time of such issuance, amendment, transfer or drawing, as the case may be, or as otherwise agreed to by the Issuing Lender. Promptly upon receipt by Issuing Lender of any amount described in clauses (2), (3) or (4) of this subsection 2.7E with respect to a Letter of Credit, the Issuing Lender shall distribute to each Lender its Pro Rata Share of the Revolving Credit Commitments of such amount. F. OBLIGATIONS ABSOLUTE. The obligation of Company to reimburse the Issuing Lender for drawings made under the Letters of Credit issued by it and the obligations by Lenders under subsection 2.7D shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Company may have at any time against a beneficiary or any transferee of any Letter of Credit (or any persons or entities for whom any such transferee may be acting), Agent, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Company and the beneficiary for which the Letter of Credit was procured); (iii) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; PROVIDED that the Issuing Lender shall use reasonable care to determine that the documents and certificates required to be delivered under any Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit; (iv) payment by the Issuing Lender under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; PROVIDED that the Issuing Lender shall use reasonable care to determine that the documents and certificates required to be delivered under any Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit; (v) any adverse change in the condition (financial or otherwise) of Holding or any of its Subsidiaries; (vi) any breach of this Agreement or any other Loan Document by Holding or any of its Subsidiaries, Agent, or any Lender (other than the Issuing Lender); (vii) any other circumstance or happening whatsoever, which is similar to any of the -35- foregoing; or (viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing; PROVIDED that Company shall not be required to pay any such amounts to the extent they arise from the gross negligence or willful misconduct of the Issuing Lender (as determined by a court of competent jurisdiction). G. ADDITIONAL PAYMENTS. If, after the date hereof, by reason of (a) the introduction of or change in the official interpretation of any applicable law or regulation by the authority charged with the administration or interpretation thereof or (b) compliance by the Issuing Lender or any Lender with any guideline or request of any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law): (i) the Issuing Lender or any Lender shall be subject to any increase in the net amount of any tax, duty or other charge with respect to the maintenance or fulfillment of its obligations under this subsection 2.7 (except for any increase or other change in or with respect to Excluded Taxes); (ii) any reserve, special deposit, premium, FDIC assessment, capital adequacy or similar requirement is or shall be applicable, imposed or modified in respect of any Letters of Credit issued by the Issuing Lender or participations therein purchased by any Lender; or (iii) there shall be imposed on the Issuing Lender or any Lender any other condition regarding this subsection 2.7, any Letter of Credit or any participation therein; and the result of the foregoing is to directly or indirectly increase the cost to the Issuing Lender or any Lender of, making or maintaining any Letter of Credit or of purchasing or maintaining any participation therein, or to reduce the amount receivable in respect thereof by the Issuing Lender or any Lender, then and in any such case the Issuing Lender or such Lender may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Company and Agent, and Company shall pay within five Business Days of the date of such notice such amounts as the Issuing Lender or such Lender may specify to be necessary to compensate the Issuing Lender or such Lender for such additional cost or reduced receipt, together with interest on such amount from the date demanded until payment in full thereof at a rate equal at all times to the Base Rate PLUS 3.00% per annum but in no event in excess of the Highest Lawful Rate. The determination by the Issuing Lender or any Lender, as the case may be, of any amount due pursuant to this subsection 2.7G as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest error, be final and conclusive and binding on all of the parties hereto. Company shall not be required to pay any amounts pursuant to this subsection 2.7G to or on behalf of any Foreign Lender unless such Foreign Lender has provided to Company either a Certificate of Exemption or a Letter of Non-Exemption. -36- H. INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES. IN ADDITION TO AMOUNTS PAYABLE AS ELSEWHERE PROVIDED IN THIS SUBSECTION 2.7, COMPANY HEREBY AGREES TO PROTECT, INDEMNIFY, PAY AND SAVE HARMLESS THE ISSUING LENDER FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, DAMAGES AND LOSSES OF, AND LIABILITIES TO, THIRD PARTIES TO WHICH THE ISSUING LENDER MAY BE SUBJECT, AND ALL REASONABLE OUT-OF-POCKET COSTS, CHARGES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) RELATING THERETO WHICH THE ISSUING LENDER MAY INCUR OR BE SUBJECT TO AS A CONSEQUENCE, DIRECT OR INDIRECT, OF (i) THE ISSUANCE OF ANY LETTER OF CREDIT, OTHER THAN AS A RESULT OF FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ISSUING LENDER OR THE ISSUING LENDER FAILING TO USE REASONABLE CARE TO DETERMINE THAT THE DOCUMENTS AND CERTIFICATES REQUIRED TO BE DELIVERED UNDER SUCH LETTER OF CREDIT HAD BEEN DELIVERED AND THAT THEY COMPLIED ON THEIR FACE WITH THE REQUIREMENTS OF THAT LETTER OF CREDIT (AS DETERMINED BY A COURT OF COMPETENT JURISDICTION) OR (ii) THE FAILURE OF THE ISSUING LENDER TO HONOR A DRAWING UNDER ANY LETTER OF CREDIT AS A RESULT OF ANY ACT OR OMISSION, WHETHER RIGHTFUL OR WRONGFUL, OF ANY PRESENT OR FUTURE DE JURE OR DE FACTO GOVERNMENT OR GOVERNMENTAL AUTHORITY (ALL SUCH ACTS OR OMISSIONS HEREIN CALLED "GOVERNMENT ACTS"). EACH LENDER, PROPORTIONATELY TO ITS PRO RATA SHARE OF THE REVOLVING CREDIT COMMITMENTS, SEVERALLY AGREES TO INDEMNIFY ISSUING LENDER TO THE EXTENT ISSUING LENDER SHALL NOT HAVE BEEN REIMBURSED BY HOLDING OR ITS SUBSIDIARIES, FOR AND AGAINST ANY OF THE FOREGOING CLAIMS, DEMANDS, LIABILITIES, DAMAGES, LOSSES, COSTS, CHARGES AND EXPENSES TO WHICH ISSUING LENDER IS ENTITLED TO REIMBURSEMENT FROM HOLDING OR ITS SUBSIDIARIES, EXCLUDING THOSE ARISING AS A RESULT OF THE FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ISSUING LENDER AS DETERMINED BY A COURT OF COMPETENT JURISDICTION. As between Company and the Issuing Lender, Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by the Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender shall not be responsible (absent fraud, gross negligence or willful misconduct (as determined by a court of competent jurisdiction) and PROVIDED that the Issuing Lender shall use reasonable care to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit): (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of such Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of any such Letter of Credit to comply fully with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Issuing Lender, including, without limitation, any Government Acts. -37- In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Lender under or in connection with the Letters of Credit issued by it or the related certificates, if taken or omitted in good faith and absent fraud, gross negligence or willful misconduct of the Issuing Lender (as determined by a court of competent jurisdiction), shall not put the Issuing Lender under any resulting liability to Company; PROVIDED that, notwithstanding the foregoing, the Issuing Lender shall use reasonable care to determine that the documents and certificates required to be delivered under any such Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit. Notwithstanding anything to the contrary contained in this subsection 2.7H, Company shall have no obligation to indemnify the Issuing Lender in respect of any claims, demands, liabilities, damages, losses, costs, charges or expenses to which the Issuing Lender may incur or be subject, to the extent they arise out of the fraud, gross negligence or willful misconduct of the Issuing Lender as determined by a court of competent jurisdiction, or out of the wrongful dishonor by the Issuing Lender of a proper demand for payment made under the Letters of Credit, or out of the failure of the Issuing Lender to use reasonable care to determine that the documents and certificates required to be delivered under any Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit. For purposes of this subsection 2.7H, the term "Issuing Lender" means the Issuing Lender and any Lender purchasing a participation in any Letter of Credit pursuant to subsection 2.7D. I. COMPUTATION OF INTEREST AND FEES. Subject to subsection 10.18, interest and fees payable pursuant to this subsection 2.7 shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues. -38- 2.8 Tax Certificates. Each Lender that becomes a Lender pursuant to the proviso in the definition of Lender shall deliver to each of Company and Agent either (1) a letter or other written certification stating that it is organized under the laws of the United States of America or a state thereof (referred to in this subsection 2.8 as a "LETTER OF DOMESTIC ORGANIZATION") or (2) if it is not a "United States person" within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (referred to in this subsection 2.8 as a "FOREIGN LENDER") (x) two properly completed and executed copies of United States Internal Revenue Service Form 4224 or Form 1001 or other successor applicable form, certificate or document prescribed by the Internal Revenue Service of the United States certifying as to such Foreign Lender's entitlement to an exemption from or reduced rate of United States withholding under an applicable statute or tax treaty with respect to payments to be made to such Foreign Lender hereunder (referred to in this subsection 2.8 as a "CERTIFICATE OF EXEMPTION") or (y) a letter from such Foreign Lender stating that it is not entitled to any such exemption or reduced rate (referred to in this subsection 2.8 as a "LETTER OF NON-EXEMPTION") on the date such Lender becomes a Lender and each Lender shall provide additional Letters of Domestic Organization, Certificates of Exemption or Letters of Non-Exemption from time to time thereafter if requested by Company or Agent or required because, as a result of a change in law, or a change in circumstances, the expiration of a previously delivered letter or certificate, or otherwise, a previously delivered letter or certificate becomes incomplete, incorrect or ineffective in any material respect; PROVIDED, HOWEVER, that each initial Lender executing this Agreement certifies that it (1) is organized under the laws of the United States of America or a state thereof and such certification constitutes such Lender's Letter of Domestic Organization for purposes of this subsection 2.8 or (2) has delivered a Certificate of Exemption in connection with the Original Credit Agreement. Unless Company and Agent have received from each Lender that becomes a Lender pursuant to the proviso in the definition of Lender a Certificate of Exemption or Letter of Domestic Organization when and as required pursuant to the preceding sentence, the accuracy of which shall be reasonably satisfactory to Company and Agent, Company and Agent shall be entitled to withhold taxes from all payments to such Lender at the statutory rate applicable to amounts to be paid hereunder to such Lender. If Company and Agent have received from any Foreign Lender a Certificate of Exemption pursuant to the Original Credit Agreement or when and as required by this subsection 2.8, the accuracy of which shall be reasonably satisfactory to Company and Agent, certifying as to such Foreign Lender's entitlement to a reduced rate of withholding tax, Company and Agent shall withhold taxes from all payments to such Foreign Lender at the rate specified in such certificate. For the avoidance of doubt, any reference to any Lender in this subsection 2.8 shall be deemed to refer to and include any Issuing Lender. -39- SECTION 3. CONDITIONS TO REVOLVING CREDIT LOANS AND LETTERS OF CREDIT 3.1 Conditions to Initial Revolving Credit Loans and Letters of Credit The obligations of Lenders to make the initial Revolving Credit Loans, and of any Issuing Lender to issue Letters of Credit on the Closing Date are, in addition to the conditions precedent specified in subsections 3.2 and 3.3, as applicable, subject to prior or concurrent satisfaction of the following conditions: A. HOLDING DOCUMENTS. On or before the Closing Date, Holding shall deliver to Lenders (or to Agent for Lenders with sufficient originally executed copies for each Lender): 1. Certified copies of any amendment to its Certificate of Incorporation since October 15, 1996, together with good standing certificates from the Secretary of State of the States of Delaware and each of its principal places of business, each to be dated a recent date prior to the Closing Date; 2. Copies of any amendments to its Bylaws since October 15, 1996, certified as of the Closing Date by its corporate secretary or an assistant Secretary; 3. Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement to which it is a party, and approving and authorizing any documents, instruments or certificates to be executed by it in connection with this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement to which it is a party, all in form and substance reasonably satisfactory to Agent and its counsel, each certified as of the Closing Date by its corporate secretary or an assistant secretary as being in full force and effect; 4. Signature and incumbency certificates, dated the Closing Date, of its officers executing this Agreement, the Domestic Loan Documents to be executed in connection with this Agreement to which it is a party and any documents, instruments or certificates to be executed by it in connection therewith; 5. Copies of this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement to which it is a party, executed by it; 6. A certificate in form and substance reasonably satisfactory to Requisite Lenders stating that as of the Closing Date, Holding, Company and the Subsidiaries taken as a whole are Solvent; 7. Copies of any other instruments, documents and certificates required to be executed by it in connection with the execution of this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement, so executed; and -40- 8. Such other documents as Agent or Requisite Lenders may reasonably request. B. COMPANY DOCUMENTS. On or before the Closing Date, Company shall deliver to Lenders (or to Agent for Lenders with sufficiently originally executed copies for each Lender): 1. Certified copies of any amendments to its Certificate of Incorporation since October 15, 1996, together with good standing certificates from the Secretary of State of the States of Delaware and each of its principal places of business, each to be dated as of a recent date prior to the Closing Date; 2. Copies of any amendments to its Bylaws since October 15, 1996, certified as of the Closing Date by its corporate Secretary or an assistant Secretary; 3. Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement to which it is a party and approving and authorizing any documents, instruments or certificates required to be executed by it in connection with this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement to which it is a party, all in form and substance reasonably satisfactory to Agent and its counsel, all certified as of the Closing Date by its corporate secretary or an assistant secretary as being in full force and effect; 4. Signature and incumbency certificates, dated the Closing Date, of its officers executing this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement to which it is a party and any documents, instruments or certificates to be delivered in connection therewith; 5. Copies of this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement to which it is a party, executed by it; 6. Copies of any other instruments, documents and certificates required to be executed by it in connection with the execution of this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement, so executed; and 7. Such other documents as Agent or Requisite Lenders may reasonably request. C. SUBSIDIARY DOCUMENTS. On or before the Closing Date, each Subsidiary that is a party to a Loan Document shall deliver to Lenders (or to Agent for Lenders with sufficiently originally executed copies for each Lender): 1. Copies of its Certificate of Incorporation or Articles of Incorporation, as applicable, together with good standing certificates from the Secretary of State of the States of its incorporation and each of its principal places of business, each to be dated as of a recent date prior to the Closing Date; -41- 2. Copies of its Bylaws, certified as of the Closing Date by its corporate secretary or an assistant secretary; 3. Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of the Domestic Loan Documents to be executed in connection with this Agreement to which it is a party and approving and authorizing any documents, instruments or certificates required to be executed by it in connection with this Agreement and the other Domestic Loan Documents to be executed in connection with this Agreement to which it is a party, all in form and substance satisfactory to Agent and its counsel, all certified as of the Closing Date by its corporate secretary or an assistant secretary as being in full force and effect; 4. Signature and incumbency certificates, dated the Closing Date, of its officers executing the Domestic Loan Documents to be executed in connection with this Agreement to which it is a party and any documents, instruments or certificates to be delivered in connection therewith; 5. Copies of the Domestic Loan Documents to be executed in connection with this Agreement to which it is a party, executed by it; 6. Copies of any other instruments, documents and certificates required to be executed by it in connection with the execution of the Domestic Loan Documents to be executed in connection with this Agreement, so executed; and 7. Such other documents as Agent may reasonably request. D. EUROCURRENCY CREDIT AGREEMENTS. On or before the Closing Date, all amendments and/or supplements to the Eurocurrency Credit Agreements and to the Eurocurrency Loan Documents, if any, shall have been executed. E. PERFECTION OF SECURITY INTERESTS AND STOCK CERTIFICATES. Collateral Agent shall have a valid and perfected first priority security interest in the entire Collateral to the extent granted by the Collateral Documents (other than deposit accounts), subject to the Liens, if any, permitted under subsection 6.2, including without limitation, the remaining shares of Pelikan Scotland and Produktions (exclusive of nominal directors' qualifying shares) PLUS a mortgage upon the Bardstown, Kentucky property, all upon terms satisfactory to Agent. F. NECESSARY CONSENTS. On or before the Closing Date, each of Holding, Company and each Subsidiary executing a Domestic Loan Document shall have obtained all consents to the transactions contemplated under this Agreement and the other Domestic Loan Documents of any Person required under any Contractual Obligation of Holding, Company or such Subsidiary, as the case may be, all of the foregoing in form and substance reasonably satisfactory to Agent, except for any such consents the failure of which to be obtained, individually and in the aggregate, would not reasonably be expected to have a material adverse effect on the business or financial condition of -42- Holding and its Subsidiaries, taken as a whole, or on the ability of Holding, Company or any such Subsidiary to perform its obligations under this Agreement and the other Domestic Loan Documents. G. REPRESENTATIONS OF HOLDING AND COMPANY. Each of Holding and Company shall have delivered to Agent an Officers' Certificate in form and substance reasonably satisfactory to Agent to the effect that (i) the representations and warranties in Section 4 hereof pertaining to such Person are true and correct in all material respects on and as of the Closing Date to the same extent as though made on and as of that date, (ii) except for the decline in European sales heretofore disclosed to Lenders, since March 31, 1997 through the Closing Date, there has been no change in the business, operations, properties, assets, business prospects or condition (financial or otherwise) of Holding and its Subsidiaries, which has been or could reasonably be expected to be materially adverse to Holding and its Subsidiaries, taken as a whole, (iii) no Event of Default or Potential Event of Default shall have occurred and be continuing or will result from the transactions contemplated to occur hereunder on the Closing Date and (iv) Holding and Company shall have performed in all material respects all agreements which this Agreement provides shall be performed on or before the Closing Date. H. SATISFACTION OF CONDITIONS TO FUNDING. All conditions precedent to Revolving Credit Loans described in subsection 3.2B shall be satisfied on and as of the Closing Date with respect to the Revolving Credit Loans to be made on such date. I. PERFORMANCE OF AGREEMENTS. Each of Holding, Company and each Subsidiary entering into a Domestic Loan Document to be executed in connection with this Agreement shall have performed in all material respects all agreements which this Agreement provides shall be performed on or before the Closing Date except as otherwise disclosed to and agreed to in writing by Agent. J. PAYMENT OF FEES AND EXPENSES. On or before the Closing Date, Company shall have paid or cause to have been paid (i) to Agent for distribution (as appropriate) to Lenders and Agent, the fees payable on the Closing Date referred to in subsection 2.3, and (ii) to such Persons, all costs and expenses incurred by any Lender (in an amount not to exceed $10,000 for any single Lender) or Agent, including costs and fees of counsel to any Lender or Agent and other professional fees and expenses incurred in connection with the preparation, negotiation, review and execution of this Agreement and the other Loan Documents. K. OPINIONS FROM COUNSEL. Lenders and their respective counsel shall have received originally executed copies of one or more favorable written opinions of counsel for Holding, Company and the Subsidiaries, in form and substance reasonably satisfactory to Agent and its counsel, dated as of the Closing Date, and setting forth substantially the matters in the opinions designated in EXHIBIT III annexed hereto and as to such other matters as Agent may reasonably request. L. OPINIONS FROM COUNSEL TO AGENT. Lenders shall have received an originally executed copy of one or more favorable written opinions of Winstead Sechrest & Minick P.C., counsel to Agent, dated as of the Closing Date, addressed to Agent and substantially in the form of EXHIBIT IV annexed hereto and as to such other matters as Agent may reasonably request. M. OTHER CORPORATE ACTIONS. On or before the Closing Date, all corporate and other -43- proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agent, acting on behalf of Lenders, and its counsel shall be reasonably satisfactory in form and substance to Agent and such counsel, and Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Agent may reasonably request. N. ACKNOWLEDGEMENT. Agent shall have received the Acknowledgement, duly executed by each of Holding, Company, ICMI, Nu-kote Imperial, Nu-kote Imaging, and Future Graphics. O. ANNUAL AUDIT. Agent shall have received the annual audited financial statements of Holding and the Subsidiaries for the year ended March 31, 1997, accompanied by a report thereon of Coopers & Lybrand which report shall be unqualified as to going concern and scope of audit and shall state that such consolidated financial statements present fairly, in all material respects, the financial position of Holding and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP and the audit by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards. P. WARRANT AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT. Lenders shall have received the Warrant Agreement and the Registration Rights Agreement duly executed by Holding, and all terms and conditions to the effectiveness thereof shall have been satisfied. 3.2 Conditions to All Revolving Credit Loans The obligations of Agent and Lenders to make all Revolving Credit Loans on each Funding Date (including, without limitation, the making of the Revolving Credit Loans on the Closing Date) are subject to the following further conditions precedent: A. NOTICE OF BORROWING. Agent shall have received, in accordance with the provisions of subsection 2.1B, before that Funding Date, an originally executed Notice of Borrowing in each case signed by the Chief Executive Officer, the President, the Chief Financial Officer, the Chief Operating Officer, the Corporate Controller or the Treasurer of Company, or by any officer of Company designated by any of the above-described officers on behalf of Company in writing delivered to Agent. B. CONDITIONS TO FUNDING. As of that Funding Date: 1. The representations and warranties contained herein shall be true and correct in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; 2. No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute (a) an Event of Default or (b) a Potential Event of Default; -44- 3. Holding and its Subsidiaries shall have in all material respects performed all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by them on or before that Funding Date; 4. No order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain any Lender from making such Revolving Credit Loan; and 5. There shall not be pending or, to the knowledge of Holding or Company, threatened, any action, suit, proceeding, governmental investigation or arbitration against or affecting Holding or Company or any property of Holding or Company, that has not been disclosed by Holding or Company in writing pursuant to subsection 4.6 or 5.1(ii) prior to the making of such Revolving Credit Loan (or, in the case of the initial Revolving Credit Loans, prior to the Closing Date) and there shall have occurred no development not so disclosed in any such action, suit, proceeding, governmental investigation or arbitration so disclosed, that, in either event, would reasonably be expected to either (i) materially and adversely affect the business, operations, properties, assets or condition (financial or otherwise) of Holding and its Subsidiaries taken as a whole, or the prospects of Holding and its Subsidiaries taken as a whole or (ii) materially and adversely impair the ability of Holding or any of its Subsidiaries to perform or of Lenders to enforce the Obligations other than, in either case, those matters that are adequately covered by insurance or for which indemnification to Holding and its Subsidiaries reasonably satisfactory to Agent has been provided. No injunction or other restraining order shall have been issued and no hearing to cause an injunction or other restraining order to be issued shall be pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, this Agreement or the making of Revolving Credit Loans hereunder. 3.3 Conditions to Letters of Credit The obligation of any Issuing Lender to issue or extend any Letter of Credit hereunder is subject to prior or concurrent satisfaction of all of the following conditions: A. On or before the date of issuance of such Letter of Credit, the Issuing Lender with respect thereto shall have received, in accordance with the provisions of subsection 2.7B, a notice requesting the issuance of such Letter of Credit and all other information specified in subsection 2.7B, and such other documents as such Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. B. On the date of issuance or extension of such Letter of Credit, all conditions precedent described in subsection 3.2B shall be satisfied to the same extent as though the issuance or extension of such Letter of Credit were the making of a Revolving Credit Loan and the date of issuance or extension of such Letter of Credit were a Funding Date. -45- SECTION 4. REPRESENTATIONS AND WARRANTIES This Section 4 shall not be effective or in full force and effect until the Closing Date. In order to induce Agent and Lenders to enter into this Agreement, Holding and Company severally represent and warrant to Agent and each Lender that the following statements are true and correct: 4.1 Organization, Powers, Good Standing, Business and Subsidiaries A. ORGANIZATION AND POWERS. Each of Holding, Company and each Subsidiary is a corporation duly organized and validly existing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, to enter into each Loan Document to which it is a party, and to carry out the transactions contemplated thereby. B. GOOD STANDING. Each of Holding, Company and each Subsidiary is in good standing as a qualified foreign corporation wherever necessary to carry on its present business and operations, except in jurisdictions in which the failure to be in good standing has not had and could not reasonably be expected to have a material adverse effect on Holding and its Subsidiaries taken as a whole. C. SUBSIDIARIES. All of the Subsidiaries of Holding, as of the Closing Date, are identified in SCHEDULE 4.1-C annexed hereto. SCHEDULE 4.1-C correctly sets forth the ownership interest as of the Closing Date of Holding in each of its Subsidiaries. All of the Subsidiaries of Company, as of the Closing Date, are identified as such in SCHEDULE 4.1-C annexed hereto. All of the Subsidiaries of Holding identified on SCHEDULE 5.13-B hereto are dormant, do not conduct business, and on the Closing Date own total assets with an aggregate value less than $2,000,000 and an aggregate value (net of liabilities) less than zero. 4.2 Authorization of Borrowing, etc. A. AUTHORIZATION OF BORROWING. The execution, delivery and performance of the Loan Documents and the transactions contemplated thereby have been duly authorized, as appropriate, by all necessary corporate action by Holding, Company and the Subsidiaries. B. NO CONFLICT. The execution, delivery and performance by Holding, Company and the Subsidiaries of the Loan Documents to which each such Person is a party and the consummation of the transactions contemplated thereby do not and will not (i) violate any provision of law applicable to Holding, Company or any Subsidiary, the Certificate of Incorporation or Bylaws (or equivalent documents) of Holding, Company or any Subsidiary, or any order, judgment or decree of any court or other agency of government, domestic or foreign, binding on Holding, Company or any Subsidiary, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Holding, Company or any Subsidiary, (iii) pursuant to any such Contractual Obligation, result in or require the creation or imposition of any Lien upon any of the properties or assets of Holding, Company or any Subsidiary (other than Liens in favor of (a) the Collateral Agent for the benefit of Lenders and the Eurocurrency Lenders or (b) any Person as agent or -46- trustee for the benefit of any Eurocurrency Lender and any Liens permitted by subsection 6.2 or pursuant to the terms of any Eurocurrency Loan Document), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Holding, Company or any Subsidiary, except for such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders or which might be required in connection with any security interest in deposit accounts, and except in the cases of the foregoing clauses (i), (ii), (iii) and (iv) for any such violations, conflicts, breaches and defaults the existence of which, and any such approvals and consents the failure of which to be obtained, individually and in the aggregate, would not reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole, or on the ability of Holding, Company and the Subsidiaries to perform their respective obligations under the Loan Documents. C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by each of Holding, Company and each Subsidiary of the Loan Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Federal, state or other governmental authority or regulatory body, domestic or foreign, except for (y) filings, registrations, consents, approvals, notices or other actions required in connection with the granting or perfection of security interests granted pursuant to the Loan Documents, and (z) other registrations, consents, approvals, notices and actions that have been or will be obtained or taken on or before the Closing Date. D. BINDING OBLIGATION. The Loan Documents are the legally valid and binding obligations of Holding, Company and the Subsidiaries, as their interests and obligations appear herein and therein, enforceable against Holding, Company and the Subsidiaries in accordance with their respective terms, except (i) as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, (ii) for limitations on enforceability of any Loan Document to the extent it grants or purports to grant any security interest in deposit accounts or rights of set-off or other equitable rights of combination and (iii) for limitations on enforceability of rights to indemnification under federal securities or other laws or regulations or public policy. -47- 4.3 Financial Condition The audited consolidated balance sheets of Holding and its Subsidiaries as at March 31, 1997, and the related consolidated statements of operations, cash flows and changes in stockholders' equity of Holding and its Subsidiaries for the Fiscal Year then ended to be delivered prior to the effectiveness of this Agreement and the unaudited consolidated balance sheet of Holding and its Subsidiaries as at May 23, 1997, and the related statements of operations and cash flows for the two months then ended, were prepared in conformity with GAAP and fairly present, in all material respects, the consolidated financial position of Holding and its Subsidiaries as at the date thereof and the consolidated results of operations and cash flows of Holding and its Subsidiaries for each of the periods covered thereby subject, in the case of such May 23, 1997, financial statements, to changes resulting from audit and normal year-end adjustments and the absence of notes and such financial statements may be only substantially in conformity with GAAP. At March 31, 1997, neither Holding nor any of its Subsidiaries had any material (i) Contingent Obligation, (ii) contingent liability or liability for taxes, (iii) long-term lease or (iv) unusual forward or long-term commitment out of the ordinary course of business, that is not reflected in such financial statements or in the notes thereto. 4.4 No Material Adverse Change; No Stock Payments Except for the decline in European sales heretofore disclosed to Lenders, since March 31, 1997, there has been no change in the business, operations, properties, assets or condition (financial or otherwise) of Holding and its Subsidiaries, which has been or could reasonably be expected to be materially adverse to Holding and its Subsidiaries, taken as a whole. Neither Holding, Company nor any Subsidiary has directly or indirectly declared, ordered, paid or made or set aside any sum or property (excluding any foreign law requirement to maintain a statutory reserve or the like) for any Restricted Junior Payment or agreed to do so except as permitted by subsection 6.5. 4.5 Title to Properties; Liens Holding, Company and the Subsidiaries have good, sufficient and legal title, subject only to Liens permitted pursuant to subsection 6.2 and the Eurocurrency Loan Documents, to all their respective owned properties and assets reflected in the financial statements referred to in subsection 4.3 or in the most recent financial statements delivered pursuant to subsection 5.1 of this Agreement or the Eurocurrency Guaranties, except for assets (i) not material to the business of Holding and its Subsidiaries taken as a whole, or (ii) acquired or disposed of (A) in the ordinary course of business or (B) as otherwise permitted under this Agreement since the date of the consolidated balance sheet contained in such financial statements. All real property leased by Holding, Company or any of the Domestic Subsidiaries at which Inventory is located is identified in SCHEDULE 4.5 annexed hereto. -48- 4.6 Litigation; Adverse Facts Except as set forth on SCHEDULE 4.6 hereto or otherwise disclosed in writing to Lenders and Eurocurrency Lenders prior to the Closing Date, there is no action, suit, proceeding, governmental investigation or arbitration (whether or not purportedly on behalf of Holding or any of its Subsidiaries) at law or in equity or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, pending or, to the knowledge of Holding or any of its Subsidiaries, threatened against or affecting Holding or any of its Subsidiaries or any property of Holding or any of its Subsidiaries that would reasonably be expected to result in any material adverse change in the business, prospects, operations, properties, assets or condition (financial or otherwise) of Holding and its Subsidiaries taken as a whole, or would materially adversely affect Holding's, Company's or any Subsidiary's ability to perform or Lenders' ability to enforce the Obligations or would affect Holding's, Company's or any Subsidiary's ability to perform, or Eurocurrency Lenders' ability to enforce, the obligations owing or to be owed under the Eurocurrency Loan Documents. As of the Closing Date, none of Holding, Company or any Subsidiary has received any notice of termination of any material contract, lease or other agreement or suffered any material damage, destruction or loss (whether or not covered by insurance) or had any employee strike, work-stoppage, slow-down or lock-out any of which remain pending, that would or could reasonably be expected to be materially adverse to Holding and its Subsidiaries, taken as a whole. 4.7 Payment of Taxes Except to the extent otherwise permitted by subsection 5.3, all taxes required to be paid by Holding, Company and each Subsidiary which are due and payable and are material to the business, operations, properties, assets or condition (financial or otherwise) of Holding and its Subsidiaries taken as a whole have been paid. Neither Holding, Company nor any Subsidiary knows of any tax assessment proposed in writing against any such Person that would be material to the condition (financial or otherwise) of Holding and its Subsidiaries taken as a whole, except for any such tax assessment which is being actively contested by such Person to the extent affected thereby, in good faith and by appropriate proceedings, and with respect to which reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 4.8 Materially Adverse Agreements; Performance of Agreements A. Neither Holding, Company nor any Subsidiary is a party to or is subject to any agreement or instrument materially and adversely affecting the financial condition of Holding and its Subsidiaries, taken as a whole, except as otherwise disclosed in writing to Lenders prior to the Closing Date. B. Neither Holding, Company nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or -49- indirect, of such default or defaults or the consequences of actions curing such default or defaults, if any, would not be reasonably expected to have a material adverse effect on the business, properties, assets, operations or condition (financial or otherwise) of Holding and its Subsidiaries, taken as a whole. 4.9 Governmental Regulation Neither Holding nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940, or to any Federal or state statute or regulation, domestic or foreign, limiting its ability to incur Indebtedness for money borrowed or to create Liens on any of its properties or assets to secure such Indebtedness that materially and adversely affects its ability to perform its obligations under the Loan Documents. 4.10 Securities Activities Neither Holding, Company or any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. 4.11 Employee Benefit Plans A. Holding and each of its ERISA Affiliates is in compliance in all material respects with any applicable provisions of the Internal Revenue Code, ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans. B. No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan which would have a material adverse effect on the financial condition of Holding and its Subsidiaries, taken as a whole. C. Based upon the actuarial assumptions, methods and most recent valuation date utilized in the most recent actuarial valuation report prepared with respect to each Pension Plan, as of such valuation date, the actuarial present value of all benefit liabilities under all Pension Plans does not exceed the fair market value of the assets allocable to such benefit liabilities by more than $1,500,000. For purposes of the preceding sentence, the terms "actuarial present value" and "benefit liabilities" shall have the meanings specified in Section 4001 of ERISA. D. Neither Holding nor any of its ERISA Affiliates has incurred or reasonably expects to incur any withdrawal liability under Title IV of ERISA to any Multiemployer Plan which would have a material adverse effect on the financial condition of Holding and its Subsidiaries, taken as a whole. E. None of Holding or any Subsidiary thereof has engaged in any "prohibited transaction," as such term is defined in Section 4975 of the Internal Revenue Code or Section 406 of Title I of ERISA in connection with any Pension Plan for which no exemption was available under ERISA or the Internal Revenue Code, that resulted in a liability under ERISA or the Internal Revenue Code which -50- would have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole. F. Other than the post-retirement medical plan sponsored by Holding covering certain employees who were employees prior to January 1987, employment or supplemented employment agreements with three executive officers of Holding and Company, the regular severance and vacation policies of Holding and its Subsidiaries, certain key-man insurance policies and information (including information disclosed pursuant to FAS 106) as to which has been disclosed in the most recent financial statements of Holding and its Subsidiaries, none of Holding or any Subsidiary thereof maintains or has maintained any welfare benefit plan within the meaning of Section 3(1) of ERISA which provides for continuing benefits or coverage for any participant or any beneficiary of a participant after such participant's termination of employment except as may be required by Part 6 of Title I of ERISA and the regulations thereunder or except as to plans with respect to which such participant or beneficiary pays his or her allocable share of the premium or other material costs of providing benefits or coverage under such plan. 4.12 Disclosure No representation or warranty of Holding, Company or any Subsidiary contained in any Loan Document or any other document, certificate or written statement furnished to Lenders by or on behalf of Company for use in connection with the transactions contemplated by the Loan Documents contains any untrue statement of a material fact or omits to state a material fact (known to Holding, Company or any Subsidiary in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made as of the time the same were made. Since March 31, 1997, there is no fact known to Holding, Company or any Subsidiary (other than matters of a general economic, political or social nature) that materially and adversely affects the business, operations, property, assets or condition (financial or otherwise) of Holding and its Subsidiaries, taken as a whole, that has not been disclosed herein or in other documents, certificates and written statements furnished to Lenders and Eurocurrency Lenders from time to time for use in connection with the transactions contemplated by the Loan Documents. 4.13 Licenses, Permits and Authorizations Holding, Company and each Subsidiary has all approvals, licenses or other permits of all governmental or regulatory agencies, whether Federal, state or local, the absence of which would or could reasonably be expected to be materially adverse to Holding and its Subsidiaries taken as a whole. -51- 4.14 Intangible Property Holding, Company and each Subsidiary owns or possesses licenses or other rights to use all trade names, unregistered trademarks and service marks, brand names, patents, registered and unregistered copyrights, registered trademarks and service marks, and all applications for any of the foregoing, and all permits, grants and licenses or other rights with respect thereto, in each case used in the operation of its and their businesses in the manner in which they are currently being conducted, the absence of which would be reasonably expected to materially adversely affect the business, operations, assets or financial condition of Holding and its Subsidiaries taken as a whole ("MATERIAL INTELLECTUAL PROPERTY"). SCHEDULE 4.14 sets forth a true and complete list of all service mark and trademark registrations and applications for registration of Holding and its Subsidiaries included in the Material Intellectual Property as of the date of this Agreement. Except as set forth on SCHEDULE 4.6 or otherwise disclosed in writing to Lenders prior to the Closing Date, to the knowledge of Holding and Company as of such date, no claim of infringement materially adverse to the business, operations, or financial condition of Holding and its Subsidiaries taken as a whole is currently being asserted by any other Person to the use by Holding or any of its Subsidiaries of any Material Intellectual Property, and neither Holding, Company nor any of its Subsidiaries has been notified or advised of any such claim. 4.15 Environmental Matters Except as disclosed in writing to Lenders prior to the Closing Date, including disclosure in Holding's Annual Report on Form 10-K for the fiscal year ended March 31, 1997: (i) the operations of Holding, Company and each Subsidiary (including, without limitation, all operations and conditions at or in the Facilities) comply in all material respects with all applicable Environmental Laws; (ii) Holding, Company and each Subsidiary have obtained all material environmental, health and safety permits necessary to their respective operations, and all such permits are in good standing, and Holding, Company and each Subsidiary are in compliance with all material terms and conditions of such permits; (iii) neither Holding, Company nor any Subsidiary has received any Environmental Claim that would reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole; (iv) none of the operations of Holding, Company or any Subsidiary is the subject of any pending judicial or administrative proceeding alleging the violation of or liability under any Environmental Laws which would reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole; (v) Holding, Company and each Subsidiary and all of their present Facilities or operations, as well as their past Facilities or operations, are not subject to any outstanding written order or agreement with any governmental authority or private party respecting (A) any -52- Environmental Laws or (B) any Environmental Claims that would reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole; (vi) neither Holding, Company nor any Subsidiary has any Contingent Obligation in connection with any Release of any Hazardous Materials by Holding, Company or any Subsidiary that would reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole; (vii) neither Holding, Company nor any Subsidiary nor, as of the Closing Date and to the knowledge of Holding and Company as of such date, any predecessor of Holding, Company or Subsidiary has filed any notice under any Environmental Law indicating past or present treatment, storage, or disposal of Hazardous Materials at any Facility except as a lawful incident of its business operation; none of Holding's or any of its Subsidiary's operations involves the generation, transportation, treatment or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent except as a lawful incident of its business operation; and neither Holding, Company nor any Subsidiary nor, as of the Closing Date and to the knowledge of Holding and Company as of such date, any predecessor in title to any of them nor, as of the Closing Date and to the knowledge of Holding and Company as of such date, has any third party at any time occupying any Facilities at any time used, generated, disposed of, stored, transported to or from or released any Hazardous Materials, from, under or effecting such Facility except as a lawful incident of its business operation, which generation, transportation, treatment, storage, use, disposal or release in any of the foregoing cases would reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole; (viii) no Hazardous Materials exist on, under or about any Facility in a manner that would reasonably be expected to give rise to an Environmental Claim having a material adverse effect on the business or financial condition of Holding and its Subsidiaries taken as a whole, and neither Holding, Company nor any Subsidiary has filed any notice or report of a Release of any Hazardous Materials that would reasonably be expected give rise to an Environmental Claim having a material adverse effect on the business or financial condition of Holding and its Subsidiaries taken as a whole; (ix) as of the Closing Date and to the knowledge of Holding and Company as of such date, no underground storage tanks or surface impoundments are on or at the Facilities; and (x) no Lien in favor of any governmental authority for (A) any liability under Environmental Laws, or (B) damages arising from or costs incurred by such governmental authority in response to a Release has been filed or attached to the Facilities, which liability, damages or costs would reasonably be expected to have a material adverse effect on the business or financial condition of Holding and Subsidiaries, taken as a whole. -53- SECTION 5. AFFIRMATIVE COVENANTS Holding and Company severally covenant and agree that, on and after the Closing Date, so long as the Revolving Credit Commitments hereunder shall be in effect and until payment in full of all of the Revolving Credit Loans and all other amounts owing hereunder, unless Requisite Lenders shall otherwise give prior written consent, such Person shall perform all covenants in this Section 5 to be performed by it (including, in the case of Company, covenants applicable to it in its capacity as a Subsidiary of Holding) and cause each of its Subsidiaries to comply with all covenants in this Section 5 applicable to such Subsidiary. 5.1 Financial Statements and Other Reports Holding will maintain, or cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Company will deliver to Lenders and Eurocurrency Lenders: (i) as soon as practicable and in any event within 45 days after the end of each of the first three fiscal quarters in each Fiscal Year (including the fiscal quarter ended June 27, 1997), (a) management's discussion and analysis of financial condition and results of operations contained in Holding's Quarterly Report on Form 10-Q for such fiscal quarter, or a written discussion and analysis in form and detail substantially similar thereto and (b) consolidated balance sheets of Holding and its Subsidiaries as at the end of such period and the related consolidated statements of income, stockholders' equity and cash flow of Holding and its Subsidiaries for such fiscal quarter and setting forth in each case in comparative form the consolidated figures for the corresponding periods of the previous Fiscal Year (all of said financial statements set forth in this clause (b) shall also include consolidating financial information with respect to the Subsidiaries), all in reasonable detail and certified by the Chief Financial Officer, Corporate Controller or Treasurer of Holding that they fairly present, in all material respects, the financial condition of Holding and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated, subject to changes resulting from audit and normal year- end adjustments, and except that such financial statements need not contain notes and shall be prepared substantially in conformity with GAAP; (ii) as soon as practicable and in any event within 90 days after the end of each Fiscal Year, to the extent not included in management's discussion and analysis of financial condition and results of operations contained in Holding's Annual Report on Form 10-K for such Fiscal Year, (a) a written discussion of the financial and operating performance for the fourth fiscal quarter of such Fiscal Year from a profit and loss, cash flow and balance sheet standpoint and discussions of the major factors affecting such performance, including but not limited to changes in working capital for such fiscal quarter and consolidated balance sheets of Holding and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income (all of said financial statements set forth in this clause (a) shall also -54- include consolidating financial information with respect to the Subsidiaries), stockholders' equity and cash flows of Holding and its Subsidiaries for such Fiscal Year, setting forth in each case, in comparative form the consolidated figures for the previous year, all in reasonable detail, including the notes thereto which shall, among other things, indicate that Holding and its Subsidiaries are in compliance with the financial covenants contained in this Agreement, and accompanied by a report thereon of Coopers & Lybrand or such other independent certified public accountants of recognized national standing selected by Holding as shall be satisfactory to Agent which report shall be unqualified as to going concern and scope of audit and shall state that such consolidated financial statements present fairly, in all material respects, the financial position of Holding and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP and that the audit by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards and (b) with respect to the final quarter of such Fiscal Year, the schedules and financial information set forth in clause (b) of subsection 5.1(i), certified by the Chief Financial Officer, Corporate Controller or Treasurer of Holding as fairly presenting, in all material respects, the matters set forth therein as at the dates thereof; (iii) as soon as practicable and in any event within 45 days after June 30, 1997, July 31, 1997, and August 31, 1997, and within 30 days after the last day of each calendar month (including the twelfth calendar month of each Fiscal Year) thereafter beginning with the calendar month ending September 30, 1997, consolidated balance sheets of Holding and its Subsidiaries as at the end of such period and the related consolidated statements of income, stockholders' equity and cash flow of Holding and its Subsidiaries for such month and for the Fiscal Year to date and setting forth in each case in comparative form the consolidated figures for the corresponding periods of the previous Fiscal Year (all of said financial statements shall also include consolidating financial information with respect to the Subsidiaries and shall include a comparison of such information to budget), all in reasonable detail and certified by the Chief Financial Officer, Corporate Controller or Treasurer of Holding that they fairly present, in all material respects, the financial condition of Holding and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, and except that such financial statements need not contain notes and shall be prepared substantially in conformity with GAAP; (iv) promptly after preparation, and no later than 5:00 p.m., Dallas, Texas Time, on the 3rd Business Day of each week, a weekly revenue flash report and an estimate of cash and Indebtedness balances versus the prior week's forecast, all in the form currently being provided to Price Waterhouse LLP or such other form as may be acceptable to Requisite Lenders, and in each case breaking out such information with respect to North American and non-North American operations; (v) together with each delivery of financial statements of Holding and its Subsidiaries pursuant to subdivisions (i), (ii) and (iii) of this subsection 5.1, (x) an Officers' Certificate of Holding stating that the signers have reviewed the terms of this Agreement and -55- the other Loan Documents and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of Holding and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as of the date of the Officers' Certificate, of any condition or event that constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action Holding has taken, is taking and proposes to take with respect thereto; and (y) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the applicable accounting periods with the restrictions contained in this Agreement in the manner set forth in such Compliance Certificate; (vi) promptly upon any Executive Officer of Holding, Company or any Subsidiary obtaining knowledge (a) that a condition or event has occurred and is continuing that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender or Agent or any Eurocurrency Lender or Eurocurrency Administrative Agent, as appropriate, has given any notice or taken any other action with respect to a claimed Event of Default or Potential Event of Default under any Loan Document, (b) that any Person has given any notice to Holding, Company or any Material Subsidiary or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 8.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K pursuant to Items 1, 2 or 4 of such Form as in effect on the date hereof if Company were required to file such reports under the Exchange Act, or (d) of a material adverse change in the business, operations, properties, assets or condition (financial or otherwise) of Holding and its Subsidiaries taken as a whole, or of an event or condition that would reasonably be expected to result in such a material adverse change, an Officers' Certificate specifying the nature and period of existence of such condition or event, or specifying the notice given or action taken by such holder or Person and the nature of such claimed default, Event of Default, Potential Event of Default, event or condition, and what action Holding, or Company has taken, is taking and proposes to take with respect thereto; (vii) upon any officer of Holding, Company or any Subsidiary obtaining knowledge of (a) the institution of, or non-frivolous threat in writing of, any action, suit, proceeding, governmental investigation or arbitration against or affecting Holding or any of its Subsidiaries or any property of Holding, Company or any Subsidiaries not previously disclosed by Holding to Lenders and Eurocurrency Lenders and involving potential liability of Holding, Company or a Subsidiary for which reserves shall be required in conformity with GAAP in excess of $250,000 in any such case, or (b) any material development in any such action, suit, proceeding, governmental investigation or arbitration, that, in either case, would reasonably be expected to have a material and adverse effect on the business, operations, properties, assets or condition (financial or otherwise) of Holding and its Subsidiaries taken as a whole or on the prospects of Holding and its Subsidiaries taken as a whole, Holding shall promptly give notice thereof to Lenders and Eurocurrency Lenders and provide such other information as may be reasonably available to it to enable Lenders and Eurocurrency Lenders and their counsel to -56- evaluate such matters; (viii) promptly upon becoming aware that one of the following has occurred or is about to occur: (a) Termination Event (other than a standard termination of any Pension Plan pursuant to Section 4041(b) of ERISA), or (b) non-exempt "prohibited transaction," as such term is defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA in connection with any Employee Benefit Plan or any trust created thereunder, a written notice specifying the nature thereof, what action Holding or Company has taken, is taking or proposes to take with respect thereto, and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor, or the PBGC with respect thereto; (ix) with reasonable promptness copies of (a) all notices received by Holding, Company or any of their respective ERISA Affiliates of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan; (b) each Schedule A (Actuarial Information) to the annual report (Form 5500 Series) filed by Holding, Company or any of their ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan under which the present value of accrued benefits under such plan exceeds the current value of the assets of such plan as of the reporting date for such annual report; and (c) all notices received by Holding, Company or any of their ERISA Affiliates from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA; (x) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by Holding to its security holders or by Company or any Subsidiary to its security holders, of all regular and periodic reports and all registration statements and prospectuses, if any, filed by Holding, Company or any Subsidiary with any securities exchange or with the Securities and Exchange Commission or any governmental authority succeeding to any of its functions, and of all press releases and other statements made available generally by Holding, Company or any Subsidiary to the public concerning material developments in the business of Holding and its Subsidiaries, taken as a whole; (xi) immediately prior to or coincident with the release thereof, notice of all material press releases to Agent and Eurocurrency Administrative Agent; and (xii) with reasonable promptness, a copy of any management letter submitted to Holding, Company or any Subsidiary by their independent certified public accountants and such other information and data with respect to Holding, Company or any Subsidiary as from time to time may be reasonably requested by any Lender or Eurocurrency Lender. 5.2 Corporate Existence, etc. Holding and Company will at all times preserve and keep in full force and effect its respective corporate existence and all of its related rights and franchises material to the business of Holding and its Subsidiaries, taken as a whole, except as otherwise permitted by subsection 6.7. -57- 5.3 Payment of Taxes and Claims; Tax Consolidation A. Each of Holding, Company and each Subsidiary will pay or cause to be paid all material taxes, assessments and other governmental charges required to be paid by it before any material penalty accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a material Lien upon any of its properties or assets, prior to the time when any material penalty or fine shall be accrued with respect thereto; PROVIDED that so long as no such property or asset (other than money for such charge or claim and the interest or penalty accruing thereof) of Holding, Company or any Subsidiary is in danger of being lost or forfeited as a result thereof, no such tax, assessment, charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. B. Each of Holding, Company and each Subsidiary will not file or consent to the filing of any consolidated U.S. federal income tax return with any Person other than (i) Holding or any of its Subsidiaries or (ii) such other Person with whom Holding, Company or any Subsidiary has entered into a tax sharing agreement reasonably satisfactory to Agent requiring such other Person to promptly reimburse Holding, Company or such Subsidiary in cash for the reasonable value of any tax benefits attributable to Holding, Company or such Subsidiary and effectively utilized by such other Person to reduce its taxes payable. 5.4 Maintenance of Properties; Insurance; Sales of Certain Assets Each of Holding, Company and each Subsidiary will maintain or cause to be maintained in good repair, working order and condition (ordinary wear and tear excepted) all material properties used in the business of such Person and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. Holding, Company and the Subsidiaries will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to their respective properties and business and the properties and business of their respective Subsidiaries against loss or damage of the kinds customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations, including without limitation a policy covering claims with respect to trademark and patent infringement. Each such policy of insurance shall provide for at least thirty (30) days prior written notice to Agent of any modification or cancellation of such policies, and all policies covering Collateral shall name the Agent as loss payee thereof. As soon as practicable after the Closing Date and each anniversary thereof, Company shall submit to Agent an Officers' Certificate setting forth in reasonable detail the type and amount of insurance maintained pursuant to this subsection. Each of Holding, Company and each Subsidiary shall use its reasonable best efforts to sell assets which are not necessary for their continuing operations. -58- 5.5 Inspection; Lender Meeting Holding, Company and its Subsidiaries shall permit any authorized representatives designated by any Lender or Eurocurrency Lender to visit and inspect any of the properties of Holding, Company and its Subsidiaries, including its and their financial and accounting records, and to make copies and take extracts therefrom, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants, all upon reasonable notice and at reasonable times during normal business hours and as often as may be reasonably requested. Without in any way limiting the foregoing, Company will participate in an annual meeting of Agent, Lenders and Eurocurrency Lenders to be held at such place and time as may be agreed to by Company and Agent and more frequent meetings if requested by Agent or Requisite Lenders. 5.6 No Further Negative Pledges Except with respect to specific property encumbered to secure payment of particular Indebtedness, neither Holding, Company nor any Subsidiary shall enter into any agreement prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired. 5.7 Compliance with Laws, etc. Holding, Company and the Subsidiaries shall comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority (including, without limitation, all Environmental Laws), noncompliance with which would or could reasonably be expected to materially adversely affect the business, properties, assets, operations or condition (financial or otherwise) of Holding and its Subsidiaries, taken as a whole. 5.8 Environmental Disclosure and Inspection (A) Except as disclosed in writing to Lenders and Eurocurrency Lenders prior to the Closing Date, Holding shall comply, and shall cause each of Company and the Subsidiaries and their Facilities to comply, and cause (a) their respective employees, agents, contractors and subcontractors and (b) all tenants under any lease or occupancy agreement affecting any portion of the Facilities to comply with all applicable Environmental Laws in all material respects. Holding shall cause each of its Subsidiaries to use all commercially reasonable efforts to comply in all material respects with all Environmental Laws applicable to such matters in a timely manner following the Closing Date. (B) Except as to matters disclosed in writing to Lenders and Eurocurrency Lenders prior to the Closing Date, Company shall promptly advise Lenders and Eurocurrency Lenders in writing and in reasonable detail of (a) any material Release of any Hazardous Material required to be reported to any federal, state or local governmental or regulatory agency, domestic or foreign, under all applicable Environmental Laws, (b) any remedial action taken by Holding, Company or, to the extent Holding or any of its Subsidiaries has any such knowledge, -59- any such Person or Subsidiary in response to (1) any Hazardous Material on, under or about any Facility, the existence of which would reasonably be expected to result in an Environmental Claim having a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole or (2) any Environmental Claim that would reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries taken as a whole, and (c) any request for information from any governmental agency, domestic or foreign, that indicates such agency is investigating whether Holding, Company or any Subsidiary may be potentially responsible for a material Release of Hazardous Materials. (C) Company shall promptly notify Lenders and Eurocurrency Lenders of any proposed acquisition of assets or property by Holding, Company or any Subsidiary, that could reasonably be expected to result in Environmental Claims having a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole. (D) Company shall, at its own expense, provide copies to Agent of such documents or information to which Holding, Company or any Subsidiaries has access as Agent may reasonably request in relation to any matters disclosed pursuant to this subsection 5.8. (E) Company shall promptly notify Lenders and Eurocurrency Lenders of any material change in the validity or enforceability or any termination or notice of termination of the indemnity obligations of Unisys Corporation owed to the Company pursuant to the Unisys Acquisition Agreement. 5.9 Hazardous Materials; Remedial Action A. Each of Holding and Company shall, and shall cause the Subsidiaries, to (i) store, use, dispose and transport any Hazardous Materials in compliance with all applicable Environmental Laws, except to the extent that any failure so to comply would not reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole, and (ii) take promptly any and all necessary remedial action in response to the Release of any Hazardous Materials on, under or about any Facility, except (x) with respect to matters as to which Unisys Corporation is obligated to indemnify Holding or a Subsidiary thereof, or as to which Holding or a Subsidiary thereof is contesting in good faith the extent of its liability, or (y) to the extent that any failure so to take such action would not reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole. In the event Holding, Company or any Subsidiary undertakes any remedial action with respect to any Hazardous Material on, under or about any Facility, Holding, Company or such Subsidiary shall conduct and complete such remedial action in compliance with all applicable Environmental Laws, and in a manner not inconsistent with all applicable orders and directives of all federal, state and local governmental authorities, except (a) when the extent of Holding's, Company's or such Subsidiary's liability with respect to such Hazardous Material is being contested in good faith by Holding, Company or such Subsidiary or (b) to the extent that any failure so to comply or be not inconsistent would not reasonably be expected to have a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole. -60- B. Company shall not and shall not permit its Subsidiaries to install or permit to be installed any regulated level of asbestos in any property owned or leased by any of them, except as appropriate for the operation of their respective equipment. With respect to any asbestos currently present in such property, Company shall and shall cause its Subsidiaries to promptly and in accordance with all applicable Environmental Laws and prudent industry practices, maintain such asbestos in good and safe condition. -61- 5.10 Further Assurances; New Subsidiaries; Intellectual Property; Landlord Waivers At any time or from time to time upon the request of Agent, Holding or Company, or both, shall and shall cause the Subsidiaries to execute and deliver such further documents (including without limitation, such financing statements, continuation statements or amendments thereto and such other documents and certificates as may be necessary or as Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted under any of the Collateral Documents, in the event Company, Holding and/or any Subsidiary changes its name or address) and do such other acts and things as Agent may reasonably request in order to effect fully the purposes of this Agreement and the other Domestic Loan Documents and to provide for payment of (i) the Obligations in accordance with the terms of this Agreement and the other Domestic Loan Documents and (ii) the Eurocurrency Guaranty Obligations in accordance with the terms of the Eurocurrency Guaranties or all obligations under the Eurocurrency Loan Documents, as appropriate; PROVIDED, HOWEVER, with respect to actions requested by Agent in connection with Collateral consisting of deposit accounts, Holding, Company and the Subsidiaries shall only be required to take actions limited to: (i) providing joint notification with Agent to any such Person holding such deposit accounts, stating that such deposit accounts are subject to a security interest granted to Collateral Agent in connection with this Agreement and the Eurocurrency Credit Agreements and upon the occurrence of certain events, Collateral Agent shall have certain remedies, including the restriction of withdrawals; and (ii) amending the applicable schedules to the Collateral Documents. Without limiting any of the foregoing, in the event (i) a Person becomes a Subsidiary after the Closing Date or (ii) Holding, Company or any Subsidiary described in the preceding clause (i) registers any trademark or material patent with any governmental authority, then, Holding and Company, upon the request of Agent shall or shall cause such Subsidiary to execute and deliver such guaranties, Collateral Documents, and such other agreements, pledges, assignments in a mutually reasonably satisfactory fashion, documents and certificates (including, without limitation, any amendments to the Domestic Loan Documents) as may be necessary or as Agent may reasonably request and do such other acts and things as Agent may reasonably request in order to have such Subsidiary guaranty and/or secure the Obligations and its Eurocurrency Guaranty Obligations with its personal property (including without limitation fixtures) or have such trademark or patent secure the Obligations and its Eurocurrency Guaranty Obligations, and effect fully the purposes of this Agreement and the other Domestic Loan Documents and to provide for payment of (i) the Obligations in accordance with the terms of this Agreement and the other Domestic Loan Documents and (ii) the Eurocurrency Guaranty Obligations in accordance with the terms of the Eurocurrency Guaranties; PROVIDED that any actions with respect to Collateral consisting of deposit accounts shall be limited to the proviso in the immediately preceding sentence. Company shall, and shall cause each Subsidiary to, in good faith use all reasonable efforts to obtain landlord's waivers or subordinations in form and substance satisfactory to Agent with respect to Collateral located in Facilities leased by Company and each Subsidiary; PROVIDED that no security or pledge agreements or other action contemplated by this sentence shall be required to be entered into or taken to the extent required to avoid (A) any violation of applicable law, (B) liability of officers, directors or shareholders of Holding or any of its Subsidiaries, (C) any material risk of any of the foregoing, or (D) costs which Holding, the Agent, and the Eurocurrency Administrative Agent shall determine to be excessive in relation to the benefits that would be conferred by such security or pledge agreements or action. -62- 5.11 Notice of Asset Transfers A. Company shall give Agent written notice of US/US Transfers (describing the type and location of all assets transferred) at such time, if any, that transfers relate to a location where Collateral has not theretofore been located or the net aggregate book value of the assets transferred in US/US Transfers (excluding transfers of inventory in the ordinary course of business subject to the perfected Lien of Agent, Eurocurrency Administrative Agent or Eurocurrency Collateral Agent, as the case may be) since (i) July 31, 1997 exceeds $2,000,000 and (ii) the most recent Recalculation Date exceeds $2,000,000. Upon receipt of such written notice, Agent shall have 30 days to make the appropriate filings against such assets in order to maintain the perfection of the Liens with respect to all such assets transferred. On the first day following any such 30-day period (the "Recalculation Date"), Company and its Subsidiaries may make such US/US Transfers, subject to the restrictions set forth in clause (C) of this subsection 5.11. The requirements of this subsection 5.11A shall not apply to any Asset Transfer pursuant to subsection 6.7B(vi) or 6.7B(ix) and furthermore shall not apply to any Asset Transfer involving the Proposed Closed Facilities or any Discontinued Operations unless such transfers relate to a new location where Collateral shall be located. B. Company shall give Agent written notice of Asset Transfers among Foreign Subsidiaries (describing the type and location of all assets transferred) at such time, if any, that transfers relate to a location where Collateral has not theretofore been located or the net aggregate book value of the assets transferred in Asset Transfers among Foreign Subsidiaries (excluding transfers of inventory in the ordinary course of business subject to the Lien of Agent, Eurocurrency Administrative Agent or Eurocurrency Collateral Agent, as the case may be) since (i) July 31, 1997, exceeds $2,000,000 and (ii) the most recent Foreign Recalculation Date exceeds $2,000,000. Upon receipt of such written notice, Agent shall have 90 days to make the appropriate filings against such assets in order to maintain the perfection of the Liens with respect to all such assets transferred. On the first day following any such 90-day period (the "Foreign Recalculation Date"), Holding and its Subsidiaries may make such Asset Transfers among Foreign Subsidiaries, subject to the restrictions set forth in clause (C) of this subsecton 5.11. The requirements of this subsection 5.11A shall not apply to any Asset Transfer pursuant to subsection 6.7B(vi) or 6.7B(ix) and furthermore shall not apply to any Asset Transfer involving the Proposed Closed Facilities or any Discontinued Operations unless such transfers relate to a new location where Collateral shall be located. C. Holding and its Subsidiaries shall receive the prior written consent of Requisite Lenders for any US/Foreign Transfer, or any Asset Transfer by a Foreign Subsidiary to Holding or any Domestic Subsidiary. Notwithstanding the foregoing, Holding and its Subsidiaries may ship raw materials to Nu-kote International de Mexico, S.A. de C.V., in the ordinary course of business when no Event of Default exists. -63- 5.12 Deposit Accounts Holding and its Subsidiaries shall maintain all of their cash and deposit accounts with one or more of the Lenders and the Eurocurrency Lenders or their Affiliates, except for available funds aggregating up to $5,000,000 outstanding at any time which may be maintained with financial institutions other than Lenders and Eurocurrency Lenders or their Affiliates for petty cash, payroll, lockbox purposes, and similar uses in the ordinary course of business. 5.13 Additional Collateral Within 120 days after the Closing Date, Holding and Company shall deliver or cause to be delivered to Agent the following: (i) A paid mortgagee policy of title insurance in the amount of $1,500,000, $300,000, $5,000,000, $2,500,000, and the fair market value of the Franklin, Tennessee, property, respectively, insuring that the Lien in favor of the Agent upon the real property of Holding and its Subsidiaries located at Bardstown, Kentucky, Macedon, New York, Connellsville, Pennsylvania, Derry, Pennsylvania, and Franklin, Tennessee, are first priority liens upon such property, such mortgagee policy of title insurance to have been issued at the Company's expense by a title insurance company acceptable to the Agent, and shall contain such endorsements as may be required by the Agent. (ii) A survey of each parcel of the real property identified in (i) above dated as of a current date and certified to the Agent by a registered public surveyor acceptable to the Agent, showing (a) a metes and bounds description of such property, (b) all recorded or visible boundary lines, building locations, locations of utilities, easements, rights of way, rights of access, building or set-back lines, dedications, and natural and manufactured objects affecting such property, (c) any encroachments upon or protrusions from such property, (d) any area federally designated as a flood hazard, and (e) such other matters as the Agent may require, including copies of all recorded easements, rights of way, restrictive covenants, leases, encumbrances, and other documents and instruments filed of record affecting such property as Agent may reasonably require. (iii) Unconditional guarantees of payment and performance of the Obligations and all obligations now or hereafter owing under the Eurocurrency Loan Documents, Liens upon all of the issued and outstanding shares, and Liens upon substantially all of the assets of the Subsidiaries of Holding listed on SCHEDULE 5.13-A hereto, together with supporting corporate authority documents and such other similar items as Agent may reasonably require, all upon terms and conditions satisfactory to Agent; PROVIDED that no security or pledge agreements or other action contemplated by this sentence shall be -64- required to be entered into or taken to the extent required to avoid (A) any violation of applicable law, (B) liability of officers, directors or shareholders of Holding or any of its Subsidiaries, (C) any material risk of any of the foregoing, or (D) costs which Holding, the Agent, and the Eurocurrency Administrative Agent shall determine to be excessive in relation to the benefits that would be conferred by such security or pledge agreements or action. (iv) To the extent not heretofore delivered to Agent, the intercompany notes required by subsection 6.3 of this Agreement, together with such corporate authority documents relating thereto as Agent may reasonably require. 5.14 Delivery of Greif Shares Within 5 Business Days after the Closing Date, Holding and Company shall deliver or cause to be delivered to Agent a Lien upon the remaining 35% of the shares of Greif, upon terms satisfactory to Agent, together with supporting corporate authority documents and such other similar items as Agent may reasonably require. SECTION 6. NEGATIVE COVENANTS Holding and Company severally covenant and agree that, on and after the Closing Date, so long as the Revolving Credit Commitments shall be in effect and until payment in full of all of the Revolving Credit Loans and all other amounts owing hereunder, unless Requisite Lenders shall otherwise give prior written consent, such Person will perform all covenants in this Section 6 to be performed by it (including, in the case of Company, covenants applicable to it in its capacity as a Subsidiary of Holding) and cause each of its Subsidiaries to comply with all covenants in this Section 6 applicable to such Subsidiary. 6.1 Indebtedness Holding and Company will not, and will not permit any Subsidiary to, directly or indirectly, create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (i) Holding and its Subsidiaries may become and remain liable with respect to the Obligations; (ii) Company and its Subsidiaries may become and remain liable with respect to Indebtedness in respect of (y) Capital Leases if such Capital Leases would be permitted under subsection 6.6 and (z) Indebtedness incurred to purchase, or to finance or refinance the purchase price of, personal property (including, without limitation, fixtures but excluding Inventory) used in the conduct of Holding's or any of its Subsidiaries' business; PROVIDED that in the case of clause (z) above (a) at the time of incurrence, no Event of Default, or Potential Event of Default has occurred and is continuing or would result therefrom, (b) the documentation pursuant to which such Indebtedness is incurred either does not contain any -65- financial covenants or contains financial covenants less restrictive (to an extent reasonably acceptable to Agent) than those contained in this Agreement, (c) such documentation does not contain any "cross-default" provision providing for a default on such Indebtedness solely upon the occurrence of a default under any other Contractual Obligation of Holding or any of its Subsidiaries (including this Agreement), other than a Contractual Obligation between Holding or any of its Subsidiaries and the holder of such Indebtedness or any of such holder's Affiliates, and (d) the amount of such Indebtedness incurred is not greater than the fair market value of (as determined in good faith by Company or the relevant Subsidiary thereof), plus the delivered and installed cost and related expenses for, any property so financed at the time of such acquisition; (iii) Holding and its Subsidiaries may become and remain liable with respect to Contingent Obligations permitted by subsection 6.4; (iv) Company and its Subsidiaries may make and maintain intercompany loans to or from Holding or any Subsidiary thereof permitted by subsection 6.3; (v) Company and its Subsidiaries may remain liable with respect to (A) the existing Indebtedness listed on SCHEDULE 6.1 annexed to the Original Credit Agreement and (B) any refinancings, refundings, renewals or extensions thereof, PROVIDED that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension; (vi) Discontinued Operations may remain liable with respect to Indebtedness for working capital and other general corporate purposes not exceeding $1,000,000 in aggregate principal amount outstanding at any time; (vii) Latin American Subsidiaries may become and remain liable with respect to Indebtedness for working capital and other general corporate purposes not exceeding $1,000,000 in aggregate principal amount outstanding at any time; (viii) Holding and its Subsidiaries may become and remain liable with respect to Indebtedness under any Interest Hedge Agreements, comprised solely of forward currency exchange, option and swap agreements with a term not to exceed 90 days and the net hedged position not to exceed $20,000,000 in aggregate notional amount outstanding at any time, entered into with any Lender or Eurocurrency Lender or Affiliate thereof; (ix) Company and its Subsidiaries may become and remain liable with respect to Indebtedness not exceeding $3,000,000 in aggregate principal amount outstanding at any time, incurred for the purpose of financing the premiums for insurance policies; (x) Holding and its Subsidiaries may become and remain liable with respect to Indebtedness pursuant to the Eurocurrency Credit Agreements; and (xi) Company and its Subsidiaries may become and remain liable to any Lender with respect to Indebtedness in respect of cash management facilities offered to Company and -66- its Subsidiaries by any Lenders. 6.2 Liens Holding and Company will not, and will not permit any Subsidiary to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset (including any document or instrument in respect of goods or accounts receivable) of Holding, Company or any Subsidiary, whether now owned or hereafter acquired, or any income or profits therefrom, except: (i) Permitted Encumbrances; (ii) Liens granted pursuant to the Collateral Documents; (iii) Liens created to secure the Indebtedness permitted pursuant to subsection 6.1(ii); PROVIDED such Liens relate solely to the property financed with such Indebtedness; (iv) Liens existing on February 24, 1995 which secure the Indebtedness permitted pursuant to subsection 6.1(v) (or are provided for on such date under the documentation relating to such Indebtedness) and which are listed on SCHEDULE 6.2 annexed to the Original Credit Agreement, and renewal of such Liens in connection with any refinancing, refunding, renewal or extension permitted by clause (B) of subsection 6.1(v), PROVIDED that no such Lien is extended to cover any additional property or assets after February 24, 1995 in connection with any refinancing, refunding, renewal or extension contemplated by such clause (B) to subsection 6.1(v); (v) Liens on assets of Discontinued Operations securing Indebtedness permitted pursuant to subsection 6.1(vi); (vi) Liens on assets of Latin American Subsidiaries securing Indebtedness, permitted pursuant to subsection 6.1(vii); (vii) Liens on insurance policies or the proceeds of insurance policies to secure Indebtedness permitted by subsection 6.1(ix); and (viii) Liens granted to the Eurocurrency Administrative Agent pursuant to the Eurocurrency Loan Documents. 6.3 Investments Holding and Company will not, and will not permit any Subsidiary to, directly or indirectly, make or own any Investment in any Person, except: (i) Company and its Subsidiaries may make and own Investments in Cash Equivalents; -67- (ii) Company may make and maintain intercompany loans to Holding to the extent permitted by subsection 6.5; (iii) Investments existing on July 31, 1997 and listed on SCHEDULE 6.3 hereto; (iv) Company and its Subsidiaries may make and maintain Investments as permitted by subsection 6.7B; (v) Company and its Subsidiaries may make and maintain Investments in (including intercompany loans to) Company and the Domestic Subsidiaries for any purpose; provided, however, (A) such investment shall be in the form of an intercompany loan, (B) Company or such Subsidiary making the loan, as appropriate, shall maintain a ledger and record all such loans pursuant to this subsection 6.3(v) and such ledger shall be available for inspection at any Lender's request and (C) all such intercompany loans made by Company or the Domestic Subsidiaries shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, and which shall be pledged to Agent pursuant to the Collateral Documents; (vi) Company and its Domestic Subsidiaries may make and maintain Investments in (including intercompany loans to) Eurocurrency Borrowers for any purpose; PROVIDED, HOWEVER, that (A) the aggregate principal amount of all such Investments in all such Eurocurrency Borrowers shall not exceed $15,000,000 outstanding at any time, (B) Company or any such Domestic Subsidiary, as appropriate, shall maintain a ledger recording all such Investments in and intercompany loans made pursuant to this subsection 6.3(vi) and such ledger shall be available for inspection at any Lender's request and (C) all intercompany loans made pursuant to this subsection 6.3(vi) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, and which shall be pledged to Agent pursuant to the Collateral Documents; (vii) Company and its Domestic Subsidiaries may make and maintain Investments in (including intercompany loans to) Latin American Subsidiaries for any purpose; PROVIDED, HOWEVER, that (A) the aggregate principal amount of all such Investments in all Latin American Subsidiaries shall not exceed $3,000,000 outstanding at any time, (B) Company or any such Domestic Subsidiary, as appropriate, shall maintain a ledger recording all such Investments in and intercompany loans made pursuant to this subsection 6.3(vii) and such ledger shall be available for inspection at any Lender's request and (C) all intercompany loans made pursuant to this subsection 6.3(vii) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, and which shall be pledged to Agent pursuant to the Collateral Documents; (viii) Greif and Hardcopy Deutschland may make and maintain Investments in (including intercompany loans to) their Subsidiaries and Chinese operations for any purpose; PROVIDED, HOWEVER, that (A) the aggregate principal amount of all such Investments shall not exceed $5,000,000 outstanding at any time, (B) Greif shall maintain a ledger recording all such -68- Investments in and intercompany loans made pursuant to this subsection 6.3(viii) and such ledger shall be available for inspection at any Eurocurrency Lender's request, and (C) all intercompany loans made pursuant to this subsection 6.3(vii) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, and which shall be pledged to Agent pursuant to the Collateral Documents; (ix) Produktions and Pelikan Hardcopy may make and maintain Investments in (including intercompany loans to) their Subsidiaries for any purpose; PROVIDED, HOWEVER, that (A) the aggregate principal amount of all such Investments shall not exceed $25,000,000 outstanding at any time, (B) Produktions shall maintain a ledger recording all such Investments in and intercompany loans made pursuant to this subsection 6.3(ix) and such ledger shall be available for inspection at any Eurocurrency Lender's request and (C) all intercompany loans made pursuant to this subsection 6.3(ix) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, and which shall be pledged to Agent pursuant to the Collateral Documents; (x) In addition to Investments permitted by subsection 6.3(iii), Pelikan Scotland may make and maintain Investments in (including intercompany loans to) its Subsidiaries and the U.K. Subsidiaries for any purpose; PROVIDED, HOWEVER, that (A) the aggregate principal amount of all such Investments shall not exceed $5,000,000 outstanding at any time, (B) Pelikan Scotland shall maintain a ledger recording all such Investments in and intercompany loans made pursuant to this subsection 6.3(x) and such ledger shall be available for inspection at any Eurocurrency Lender's request and (C) all intercompany loans made pursuant to this subsection 6.3(x) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, and which shall be pledged to Agent pursuant to the Collateral Documents; (xi) Greif and Hardcopy Deutschland may make and maintain Investments in (including intercompany loans to) Produktions, Pelikan Hardcopy and Pelikan Scotland for any purpose; PROVIDED, HOWEVER, that (A) the aggregate principal amount of all such Investments shall not exceed $20,000,000 outstanding at any time, (B) Greif shall maintain a ledger recording all such Investments made pursuant to this subsection 6.3(xi) and such ledger shall be available for inspection at any Eurocurrency Lender's request and (C) all Investments made pursuant to this subsection 6.3(xi) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, which shall be pledged to Agent pursuant to the Collateral Documents and shall be subordinated to the debt evidenced by the Eurocurrency Credit Agreement to which the Person in whom the Investment hereunder is being made is party such that no payments shall be made on such intercompany indebtedness after the occurrence of a Potential Event of Default or Event of Default under such Eurocurrency Credit Agreement; (xii) Produktions and Pelikan Hardcopy may make and maintain Investments in (including intercompany loans to) Greif, Hardcopy Deutschland and Pelikan Scotland for any purpose; PROVIDED, HOWEVER, that (A) the aggregate principal amount of all such Investments shall not exceed $10,000,000 outstanding at any time, (B) Produktions shall maintain a ledger -69- recording all such Investments made pursuant to this subsection 6.3(xii) and such ledger shall be available for inspection at any Eurocurrency Lender's request and (C) all Investments made pursuant to this subsection 6.3(xii) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, and shall be pledged to Agent pursuant to the appropriate Collateral Documents and, to the extent such Investment is being made in Pelikan Scotland, shall be subordinated to the debt evidenced by the U.K. Credit Agreement such that no payments shall be made on such intercompany indebtedness after the occurrence of a Potential Event of Default or Event of Default under the U.K. Facility Agreement; (xiii) Pelikan Scotland may make and maintain Investments in (including intercompany loans to) Greif, Hardcopy Deutschland, Produktions or Pelikan Hardcopy for any purpose; PROVIDED, HOWEVER, that (A) the aggregate principal amount of all such Investments shall not exceed $40,000,000 outstanding at any time, (B) Pelikan Scotland shall maintain a ledger recording all such Investments made pursuant to this subsection 6.3(xiii) and such ledger shall be available for inspection at any Eurocurrency Lender's request and (C) all Investments made pursuant to this subsection 6.3(xiii) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, and shall be pledged to Agent pursuant to the appropriate Collateral Documents and, to the extent such Investment is being made in Produktions or Pelikan Hardcopy, shall be subordinated to the debt evidenced by the Swiss Facility Agreement such that no payments shall be made on such intercompany indebtedness after the occurrence of a Potential Event of Default or Event of Default under the Swiss Facility Agreement; (xiv) Greif, Hardcopy Deutschland, Produktions, Pelikan Hardcopy and Pelikan Scotland may make and maintain Investments in (including intercompany loans to) Company for any purpose; PROVIDED, HOWEVER, that (A) the aggregate principal amount of all such Investments shall not exceed $30,000,000 outstanding at any time, (B) any Eurocurrency Borrower making any such Investments shall maintain a ledger recording all such Investments made pursuant to this subsection 6.3(xiv) and such ledger shall be available for inspection at any Eurocurrency Lender's request, (C) all Investments made by Produktions, Pelikan Hardcopy or Pelikan Scotland pursuant to this subsection 6.3(xiv) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, including collateral, and shall be pledged to Agent pursuant to the Collateral Documents and shall be subordinated to the debt evidenced by this Agreement such that no payments shall be made on such intercompany indebtedness after the occurrence of a Potential Event of Default or Event of Default under this Agreement and (D) all Investments made by Greif or Hardcopy Deutschland pursuant to this subsection 6.3(xiv) shall be evidenced by promissory notes which shall be on terms and conditions satisfactory to Agent, shall be pledged to Agent pursuant to the Collateral Documents, and shall be subordinated to the debt evidenced by this Agreement such that no payments shall be made on such intercompany indebtedness after the occurrence of a Potential Event of Default or Event of Default under this Agreement; Notwithstanding anything in this Agreement to the contrary, in no event shall the aggregate amount of Investments made after February 24, 1995 by Holding, Company and the Domestic Subsidiaries in -70- Foreign Subsidiaries, permitted pursuant to this subsection 6.3 exceed $30,000,000 in aggregate principal amount outstanding at any time, and in no event shall the aggregate amount of Investments made on or after April 1, 1997, by Holding and its Subsidiaries in MIT exceed $6,000,000 in aggregate principal amount outstanding at any time. 6.4 Contingent Obligations Holding and Company will not, and will not permit any Subsidiary to, directly or indirectly, create or become or be liable with respect to any Contingent Obligation except: (i) Contingent Obligations in respect of the Obligations; (ii) guaranties resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (iii) guaranties by Holding, Company or any Domestic Subsidiary in the ordinary course of business of Operating Leases and Capital Leases of Holding, Company or such Domestic Subsidiary permitted by subsection 6.6; (iv) guaranties by Holding or its Subsidiaries in the ordinary course of business of Operating Leases and Capital Leases of any Foreign Subsidiary permitted by subsection 6.6; (v) guaranties by Holding and its Subsidiaries of loans or advances to employees for moving, travel and entertainment expenses, drawing accounts and similar expenditures made in the ordinary course of business; (vi) Contingent Obligations in respect of interest rate or foreign currency protection agreements or hedging arrangements permitted pursuant to subsection 6.1(viii); (vii) obligations to insurers in respect of workers' compensation and other insurance coverage incurred in the ordinary course of business; (viii) Contingent Obligations in respect of the Eurocurrency Credit Agreements; (ix) guarantees, product warranties or indemnities issued by Company or its Subsidiaries in the ordinary course of business in connection with the sale of Inventory, services or assets; (x) Contingent Obligations in respect of existing litigation set forth on Schedule 4.6 attached hereto; -71- (xi) Contingent Obligations in respect of Indebtedness permitted pursuant to subsection 6.1(vii) and (viii); and (xii) Contingent Obligations in respect of surety, appeal, performance or return-of-money bonds not to exceed $1,000,000 in the aggregate outstanding at any time. 6.5 Restricted Junior Payments Holding and Company will not, and will not permit any Domestic Subsidiary to, directly or indirectly, declare, order, pay, make or set apart any sum (excluding any foreign law requirement to maintain a statutory reserve or the like) for any Restricted Junior Payment except: (i) Holding may declare and pay any dividend or make any distribution in respect of its stock required or permitted by the terms of Holding's Rights Agreement, dated as of May 19, 1994, and amended as of November 15, 1994, between Holding and Chemical Bank, as Rights Agent, and the Series A Junior Participating Preferred Stock issuable upon the exercise of any preferred share purchase right, as said Rights Agreement and Series A Junior Participating Preferred Stock may be supplemented from time to time; (ii) In addition to clause (i) above of this subsection 6.5, Company may declare and pay dividends or otherwise make distributions, loans or advances to Holding of up to an aggregate amount of $6,000,000 to permit Holding to purchase or cancel any stock options or settle any stock appreciation rights held by, or distribute any amounts under any deferred compensation plan or arrangement in respect of, any employee or director of Holding or any of its Subsidiaries upon termination of employment or other service, or to purchase any of its stock held by any such employee or director; (iii) Company may declare and pay dividends or otherwise make distributions, loans or advances to Holding in amounts sufficient to cover reasonable and necessary expenses incurred by Holding in connection with registration, public offerings and exchange listing of equity securities; (iv) Company may declare and pay dividends or otherwise make distributions, loans or advances to Holding in amounts sufficient to pay tax liabilities of Holding; (v) Company may declare and pay dividends or otherwise make distributions, loans or advances to Holding in amounts sufficient to allow Holding to pay other business and operating expenses incurred in the ordinary course of business; and (vi) Company may make (a) payments (including prepayments) on Existing Seller Notes and (b) payments of amounts due under the Non-Competition Agreements; PROVIDED, HOWEVER, that immediately prior to and immediately after giving effect to any Restricted Junior Payment permitted by clauses (i) and (ii) of this subsection 6.5 and clause (vi) of this -72- subsection 6.5 relating to voluntary prepayments on Existing Seller Notes, no Event of Default or Potential Event of Default exists. Holding and Company will not, nor will they permit any of Domestic Subsidiary to, deposit any funds for the purpose of making any Restricted Junior Payment with a trustee, paying agent or registrar or other payment intermediary more than three Business Days prior to the date such payment is due. 6.6 Financial Covenants A. CONSOLIDATED FUNDED DEBT TO CONSOLIDATED EBITDAR Holding and its Subsidiaries shall not permit the ratio of (i) Consolidated Funded Debt as of any such date of determination to (ii) Consolidated EBITDAR (calculated as of any such date of determination on a cumulative basis for the period of four consecutive fiscal quarters ending on or before such date of determination, except for the quarters ending September 30, 1997, and December 31, 1997, which shall be calculated on an annualized basis beginning April 1, 1997), as of the end of any fiscal quarter listed below, to exceed the following: Date Maximum Ratio Permitted ---- ----------------------- 9/30/97 15.3 to 1.0 12/31/97 7.4 to 1.0 3/31/98 5.2 to 1.0 6/30/98 4.0 to 1.0 9/30/98 3.6 to 1.0 B. MINIMUM INTEREST COVERAGE RATIO Holding and its Subsidiaries will not permit the Interest Coverage Ratio as of the last day of any fiscal quarter listed below (calculated as of any such date of determination on a cumulative basis beginning April 1, 1997, until and including March 31, 1998, and thereafter for the period of four consecutive fiscal quarters ending on or before such date of determination to be less than the following: Date Minimum Ratio Permitted ---- ----------------------- 9/30/97 0.86 to 1.0 12/31/97 1.73 to 1.0 3/31/98 2.39 to 1.0 6/30/98 2.95 to 1.0 9/30/98 3.23 to 1.0 -73- C. MINIMUM CONSOLIDATED TANGIBLE NET WORTH Holding and its Subsidiaries shall not permit Consolidated Tangible Net Worth as of the last day of any fiscal quarter listed below to be less than the following: Date Minimum Permitted Amount ---- ------------------------- 9/30/97 $17,000,000 12/31/97 18,500,000 3/31/98 22,500,000 6/30/98 24,500,000 9/30/98 25,500,000 Provided that to the extent Restructuring Charges exceed $15,000,000 in Fiscal Year 1998, the minimum required Consolidated Tangible Net Worth at September 30, 1997, December 31, 1997, and March 31, 1998, shall be reduced by such excess amount. D. MAXIMUM CONSOLIDATED GAAP CAPITAL EXPENDITURES Holding and its Subsidiaries shall not permit Consolidated GAAP Capital Expenditures to exceed the following amounts, calculated quarterly on a cumulative basis beginning April 1, 1997: Date Maximum Permitted Amount Since April 1, 1997 ---- ------------------------- 9/30/97 $ 5,300,000 12/31/97 7,100,000 3/31/98 9,000,000 6/30/98 11,700,000 9/30/98 14,500,000 The foregoing Maximum Permitted Amount shall be reduced by all Investments by Holdings and its Subsidiaries in MIT on or after April 1, 1997, in excess of $5,000,000. E. MAXIMUM RESTRUCTURING CHARGE Holding and its Subsidiaries shall not permit expenditures on and after April 1, 1997, for Restructuring Charges to exceed $20,000,000. F. CONSOLIDATED FUNDED DEBT TO CONSOLIDATED NET CURRENT ASSETS -74- Holding and its Subsidiaries shall not permit the ratio of (i) Consolidated Funded Debt to (ii) Consolidated Net Current Assets, as of the end of any month, to be greater than 1.0 to 1.0. G. MINIMUM EBITDAR Holding and its Subsidiaries shall not permit Consolidated EBITDAR (calculated on a cumulative basis, beginning April 1, 1997, until and including March 31, 1998, and thereafter for the period of twelve consecutive months ending on or before such date of determination) to, as of the dates set forth below, be less than the following: Date Minimum Permitted Amount ---- ------------------------- 9/30/97 $ 4,737,000 10/31/97 6,695,000 11/30/97 8,782,000 12/31/97 14,671,000 1/31/98 16,293,000 2/28/98 19,213,000 3/31/98 26,956,000 4/30/98 28,469,000 5/31/98 30,034,000 6/30/98 34,195,000 7/31/98 35,126,000 8/31/98 36,152,000 9/30/98 37,490,000 10/31/98 38,081,000 11/30/98 38,649,000 Provided that, notwithstanding the foregoing, a failure of Consolidated EBITDAR to exceed the foregoing amounts in only one of the first two months of any calendar quarter shall not constitute an Event of Default if Consolidated EBITDAR exceed the foregoing amounts for the other of the first two months of any calendar quarter. A failure in the third month of any quarter shall constitute an Event of Default. H. CURRENT RATIO Holding and its Subsidiaries shall not permit the Current Ratio as of the last day of any fiscal -75- quarters ending September 30, 1997, December 31, 1997, and March 31, 1998, to be less than 1.5 to 1.0, or any fiscal quarter thereafter beginning with the fiscal quarter ending June 30, 1998, to be less than 2.0 to 1.0. 6.7 Restriction on Fundamental Changes A. Other than as permitted by subsection 6.7B, neither Holding, Company nor any Subsidiary may, without the consent of Requisite Lenders, acquire or create any Subsidiaries or convey, sell, lease, sublease or transfer any of its assets to any of its Subsidiaries. B. Neither Holding, Company nor any Subsidiary will enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, exchange, lease, sub-lease, transfer or otherwise dispose of, in one transaction or a series of related transactions, all or any substantial part of its business, property or fixed assets or all or any portion of the stock or other evidence of beneficial ownership of, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person except: (i) Holding may be merged or consolidated with or into Company, or all or substantially all of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company and Holding thereafter may be liquidated, wound up or dissolved; PROVIDED that, in the case of such a merger or consolidation, Company shall be the continuing or surviving corporation; (ii) Company or a Subsidiary thereof may sell, lease, license, exchange or otherwise dispose of assets or rights in Asset Sale transactions for cash or Cash Equivalent consideration only so long as the Net Cash Proceeds thereof are applied as provided in subsection 2.4(A)(ii); PROVIDED that (A) any Asset Sale is made for at least the fair market value of such assets (as determined in good faith by Company or such Subsidiary), (B) the aggregate Net Cash Proceeds of Asset Sale transactions since July 31, 1997, with respect to assets located in the United Kingdom shall not exceed 10% of the Pounds Sterling equivalent of the net book value, determined as of July 31, 1997, of all assets of Company and its Subsidiaries located in the United Kingdom on July 31, 1997, (C) the aggregate Net Cash Proceeds of Asset Sales transactions since July 31, 1997, with respect to assets located in Switzerland shall not exceed 10% of the Swiss Franc equivalent of the net book value, determined as of July 31, 1997, of all assets of Company and its Subsidiaries located in Switzerland on July 31, 1997, (D) the aggregate Net Cash Proceeds of Asset Sales transactions since July 31, 1997, with respect to assets located in Germany shall not exceed 10% of the German Mark equivalent of the net book value, determined as of July 31, 1997, of all assets of Company and its Subsidiaries located in Germany on July 31, 1997, (E) Asset Sale transactions involving assets located in the United States may be made so long as the aggregate Net Cash Proceeds of such Asset Sale transactions since July 31, 1997, shall not exceed $20,000,000, (F) subject to subsection 2.4A(ii) no sale of the shares of MIT and no Asset Sale shall be made with respect to MIT unless consented to by all Lenders, and (G) with respect to Asset Sale transactions not otherwise referred to in clauses (B), (C), (D), (E) or (F) above or not otherwise expressly -76- permitted by this subsection 6.7B, Company receives the prior written consent of Requisite Lenders for any such Asset Sale or series of related Asset Sales involving the fair market value of assets (as determined in good faith by Company or such Subsidiary) or sales price in excess of $250,000; PROVIDED, FURTHER, that the restrictions on Asset Sale transactions set forth in the foregoing PROVISO shall not apply to any Asset Sale transactions involving (1) the Proposed Closed Facilities, (2) any Discontinued Operations or (3) any capital stock or treasury stock of Holding, or any rights, options or warrants to acquire same; PROVIDED, HOWEVER in no event may any stock of any Subsidiary that is not a Discontinued Operation be sold; (iii) A Domestic Subsidiary may be merged or consolidated with or into Company or another Domestic Subsidiary, or be liquidated, wound up or dissolved; PROVIDED, HOWEVER, that in the case of such a merger or consolidation of a Material Domestic Subsidiary, (i) Company or another Material Domestic Subsidiary shall be the continuing or surviving corporation and (ii) another Subsidiary which becomes a Material Domestic Subsidiary and complies with the requirements of subsection 5.10A shall be the continuing or surviving corporation; (iv) A Foreign Subsidiary may be merged or consolidated with or into another Foreign Subsidiary; PROVIDED, HOWEVER, that (x) if any capital stock of either such Foreign Subsidiary shall have previously been required to be pledged to Collateral Agent or Eurocurrency Administrative Agent, such Foreign Subsidiary shall be the surviving corporation in such merger or consolidation or the same proportion of the surviving corporation's capital stock shall be similarly pledged to Collateral Agent or Eurocurrency Administrative Agent, as applicable, and (y) a Foreign Subsidiary not part of Discontinued Operations may not be merged or consolidated with another Foreign Subsidiary that is part of Discontinued Operations unless the former Subsidiary or another Subsidiary which is not a part of Discontinued Operations is the surviving or continuing corporation. Any Foreign Subsidiary the capital stock of which is not required to be pledged to Collateral Agent or Eurocurrency Collateral Agent may be liquidated, wound up or dissolved; (v) Holding or Company may create one or more new Domestic Subsidiaries thereof; PROVIDED such Domestic Subsidiary shall comply with subsection 5.10; (vi) Any of Holding and its Subsidiaries may sell, lease, consign, transfer or otherwise dispose of Inventory to any Person in the ordinary course of business; (vii) Any of Holding and its Subsidiaries may acquire additional capital stock of an existing Subsidiary thereof from such Subsidiary; PROVIDED that (i) if such Subsidiary is a Domestic Subsidiary and any previously outstanding capital stock of such Subsidiary shall have been pledged to Collateral Agent to secure the Obligations and the Eurocurrency Guaranty Obligations, 100% of such additional capital stock shall be similarly pledged to Collateral Agent, (ii) if such Subsidiary is a Foreign Subsidiary and any previously outstanding capital stock of such Subsidiary shall have been pledged to the Collateral Agent to secure the Obligations and the Eurocurrency Guaranty Obligations, 100% of such additional stock shall be similarly pledged to Collateral Agent, and (iii) if such Subsidiary is a Foreign Subsidiary and -77- any previously outstanding capital stock of such Subsidiary shall have been pledged to Eurocurrency Administrative Agent to secure the obligations under the relevant Eurocurrency Credit Agreement, 100% of such additional stock shall be similarly pledged to the Eurocurrency Administrative Agent; (viii) Investments permitted by subsection 6.3; (ix) Any of Holding and its Subsidiaries may dispose of property that is obsolete, worn out or otherwise no longer needed in its business, including abandonment of trademarks, patents, copyrights and other intellectual property no longer economically practicable to maintain; and (x) Holding and its Subsidiaries may enter into, and perform, any transactions permitted by subsection 6.10 or 6.13. Upon any disposition of property or assets in compliance with this subsection 6.7 to Persons other than Holding or its Subsidiaries, Lenders will cause Collateral Agent to, and Collateral Agent will, take such action as is necessary to evidence the release of the Liens of Lenders on such property or assets, including delivering to Holding, Company or any Subsidiary, as appropriate, appropriate releases and termination statements. 6.8 Sales and Leasebacks Holding and its Subsidiaries will not directly or indirectly, become or remain liable (unless indemnified against such liability by a Person other than Holding or a Subsidiary thereof) 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 now owned or hereafter acquired, (i) that Holding or its Subsidiaries has sold or transferred or is to sell or transfer to any other Person, or (ii) that Holding or its Subsidiaries intends to use for substantially the same purpose as any other property that has been or is to be sold or transferred by Holding, Company or any Subsidiary to any Person in connection with such lease (a "Sale/leaseback"); PROVIDED that Company and its Subsidiaries may enter into sale/leaseback arrangements if permitted by subsection 6.6. 6.9 Sale or Discount of Receivables Holding and its Subsidiaries will not, directly or indirectly, sell or discount notes or accounts receivable held by any such Person; PROVIDED that the foregoing shall not be construed to restrict or prohibit compromises, settlements, waivers, substitutions or other modifications or agreements with respect to such notes or accounts receivable. -78- 6.10 Transactions with Shareholders, Affiliates and Subsidiaries Holding and its Subsidiaries will not, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or inventory or the rendering of any service) with any holder of 5% or more of any class of equity securities of Holding or Company or with any Affiliate of Holding or Company or of any such holder or with any Subsidiary of Holding, as the case may be, on terms that are less favorable to Holding or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate or Subsidiary; PROVIDED that the foregoing restriction shall not apply to (i) Indebtedness and Investments permitted by subsections 6.1 or 6.3, (ii) Contingent Obligations permitted by subsection 6.4, (iii) payments permitted under subsection 6.5, (iv) transactions with Holding or a Subsidiary thereof permitted by subsection 6.7, (v) any consulting, management, stock option, stock appreciation right, or other employment, or deferred compensation agreement or arrangement with an employee or director of Holding or any of its Subsidiaries that is approved by a majority of the non-employee members of the board of directors of Holding or its stockholders, (vi) transactions permitted by subsection 6.11, (vii) the payment of transaction expenses in connection with this Agreement and the transactions related hereto and thereto, (viii) the payment by any Subsidiary of royalties for the use of products, trademarks of other intellectual property rights, guaranty fees, and fees for technical assistance, corporate administrative support and other services, (ix) the payment by Holding or any Subsidiary of any amount pursuant to or in respect of any bylaw or charter provision or agreement providing for indemnification or reimbursement of any officer, director, employee or other agent of Holding or any of its Subsidiaries, and (x) payments of customary director fees and out-of-pocket expense reimbursement. For purposes of this subsection 6.10, (A) any transaction shall be deemed to have satisfied the standard set forth in the preceding sentence if (i) such transaction is approved by a majority of the Disinterested Directors of the Board of Directors of Holding, the Company or the applicable Subsidiary or (ii) a nationally recognized expert with expertise in appraising the terms and conditions of the type of transaction for which approval is required delivers to Holding, the Company or the applicable Subsidiary (which shall promptly forward a copy to the Agent) a written opinion stating that such transaction is fair to Holding, the Company or the applicable Subsidiary from a financial point of view and (B) "DISINTERESTED DIRECTOR" shall mean, with respect to any Person and transaction, a member of the Board of Directors of such Person who does not have any material direct or indirect financial interest in or with respect to such transaction. 6.11 Disposal of Subsidiary Stock Except as permitted by subsection 6.7 or as required by the Collateral Documents and except for Permitted Encumbrances, neither Holding, Company nor any Subsidiary will, (i) directly or indirectly sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity securities of (or warrants, rights or options to acquire shares or other equity securities of) any of its Subsidiaries other than to Holding or any of its Subsidiaries if the Liens in favor of Agent, Eurocurrency Administrative Agent, or Eurocurrency Collateral Agent, as the case may be, are preserved and ratified, except to qualify directors if necessary or appropriate under applicable law; or -79- (ii) permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other securities of (or warrants, rights or options to acquire shares or other securities of) such Subsidiary other than to Holding or any of its Subsidiaries if the Liens in favor of Agent, Eurocurrency Administrative Agent, or Eurocurrency Collateral Agent, as the case may be, are preserved and ratified, except to Company, another Subsidiary or to qualify directors if required by applicable law. Notwithstanding the foregoing, Holding and Company may take such action as is necessary to cause MIT to be a direct or indirect Subsidiary of Holding or a Domestic Subsidiary if the Liens thereon in favor of Agent are preserved and ratified. 6.12 Conduct of Business Holding and its Subsidiaries will not engage in any business other than the business they were engaged in on February 24, 1995, or business similar or related to such business, and other lines of business consented to by Agent and Requisite Lenders. The Subsidiaries of Holding identified on SCHEDULE 5.13-B hereto shall not engage in any business or acquire any assets. 6.13 Restructuring and Affiliate Reorganizations Notwithstanding anything else contained herein to the contrary, in order to effect the restructuring or discontinuation of certain operations at the Proposed Closed Facilities and the transfer or other disposition, in whole or in part, of the property and assets relating thereto, Holding and its Subsidiaries may merge, consolidate, or liquidate, wind-up and dissolve, or convey, sell, exchange, assign, lease, sub-lease, transfer or otherwise dispose of, in one transaction or series of related transactions including, without limitation, but not with respect to capital stock of Holding, by way of dividend or distribution on or with respect to its capital stock, all or any portion of its business, property or assets or all or any portion of the stock or other evidence of beneficial ownership of any Affiliate, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all of the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Affiliate, and may engage in Asset Transfers as permitted hereto. -80- SECTION 7. GUARANTY OF HOLDING Holding hereby consents to and confirms its guaranty of all Obligations. In furtherance of the foregoing, Holding hereby agrees as follows: 7.1 Guaranty by Holding As consideration for Lenders agreeing to enter into this Agreement and extend the Revolving Credit Commitments hereunder, Holding hereby unconditionally and irrevocably guaranties the due and punctual payment when due (whether by required prepayment, declaration, demand or otherwise) (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. 362(a)) of all Obligations of Company (including, without limitation, interest which, but for the filing of a petition in bankruptcy with respect to Company, would accrue on such Obligations). For purposes of this Section 7, Holding is referred to as a "Guarantor" and the obligations of Holding under this subsection 7.1 are referred to as this "Guaranty". 7.2 Terms of Guaranty The Guarantor agrees that the Obligations of Company may be extended or renewed, and the Revolving Credit Loans repaid and reborrowed in whole or in part, without notice or further assent from it, and that it will remain bound upon this Guaranty notwithstanding any extension, renewal or other alteration of any such Obligation or repayment and reborrowing of the Revolving Credit Loans. The Guarantor waives presentation of, demand of, payment from and protest of any Obligation of Company and also waives notice of protest for nonpayment. The obligations of the Guarantor under this Guaranty shall not be affected by, and the Guarantor hereby waives its rights (to the extent permitted by law) in connection with: (a) the failure of Agent, Collateral Agent or any Lender to assert any claim or demand or to enforce any right or remedy against Holding, Company or any Material Domestic Subsidiary under the provisions of this Agreement or any other agreement or otherwise, (b) any extension or renewal of any provision thereof, (c) any increase in the amount of the Obligations, (d) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement (subject to subsection 10.7) or any instrument executed pursuant hereto, (e) the release of any of the security held by Collateral Agent, Agent or any Lender for the Obligations of Holding, Company or any Subsidiary, (f) the failure of Collateral Agent, Agent or any Lender to exercise any right or -81- remedy against any other guarantor of the Obligations of Company, (g) Collateral Agent, Agent or any Lender taking and holding security or collateral for the payment of this Guaranty, any other guaranties of the Obligations or other liabilities of Company and the Obligations guarantied hereby, and exchanging, enforcing, waiving and releasing any such security or collateral, (h) Collateral Agent, Agent or any Lender applying any such security or collateral and directing the order or manner of sale thereof as Collateral Agent in its discretion may determine, or (i) Collateral Agent, Agent or any Lender settling, releasing, compromising, collecting or otherwise liquidating the Obligations and any security or collateral therefor in any manner determined by Collateral Agent, Agent, or such Lender. The Guarantor further agrees that this Guaranty constitutes a guaranty of payment when due and not of collection and waives any right to require that any resort be had by Collateral Agent, Agent or any other Person to any of the security held for payment of the Obligations of Company or to any balance of any deposit account or credit on the books of Collateral Agent, Agent or any other Person in favor of Company or any other Person. The obligations of the Guarantor under this Guaranty shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations, discharge of Company from the Obligations in a bankruptcy or similar proceeding or otherwise. Without limiting the generality of the foregoing, the obligations of the Guarantor under this Guaranty shall not be discharged or impaired or otherwise affected by the failure of Collateral Agent, Agent or any Lender to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations of Company, or by any other act or thing or omission or delay to do any other act or thing that may or might in any manner or to any extent vary the risk of the Guarantor or would otherwise operate as a discharge of the Guarantor as a matter of law or equity. Collateral Agent may, at its election, foreclose on any security held by Collateral Agent by one or more judicial or nonjudicial sales, or exercise any other right or remedy Collateral Agent may have against Holding, Company or any Subsidiary or any security without affecting or impairing in any way the liability of the Guarantor hereunder except to the extent the Obligations have been paid. The Guarantor waives any defense arising out of such election by Collateral Agent, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of the Guarantor against Company or any security, so long as Collateral Agent have acted in a commercially reasonable manner. The Guarantor further agrees that this Guaranty shall continue to be effective or be reinstated, -82- as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation of Company is rescinded or must otherwise be restored by Agent, Collateral Agent or any Lender upon the bankruptcy or reorganization of Company or otherwise. The Guarantor further agrees, in furtherance of the foregoing and not in limitation of any other right that Agent, Collateral Agent or any Lender may have at law or in equity against the Guarantor by virtue hereof, upon the failure of Company to pay any of its Obligations when and as the same shall become due (whether by required prepayment, declaration, demand or otherwise), the Guarantor will forthwith pay, or cause to be paid, in cash, to Agent an amount equal to the sum of the unpaid principal amount of such Obligations, accrued and unpaid interest on such Obligations and all other Obligations of Company to Agent, Collateral Agent or such Lender. So long as any of the Obligations of Company shall remain outstanding hereunder, Guarantor hereby irrevocably waives any right of subrogation, contribution, indemnity or otherwise against Company that may arise out of or be caused by this Guaranty, all rights and/or claims against Company which may arise against Company by reason of this Guaranty, any right to enforce any remedy that Lenders now have or may hereafter have against Company and any benefit of, and any right to participate in, any security now or hereafter held by Lenders. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon any failure of Company to pay its Obligations when due (whether by required prepayment, declaration, demand or otherwise) and consequent acceleration of the Obligations pursuant to Section 8, each Lender, upon the consent of Agent and Requisite Lenders, is hereby authorized by Guarantor at any time or from time to time, without notice to Guarantor or to any other Person, any such notice being hereby expressly waived to the extent permitted by applicable law, to set off and to appropriate and to apply any and all deposits (general or special, including, not limited to, Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time owing by that Lender to or for the credit or the account of Guarantor against and on account of the obligations and liabilities of Guarantor to Lenders under this Guaranty, including but not limited to, all such obligations and liabilities with respect to all claims of any nature or description arising out of or connected with this Agreement, this Guaranty or the Letters of Credit or any of the other Domestic Loan Documents, irrespective of whether or not Lenders or Agent, with respect to any Obligation owed under the Letters of Credit or this Agreement, shall have made any demand hereunder. Each Lender and Agent agrees promptly to notify Guarantor after any such set-off and application is made by such Lender or Agent. Notwithstanding anything contained in this Section 7 to the contrary, this Guaranty shall not be effective or in full force and effect until the Closing Date. -83- SECTION 8. EVENTS OF DEFAULT If on or after the Closing Date, any of the following conditions or events ("Events of Default") shall occur and be continuing: 8.1 Failure to Make Payments when Due Failure to pay any installment of principal of any Revolving Credit Loan made hereunder or any Eurocurrency Loan made under any Eurocurrency Credit Agreement when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise; or failure to pay any interest on any Revolving Credit Loan made hereunder or any Eurocurrency Loan made under any Eurocurrency Credit Agreement or any other amount due under this Agreement (including, without limitation, any payment with respect to reimbursement of amounts drawn under Letters of Credit) or any Eurocurrency Credit Agreement within three (3) days after the date due; or 8.2 Default in Other Agreements Failure of Holding, Company or any Subsidiary (excluding Discontinued Operations) to pay when due (x) any principal or interest on any Indebtedness (other than Indebtedness referred to in subsection 8.1) in an individual principal amount of $1,000,000 or more or items of Indebtedness with an aggregate principal amount of $1,000,000 or more, or (y) any Contingent Obligation in an individual principal amount of $1,000,000 or more or Contingent Obligations with an aggregate principal amount of $1,000,000 or more, in each case beyond the end of any period prior to which the obligee is prohibited from accelerating payment thereunder; or Breach or default of Holding or Company or any Subsidiary (excluding Discontinued Operations) with respect to any other material term of (x) any evidence of any Indebtedness in an individual principal amount of $1,000,000 or more or items of Indebtedness with an aggregate principal amount of $1,000,000 or more or any Contingent Obligation in an individual principal amount of $1,000,000 or more or Contingent Obligations with an aggregate principal amount of $1,000,000 or more, or (y) any loan agreement, mortgage, indenture or other agreement relating thereto, with respect to Indebtedness with an aggregate principal amount of $1,000,000 or more, if, in the case of either clause (x) or clause (y) of this paragraph, the effect of such failure, default or breach is then to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation (or a trustee on behalf of such holder or holders) then to cause, that Indebtedness or Contingent Obligation to become or be declared due prior to its stated maturity (or the stated maturity of any underlying obligation, as the case may be); or 8.3 Breach of Certain Covenants Failure of Holding or Company to perform or comply with any term or condition contained in subsections 2.5, 5.2 or 5.6 or Section 6 hereunder or to the extent such subsections are incorporated into Section 4 of the Eurocurrency Guaranties; or -84- 8.4 Breach of Warranty Any representation, warranty, certification or other statement made by Holding, Company or any Subsidiary in any Loan Document or in any statement or certificate at any time given by Holding, Company or any Subsidiary in writing pursuant hereto or in connection herewith shall be false in any material respect on the date as of which made; or 8.5 Other Defaults Under Agreement or Loan Documents Holding, Company or any Subsidiary shall default in the performance of or compliance with any term contained in this Agreement or the other Loan Documents other than those referred to above in subsections 8.1, 8.3 or 8.4 and such default shall not have been remedied or waived within 20 days after receipt by Holding or Company or any Subsidiary, as the case may be, of notice from Agent or Requisite Lenders with respect to Holding or Company or any Subsidiary, of any such default; or 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Holding or Company or any of the Subsidiaries (excluding Discontinued Operations) in an involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable Federal or state law; or (ii) an involuntary case is commenced against Holding, Company or any Subsidiary (excluding Discontinued Operations) under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Holding or Company or any Subsidiary (excluding Discontinued Operations), or over all or a substantial part of its property, shall have been entered; or the involuntary appointment of an interim receiver, trustee or other custodian of Holding or Company or any Subsidiary (excluding Discontinued Operations) for all or a substantial part of its property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of Holding or Company or any Subsidiary (excluding Discontinued Operations) and the continuance of any such event in clause (ii) for 30 days unless dismissed, bonded or discharged; or -85- 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. (i) Holding or Company or any Subsidiary (excluding Discontinued Operations) shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Holding or any of its Subsidiaries (excluding Discontinued Operations) shall make any assignment for the benefit of creditors; or (ii) the general inability or failure of Holding or Company or any Subsidiary, or the admission by Holding or Company or any Subsidiary in writing of its general inability, to pay its debts as such debts become due; or the Board of Directors of Holding or Company or any Subsidiary (or any committee thereof) adopts any resolution to approve or otherwise authorizes any of the actions referred to in clause (i) or this clause (ii); or 8.8 Judgments and Attachments Any money judgment, writ or warrant of attachment, or similar process involving in any individual case an amount in excess of $1,000,000 (exclusive of any amount which is fully and adequately covered by insurance and with respect to which the insurer has not disputed in writing its coverage, it being understood that a reservation of rights is not to be deemed a dispute) shall be entered or filed against Holding or Company or any Subsidiary (excluding Discontinued Operations) or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days or in any event later than five days prior to the date of any proposed sale thereunder; or 8.9 Dissolution Except as permitted by Subsection 6.7, any order, judgment or decree shall be entered against Holding or Company or any Subsidiary decreeing the dissolution or split up of Holding or Company or any Subsidiary (excluding Discontinued Operations) and such order shall remain undischarged or unstayed for a period in excess of 30 days; or 8.10 ERISA (i) Holding or Company or any of their respective ERISA Affiliates fails to make full payment when due of all amounts which, under the provisions of any Pension Plan or Section 412 of the Code, Holding or Company or any of their respective ERISA Affiliates is required to pay as contributions thereto; (ii) Any accumulated funding deficiency occurs or exists, whether or not waived, with respect to any Pension Plan; -86- (iii) The actuarial present value of all benefit liabilities under all Pension Plans exceeds the fair market value of the assets of such Pension Plans by an amount which would result in a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole, if all such Pension Plans were terminated; (iv) (A) Any Pension Plan maintained by Holding or Company or any of their respective ERISA Affiliates shall be terminated within the meaning of Title IV of ERISA, or (B) a trustee shall be appointed by an appropriate United States district court to administer any Pension Plan, or (C) the PBGC (or any successor thereto) shall institute proceedings to terminate any Pension Plan or to appoint a trustee to administer any Pension Plan, or (D) Holding or Company or any of their respective ERISA Affiliates shall withdraw (under Section 4063 of ERISA) from a Pension Plan, or (E) any Termination Event resulting in any liability of Company or any ERISA Affiliate of Company or (F) Holding or Company or any of their respective ERISA Affiliates enters into any transaction which has as its principal purpose the evasion of liability under subtitle D of Title IV of ERISA; or (G) Company or any of its ERISA Affiliates engages in any transaction in connection with which Company or any of its ERISA Affiliates is subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code; which events set forth in clauses (i), (ii) or (iv) above would have either individually or in the aggregate, a material adverse effect on the business or financial condition of Holding and its Subsidiaries, taken as a whole; or 8.11 Withdrawal Liability Under Multiemployer Plan Holding or Company or any of their respective ERISA Affiliates as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and such employer shall have incurred a withdrawal liability that is not subject to contest in an amount which would have a material adverse effect on the business or financial condition of Holding and its Subsidiaries taken as a whole; or 8.12 Invalidity of Guaranties (i) Any guaranty of the Obligations, including the Holding Guaranty, for any reason, other than the satisfaction in full of all Obligations, ceases to be in full force and effect or is declared to be null and void, or any guarantor, including Holding, denies that it has any further liability, including, without limitation, with respect to future advances by Lenders, under any such guaranty or gives notice to such effect, except as to any guarantor that is merged, consolidated, liquidated, wound up, dissolved, sold or otherwise disposed of as permitted by subsection 6.7; or (ii) Any guaranty of the obligations under the Eurocurrency Loan Documents, for any reason, other than the satisfaction in full of such obligations, ceases to be in full force and effect or is declared to be null and void, or any guarantor denies that it has any further liability, including, without limitation, with respect to future advances by Eurocurrency Lenders, under -87- any such guaranty or gives notice to such effect, except as to any guarantor that is merged, consolidated, liquidated, wound up, dissolved, sold or otherwise disposed of as permitted by subsection 6.7; or 8.13 Change of Control (A) Except as otherwise permitted by subsection 6.7B(i), Holding shall cease to own and control at least 100% of the common stock and 100% of the voting power of Company entitled to vote for an election of the board of directors of Company; or (B) individuals who on February 24, 1995 were members of the board of directors of Holding (together with any new directors whose election to such board of directors or whose nomination for election by the stockholders of Holding was approved by a vote of a majority of the directors then still in office who were either directors on February 24, 1995 or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such board of directors then in office; or (C) a "person" or "group" (within the meaning of Section 13(d) of the Exchange Act), becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 30% of the total issued and outstanding common stock of Holding; or 8.14 Impairment of Collateral (A) A judgment creditor of Holding or Company or any Subsidiary shall obtain possession of any material portion of the Collateral by any means, including, without limitation, levy, distraint, replevin or self-help, (B) any substantial portion of the Collateral shall be taken by eminent domain or condemnation, (C) any of the Collateral Documents or the Eurocurrency Security Documents shall cease for any reason to be in full force and effect, or any party thereto shall purport in writing to disavow its obligations thereunder or shall declare in writing that it does not have any further obligations thereunder or shall contest the validity or enforceability thereof or Lenders shall cease to have a valid and perfected first priority security interest (or a comparable interest under any law governing any Eurocurrency Security Document or Company Pledge Agreement with respect to the capital stock of any Foreign Subsidiary) to the extent provided for therein in any material Collateral covered thereby except as to any Collateral Document or the Eurocurrency Security Document that is a guaranty of a guarantor that is merged, consolidated, liquidated, wound up, dissolved, sold or otherwise disposed of as permitted by subsection 6.7, and except as to any Collateral that is conveyed, sold, exchanged, leased, subleased, transferred or otherwise disposed of as permitted by this Agreement or the Collateral Document or the Eurocurrency Security Document relating thereto, or (D) Lenders' or Eurocurrency Lenders' security interests or liens on any material portion of the Collateral under the Collateral Documents or the Eurocurrency Security Documents, as appropriate, shall become otherwise impaired or unenforceable, except as to any Collateral that is conveyed, sold, exchanged, leased, subleased, transferred or otherwise disposed of as permitted by this Agreement or the Collateral Document or the Eurocurrency Security Document relating thereto, and except in each case under the foregoing clauses (A) through (D) as to any Collateral consisting of deposit accounts; or -88- 8.15 Eurocurrency Credit Agreement An Event of Default shall occur and be continuing under any Eurocurrency Credit Agreement; or 8.16 ERISA Lien Holding or Company or any of their respective ERISA Affiliates shall fail to make required contributions when due under Section 412 of the Internal Revenue Code which results in the imposition of a Lien under Section 412 of the Internal Revenue Code to secure such unpaid contributions in an aggregate amount in excess of $1,000,000; THEN (i) upon the occurrence of any Event of Default described in the foregoing subsections 8.6 or 8.7 with respect to Holding, Company or any Subsidiary, each of (a) the unpaid principal amount of and accrued interest on the Revolving Credit Loans, (b) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any Letter of Credit shall have presented or be entitled to present, the drafts and other documents required to draw under the Letter of Credit), and (c) all other Obligations, shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Holding and its Subsidiaries, and the obligation of each Lender to make any Revolving Credit Loan or to issue any Letter of Credit shall thereupon terminate and (ii) upon the occurrence and during the continuance of any other Event of Default (including any Event of Default described in the foregoing subsections 8.6 or 8.7 with respect to any Foreign Subsidiary), Requisite Lenders may, by written notice to Company, declare all or any portion of the amounts described in clause (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, together with accrued interest thereon, and the obligation of each Lender to make any Revolving Credit Loan or to issue any Letter of Credit shall thereupon terminate. So long as any Letter of Credit shall remain outstanding, any amounts described in clause (b) above with respect to Letters of Credit, when received by the Issuing Lender, shall be held by the Issuing Lender, pursuant to such documentation as the Issuing Lender shall request, as cash collateral for the obligation of Company to reimburse the Issuing Lender in the event of any drawing under such Letters of Credit, and so much of such funds shall at all times remain on deposit as cash collateral as aforesaid as shall equal the maximum amount available at any time for drawing under all Letters of Credit (the "Maximum Available Amount"); PROVIDED that in the event of cancellation or expiration of any Letter of Credit or any reduction in the Maximum Available Amount, the Issuing Lender shall apply the difference between the cash collateral held by the Issuing Lender immediately prior to such cancellation, expiration or reduction and the Maximum Available Amount immediately after such cancellation, expiration or reduction first to the payment of any outstanding Obligations, and SECOND to the payment to whomsoever shall be lawfully entitled to receive such funds. Notwithstanding anything contained in the foregoing paragraph, if at any time within 60 days after acceleration of the maturity of any Revolving Credit Loan, Holding or Company shall pay all arrears of interest and all payments on account of the principal which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, -89- at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than non-payment of principal of and accrued interest on the Revolving Credit Loans and payments of amounts referred to clauses (a), (b), and (c) above, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 10.7, then Requisite Lenders, by written notice to Company, may at their option rescind and annul the acceleration and its consequences and return to Company any amounts held pursuant to the cash collateral arrangement referred to above as cash collateral in respect of the amounts described in clause (b) above; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. SECTION 9. AGENT 9.1 Appointment NationsBank is hereby appointed sole administrative Agent hereunder by each Lender and notwithstanding anything contained herein to the contrary, any Lender designated as "Co-Agent" or "Syndication Agent" shall not have any authority to act as Agent hereunder or in any other agency capacity. Each Lender hereby authorizes Agent to act hereunder and under the other instruments and agreements referred to herein (including, without limitation, the Collateral Documents to which Agent is party as Collateral Agent) as its agent hereunder and thereunder. Agent agrees to act as such upon the express conditions contained in this Section 9 and in such Collateral Documents. The provisions of this Section 9 are solely for the benefit of Agent and Lenders, and neither Holding nor any of its Subsidiaries shall have any rights as a third party beneficiary of any of the provisions of this Section 9, except with respect to subsections 9.2D, 9.5, 9.6 and 9.7, and provided that Holding and its Subsidiaries shall be entitled to rely on the appointment of any Agent or Collateral Agent pursuant hereto and on the exercise of powers and other actions by such Agent or Collateral Agent hereunder and under the other instruments and agreements referred to herein (including, without limitation, such Collateral Documents). In performing its functions and duties under this Agreement, Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any fiduciary or similar obligation towards or relationship of agency or trust with or for Holding or any of its Subsidiaries. -90- 9.2 Powers; General Immunity A. DUTIES SPECIFIED. Each Lender irrevocably authorizes Agent to take such action on such Lender's behalf and to exercise such powers hereunder and under the other instruments and agreements referred to herein (including, without limitation, the Collateral Documents) as are specifically delegated to Agent, by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the Collateral Documents, and it may perform such duties by or through its agents or employees. The duties of Agent shall be mechanical and administrative in nature; Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement or the other instruments and agreements referred to herein except as expressly set forth herein or therein. B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Agent shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement, any other Domestic Loan Document or Letters of Credit, or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by Agent to Lenders or by or on behalf of Holding or any of its Subsidiaries to Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Revolving Credit Loans or the Letters of Credit or of the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Agent shall not have any liability arising from confirmations of the amount of outstanding Revolving Credit Loans. C. EXCULPATORY PROVISIONS. Neither Agent nor any of its officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted hereunder or in connection herewith (including, without limitation, any act or omission under the Collateral Documents) unless caused by its or their gross negligence or willful misconduct. If Agent shall request instructions from Lenders with respect to any act or action (including the failure to take an action) in connection with this Agreement, Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from Requisite Lenders, or unless Agent shall be required by the terms of this Agreement or any Collateral Document so to act or take such action. Without prejudice to the generality of the foregoing, (i) Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Holding or any of its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or (where so instructed) refraining from acting under this Agreement or the other instruments and agreements referred to herein in accordance with the instructions of Requisite Lenders. Agent shall be entitled to refrain from exercising any power, discretion or authority vested in it under this Agreement or the other -91- instruments and agreements referred to herein unless and until it has obtained the instructions of Requisite Lenders. D. AGENT ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Revolving Credit Loans, Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder and the term "Lender" or any similar term used in any Loan Document shall, unless the context clearly otherwise indicates, include Agent in its individual capacity. Each of Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Holding or any Affiliate of Holding as if it were not performing the duties specified herein, and may accept fees and other consideration from Holding or any of its Subsidiaries for services in connection with this Agreement and otherwise without having to account for the same to Lenders, except as required by subsection 2.3. 9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Holding and its Subsidiaries in connection with the making of the Revolving Credit Loans hereunder and has made and shall continue to make its own appraisal of the creditworthiness of Holding and its Subsidiaries. Agent shall not have any duty or responsibility either initially or on a continuing basis to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto whether coming into their possession before the making of the Revolving Credit Loans or any time or times thereafter, and Agent shall not have any responsibility with respect to the accuracy of or the completeness of the information provided to Lenders. 9.4 Right to Indemnity Each Lender, proportionately to its Pro Rata Share of the Revolving Credit Commitments, severally agrees to indemnify Agent to the extent Agent shall not have been reimbursed by Holding or its Subsidiaries, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, disbursements and reasonable counsel fees) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent in performing its duties hereunder in its capacity as Agent, in any way relating to or arising out of this Agreement; PROVIDED that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's gross negligence or willful misconduct. If any indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. -92- 9.5 Registered Persons Treated as Owner Agent and Holding and its Subsidiaries may deem and treat the Persons listed as Lenders in the Register as the owner of the corresponding Revolving Credit Loan listed therein for all purposes hereof unless and until an assignment is made pursuant to subsection 10.2 and a written notice of the assignment or transfer thereof shall have been filed with Agent, and recorded in the Register, and a copy thereof shall have been delivered to Holding. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, transferee or assignee of the corresponding Revolving Credit Loan. 9.6 Collateral Documents; Appointment of Collateral Agent; Successor Collateral Agent Each Lender and Agent hereby appoints NationsBank as Collateral Agent, and authorizes Collateral Agent, as such agent, to act as such under the Collateral Documents to which Collateral Agent is party or which are entered into in favor of Collateral Agent. Each Lender and Agent hereby further authorizes Collateral Agent to enter into such Collateral Documents on behalf of and for the benefit of Lenders and Agent and agrees to be bound by the terms of such Collateral Documents; PROVIDED that, subject to the third sentence of this subsection 9.6, Collateral Agent shall not enter into or consent to any amendment, modification, termination or waiver (x) of any Collateral Document that releases any guarantor or Collateral not otherwise permitted under this Agreement or such Collateral Document, without the prior written consent of Lenders required by the fifth sentence of subsection 10.7, and (y) of any other provision contained in any Collateral Document without the prior written consent of Agent and Requisite Lenders. Each Lender and Agent agrees that no Lender or Agent shall have any right individually to realize upon the security granted by such Collateral Documents, it being understood and agreed that such rights and remedies may be exercised by Collateral Agent for the benefit of Lenders and Agent in accordance with the terms of such agreements. Each Lender and Agent hereby authorize Collateral Agent, and Collateral Agent hereby agrees, to release Collateral as permitted or required under this Agreement or such Collateral Documents and to execute and deliver any certificate, agreement, instrument or other document necessary or appropriate to effect or evidence such release of Collateral, and each Lender, Agent and Collateral Agent agree that a certificate executed, by Collateral Agent evidencing such release of Collateral shall be conclusive evidence of such release as to any third party. Collateral Agent shall at all times be the same Person that is Agent. Written notice of resignation by Agent pursuant to subsection 9.7 shall also constitute notice of resignation as Collateral Agent; removal of Agent pursuant to subsection 9.7 shall also constitute removal as Collateral Agent; and appointment of a successor Agent pursuant to subsection 9.7 shall also constitute appointment of a successor Collateral Agent. -93- 9.7 Successor Agents Agent may resign at any time by giving written notice thereof to Lenders and Company, and Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Agent and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five days notice to Company, to appoint a successor Agent. If no successor Agent shall have been so appointed by Requisite Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or Requisite Lenders' removal of the retiring Agent, then upon five days' notice to Company the retiring Agent may, on behalf of Lenders, appoint a successor Agent which shall be a Lender, or a commercial bank organized under the laws of the United States of America or of any State thereof, or any Affiliate of such bank, having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, that successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent, and the retiring or removed Agent shall be discharged from its duties and obligations as Agent under this Agreement. After any retiring or removed Agent's resignation or removal hereunder as Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. The resignation by Collateral Agent, removal of Collateral Agent and appointment of successor Collateral Agent shall be as provided in the final two sentences of subsection 9.6. SECTION 10. MISCELLANEOUS 10.1 Representation of Lenders Each Lender hereby represents that (a) it is a commercial lender or financial institution, (b) it will make any Revolving Credit Loan for its own account, (c) subject to subsection 10.2, the disposition of evidence of Indebtedness held by that Lender shall at all times be within its exclusive control, and (d) its participation as a Lender hereunder and extension of credit in respect hereof will not require registration or qualification under any securities laws. -94- 10.2 Assignments and Participations in Revolving Credit Loans; Letters of Credit -95- Notwithstanding the provisions of subsection 10.1, each Lender may assign its rights and obligations under this Agreement and further may assign, or sell participations in, all or any part of any Revolving Credit Loan or Revolving Credit Loans made by it or its Commitments or any other interest herein or in its participation in the Letters of Credit to another bank or other entity; PROVIDED that (i) no participation or assignment shall, without the consent of Company, require Company to file a registration statement or similar document with the Securities and Exchange Commission or any other regulatory authority or apply to qualify the Revolving Credit Loans under the blue sky laws of any state; (ii) in the case of an assignment, such assignment shall (a) be assigned to (x) with the prior written consent of Agent (which consent shall not be unreasonably withheld), an Eligible Assignee with the giving of notice to Company and Agent (EXCEPT that if any such assignment, is made without the consent of Company, Company shall not be required to pay any amounts to such assignee pursuant to subsections 2.6, 2.7 or 2.8 hereof in excess of the amounts that it would have been required to pay thereunder to the assigning Lender), or (y) any other Person approved by Agent and, unless an Event of Default has occurred and is continuing, Company, which such approvals shall not be unreasonably withheld, and (b) be assigned pursuant to an assignment agreement substantially in the form of EXHIBIT VII annexed hereto, (c) if made to a Person other than a Lender, be in an amount (x) such that the Dollar Equivalent of the assigning Lender's Revolving Credit Commitment and the commitments under the Eurocurrency Credit Agreements being assigned is in an aggregate minimum amount of $5,000,000 or (y) equal to 100% of the assigning Lender's Revolving Credit Commitment and commitments under the Eurocurrency Credit Agreements if the Dollar Equivalent of such Lender's Revolving Credit Commitment and commitments under the Eurocurrency Credit Agreements is less than $5,000,000 in the aggregate, and (d) unless such assignee is an Eligible Assignee to which the Agent has provided its prior written consent (which consent shall not be unreasonably withheld), be on a pro rata basis with the Eurocurrency Credit Agreements so that the Pro Rata Share of such assignee under this Agreement shall be equal to the Proportion (as defined in the Eurocurrency Credit Agreements) of such assignee under the Eurocurrency Credit Agreements, PROVIDED that notwithstanding anything herein to the contrary, an assignment may be on a non-pro rata basis with the Eurocurrency Credit Agreements with the consent of Agent and, unless an Event of Default has occurred and is continuing, Company, which consent by Company shall not be unreasonably withheld; and (iii) in the case of a participation, (A) the Lender so participating out its Revolving Credit Loan shall remain a Lender hereunder and the Person acquiring such participation shall not become a Lender hereunder, (B) such Lender's obligations hereunder shall remain unchanged and it shall remain solely responsible for the performance thereof, (C) all loan parties and Agent shall continue to deal solely with such Lender in connection with the relevant Revolving Credit Loan and other related transactions contemplated hereby, (D) such Lender shall be solely responsible for any withholding taxes or any filing or reporting requirements relating to such participation and shall hold harmless Holding, Company, each Subsidiary and Agent and their respective successors, permitted assigns, employees, officers, directors and representatives against the same, and (E) the holder of any such participation, other than an Affiliate of such Lender, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting the extension of the final maturity of the principal amount of a Revolving Credit Loan or Revolving Credit Commitment or a reduction of the principal amount of or the decrease in the rate of interest payable on the Revolving Credit Loans or any fees related thereto. Each Lender making an assignment described in clause (ii)(a)(y) of the first proviso in the immediately preceding sentence shall pay to Agent a fee in the amount of $3,000. In the case of an assignment authorized under this subsection 10.2, the assignee shall have, to the extent of such -96- assignment, the same rights, benefits and obligations as it would if it were a Lender hereunder, including, without limitation, the right to be considered a Lender for purposes of the definition of the "Requisite Lenders" and the obligation to fund Revolving Credit Loans directly to Agent pursuant to subsection 2.1C, and the assigning Lender shall be relieved of its obligations hereunder with respect to its Revolving Credit Commitment to the extent assigned. Company hereby acknowledges and agrees that such assignee of any Lender shall for all purposes hereunder be considered to be such a "Lender". In the event of an assignment hereunder the Revolving Credit Commitments hereunder shall be modified to reflect the Revolving Credit Commitment of such assignee. Assignments pursuant to this subsection 10.2 shall not be deemed effective hereunder until (i) Agent shall have been paid any fee required pursuant to this subsection in relation to such assignment and (ii) if any such assignment occurs while any Revolving Credit Loan is outstanding, such assignment shall have been recorded by Agent in the Register as provided in subsection 2.1D. Agent shall no later than five Business Days following receipt of notice thereof, record assignments pursuant to this subsection 10.2 in the Register. Each Lender may furnish any information concerning Holding or any of its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to subsection 10.17. Notwithstanding the preceding provisions of this subsection 10.2, any Lender may pledge or assign all or any portion of its rights under this Agreement to a Federal Reserve Bank as security for borrowings therefrom; PROVIDED no such pledge or assignment shall release any such Lender from its obligations hereunder. Upon its receipt of an assignment agreement substantially in the form of EXHIBIT VII annexed hereto executed by Lender making the assignment and the assignee and the Revolving Credit Notes subject to such assignment, Company shall, within three Business Days after its receipt of such assignment agreement, execute and deliver to Agent in exchange for the surrendered Revolving Credit Note a new Revolving Credit Note payable to the order of such assignee in amount equal to the Revolving Credit Commitment assigned to such assignee pursuant to such assignment agreement and a new Revolving Credit Note to the assigning Lender in an amount equal to the portion of the Revolving Credit Commitment retained by such assigning Lender hereunder, if any. Such new Revolving Credit Notes shall be (i) in an aggregate principal amount equal to the aggregate principal amount of such surrendered Revolving Credit Note, (ii) dated the effective date of such assignment agreement and (iii) otherwise be in substantially the form of EXHIBIT VIII annexed hereto. -97- 10.3 Expenses Whether or not the transactions contemplated hereby shall be consummated, Holding and Company jointly and severally agree to pay promptly (i) all reasonable costs of furnishing all opinions by counsel for Holding and its Subsidiaries (including, without limitation, any opinions reasonably requested by Agent as to any legal matters arising hereunder), and of Holding's and its Subsidiaries' performance of and compliance with all agreements and conditions contained herein on its part to be performed or complied with, (ii) the reasonable fees, expenses and disbursements of counsel to Agent in connection with the negotiation, preparation, execution and administration of this Agreement, the other Domestic Loan Documents, the Revolving Credit Loans hereunder, and any amendments and waivers hereto, (iii) all the actual costs and expenses of creating and perfecting Liens in favor of Lenders contemplated by this Agreement and the other Domestic Loan Documents, including filing and recording fees and expenses, recording or similar taxes, reasonable fees and expenses of counsel for providing such opinions as Agent may reasonably request and reasonable fees and expenses of legal counsel to Agent, (iv) all reasonable accountable out-of-pocket expenses (including travel and due diligence expenses) incurred by Agent in connection with the negotiation and closing of this Agreement, (v) all other actual and reasonable accountable out-of-pocket expenses incurred by Agent in connection with the making of the Revolving Credit Loans hereunder and the issuance of the Letters of Credit and other extensions of credit hereunder, and (vi) all costs and expenses (including reasonable attorneys' fees and costs of settlement) incurred by Agent or any Lender in connection with any work-out or collection of any portion of the Obligations or the enforcement of any Loan Documents. -98- 10.4 INDEMNITY IN ADDITION TO THE PAYMENT OF EXPENSES PURSUANT TO SUBSECTION 10.3, WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE CONSUMMATED, HOLDING AND COMPANY JOINTLY AND SEVERALLY AGREE TO INDEMNIFY, PAY AND HOLD AGENT AND LENDERS, AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, AND AFFILIATES OF LENDERS (COLLECTIVELY CALLED THE "INDEMNITEES") HARMLESS FROM AND AGAINST, ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, AND OUT-OF-POCKET COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL FOR SUCH INDEMNITEES) IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING COMMENCED OR THREATENED, WHETHER OR NOT SUCH INDEMNITEE SHALL BE DESIGNATED A PARTY THERETO, THAT MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THAT INDEMNITEE, IN ANY MANNER RELATING TO OR ARISING OUT OF, THIS AGREEMENT OR THE OTHER DOMESTIC LOAN DOCUMENTS, LENDERS' AGREEMENT TO MAKE THE REVOLVING CREDIT LOANS AND OTHER EXTENSIONS OF CREDIT AND LENDERS' AGREEMENTS TO PURCHASE PARTICIPATIONS THEREIN AS PROVIDED HEREIN, OR THE USE OR INTENDED USE OF THE PROCEEDS OF ANY OF THE REVOLVING CREDIT LOANS OR OTHER EXTENSIONS OF CREDIT HEREUNDER OR IN ANY WAY RELATING TO OR RESULTING FROM THE ACTIONS OR ASSETS OF HOLDING, COMPANY OR ANY OF THEIR RESPECTIVE SUBSIDIARIES (THE "INDEMNIFIED LIABILITIES"); PROVIDED THAT NEITHER HOLDING NOR COMPANY SHALL HAVE ANY OBLIGATION HEREUNDER TO ANY LENDER OR ANY OF ITS RELATED INDEMNITEES WITH RESPECT TO INDEMNIFIED LIABILITIES ARISING FROM THE FRAUD, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR WILLFUL BREACH OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OF SUCH LENDER OR ANY OF ITS RELATED INDEMNITEES, ALL AS DETERMINED BY A FINAL JUDGMENT OF A COURT OF COMPETENT JURISDICTION (OR A SETTLEMENT TANTAMOUNT TO SUCH A FINAL JUDGMENT). TO THE EXTENT THAT THE UNDERTAKING TO INDEMNIFY, PAY AND HOLD HARMLESS SET FORTH IN THE IMMEDIATELY PRECEDING SENTENCE MAY BE UNENFORCEABLE BECAUSE IT IS VIOLATIVE OF ANY LAW OR PUBLIC POLICY, HOLDING AND COMPANY SHALL EACH CONTRIBUTE THE MAXIMUM PORTION THAT IT IS PERMITTED TO PAY AND SATISFY UNDER APPLICABLE LAW, TO THE PAYMENT AND SATISFACTION OF ALL INDEMNIFIED LIABILITIES INCURRED BY THE INDEMNITEES OR ANY OF THEM. -99- 10.5 Set Off In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default and consequent acceleration of the Obligations pursuant to Section 8, each Lender, Eurocurrency Lender, and all Affiliates thereof, upon the consent of Agent and Requisite Lenders, is hereby authorized by Company at any time or from time to time, without notice to Company, or to any other Person, any such notice being hereby expressly waived to the extent permitted by applicable law, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, Indebtedness evidenced by certificates of deposit, whether matured or unmatured but not including trust accounts) and any other Indebtedness at any time held or owing by that Person to or for the credit or the account of Company, against and on account of the obligations and liabilities of Company to Lenders under this Agreement or the Eurocurrency Credit Agreements or with respect to the Letters of Credit, including, but not limited to, all such obligations and liabilities with respect to all claims of any nature or description arising out of or connected with this Agreement or with respect to the Letters of Credit or any other Loan Document, irrespective of whether or not that Lender shall have made any demand hereunder and although said obligations and liabilities, or any of them, may be contingent or unmatured. Each Lender and Agent agrees promptly to notify Holding and Company after any such set-off and application is made by such Lender or Agent. 10.6 Ratable Sharing Lenders each agree among themselves that if any of them shall, through the exercise of any right of counterclaim, set-off, banker's lien or otherwise or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal and interest then due with respect to the Revolving Credit Loans and the amounts payable in respect of the Letters of Credit held by that Lender, or amounts due to that Lender in respect of facility fees or commitment fees hereunder (collectively, the "Aggregate Amounts Due" to such Lender), which is greater than the proportion received by any other Lender in respect to the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (y) notify each other Lender and Agent of such receipt and (z) purchase participations (which it shall be deemed to have done simultaneously upon the receipt of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by Lenders in proportion to the Aggregate Amounts Due them; PROVIDED that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to that Lender to the extent of such recovery, but without interest. Each of Holding and Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Holding or Company to that holder. -100- 10.7 Amendments and Waivers To the extent not otherwise expressly provided, no amendment, modification, termination or waiver of any provision of this Agreement, or consent to any departure by Holding or any of its Subsidiaries therefrom, shall in any event be effective without the written concurrence of Requisite Lenders, Holding and Company; except that any amendment, modification, termination, or waiver that (i) changes the amount of the Revolving Credit Commitments or the principal amount of the Revolving Credit Loans or extends the scheduled maturity thereof; (ii) changes any Lender's Pro Rata Share, the definition of "Requisite Lenders", or any provision of this Agreement expressly requiring the approval or concurrence of all Lenders; (iii) extends the dates on which interest is or fees are payable hereunder, or the maximum duration of Interest Periods; (iv) changes the provisions contained in subsections 8.1 or 10.7; or (v) reduces any interest rates payable on the Revolving Credit Loans or any fees (other than administrative fees) payable hereunder, each shall be effective only if evidenced by a writing signed by or on behalf of all Lenders, Agent, Holding and Company; PROVIDED, HOWEVER, that (A) SCHEDULE 1.1 annexed hereto and the Revolving Credit Commitments and Pro Rata Shares set forth therein shall be amended from time to time to give effect to the Revolving Credit Commitment and Pro Rata Share of each new Lender that becomes a party to this Agreement at the time such Lender becomes a Lender and (B) any amendment, modification or waiver that changes any administrative fees, or the times at which such fees are payable, hereunder shall be effective only if evidenced by a writing signed by or on behalf of Holding, Company and each Lender affected thereby. For the purposes of subsection 2.2C, no waiver of any Event of Default and no amendment to this Agreement shall operate as a cure of any Event of Default unless stated in writing in such waiver or amendment. To the extent not otherwise expressly provided, any amendment, modification, termination or waiver of any of the provisions contained in Section 3 shall be effective only if evidenced by a writing signed by or on behalf of Agent, Requisite Lenders, Holding and Company. No amendment, modification, termination or waiver of any provision of Section 9 hereof shall be effective without the written concurrence of Agent, Requisite Lenders, Holding and Company. No amendment, modification, termination, or waiver of any Loan Document that releases any guarantor or releases any Collateral under a Loan Document not otherwise permitted under this Agreement or such Loan Document (including but not limited to, as permitted pursuant to subsection 6.7 or 9.6 of this Agreement) shall be effective unless evidenced by a writing signed by or on behalf of Lenders having 80% or more of the combined aggregate amount of the Revolving Credit Commitments or, in the case of the Revolving Credit Commitments have been terminated, the outstanding principal amount of the Revolving Credit Loans, if any, made thereunder. Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Holding or any of its Subsidiaries shall entitle Holding and Company to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 10.7 shall be binding upon Holding and Company, and each of their respective Subsidiaries. -101- 10.8 Notices Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, telexed or sent by United States mail or courier service and shall be deemed to have been given when delivered in person, on receipt of telecopy or telex or four Business Days after depositing it in the United States mail, registered or certified, with postage prepaid and properly addressed; PROVIDED that notices to Agent shall not be effective until received. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this subsection 10.8) shall be as set forth under each party's name on the signature pages hereof. 10.9 Survival of Warranties and Certain Agreements A. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, and the making of the Revolving Credit Loans and the issuance of the Letters of Credit hereunder. B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements set forth in subsections 2.6, 2.7G, 2.7H, 2.8, 10.3, 10.4 and 10.5, the agreements of Holding set forth in Section 7 (to the extent set forth therein) and the agreements of Lenders set forth in subsections 9.2C, 9.4, 10.5, 10.6 and 10.17 shall survive the payment of the Revolving Credit Loans and the reimbursement obligations under the Letters of Credit and the termination of this Agreement. 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative No failure or delay on the part of any party hereto in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. 10.11 Severability In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. -102- 10.12 Obligations Several; Independent Nature of Lenders' Rights The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement and no action taken by Lenders pursuant hereto shall be deemed to constitute Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.13 Headings Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 10.14 Applicable Law THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 10.15 Successors and Assigns This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and permitted assigns of Lenders. The terms and provisions of this Agreement shall inure to the benefit of any permitted assignee of the Revolving Credit Loans, and in the event of such assignment, the rights and privileges herein conferred upon Lenders shall automatically extend to and be vested in such assignee, all subject to the terms and conditions hereof. Neither Holding's or any of its Subsidiaries' rights nor any interest therein hereunder may be assigned without the written consent of all Lenders. Lenders rights of assignment are subject to subsection 10.2. -103- 10.16 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OBLIGATION MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN DALLAS, TEXAS AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT EACH OF THE PARTIES HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR SUCH OBLIGATION; PROVIDED THAT SUCH PARTIES RETAIN ANY RIGHTS TO APPEAL SUCH JUDGMENT. ALL PARTIES TO THIS AGREEMENT IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OBLIGATION. Each of Holding and Company designates and appoints Nu-kote International, Inc. with offices at 17950 Preston Road, Suite 690, Dallas, Texas 75252, and such other Persons as may hereafter be selected by Holding and Company irrevocably agreeing in writing to so serve, as its agent to receive on its behalf service of all process in any such proceedings in any such court, such service being hereby acknowledged by Holding and Company to be effective and binding service in every respect. A copy of any such process so served shall be mailed by registered mail to Holding and Company at its address provided in the applicable signature page hereto, except that unless otherwise provided by applicable law, any failure to mail such copy shall not affect the validity of service of process. If any agent appointed by Holding and Company refuses to accept service, Holding and Company hereby agree that service upon it by registered mail shall constitute sufficient notice. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Agent, Collateral Agent or any Lender to bring proceedings against Holding and each of its Subsidiaries in the courts of any other jurisdiction. -104- 10.17 Confidentiality Lenders shall take normal and reasonable precautions to maintain the confidentiality of all non-public information obtained pursuant to the requirements of this Agreement which has been identified as such by Holding or any of its Subsidiaries but may, in any event, make disclosures reasonably required by any bona fide assignee or participant (or prospective assignee or participant) in connection with the contemplated assignment of any of the Revolving Credit Commitments or Revolving Credit Loans or participations therein or as required or requested by any governmental agency or representative thereof or as required pursuant to legal process; PROVIDED that (a) such assignee or participant agrees to comply with the provisions of this subsection 10.17, (b) such prospective assignee or participant shall have executed a confidentiality agreement substantially in the form of EXHIBIT V annexed hereto, (c) unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any requirement or request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) and any requirement pursuant to legal process of or for disclosure of such information, and (d) in no event shall any Lender be obligated or required to return any materials furnished by Holding and its Subsidiaries. 10.18 Interest and Charges It is not the intention of any parties to this Agreement to make an agreement in violation of the laws of any applicable jurisdiction relating to usury. Regardless of any provision in any Loan Documents, no Lender shall ever be entitled to receive, collect or apply, as interest on the Obligations, any amount in excess of the Maximum Amount. If any Lender or participant ever receives, collects or applies, as interest, any such excess, such amount which would be excessive interest shall be deemed a partial repayment of principal and treated hereunder as such; and if principal is paid in full, any remaining excess shall be paid to Company. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Maximum Amount, Company and Lenders shall, to the maximum extent permitted under Applicable Law, (a) characterize any nonprincipal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effect thereof, and (c) amortize, prorate, allocate and spread in equal parts, the total amount of interest throughout the entire contemplated term of the Obligations so that the interest rate is uniform throughout the entire term of the Obligations; provided, however, that if the Obligations are paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Maximum Amount, Lenders shall refund to Company the amount of such excess or credit the amount of such excess against the total principal amount of the Obligations owing, and, in such event, Lenders shall not be subject to any penalties provided by any laws for contracting for, charging or receiving interest in excess of the Maximum Amount. This Section shall control every other provision of all agreements pertaining to the transactions contemplated by or contained in the Loan Documents. -105- 10.19 Amendment, Restatement, Extension, Renewal and Increase This Agreement is a renewal, extension, amendment and restatement and, as such, except for the "Obligations" as defined in the First Restatement (which shall survive and shall be renewed, extended, increased and restated by the terms of this Agreement), all other terms and provisions of this Agreement supersede in their entirety the First Restatement. All Liens created under the Collateral Documents shall remain valid, binding and enforceable Liens against the Persons which granted such Liens. 10.20 Counterparts; Effectiveness This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt of written or telephonic notification of such execution and authorization of delivery thereof by Holding, Company and Agent. Holding and Company hereby acknowledge and agree that on and after the Closing Date, each reference in the Loan Documents to the "Credit Agreement", "thereunder", "thereof' and words of like import referring to the Credit Agreement shall mean and be a reference to this Agreement. 10.21 Waivers Holding and Company each hereby expressly acknowledge and agree that, as of the Closing Date, neither of them has any setoffs, counterclaims, adjustments, recoupments, defenses, claims or actions of any character, whether contingent, non-contingent, liquidated, unliquidated, fixed, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, against any Lender, the Agent, the Documentation Agent, or the Collateral Agent or any grounds or cause for reduction, modification or subordination of the Obligations or any liens or security interests of any Lender, the Agent, the Documentation Agent, or the Collateral Agent. To the extent Holding or the Company possesses, as of the Closing Date, any such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds or causes, each of Holding and the Company hereby waives, and hereby releases each Lender, the Agent, the Documentation Agent, or the Collateral Agent from, any and all of such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds and causes, such waiver and release being with full knowledge and understanding of the circumstances and effects of such waiver and release and after having consulted counsel with respect thereto. Company hereby acknowledges that it is indebted to Lenders with respect to Revolving Credit Loans in the principal amount of $92,000,000 on the date hereof and that Letters of Credit in the aggregate amount of $275,000 are outstanding on the date hereof. ============================================================================== REMAINDER OF PAGE LEFT INTENTIONALLY BLANK ============================================================================== -106- WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. NU-KOTE INTERNATIONAL, INC., as Borrower By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Nu-kote International, Inc. Suite 690, LB 21 17950 Preston Road Dallas, Texas 75252 Attention: Treasurer NU-KOTE HOLDING, INC., as Guarantor By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Nu-kote Holding, Inc. Suite 690, LB 21 17950 Preston Road Dallas, Texas 75252 Attention: Treasurer NATIONSBANK OF TEXAS, N.A. as a Lender and as Administrative Agent and Collateral Agent By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: NationsBank of Texas, N.A. 901 Main Street, 66th Floor Dallas, Texas 75202 Attention: William E. Livingstone, IV Senior Vice President BARCLAYS BANK PLC, as a Lender and as Documentation Agent By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer COMMERZBANK AKTIENGESELLSCHAFT ATLANTA AGENCY By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Commerzbank Aktiengesellschaft Atlanta Agency Promenade Two, Suite 3500 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 Attention: Harry P. Yergey CREDIT LYONNAIS, NEW YORK BRANCH By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Credit Lyonnais 1301 Avenue of the Americas, 18th Floor New York, New York 10019 Attention: Alan Sidrane THE FIRST NATIONAL BANK OF CHICAGO By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: The First National Bank of Chicago One First National Plaza, Mail Suite 0088 Chicago, Illinois 60670-0088 Attention: Richard A. Peterson SOCIETE GENERALE By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Societe Generale Trammell Crow Center, Suite 4800 2001 Ross Avenue Dallas, Texas 75201 Attention: Richard M. Lewis FIRST AMERICAN NATIONAL BANK By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: First American National Bank 4th & Union Street AA-0310, 10th Floor Nashville, Tennessee 37238 Attention: Zachry F. Martin DEUTSCHE BANK, A.G., NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Deutsche Bank, A.G., New York Branch and/or Cayman Islands Branch 31 West 52nd Street, 24th Floor New York, New York 10019 Attention: Ralf Hoffmann ABN AMRO BANK, N.V. By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: ABN AMRO Bank, N.V. 10 E. 53rd Street, 37th Floor New York, New York 10022 Attention: Ronald O. Drake SCHEDULE 1.1 LENDER'S ORIGINAL COMMITMENTS AND PRO RATA SHARES NATIONSBANK OF TEXAS, N.A. Revolving Credit Loan Commitment: $24,716,667.00 Pro Rata Share of Revolving Credit Commitment: 24.7166667% BARCLAYS BANK PLC Revolving Credit Loan Commitment: $14,000,000.00 Pro Rata Share of Revolving Credit Commitment: 14.00% COMMERZBANK AKTIENGESELLSCHAFT ATLANTA AGENCY Revolving Credit Loan Commitment: $10,000,000.00 Pro Rata Share of Revolving Credit Commitment: 10.00% CREDIT LYONNAIS, NEW YORK BRANCH Revolving Credit Loan Commitment: $6,550,000.00 Pro Rata Share of Revolving Credit Commitment: 6.55% THE FIRST NATIONAL BANK OF CHICAGO Revolving Credit Loan Commitment: $10,000,000.00 Pro Rata Share of Revolving Credit Commitment: 10.00% SOCIETE GENERALE Revolving Credit Loan Commitment: $9,850,000.00 Pro Rata Share of Revolving Credit Commitment: 9.85% DEUTSCHE BANK, A.G., NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH Revolving Credit Loan Commitment: $10,000,000.00 Pro Rata Share of Revolving Credit Commitment: 10.00% ABN AMRO BANK, N.V. Revolving Credit Loan Commitment: $6,550,000.00 Pro Rata Share of Revolving Credit Commitment: 6.55% FIRST AMERICAN NATIONAL BANK Revolving Credit Loan Commitment: $8,333,333.00 Pro Rata Share of Revolving Credit Commitment: 8.3333333% EX-10.2 3 EX-10.2 L6,275,000 THIRD AMENDED AND RESTATED REVOLVING CREDIT FACILITY AGREEMENT DATED 31 JULY, 1997 between PELIKAN SCOTLAND LIMITED as borrower BARCLAYS BANK PLC as agent NATIONSBANK OF TEXAS, N.A. as collateral agent NATIONSBANK OF TEXAS, N.A. as documentation agent and OTHERS THIS THIRD AMENDED AND RESTATED AGREEMENT is made the 31st day of July, 1997 BETWEEN: (1) PELIKAN SCOTLAND LIMITED (the "BORROWER"): (2) BARCLAYS BANK PLC, as agent (the "AGENT"); (3) NATIONSBANK OF TEXAS, N.A. as collateral agent (the "COLLATERAL AGENT", the Agent and the Collateral Agent being hereinafter referred to collectively as the "AGENTS"); (4) NATIONSBANK OF TEXAS, N.A. as documentation agent (the "DOCUMENTATION AGENT"); (5) BARCLAYS BANK PLC as fronting bank (the "FRONTING BANK"); (6) BARCLAYS BANK PLC as overdraft provider (the "OVERDRAFT PROVIDER"); and (7) THE FINANCIAL INSTITUTIONS named in the First Schedule (the "BANKS"). WHEREAS the parties hereto wish further to amend and restate the Amended and Restated Agreement dated 15th October, 1996 (as so amended, the "ORIGINAL AGREEMENT") NOW IT IS HEREBY AGREED that the Original Agreement is hereby further amended and restated as follows: 1. INTERPRETATION 1.1 In this Agreement: "ADVANCE" means, save as otherwise provided herein, an advance made or to be made by a Lender pursuant to the terms hereof: "AGENT'S SPOT RATE OF EXCHANGE" means the Agent's spot rate of exchange for the purchase of the relevant Optional Currency in the London foreign exchange market with sterling at or about 11:00 a.m. on a particular day; "APPLICABLE MARGIN" means four percent (4%) per annum through June 30, 1998, and five percent (5%) per annum thereafter; "AVAILABLE COMMITMENT" means, in relation to a Bank at any time and save as otherwise provided herein, its Commitment at such time less (i) its share of the Outstandings (other than any outstanding Short-Term Advance) at such time (and for the purposes of determining a Bank's share of Outstandings, such Bank's share will be the amount that it may become obliged to pay to the Fronting Bank pursuant to Clause 8.6) and (ii) except for the purposes of Clause 25, its share of any Advances which it is obliged, or may become obliged, to make pursuant to Clause 6.5 in respect of (a) any outstanding Short-Term Advances at close of business on the day before the proposed Utilization Date and (b) any Short-Term Advance requested to be made by no later than the Specified Time on such Utilization Date; "AVAILABLE FACILITY" means, at any time, the aggregate of the Available Commitments at such time adjusted, in the case of a proposed Utilization only, so as to take into account: (i) any reduction in the Commitment of a Bank which will occur prior to the commencement of, or during, the Term relating to the proposed Utilization consequent upon a cancellation of the whole or any part of the Commitment of such Bank pursuant to the terms hereof; (ii) the amounts of any Advances (other than any Short-Term Advances), Letters of Credit and/or Contract Guarantees which, pursuant to any other Utilization, any Bank or the Fronting Bank as the case may be are then obliged to make or, as the case may be, issue on or before the proposed Utilization Date relating to such proposed Utilization; and (iii) the amounts of any Advances and/or Letters of Credit which were made or, as the case may be, issued by any Bank, the Overdraft Provider, or the Fronting Bank as the case may be, pursuant hereto and which are due to be repaid or, as the case may be, expire on or before the proposed Utilization Date relating to such Utilization; "BASLE PAPER" means the paper entitled International Convergence of Capital Measurement and Capital Standards dated July 1988 prepared by the Basle Committee on Banking Regulations and Supervisory Practices, as amended in November 1991; "CLOSING DATE" has the meaning given to it in the Credit Agreement; "COLLATERAL DOCUMENTS" has the meaning given to it in the Credit Agreement; "COMMITMENT" means, in relation to a Bank at any time and save as otherwise provided herein, the amount set opposite its name in the First Schedule; "COMMITMENT FEE" has the meaning given to it in Clause 25; "COMMITMENT FEE PERCENTAGE" has the meaning given to it in the Credit Agreement; "CONTRACT GUARANTEES" means guarantees, indemnities, performance bonds and similar undertakings issued or to be issued by the Fronting Bank pursuant to Clause 7 (in each case in such form as may be requested by the Borrower and acceptable to the Fronting Bank), in respect of the obligations of the Borrower or its Subsidiaries, to any third party; "CONTACT GUARANTEE OUTSTANDINGS" means at any time, the amount that is the sum of (i) the maximum aggregate amount that is or at any time thereafter may be payable by the Fronting Bank under each Contract Guarantee outstanding at such time and (ii) the aggregate amount of all claims honored by the Fronting Bank and not theretofore reimbursed by the Borrower hereunder; "CREDIT AGREEMENT" means the Third Amended and Restated Credit Agreement of even date hereof between Nu-kote Holding, Inc. as guarantor, Nu-kote International, Inc. as borrower, Barclays Bank PLC as documentation agent, NationsBank of Texas, N.A. as administrative agent and collateral agent and others; "DEBENTURE" means the Debenture dated 24th February, 1995, as supplemented by Supplemental Debenture dated October 21, 1996, entered into by the Company in favour of the Agent; -2- "EVENT OF DEFAULT" means an "Event of Default" referred to in Section 5 of the Nu-kote Guarantees; "EXPIRY DATE" means, in relation to any Letter of Credit or Contract Guarantee, the date on which the maximum aggregate liability thereunder is to be reduced to zero; "FACILITY" means the revolving cash advances and letter of credit and contract guarantee facility granted to the Borrower in this Agreement; "FACILITY OFFICE" means, in relation to any of the Agent, the Fronting Bank, the Overdraft Provider or the Banks, the office identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee, or in the case of an Overdraft Facility Transferee, at the end of the Overdraft Provider Transfer Certificate to which it is a party as the Overdraft Facility Transferee) or such other office as it may from time to time select which is located in the same jurisdiction as the office identified with its signature below (or, in the case of a Transferee as the office identified in the Transfer Certificate pursuant to which it became a party hereto, or in the case of an Overdraft Facility Transferee, at the end of the Overdraft Provider Transfer Certificate to which it is a party as the Overdraft Facility Transferee) or, such other office as may be agreed pursuant to Clause 17; "FINANCE DOCUMENTS" means this Agreement, the Nu-kote Guarantees, the Collateral Documents, the Debenture, the Hedging Documents and any other document designated as such in writing by the Agent and the Borrower; "GUARANTORS" means Nu-kote Holding, Inc., Nu-kote International, Inc., International Communication Materials, Inc., Future Graphics Inc., Nu-kote Imaging International, Inc. and Nu-kote Imperial, Ltd. and "GUARANTOR" means any one of them; "HEDGING DOCUMENTS" means any and all currency or interest rate swap and/or interest cap and/or other hedging agreements entered into or to be entered into by the Borrower with a Bank in relation to the obligations of the Borrower hereunder; "L/C OUTSTANDINGS" means, at any time, the amount that is the sum of (i) the maximum aggregate amount that is or at any time thereafter may become available for drawings under each Letter of Credit outstanding at such time and (ii) the aggregate amount of all drawings under each Letter of Credit honored by the Fronting Bank and not theretofore reimbursed by the Borrower hereunder; "LENDERS" means the Banks and the Overdraft Provider; "LETTER OF CREDIT" means a documentary or standby letter of credit issued or to be issued by the Fronting Bank pursuant to Clause 7 in each case, in such form as may be requested by a Borrower and which is acceptable to the Fronting Bank; "LIBOR" means, in relation to any Advance (other than a Short-Term Advance) or unpaid sum, the rate per annum determined by the Agent to be equal to the arithmetic mean (rounded upwards, if necessary, to four decimal places) of the rates (as notified to the Agent) at which each of the Reference Banks was offering to prime banks in the London Interbank Market deposits in the currency of the relevant Advance and for the specified period at or about 11:00 a.m. on the Quotation Date for such specified period and, for the purposes of this definition, "SPECIFIED PERIOD" means the Term of such Advance or, as the case may be, the -3- relevant period in respect of which LIBOR falls to be determined in relation to such unpaid sum; "MANDATORY LIQUID ASSET COSTS RATE" means in relation to any Advance or unpaid sum denominated in sterling, the rate determined in accordance with the Sixth Schedule; "NU-KOTE GUARANTEES" means the guarantees of 24th February, 1995 given by the Guarantors in favour of the Agent for itself and on behalf of the Lenders; "OBLIGORS" means the Borrower and the Guarantors and "OBLIGOR" means any one of them; "OPTIONAL CURRENCY" means dollars, deutschmarks and Swiss francs; "ORIGINAL STERLING AMOUNT" means: (a) the principal amount (in the case of an Advance), or the face value (in the case of a Letter of Credit or a Contract Guarantee), of a Utilization denominated in sterling; or (b) the principal amount (in the case of an Advance), or the face value (in the case of a Letter of Credit or a Contract Guarantee), of a Utilization denominated in an Optional Currency, translated into sterling on the basis of the Agent's Spot Rate of Exchange on the date of receipt by the Agent of the Utilization Request for that Utilization. "OUTSTANDINGS" means, at any time, the aggregate of: (i) the principal amount of each outstanding Advance at such time; (ii) the L/C Outstandings at such times; and (iii) the Contract Guarantee Outstandings at such time. "OVERDRAFT FACILITY TRANSFEREE" means a Lender to which the Overdraft Provider transfers all (but not part) of its rights and obligations hereunder as the Overdraft Provider in accordance with Clause 30.5; "OVERDRAFT PROVIDER" means: (i) Barclays Bank PLC in its capacity as overdraft provider hereunder; or (ii) any other Lender that may, from time to time, be appointed to act as the overdraft provider hereunder in accordance with Clause 30.5; "OVERDRAFT PROVIDER TRANSFER CERTIFICATE" means a certificate substantially in the form set out in the Seventh Schedule signed by the Overdraft Provider and the Overdraft Facility Transferee whereby: (i) the Overdraft Provider seeks to procure the transfer to the Overdraft Facility Transferee of all (but not part) of the Overdraft Provider's rights and obligations hereunder upon and subject to the conditions set out in Clause 30.5; and -4- (ii) the Overdraft Facility Transferee undertakes to perform all (but not part) of the Overdraft Provider's obligations hereunder as a result of delivery of such certificate to the Borrower and the Agent as is contemplated in Clause 30.5; "POTENTIAL EVENT OF DEFAULT" has the meaning given to it in the Nu-kote Guarantees; "PROPORTION" means, in relation to a Bank, the proportion borne by its Commitment to the Total Commitments (or, if the Total Commitments are then zero, by its Commitment to the Total Commitments immediately prior to their reduction to zero); "QUALIFYING LENDER" means a person recognized as a bank as defined in Section 840A of the Income and Corporation Taxes Act 1988 and which is within the charge to U.K. corporation tax as regards any interest received by it under this Agreement; "QUOTATION DATE" means, in relation to any period for which an interest rate is to be determined hereunder (other than a Short-Term Advance), the day on which quotations would ordinarily be given by prime banks in the London Interbank Market for deposits in the currency in relation to which such rate is to be determined for delivery on the first day of that period. Provided that, if for any such period quotations would ordinarily be given on more than one date, the Quotation Date for that period shall be the last of those dates; "REFERENCE BANKS" means the principal London office of Barclays Bank PLC or the principal offices of such other bank or banks as may from time to time be agreed between the Borrower and the Agent acting on the instructions of the Requisite Lenders; "REPAYMENT DATE" means, in relation to any Advance, the last day of the Term thereof; "REQUISITE LENDERS" has the meaning given to it in the Credit Agreement; "REQUESTED AMOUNT" means, in relation to any Utilization Request, the aggregate principal amount of the Advances or, as the case may be, face amount of the Letter of Credit therein requested; "SHORT-TERM ADVANCE" means any Advance denominated in sterling made by the Overdraft Provider in that capacity pursuant to the terms hereof; "SWISS FACILITY" means the Third Amended and Restated Revolving Credit and Letter of Credit Facility of even date hereof made available to Pelikan Produktions AG and Pelikan Hardcopy (International) AG by Barclays Bank PLC, NationsBank of Texas, N.A. and others; "SUBSIDIARY" has the meaning given to it in the Credit Agreement; "TERM" means, save as otherwise provided herein, in relation to any Advance, the period for which such Advance is borrowed (as specified in the Utilization Request relating thereto) and, in relation to any Letter of Credit or Contract Guarantee, the period from the date on which such Letter of Credit or Contract Guarantee (as the case may be) is issued until its Expiry Date (as specified in the Utilization Request relating thereto); "TERMINATION DATE" means January 4, 1999, or such earlier date on which the -5- Revolving Credit Commitments, under and as defined in the Credit Agreement, shall terminate; "TOTAL COMMITMENTS" means the aggregate for the time being of the Banks' Commitments; "TRANSFER CERTIFICATE" means a certificate substantially in the form set out in the Second Schedule signed by a Bank and a Transferee whereby: (i) such Bank seeks to procure the transfer to such Transferee of all or a part of such Bank's rights and obligations hereunder upon and subject to the terms and conditions set out in Clause 30; and (ii) such Transferee undertakes to perform the obligations it will assume as a result of delivery of such certificate to the Borrower and the Agent as is contemplated in Clause 30; "TRANSFER DATE" means, in relation to any Transfer Certificate or Overdraft Provider Transfer Certificate, the date for the making of the transfer as specified in the schedule to such Transfer Certificate or Overdraft Provider Transfer Certificate, as the case may be; "TRANSFEREE" means a bank or other financial institution to which a Bank transfers all or part of such Bank's rights and obligations hereunder in accordance with Clause 30; "UTILIZATION" means a utilization of the Facility hereunder; "UTILIZATION DATE" means the date of a Utilization, being the date on which the Advances in respect thereof are to be made or the Letter of Credit or, as the case may be, Contract Guarantee in respect thereof is to be issued; and "UTILIZATION REQUEST" means a notice given to the Agent pursuant to Clause 6.1 substantially in the form set out in the Fourth Schedule. 1.2 Any reference in this Agreement to: an "AFFILIATE" of the Agent shall be construed as a reference to a subsidiary or holding company, or to a subsidiary of a holding company, of the Agent; the "AGENT", the "COLLATERAL AGENT" or any "LENDER" or any "OVERDRAFT PROVIDER" shall be construed so as to include its and any subsequent successors, Transferees and permitted assigns in accordance with their respective interests; a "BUSINESS DAY" shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks generally are open for business in London and (but only in relation to a transaction involving an Optional Currency) the principal financial centre of the country of that Optional Currency; a "MONTH" is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month save that, where any such period would otherwise end on a day which is not a business day, it shall end on the next succeeding business day, unless that day falls in the calendar month succeeding that in which it would otherwise have ended, in which case it shall end on the immediately preceding business day. Provided that, if a period starts on the last business day in a calendar month or if there is -6- no numerically corresponding day in the month in which that period ends, that period shall end on the last business day in that later month (and references to "MONTHS" shall be construed accordingly); "TAX" shall be construed so as to include any tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and "VAT" shall be construed as a reference to value added tax including any similar tax which may be imposed in place thereof from time to time. 1.3 "L" and "STERLING" denote the lawful currency of the United Kingdom, "US$" and "DOLLARS" denote the lawful currency of the United States of America, "DM" and "DEUTSCHMARKS" denote the lawful currency of the Federal Republic of Germany and "CHF" and "SWISS FRANCS" denote the lawful currency of Switzerland. 1.4 Save where the contrary is indicated, any reference in this Agreement to: (i) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, restated, varied, novated or supplemented; and (ii) a time of day shall be construed as a reference to London time. 1.5 There are set out in the Fifth Schedule timetables of certain of the procedures provided for in this Agreement. For the purpose of construction, any reference herein to a specified time shall be construed as a reference to the relevant time set forth in the relevant timetable. 2. THE FACILITY 2.1 The Lenders grant to the Borrower, upon the terms and subject to the conditions hereof, a revolving cash advance, letter of credit and contract guarantee facility in an aggregate Original Sterling Amount of L6,275,000. 2.2 Subject to Clause 2.1 above, the aggregate amount of all Utilizations denominated in an Optional Currency outstanding at any time shall not: (i) in the case of Utilizations denominated in dollars, exceed US$10,000,000; (ii) in the case of Utilizations denominated in deutschmarks, exceed DM2,666,310; and (iii) in the case of Utilizations denominated in Swiss francs, exceed CHF3,260,741. 2.3 Notwithstanding Clause 2.2 above, that part of the Facility available for Utilization by way of Letters of Credit is limited to an Original Sterling Amount of L3,000,000. 2.4 That part of the Facility available for Utilization by way of Short-Term Advances is limited to L1,882,000. 2.5 Notwithstanding Clause 2.2 above, that part of the Facility available for utilization by -7- way of Contract Guarantees is limited to an Original Sterling Amount of Ll,000,000. 3. PURPOSE 3.1 The Facility is intended to be used for general corporate purposes including, but not limited to: (i) working capital; (ii) capital and other expenditures and expenses; (iii) the issue of Letters of Credit, (iv) the issue of Contract Guarantees in relation to liabilities of the Borrower or the Borrower's Subsidiaries, to third parties; and (v) refinancing existing indebtedness and other indebtedness, including reimbursement to the Fronting Bank of any amounts drawn under any Letters of Credit or paid under any Contract Guarantees, and, accordingly, the Borrower shall apply all amounts raised by it hereunder in or towards satisfaction of such purposes. 3.2 APPLICATION OF AMOUNTS Without prejudice to the obligations of the Borrower under Clause 3.1, the Agents and the Lenders shall not be obliged to concern themselves with the application of amounts raised by the Borrower hereunder. 4. CONDITIONS PRECEDENT The Borrower may not utilize the Facility unless the Agent has confirmed to the Borrower and the Lenders that it has received all of the documents listed in the Third Schedule and that each is, in form and substance, satisfactory to the Agent. 5. NATURE OF LENDERS' OBLIGATIONS 5.1 The obligations of each Lender hereunder are several. 5.2 The failure by a Lender to perform its obligations hereunder shall not affect the obligations of any other Lender or the Borrower towards any other party hereto nor shall any other party be liable for the failure by such Lender to perform its obligations hereunder. 6. UTILIZATION OF THE FACILITY 6.1 Save as otherwise provided herein, Advances will be made by the Banks or, as the case may be, a Letter of Credit or Contract Guarantee will be issued by the Fronting Bank or, as the case may be, Short-Term Advances will be made by the Overdraft Provider to the Borrower if: (i) no later than the specified time in respect of the proposed Utilization, the Agent or, in the case of a Short-Term Advance, the Overdraft Provider, has received from the Borrower a Utilization Request therefor; -8- (ii) the proposed Utilization Date in respect of such Utilization Request is a business day; (iii) the Requested Amount is: (a) in the case of a Utilization by means of Advances (other than Short-Term Advances), an amount which does not exceed the Available Facility at such time and which, if less than the Available Facility at such time: (1) if no other Advance (other than a Short-Term Advance) of an Original Sterling Amount of less than L1,000,000 is outstanding at such time is: (A) if the currency is sterling, a minimum amount of L500,000 and in additional integral multiples of Ll,000,000; or (B) if the currency is an Optional Currency, a minimum Original Sterling Amount of L500,000 (or an appropriate amount thereof) and in additional integral multiples of an Original Sterling Amount of L1,000,000 (or an approximate amount thereof); or (2) if an Advance (other than a Short-Term Advance) of less than an Original Sterling Amount of L1,000,000 is outstanding at such time is: (A) if the currency is sterling, a minimum amount of L1,000,000 and in additional integral multiples of L500,000; or (B) if the currency is an Optional Currency, a minimum Original Sterling Amount of L1,000,000 (or an approximate amount thereof) and in additional integral multiples of an Original Sterling Amount of L500,000 (or an approximate amount thereof); or (b) in the case of a Utilization by means of a Letter of Credit, an amount which does not exceed the Available Facility at such time and which when aggregated with the L/C Outstanding at the time of such Utilization does not exceed an Original Sterling Amount of L3,000,000; or (c) in the case of a Utilization by means of Short-Term Advances, an amount which does not exceed the Available Facility at such time and which when aggregated with all other Short-Term Advances then outstanding, does not exceed L1,882,000; (iv) in the case of a Utilization to be denominated in an Optional Currency, its principal amount (in the case of an Advance) or its face value (in the case of a Letter of Credit or a Contract Guarantee), when aggregated with the aggregate principal amounts and/or the aggregate face values, as the case may be, of all outstanding Utilizations denominated in the same Optional Currency, would not exceed the limits set out in Clause 2.2; and (v) the Term requested by the Borrower in such Utilization Request will end on a business day which is or precedes the Termination Date and which in respect of Advances will be: -9- (a) in respect of any Advance (other than a Short-Term Advance) with a proposed Utilization Date falling during the period expiring on the date that is two (2) months after the Closing Date, a period not exceeding 14 days; (b) in respect of an Advance (other than a Short-Term Advance) to which Clause 6.1(v)(a) does not apply, a period of one, three or six months; (c) in respect of a Letter of Credit or Contract Guarantee: (1) if denominated in sterling, any period of 18 months or less; or (2) if denominated in an Optional Currency, any period of twelve months or less; (d) in respect of a Short-Term Advance, any period of one month or less; and (vi) the making of such Advance (other than a Short-Term Advance) will not result in there being more than 5 outstanding Advances (other than Short-Term Advances). 6.2 If and whenever, on the occasion of a Utilization, the Banks are required to make Advances or the Fronting Bank is required to issue a Letter of Credit or Contract Guarantee pursuant hereto, the aggregate principal amount of the Advances to be so made or, as the case may be, the face amount of the Letter of Credit or Contract Guarantee (as the case may be) to be so issued shall be allocated to, and apportioned among, the Banks rateably to their respective Available Commitments for such Utilization. Provided that no amount shall be allocated to any Bank in respect of any Utilization if such Bank's Commitments will be cancelled pursuant to the terms hereof prior to or during the Term of the proposed Advances or the term of the proposed Letter of Credit or Contract Guarantee (as the case may be). 6.3 Each Lender shall, subject to the terms hereof, be obliged, through its Facility Office, to make an Advance on the proposed Utilization Date in a principal amount equal to the amount allocated to, or in the case of a Short-Term Advance, requested from it pursuant to this Clause 6. 6.4 The Agent shall not later than the specified time notify each Bank by telephone of the principal amount or, as the case may be, the amount allocated to it pursuant to this Clause 6, such notice to be promptly confirmed by the Agent by telex or telefax. 6.5 The Overdraft Provider may request by notice to the Borrower (through the Agent) at any time when the Borrower has an outstanding Short-Term Advance made by such Overdraft Provider that the Banks make an Advance to the Borrower on a business day specified by the Overdraft Provider in such notice (such date falling no earlier than five business days after receipt of such notice) and upon receiving such notice the Borrower shall, unless such outstanding Short-Term Advance has been repaid within three business days of receipt of such notice, be deemed to have served a Utilization Request for an Advance to be made by the Banks in an amount equal to, and in the same currency as, such outstanding Short-Term Advance on such business date specified by the Overdraft Provider for a Term of one month whereupon, notwithstanding the provisions of Clause 6.1(iii) or (v) or the conditions to making an Advance contained in Clause 10 or any cancellation of the Available Facility following the making of such Short-Term Advance, the Banks shall make such Advance available to the Borrower rateably to their respective Available Commitments at such time (or immediately prior to any such cancellation) and interest on such Advance shall be determined in accordance with Clause 11.2 and the Agent is hereby authorized to pay the proceeds of such Advance -10- to the Overdraft Provider on behalf of the Borrower to be applied in discharge of such outstanding Short-Term Advance. 6.6 For the avoidance of any doubt, since the definition of Commitment only applies to Banks and not the Overdraft Provider or the Fronting Bank, any Bank that is also an Overdraft Provider or Fronting Bank may be obliged to have Outstandings that, including its Advances as a Bank, its Short-Term Advances as Overdraft Provider and its L/C Outstandings and Contract Guarantee Outstandings as Fronting Bank, exceed the amount of its Commitment and any such Bank, in its capacity as Overdraft Provider and Fronting Bank, has the benefit of the Banks' obligations under Clauses 6.5 and 8.6 in respect of its Short Term Advances and L/C Outstandings and Contract Guarantee Outstandings as Fronting Bank. 7. ISSUE OF LETTERS OF CREDIT AND CONTRACT GUARANTEES 7.1 Each Utilization Request in respect of a Letter of Credit or Contract Guarantee shall, in addition to the information required pursuant to Clause 6.1, specify the name and address of the recipient to which the relevant Letter of Credit or Contract Guarantee (as the case may be) should be delivered and shall have the proposed form of the Letter of Credit or Contract Guarantee (as the case may be) attached to it. 7.2 Subject to the provisions hereof, the Fronting Bank shall issue a Letter of Credit or Contract Guarantee in accordance with Clause 7.1 if: (i) no Event of Default or Potential Event of Default has occurred which is continuing; (ii) the representations and warranties set out in Section 3 of the Nu-kote Guarantees are true in all material respects on and as of such Utilization Date to the same extent as though made on and as of such Utilization Date, except to the extent that such representations and warranties specifically relate to an earlier date, in which case, such representations and warranties shall have been true and correct in all material respects as of such earlier date; and (iii) the form of the Letter of Credit or Contract Guarantee (as the case may be) has been agreed between the Borrower with the Fronting Bank by no later than the specified time. 8. INDEMNITY (INCLUDING BANK INDEMNITY FOR SHORT-TERM ADVANCES) 8.1 If, at any time, a demand for payment (the amount so demanded being herein referred to as the "AMOUNT DEMANDED") is made under a Letter of Credit or Contract Guarantee (as the case may be) by the beneficiary thereof, the Agent shall notify the Borrower of such demand and make demand of the Borrower for an amount equal to the Amount Demanded. 8.2 The Borrower shall pay to the Agent an amount equal to the Amount Demanded following receipt by it of a demand made on it by the Agent under this Clause 8. Such payment shall be made on the business day during which the Borrower receives such demand from the Agent, or, in the event that the Borrower receives such demand after 9:00 a.m. on such business day, on the business day following. 8.3 The Borrower hereby irrevocably and unconditionally agrees to indemnify and keep indemnified the Fronting Bank against each and every sum paid or payable by the Fronting Bank under -11- any Letter of Credit or Contract Guarantee issued at its request and also undertakes to indemnify and hold harmless the Fronting Bank on demand from and against all actions, proceedings, liabilities, costs (including, without limitation, any costs incurred in funding any amount which falls due from the Fronting Bank under any Letter of Credit or Contract Guarantee (as the case may be) in connection with any such Letter of Credit or Contract Guarantee (as the case may be) as certified by the Fronting Bank to the Borrower), claims, losses, damages and expenses which the Fronting Bank may at any time incur or sustain in connection with or arising out of any Letter of Credit or Contract Guarantee (as the case may be) issued at its request. Provided that the Borrower shall not be obliged to pay any amount under this Clause 8.3 to the extent that such obligation has arisen as a result of (i) the fraud, gross negligence or wilful misconduct of the Fronting Bank or (ii) the failure by the Fronting Bank to use reasonable care to determine that any documents and certificates required to be delivered under any Letter of Credit or Contract Guarantee (as the case may be) have been delivered and that they comply on their face with the requirements of that Letter of Credit or Contract Guarantee (as the case may be) before making any payment thereunder. 8.4 The Fronting Bank shall be entitled to make any payment under any Letter of Credit or Contract Guarantee (as the case may be) for which a demand has been made without any reference to or further authority from the Borrower at whose request such Letter of Credit or Contract Guarantee (as the case may be) was issued or any other investigation or enquiry, need not concern itself with the propriety of any demand made or purported to be made under and in the manner required by the terms of any such Letter of Credit or Contract Guarantee (as the case may be) and shall be entitled to assume that any person expressed in any Letter of Credit or Contract Guarantee (as the case may be) or in any notice served pursuant to any such Letter of Credit or Contract Guarantee (as the case may be) to be entitled to make demands is so entitled and that any individual purporting to sign any such demand or notice on behalf of such person is duly authorized to do so unless it has actual knowledge that such person is not so entitled or not so authorized. Accordingly, it shall not (save as provided in this Clause 8) be a defense to any demand made of the Borrower, nor shall the Borrower's obligations hereunder be impaired by the fact (if it be the case), that the Fronting Bank was or might have been justified in refusing payment, in whole or in part, of the amounts so demanded. Provided that the Fronting Bank shall use reasonable care to determine that any documents and certificates required to be delivered under any Letter of Credit or Contract Guarantee (as the case may be) have been delivered and that they comply on their face with the requirements of that Letter of Credit or Contract Guarantee (as the case may be) before making any payment thereunder. 8.5 Save as otherwise provided in this Clause 8, the obligations of the Borrower to the Fronting Bank in connection with any such Letter of Credit or Contract Guarantee (as the case may be) shall not be discharged, lessened or impaired by any act, omission or circumstance whatsoever which, but for this provision, might operate to release or exonerate the Borrower from all or part of such obligations or in any other way discharge, lessen or impair the same. 8.6 Each Bank hereby irrevocably and unconditionally agrees to indemnify and keep indemnified the Fronting Bank and the Overdraft Provider on demand and in its Proportion against each and every sum payable hereunder by the Borrower to the Fronting Bank and the Overdraft Provider in respect of a Letter of Credit or Contract Guarantee (as the case may be) or Short-Term Advance but which is not paid on the due date therefor. 9. LETTER OF CREDIT AND CONTRACT GUARANTEE COMMISSIONS AND FEES 9.1 The Borrower agrees to pay the following amounts with respect to each Letter of Credit issued by the Fronting Bank hereunder at its request: -12- (i) in respect of each documentary Letter of Credit with a term (on issue thereof) of less than one year, a commission of 0.625 percent per annum on the weighted average maximum amount available from time to time to be drawn under such Letter of Credit. Such commission shall be paid to the Agent for the account of each Bank and for distribution by the Agent to each Bank in proportion to each Bank's allocation pursuant to Clause 6.2 in arrear on and to (but excluding) each 31st March, 30th June, 30th September and 31st December in each year during the term thereof and on the Expiry Date thereof, the first such payment to be made on 31st March, 1995 in respect of any documentary Letter of Credit issued prior to such date; (ii) in respect of each documentary Letter of Credit with a term (on issue thereof) of one year or more and each Standby Letter of Credit, a commission equal to the product of (A) the weighted average Applicable Margin applicable to the Advances (other than Short-Term Advances) outstanding hereunder during the period of calculation multiplied by (B) the weighted average maximum amount available from time to time to be drawn during such period under such Letter of Credit. Such commission shall be paid to the Agent for the account of each Bank and for distribution by the Agent to each Bank in proportion to each Bank's allocation pursuant to Clause 6.2 in arrear on and to (but excluding) each 31st March, 30th June, 30th September and 31st December in each year during the term thereof and on the Expiry Date thereof, the first such payment to be made on 31st March, 1995; (iii) a fronting fee, for the account of the Fronting Bank, of 0.20 percent per annum on the face amount of such Letter of Credit in arrear on and to (but excluding) each 31st March, 30th June, 30th September and 31st December in each year during the term thereof and on the Expiry Date thereof, the first such payment to be made on 31st March, 1995 in respect of any such Letter of Credit issued prior to such date; and (iv) with respect to the issuance, any amendment and any transfer thereof and each drawing thereunder, in each case reasonable documentary and processing charges in accordance with the Fronting Bank's standard schedule for such charges in effect at the date of issue or the relevant amendment, transfer or drawing (as the case may be) of the relevant Letter of Credit. 9.2 In respect of each Contract Guarantee, a commission equal to the higher of L100 and 0.75% per annum on the weighted average maximum amount available from time to time to be paid under such Contract Guarantee. An amount of such commission equal to 0.55% per annum on the weighted average maximum amount available from time to time to be paid under such Contract Guarantee shall be paid to the Agent for the account of each Bank for distribution by the Agent to each Bank in proportion to each Banks allocation pursuant to Clause 6.2 in arrear on and to (but excluding) each 31st March, 30th June, 30th September and 31st December in each year during the term thereof and on the Expiry Date thereof, the first such payment to be made on 30th June, 1995 in respect of any Contract Guarantee issued prior to such date. The balance of such commission shall be paid to the Fronting Bank for its own account in arrear on and to (but excluding) each 31st March, 30th June, 30th September and 31st December in each year during the term of such Contract Guarantee and on the Expiry Date thereof, the first such payment to be made on 30th June, 1995 in respect of any such Contract Guarantee issued prior to such date. 10. MAKING OF ADVANCES 10.1 If the Agent notifies any Bank or the Overdraft Provider (as the case may be) in accordance with Clause 6 that it is to make any Advance, and if on the proposed Utilization Date relating to such an Advance: -13- (i) no Event of Default or Potential Event of Default has occurred which is continuing; and (ii) the representations and warranties set out in Section 3 of the Nu-kote Guarantees are true in all material respects on and as of such Utilization Date to the same extent as though made on and as of such Utilization Date, except to the extent that such representations and warranties specifically relate to an earlier date, in which case, such representations and warranties shall have been true and correct in all material respects as of such earlier date, then, on such Utilization Date, such Bank or the Overdraft Provider (as the case may be) shall, save as otherwise provided herein, make such Advance through its Facility Office to the Borrower in accordance with the provisions of Clause 22. Advances made hereunder shall not be represented by notes or other instruments evidencing indebtedness. 10.2 If, before 9:00 a.m. on the Utilization Date of an Advance to be denominated in an Optional Currency, the Agent receives notice from a Lender that: (i) it is impracticable for the affected lender to fund its participation in such Advance for its Term in that Optional Currency in the ordinary course of business in the London interbank market; or (ii) the use of the proposed Optional Currency might contravene any law or regulation relevant to the affected Lender; then: (a) the Agent shall promptly and in any event before 10:00 a.m. on that Utilization Date notify the Borrower; (b) if the Agent receives notice from the Borrower by 11:00 a.m. on the relevant Utilization Date, that Advance shall not be made; and (c) if the Agent does not receive any notice under sub-paragraph (b) above, then that Advance shall be denominated in sterling in an amount equal to its Original Sterling Amount. 10.3 The Agent shall notify each relevant Party of any applicable Agent's Spot Rate of Exchange or Original Sterling Amount as soon as practicable after it is ascertained. 11. INTEREST 11.1 On the last business day of each month and on the Repayment Date relating to each Advance made to it the Borrower shall pay accrued interest on that Advance. 11.2 The rate of interest applicable to an Advance (other than a Short-Term Advance) made by a Bank during the Term of such Advance shall be the rate per annum determined by the Agent to be the sum of: (i) LIBOR on the Quotation Date for such Advance, (ii) the Applicable Margin; and -14- (iii) (in the case of an Advance denominated in sterling) the Mandatory Liquid Asset Costs Rate in respect thereof. 11.3 The rate of interest applicable to a Short Term Advance shall be the rate per annum determined by the Agent to be the sum of: (i) the base rate of the Overdraft Provider; and (ii) the higher of (a) the Applicable Margin and (b) one percent. 11.4 The Agent shall promptly notify the Borrower and the relevant Banks of each determination of an interest rate made by it pursuant to this Clause 11. 12. REPAYMENT OF ADVANCES 12.1 The Borrower shall repay each Advance made to it in full on (or, in the case of a Short-Term Advance, if such Borrower so elects, before) the Repayment Date relating thereto. 12.2 The Borrower shall not repay all or any part of any Advance outstanding hereunder except at the times and in the manner expressly provided herein. 13. CANCELLATION 13.1 The Borrower may, by giving to the Agent not less than three business days' prior notice to that effect, cancel the whole or any part (being a minimum amount of L1,300,000 and in additional integral multiples of L1,000,000) of the Available Facility. Any such cancellation shall reduce the Commitment of each Bank rateably. 13.2 Any notice of cancellation given by the Borrower pursuant to Clause 13.1 shall be irrevocable and shall specify the date upon which such cancellation is to be made and the amount of such cancellation. 13.3 If (i) the Borrower is required to make any additional payment to a Lender pursuant to Clauses 14 or 18.2 or (ii) any Lender claims indemnification under Clauses 15.1 or 15.2, the Borrower may, within thirty days thereafter and by not less than fifteen days' prior notice to the Agent (which notice shall be irrevocable), cancel all or any part of such Lender's Commitment whereupon on the date specified in such notice its Commitment shall be reduced by the amount so cancelled. 13.4 If the Borrower gives notice of cancellation pursuant to Clause 13.3, it may at the same time as such notice expires repay each outstanding Advance (or, as the case may be, the relevant proportion thereof) of the relevant Lender together with accrued interest thereon and may procure that such Lender's liability under all outstanding Letters of Credit and Contract Guarantees (or, as the case may be and in each case, the relevant proportion thereof) will be secured in a manner acceptable to such Lender, it being understood that in no event shall any Letter of Credit or Contract Guarantee or the obligations of the Fronting Bank thereunder be cancelled, and security equal to, and in the same currency as, the maximum amount that can be drawn under each outstanding Letter of Credit and Contract Guarantee issued by the Fronting Bank shall be acceptable to the Fronting Bank. 13.5 If on or after July 31, 1997, Nu-kote International, Inc. gives notice in accordance with the Credit Agreement to cancel the whole or any part of a Bank's commitment under the Credit Agreement, the Borrower shall, at the same time, give notice in accordance with Clause 13.1 to cancel -15- the whole or a proportion equal to the proportion to be cancelled under the Credit Agreement, of such Bank's Commitment hereunder. If the Borrower fails to give such a notice in accordance with Clause 13.1, the notice given in accordance with the Credit Agreement shall be deemed to be a notice under Clause 13.1, MUTATIS MUTANDIS. Requisite Lenders hereby waive compliance with this Section 13.5 with respect to reductions occurring on the Closing Date. 14. TAXES 14.1 All payments to be made by the Borrower to the Agent, any Lender or the Fronting Bank hereunder shall be made free and clear of and without deduction for or on account of tax unless the Borrower is required to make such a payment subject to the deduction or withholding of tax, in which case the Borrower shall promptly upon becoming aware thereof notify the Agent thereof and the Borrower shall pay to the relevant taxing or other governmental authority the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by the Borrower pursuant to the succeeding sentence) promptly upon becoming aware of the same. If such deduction or withholding is required, the sum payable by the Borrower in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, the Agent, such Lender or, as the case may be, the Fronting Bank receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made. Provided that the Borrower shall not be required to make any additional payment to any Lender pursuant to this Clause 14.1 if: (i) the law, regulation or other administrative circular requiring such deduction or withholding was in existence on 24th February, 1995; (ii) the requirement to deduct or withhold arises as a result of such Lender not being at the time it becomes a party to this Agreement or having ceased to be a Qualifying Lender; (iii) the requirement to deduct or withhold could have been avoided or reduced as a result of such Lender complying with any obligation it may have to provide documentation in accordance with Clause 17.1; or (iv) the requirement to deduct or withhold would not have arisen but for a transfer or assignment or participation in breach of Clause 30. 14.2 If a Lender shall become aware that it is eligible for a refund in respect of any taxes actually paid by the Borrower pursuant to Clause 14.1 hereof, 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 or shall furnish to the Borrower such forms, duly completed, as will enable the Borrower to claim such refund on its own behalf. The Borrower shall reimburse such Lender for all costs reasonably incurred by it in applying for and seeking such refund. If any Lender determines that it has received a refund in respect of any taxes paid by the Borrower pursuant to Clause 14.1 hereof, it shall repay such refund within 30 days after receipt to the Borrower to the extent of amounts not in excess of the amounts actually paid by the Borrower and not previously reimbursed in respect of the taxes giving rise to such refund net of all out-of-pocket expenses reasonably incurred by such Lender not previously reimbursed and without interest (other than interest received from the relevant taxing authority with respect to such refund). The Borrower, upon request of the relevant Lender, agrees to return to such Lender the amount paid to it by the applicable Lender with respect to such refund (plus applicable penalties, interest or other charges) in the event that such Lender is required to repay such -16- refund. In addition the Agent and each Lender shall reasonably cooperate with the Borrower, at the Borrower's expense, in contesting any taxes that the Borrower is required to bear pursuant to Clause 14.1 hereof and shall pay to the Borrower, on a net after tax basis, any refunds obtained as a result of such contest, together with any interest thereon, within 30 days of receipt. Nothing in this Clause 14.2 shall interfere with the right of any person to arrange its tax affairs in whatever manner it thinks fit nor oblige any person to disclose any information relating to its tax affairs or any computations in respect thereof to any other person. 15. INCREASED COSTS 15.1 If, after 24th February, 1995 by reason of, (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of tax or reserve requirements) in or in the official interpretation of any law or regulation by the authority charged with the administration or interpretation thereof, or (ii) the compliance with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law) but being a guideline or request with which banks are generally accustomed to comply: (i) a Lender incurs a cost as a result of such Lender's having entered into and/or performing its obligations under this Agreement and/or assuming or maintaining a commitment under this Agreement and/or participating in one or more Advances, or Letters of Credit and/or one or more Contract Guarantees hereunder; (ii) there is an increase in the cost to a Lender of funding or maintaining its participation in (a) all or any of the advances comprised in a class of advances formed by or including the Advances made or to be made hereunder, (b) all or any of the letters of credit comprised in a class of letters of credit formed by or including the Letters of Credit made or to be made hereunder and/or (c) all or any of the contract guarantees comprised in a class of contract guarantees formed by or including the Contract Guarantee issued or to be issued hereunder; or (iii) a Lender becomes liable to make any payment on account of tax or otherwise (not being a tax imposed on or measured by the net income or capital of such Lender by the jurisdiction in which it is incorporated or in which it or its Facility Office is located or centrally managed or controlled) on or calculated by reference to the amount of such Lender's participation in the Advances made or to be made hereunder and/or any Letter of Credit issued or to be issued hereunder and/or any Contract Guarantee issued or to be issued hereunder and/or to any sum received or receivable by it hereunder, then the relevant Lender shall, through the Agent, notify the Borrower of such cost, such increased cost or, as the case may be, such liability within 30 days of becoming aware of the same, demanding indemnification in respect thereof and upon receipt of such notice and demand, the Borrower shall pay to the Agent for the account of that Lender, within five business days after receipt of such notice and demand, additional amounts sufficient to indemnify that Lender against such cost, increased cost or such liability. A certificate in reasonable detail as to the amount of such cost, increased cost or such liability submitted to the Borrower and the Agent by that Lender, shall, except for manifest error, be final, conclusive and binding for all purposes. 15.2 In the event that any Lender shall have reasonably determined that the adoption or implementation after 24th February, 1995 of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy (other than (i) the terms, proposals and recommendations contained in the Basle Paper or (ii) any other rule, regulation, guideline or order -17- regarding capital adequacy in effect on 24th February, 1995 affecting such Lender), (including, without limitation, a request or requirement but being a request or requirement with which banks are generally accustomed to comply) which affects the manner in which a Lender is required to or does maintain capital resources having regard to such Lender's obligations hereunder and to amounts owing to it hereunder of any change therein or in the interpretation or application thereof, or compliance by any Lender with any request or directive regarding capital adequacy (whether or not having the force of law and whether or not failure to comply therewith would be unlawful but if not having the force of law, being a request or directive with which banks are generally accustomed to comply and in any event excluding the terms, proposals and recommendations contained in the Basle Paper or any other rule, regulation, guideline or order regarding capital adequacy in effect on 24th February, 1995 affecting such Lender) from any central bank or governmental agency or body having jurisdiction, has the effect of increasing the amount of capital required to be maintained by such Lender and thereby reducing the rate of return on such Lender's overall capital as a consequence of such Lender's obligations hereunder to a level below that which such Lender would have achieved but for the occurrence of such circumstances, then the relevant Lender shall, through the Agent, notify the Borrower of such event within 30 days of becoming aware of the same demanding indemnification in respect thereof and including in such notification and demand a certificate stating (a) that one of the events described in this Clause 15.2 has occurred and describing in reasonable detail the nature of such event, (b) the amount of the reduction in the rate of return on such Lender's capital reasonably determined by such Lender to be allocable to the existence of such Lender's obligations hereunder and (c) setting forth in reasonable detail the manner of calculation of the reduction in the rate of return on such Lender's capital and such allocated amount thereof and the Borrower shall upon receipt of such notice and demand pay to the Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of such compensation, submitted to the Borrower and the Agent by such Lender shall, in the absence of manifest error, be final, conclusive and binding for all purposes. In determining such amount, a Lender may use any reasonable averaging and attribution method. Nothing in this Clause 15.2 is intended to provide to the Borrower the right to inspect the records, files or books of any Lender. 15.3 The Borrower shall not be required to pay any amounts pursuant to Clauses 15.1 or 15.2: (i) to the extent that such amounts are recovered under Clause 14, Clause 18 or any other sub-clause of Clause 15; (ii) to the extent that such cost, increased cost or liability would not have arisen but for a transfer or assignment in breach of Clause 30; (iii) unless the relevant Lender has delivered a notice and demand in the manner required by Clause 15.1 or, as the case may be, Clause 15.2 and such certificates as are referred to in Clauses 15.1 or, as the case may be, 15.2; or (iv) to the extent that such cost, increased cost or liability has already been compensated for by application of the Mandatory Liquid Asset Costs Rate. -18- 16. ILLEGALITY If, at any time after 24th February, 1995 it is unlawful for a Lender to make, fund or allow to remain outstanding all or any of the Advances made or to be made by it hereunder and/or all or any of the Letters of Credit or Contract Guarantees issued or to be issued by it hereunder then that Lender shall, promptly after becoming aware of the same, deliver to the Borrower through the Agent a certificate to that effect and, unless such illegality is avoided in accordance with) Clause 17 taking into account any grace period allowed by any such order, request or requirement: (i) such Lender shall not thereafter be obliged to make any Advances or issue any letters of Credit or Contract Guarantees (as the case may be) and the amount of its Commitment shall be immediately reduced to zero; and (ii) if the Agent on behalf of such Lender so requires, the Borrower shall on such date as the Agent shall have specified: (a) repay each outstanding Advance together with accrued interest thereon and all other amounts owing to such Lender; and/or (b) procure that such Lender's obligations under any Letters of Credit or Contract Guarantees (as the case may be) will be secured in a manner acceptable to such Lender, it being understood that in no event shall any Letter of Credit or Contract Guarantees (as the case may be) or the obligations of the Fronting Bank thereunder be cancelled, and security in sterling equal to the maximum amount that can be drawn under each Letter of Credit or paid under each Contract Guarantee (as the case may be) outstanding at such time shall be acceptable to the Fronting Bank. 17. MITIGATION 17.1 If, in respect of any Lender, circumstances arise which would or would upon the giving of notice result in: (i) the reduction of its Commitment to zero pursuant to Clause 16(i); (ii) an increase in the amount of any payment to be made to it or for its account pursuant to Clause 14 or Clause 18.2; or (iii) a claim for indemnification pursuant to Clause 15.1 or 15.2, then, without in any way limiting, reducing, or otherwise qualifying the rights of such Lender or the obligations of the Borrower under any of the Clauses referred to in (i), (ii) or (iii) above such Lender shall promptly upon becoming aware of the same notify the Agent thereof and, in consultation with the Agent and the Borrower to the extent that it can do so without prejudice to its own position, take such steps as it determines are available to it (acting reasonably) to mitigate the effects of such circumstances at the request and expense of the Borrower including (i) the transfer of its Facility Office (ii) (subject to Clause 30) the transfer of its rights and obligations hereunder to another financial institution acceptable to the Borrower and willing to participate in the Facility and/or (iii) within 30 days of becoming aware of the same, the execution and delivery to the relevant authorities (and/or the Borrower) of any documentation necessary to secure the benefit of any applicable double taxation treaty or any relevant domestic law which would operate to mitigate any of the circumstances referred to above. Provided that such Lender shall be under no obligation to take any such action if, in the reasonable opinion of -19- such Lender, to do so might have any adverse effect upon its business, operations or financial condition. 17.2 The Borrower hereby agrees to pay all expenses reasonably incurred by any Lender in taking steps to mitigate the effects of circumstances giving rise to any of the matters referred to in Clause 17.1(i), (ii) and (iii) by transferring its Facility Office pursuant to Clause 17.1 to the extent that such expenses would not have occurred but for such transfer. 18. MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES 18.1 If, in relation to any Utilization by way of Advances (other than a Short-Term Advance), the Agent determines that at or about 11:00 a.m. on the Quotation Date for the Term in respect of such Advances none of the Reference Banks was offering to prime banks in the London Interbank Market deposits in the relevant currency for the proposed duration of such Term, then, notwithstanding such failure to offer deposits in that currency: (i) the Agent shall notify the other parties hereto of such event; (ii) such Advances shall, nevertheless, be made and the amount of interest payable in respect of any such Advance during its Term shall be determined in accordance with the following provisions of this Clause 18; and (iii) if the Agent so requires, within five days of such notification the Agent and the Borrower shall enter into negotiations with a view to agreeing upon a substitute basis for determining the rates of interest which may be applicable to such Advances and Advances in the future and any such substitute basis that is agreed shall take effect in accordance with its terms and be binding on each party hereto. Provided that the Agent may not agree any such substitute basis without the prior written consent of each Bank. 18.2 If no substitute basis is agreed upon within 10 business days pursuant to Clause 18.1(iii) in respect of such Advances, any such Advance made by a Bank pursuant to Clause 18.1(ii) shall bear interest during its Term at the rate per annum equal to the sum of the Applicable Margin at such time, the Mandatory Liquid Asset Costs Rate (if applicable) and the cost to such Bank (as certified by it in good faith to the Agent with a copy to the Borrower and expressed as a rate per annum) of funding such Advance from whatever sources it may reasonably select. 19. ACCELERATION EVENT If one or more Events of Default shall have occurred then at any time thereafter and so long as the Event of Default in question is continuing unremedied or unwaived, the Agent (if so instructed by the Requisite Lenders) shall: (i) cancel the Commitments whereupon the same shall be so cancelled and reduced to zero; and/or (ii) declare any outstanding Advances to be immediately due and payable, whereupon the same shall become so due and payable, together with accrued interest thereon and all other sums due hereunder forthwith; and/or (iii) require the Borrower to provide security in respect of each Letter of Credit and Contract Guarantee issued at its request in a manner acceptable to the Fronting Bank in the currency of each such Letter of Credit or Contract Guarantee, it being understood that in no -20- event shall any Letter of Credit or Contract Guarantee or the obligations of the Fronting Bank thereunder be cancelled, and security equal to, and in the same currency as, the maximum amount that can be drawn under each Letter of Credit outstanding at such time or paid under each Contract Guarantee at such time shall be acceptable to the Fronting Bank. 20. DEFAULT INTEREST AND INDEMNITIES 20.1 If any amount of principal, Commitment Fee, or interest due and payable by the Borrower hereunder is not paid on the due date therefor, the Borrower does not reimburse the Fronting Bank for any drawing under a Letter of Credit hereunder on the due date therefor, the Borrower does not reimburse the Fronting Bank for any claim under a Contract Guarantee hereunder on the due date therefor, any fees (other than the Commitment Fee) and other amounts payable by the Borrower hereunder are not paid within ten days of the due date therefor, or if any sum due and payable by the Borrower under any judgment of any court in connection herewith is not paid in accordance with the requirements of such judgment, the period beginning on such due date or, as the case may be, the date required by such judgment and ending on the date upon which the obligation of the Borrower to pay such sum (the balance thereof for the time being unpaid being herein referred to as an "UNPAID SUM") is discharged shall be divided into successive periods, each of which (other than the first) shall start on the last day of the preceding such period and the duration of each of which shall (except as otherwise provided in this Clause 20) be reasonably selected by the Agent. 20.2 During each such period relating thereto as is mentioned in Clause 20.1 an unpaid sum shall bear interest at the rate per annum which is the sum from time to time of two percent, the Applicable Margin at such time, the Mandatory Liquid Asset Costs Rate Formula (if applicable) and LIBOR on the Quotation Date therefor. Provided that: (i) if, for any such period, LIBOR cannot be determined, the rate of interest applicable to such unpaid sum in respect of the Agent or any Lender shall be the sum from time to time of two percent, the Applicable Margin at such time, the Mandatory Liquid Asset Costs Rate Formula (if applicable) and the rate per annum notified to the Agent by such person (as certified by it in good faith to the Borrower with a copy to the Agent) to be that which expresses as a percentage rate per annum the cost to such person of funding from whatever sources it may reasonably select its portion of such unpaid sum for such period; and (ii) if such unpaid sum is all or part of an Advance which became due and payable on a day other than the last day of the Term thereof, the first such period applicable thereto shall be of a duration equal to the unexpired portion of that Term and the rate of interest applicable thereto from time to time during such period shall be that which exceeds by one percent the rate which would have been applicable to it had it not so fallen due. 20.3 Any interest which shall have accrued under Clause 20.2 in respect of an unpaid sum shall be due and payable and shall be paid by the Borrower at the end of the period by reference to which it is calculated. 20.4 If any Lender or the Agent on its behalf receives or recovers all or any part of an Advance made by such Lender otherwise than on the last day of the Term thereof, the Borrower shall pay to the Agent on demand for the account of such Lender an amount equal to the amount (if any) by which (i) the additional interest which would have been payable on the amount so received or recovered had it been received or recovered on the last day of the Term thereof exceeds (ii) the amount of interest which in the opinion of the Agent would have been payable to the Agent on the last day of the Term thereof in respect of a deposit in the currency of the amount so received or recovered equal to the amount so received or recovered placed by it with a prime bank in the London Interbank Market -21- for a period starting on the third business day following the date of such receipt or recovery and ending on the last day of the Term thereof. 20.5 Any unpaid sum shall (for the purposes of this Clause 20 and Clause 15) be treated as an advance and accordingly in this Clause 20 and Clause 15 the term "ADVANCE" includes any unpaid sum and "TERM", in relation to an unpaid sum, includes each such period relating thereto as is mentioned in Clause 20.1. 20.6 If a person receives an amount in respect of the Borrower's liability under the Finance Documents or if that liability is converted into a claim, proof, judgment or order in a currency other than the currency (the "CONTRACTUAL CURRENCY") in which the amount is expressed to be payable under the relevant Finance Document:- (i) the Borrower shall indemnify that person as an independent obligation against any loss or liability arising out of or as a result of the conversion; (ii) if the amount received by that person, when converted into the contractual currency at a market rate in the usual course of its business, is less than the amount owed in the contractual currency, the Borrower shall forthwith on demand pay to that person an amount in the contractual currency equal to the deficit; and (iii) the Borrower shall pay to the person concerned on demand any exchange costs and taxes payable in connection with any such conversion. The Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable. 21. CURRENCY OF ACCOUNT 21.1 A repayment or prepayment of an Advance, or a payment by the Borrower in accordance with Clause 8.2, is payable in the currency in which that Advance or relevant Amount Demanded, as the case may be, is denominated. 21.2 Interest is payable in the currency in which the relevant amount in respect of which it is payable is denominated. 21.3 Amounts payable in respect of costs, expenses, taxes and the like are payable in the currency in which they are incurred. 21.4 Any other amount payable under this Agreement is, except as otherwise provided in this Agreement, payable in sterling. 22. PAYMENTS 22.1 On each date on which this Agreement requires an amount to be paid by the Borrower or any of the Lenders hereunder, the Borrower or, as the case may be, such Lender shall make the same available in same day funds to the Agent or to its account at such office or bank as it may notify to the Borrower or Lender for this purpose. 22.2 Save as otherwise provided herein, each payment received by the Agent for the account of another person shall be made available by the Agent to such other person (in the case of a Lender, for the account of its Facility Office) for value the same day by transfer to such account of such -22- person with such bank in the principal financial centre of the relevant currency as such person shall have previously notified to the Agent. 22.3 All payments required to be made by the Borrower hereunder shall be calculated without reference to any set-off or counterclaim and shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 22.4 Where a sum is to be paid hereunder to the Agent for account of another person, the Agent shall not be obliged to make the same available to that other person until it has been able to establish to its satisfaction that it has actually received such sum, but if it does so and it proves to be the case that it had not actually received such sum, then the person to whom such sum was so made available shall on request refund the same to the Agent together with an amount sufficient to indemnify the Agent against any cost or loss it may have suffered or incurred by reason of its having paid out such sum prior to its having received such sum. 23. SET-OFF AND NETTING OF PAYMENTS 23.1 The Borrower authorizes each Lender upon the occurrence of an Event of Default and consequent acceleration of the obligations of the Borrower hereunder pursuant to Clause 19 hereof to apply any credit balance to which the Borrower is entitled on any account of the Borrower with that Lender in satisfaction of any sum due and payable from the Borrower to such Lender hereunder but unpaid; for this purpose, each Lender is authorized to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application. Such Lender shall notify the Borrower of any such application. No Lender shall be obliged to exercise any right given to it by this Clause 23. 23.2 If, on any occasion, the Agent receives a payment for the account of the Borrower pursuant to Clause 22.1, the Agent may make available such payment to the Borrower by application: (i) first, in or towards payment the same day of any amount then due from the Borrower hereunder to the person from whom the amount was so received; and (ii) secondly, in or towards payment the same day to the account of the Borrower with such Lender in London as the Borrower shall have previously notified to the Agent for this purpose. 24. REDISTRIBUTION OF PAYMENTS 24.1 Subject to Clause 24.2, if, at any time, the proportion which any Bank (a "RECOVERING BANK") has received or recovered (whether by payment, the exercise of a right of set-off or combination of accounts or otherwise) in respect of its portion of any payment (a "RELEVANT PAYMENT") to be made under this Agreement by the Borrower for account of such Recovering Bank and one or more other Banks is greater (the portion of such receipt or recovery giving rise to such excess proportion being herein called an "EXCESS AMOUNT") than the proportion thereof so received or recovered by the Bank or Banks so receiving or recovering the smallest proportion thereof, then: (i) such Recovering Bank shall pay to the Agent an amount equal to such excess amount; (ii) there shall thereupon fall due from the Borrower to such Recovering Bank an amount equal to the amount paid out by such Recovering Bank pursuant to paragraph (i) above, the amount so due being, for the purposes hereof, treated as if it were an unpaid part of -23- such Recovering Bank's portion of such relevant payment; and (iii) the Agent shall treat the amount received by it from such Recovering Bank pursuant to paragraph (i) above as if such amount had been received by it from the Borrower in respect of such relevant payment and shall pay the same to the persons entitled thereto (including such Recovering Bank) PRO RATA to their respective entitlements thereto. 24.2 If any Bank shall commence any action or proceeding in any court to enforce its rights hereunder and, as a result thereof or in connection therewith, shall receive any excess amount (as defined in Clause 24.1), then such Bank shall not be required to share any portion of such excess amount with any Bank which has the legal right to, but does not, join in such action or proceeding or commence and diligently prosecute a separate action or proceeding to enforce its rights in another court. 25. FEES The Borrower shall pay to the Agent for account of each Bank a Commitment Fee (the "COMMITMENT FEE") on the amount of such Bank's Available Commitment (less, if such Bank is also the Overdraft Provider, the Overdraft Provider's outstanding Short-Term Advances on such day) from day to day during the period beginning on 24th February, 1995 and ending on the Termination Date at the applicable Commitment Fee Percentage per annum and payable in arrear on and to (but excluding) each 31st March, 30th June, 30th September and 31st December falling during the term of this Agreement and on the Termination Date. For this purpose, Utilizations are taken at their Original Sterling Amount. 26. COSTS AND EXPENSES 26.1 Except as otherwise agreed in writing by the Agents and the Borrower, whether or not the Closing Date shall occur, the Borrower shall, on demand of an Agent, reimburse such Agent to the extent not recovered under any other Loan Documents (as defined in the Credit Agreement) or other Finance Documents, for: (i) all reasonable costs of furnishing all opinions required hereunder by counsel for the Borrower (including, without limitation, any opinions reasonably requested by such Agent as to any legal matters arising hereunder or under any Finance Document) and of the Borrower's compliance with all agreements and conditions contained herein or in any Finance Document on its part to be performed or complied with together with any VAT thereon; (ii) the reasonable fees, expenses and disbursements of counsel to such Agent together with any VAT thereon properly incurred in connection with the negotiation, preparation, execution and administration of this Agreement and the Finance Documents, each Advance made, and each Letter of Credit and Contract Guarantee issued, thereunder and any amendments and waivers thereto; (iii) all the actual costs and expenses of creating and perfecting any encumbrance in favour of the Lenders contemplated by the Finance Documents including filing and recording fees and expenses, stamp duty or similar taxes, reasonable fees and expenses of legal counsel for providing such legal opinions as such Agent may reasonably request in connection therewith and reasonable fees and expenses of legal counsel to such Agent; (iv) all costs and expenses (including reasonable legal fees) incurred by such Agent in connection with the preservation and enforcement of any of the rights of such Agent and the -24- Lenders in connection with any work-out or collection of any of the obligations of the Borrower under this Agreement and the Finance Documents or enforcement of this Agreement or the Finance Documents; (v) all reasonable accountable out-of-pocket expenses (including travel and due diligence expenses) incurred by the Lenders in connection with the negotiation and closing of the Finance Documents; and (vi) all other actual and reasonable out-of-pocket expenses incurred by the Agent in connection with the making of Advances and issuance of Letters of Credit and Contract Guarantees hereunder. 26.2 If the Borrower fails to perform any of its obligations under Clause 26.1, each Bank shall, in its Proportion, indemnify each Agent and Arranger against any loss incurred by it as a result of such failure and the Borrower shall forthwith reimburse each Bank for any payment made by it pursuant to Clause 26.1. 26.3 In addition to the provisions of Clause 26.1 and whether or not the Closing Date shall occur, the Borrower agrees to indemnify, pay and hold each Agent and each Lender, and their respective officers, directors, employees, agents, and affiliates (collectively called the "INDEMNITEES") harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and out-of-pocket costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable legal fees) in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto, that may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement or any Finance Document (other than the Nu-kote Guarantees and the Collateral Documents), or the use or intended use of the proceeds thereof or in any way relating to or resulting from the actions or assets of the Borrower or any of their respective subsidiaries (the "INDEMNIFIED LIABILITIES") provided that the Borrower shall have no obligation under this Clause 26.3 to any Indemnitee arising from the fraud, gross negligence, willful misconduct or willful breach of this Agreement or any Finance Document (other than the Nu-kote Guarantees and the Collateral Documents) by any party hereto and its related Indemnitees. 27. THE AGENTS AND THE LENDERS 27.1 Each Lender hereby appoints the Agent to act as its agent in connection with this Agreement and the Finance Documents and the Collateral Agent to act as its agent in connection with the Collateral Documents and authorizes each of the Agent and the Collateral Agent to exercise such rights, powers, authorities and discretions as are specifically delegated to the Agent by the terms hereof together with all such rights, powers, authorities and discretions as are reasonably incidental thereto. 27.2 Each of the Agent and the Collateral Agent may: (i) assume that: (a) any representation made by any Obligor in connection with any Finance Document is true; (b) no Event of Default has occurred; (c) no Obligor is in breach of or default under its obligations under any Finance Document; and -25- (d) any right, power, authority or discretion vested in a Finance Document upon the Requisite Lenders, the Lenders or any other person or group of persons has not been exercised, unless it has, in its capacity as agent for the Lenders hereunder, received notice to the contrary from any other party hereto; (ii) assume that the Facility Office of each Lender is that identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee, or in the case of an Overdraft Facility Transferee, at the end of the Overdraft Provider Transfer Certificate to which it is a party as the Overdraft Facility Transferee) until it has received from such Lender a notice designating some other office of such Lender to replace its Facility Office and act upon any such notice until the same is superseded by a further such notice; (iii) engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (iv) rely as to any matters of fact which might reasonably be expected to be within the knowledge of the Borrower upon a certificate signed by or on behalf of the Borrower; (v) rely upon any communication or document believed by it to be genuine; (vi) refrain from exercising any right, power or discretion vested in it as Agent under any Finance Document unless and until instructed by the Requisite Lenders as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised; and (vii) retrain from acting in accordance with any instructions of the Requisite Lenders to begin any legal action or proceeding arising out of or in connection with this Agreement or any other Finance Document until it shall have received such security as it may require (whether by way of payment in advance or otherwise) for all costs, claims, losses, expenses (including, without limitation, legal fees) and liabilities together with any VAT thereon which it will or may expend or incur in complying with such instructions. 27.3 Each of the Agent and the Collateral Agent shall: (i) promptly inform each Lender of the contents of any notice or document received by it in its capacity as Agent or, as the case may be, Collateral Agent from an Obligor under a Finance Document; (ii) promptly notify each Lender of the occurrence of any Event of Default or any default by an Obligor in the due performance of or compliance with its obligations under a Finance Document of which it has notice from any other party hereto; (iii) save as otherwise provided herein, act as agent hereunder in accordance with any instructions given to it by the Requisite Lenders, which instructions shall be binding on all of the Lenders; and (iv) if so instructed by the Requisite Lenders, refrain from exercising any right, -26- power or discretion vested in it as agent hereunder. 27.4 Notwithstanding anything to the contrary expressed or implied herein, neither the Agent nor the Collateral Agent shall: (i) be bound to enquire as to: (a) whether or not any representation made by an Obligor in connection with a Finance Document is true; (b) the occurrence or otherwise of any Event of Default; (c) the performance by each Obligor of its obligations under each Finance Document to which it is a party; or (d) any breach of or default by an Obligor of or under its obligations under any Finance Document; (ii) be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account; (iii) be bound to disclose to any other person any information relating to the Borrower if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or (iv) be under any obligations other than those for which express provision is made herein. 27.5 Each Lender shall, in its Proportion, from time to time on demand by the Agent or as the case may be, the Collateral Agent, indemnify the Agent or as the case may be, the Collateral Agent against any and all costs, claims, losses, expenses (including, without limitation, legal fees) and liabilities together with any VAT thereon which it may incur, otherwise than by reason of its own gross negligence or willful misconduct, in acting in its capacity as agent hereunder. 27.6 The Agent and the Collateral Agent do not accept any responsibility for the accuracy and/or completeness of any information supplied by the Borrower in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of this Agreement or any other Finance Document and the Agent and the Collateral Agent shall not be under any liability as a result of taking or omitting to take any action in relation to this Agreement or any other Finance Document, save in the case of fraud, gross negligence or willful misconduct. 27.7 Each of the Lenders agrees that it will not assert or seek to assert against any director, officer or employee of the Agent or the Collateral Agent any claim it might have against any of them in respect of the matters referred to in Clause 27.6. 27.8 The Agent and the Collateral Agent may accept deposits from, lend money to and generally engage in any kind of banking or other business with the Borrower. 27.9 Each of the Agent and the Collateral Agent may resign its appointment hereunder at any time without assigning any reason therefor by giving not less than thirty days' prior written notice to that effect to each of the other parties hereto and by appointing any of its affiliates in its stead, such appointment to take effect from the date of resignation of the resigning agent. -27- 27.10 If a successor to the Agent or the Collateral Agent is appointed under the provisions of Clause 27.9, then (i) the retiring Agent shall be discharged from any further obligation hereunder but shall remain entitled to the benefit of the provisions of this Clause 27 and (ii) its successor and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor had been a party hereto. 27.11 It is understood and agreed by each Lender that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of the Borrower and, accordingly, each Lender warrants to the Agent and the Collateral Agent that it has not relied on and will not hereafter rely on the Agent and the Collateral Agent or any one of them: (i) to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Borrower in connection with any Finance Document or the transactions therein contemplated (whether or not such information has been or is hereafter circulated to such Lender by the Agent and the Collateral Agent or any one of them); or (ii) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower. 27.12 In acting as agent and/or collateral agent for the Lenders, the agency division of each of the Agent and the Collateral Agent shall be treated as a separate entity from any other of its divisions or departments and, notwithstanding the foregoing provisions of this Clause 27, in the event that the Agent or the Collateral Agent should act for the Borrower in any capacity in relation to any other matter, any information given by the Borrower to the Agent or the Collateral Agent in such other capacity may be treated as confidential by the Agent or the Collateral Agent. 28. BENEFIT OF AGREEMENT This Agreement shall be binding upon and ensure to the benefit of each party hereto and its or any subsequent successors, Transferees, Overdraft Facility Transferees and permitted assigns. 29. ASSIGNMENTS AND TRANSFERS BY THE BORROWER The Borrower shall not be entitled to assign or transfer all or any of its rights, benefits and obligations hereunder. 30. ASSIGNMENTS AND TRANSFERS BY BANKS 30.1 Any Bank may, at any time, assign all or any of its rights and benefits hereunder, sell participations in, or transfer in accordance with Clause 30.3 (but not otherwise) all or any of its rights, benefits and obligations hereunder to any person. Provided that: (i) no such assignment or transfer may be made: (a) unless the Bank also transfers or assigns to the same person a pro rata share of its rights, benefits and obligations (if any) under the Credit Agreement and the Swiss Facility (unless such assignment or transfer is to an Eligible Assignee as defined in the Credit Agreement with the prior written consent of the Agent, which consent shall not be unreasonably withheld); -28- (b) without the prior written consent of the Fronting Bank, the Overdraft Provider and the Agent, such consent not to be unreasonably withheld or delayed, and the prior written consent of the Borrower if such assignment or transfer is made to any person that is not an Eligible Assignee as defined in the Credit Agreement and no Event of Default has occurred and is continuing, such consent not to be unreasonably withheld or delayed; and (c) if the result thereof would be that the Borrower would be liable to pay an additional amount or amounts pursuant to Clauses 14 or 15 which additional amount or amounts would not have been payable had no such transfer or assignment occurred unless such Transferee or assignee agrees to waive its rights to receive such additional amount or amounts and any rights under Clause 24 with respect to such amounts; and (ii) no such participation may be made unless: (a) the relevant Bank remains the lender of record hereunder and the proposed participant does not become the lender of record hereunder; (b) the relevant Bank's obligations hereunder shall remain unchanged and it shall remain solely responsible for the performance thereof; (c) all parties hereto shall be entitled to deal solely with the relevant Bank in connection with its Commitment and other rights and obligations of the relevant Bank under the Finance Documents; (d) such Bank shall be solely responsible for any withholding taxes or filing or reporting requirements relating to such participation and shall hold harmless the Borrower and the Agent against the same; (e) such participant shall represent and warrant that it does not engage in the same line of business as, or derive more than 10% of its revenues in the same line of business as, Borrower; and (f) any such participant which is not an affiliate of the relevant Bank shall not be entitled to require the relevant Bank to take or omit to take any action under any Finance Document except action directly affecting the extension of the "Termination Date" hereunder or the reduction of the principal amount or the decrease in the rate of interest payable hereunder or any fees related thereto. 30.2 If any Bank assigns all or any of its rights and benefits hereunder in accordance with Clause 30.1, then, unless and until the assignee has agreed with the Agent and the other Banks that it shall be under the same obligations towards each of them as it would have been under if it had been an original party hereto as a Bank, the Agent and the other Banks shall not be obliged to recognize such assignee as having the rights against each of them which it would have had if it had been such a party hereto. 30.3 If any Bank wishes to transfer all or any of its rights, benefits and/or obligations hereunder as contemplated in Clause 30.1, then such transfer shall be effected by the delivery to the Borrower and the Agent of a duly completed and duly executed Transfer Certificate in which event, on the later of the Transfer Date specified in such Transfer Certificate and the fifth business day after (or such earlier business day endorsed by the Agent on such Transfer Certificate falling on or after) the -29- date of delivery of such Transfer Certificate to the Agent: (i) to the extent that in such Transfer Certificate the Bank party thereto seeks to transfer its rights, benefits and obligations hereunder, the Borrower and such Bank shall be released from further obligations towards one another hereunder and their respective rights against one another shall be cancelled (such rights, benefits and obligations being referred to in this Clause 30.3 as "discharged rights and obligations"); (ii) the Borrower and the Transferee party thereto shall assume obligations towards one another and/or acquire rights against one another which differ from such discharged rights and obligations only insofar as the Borrower and such Transferee have assumed and/or acquired the same in place of the Borrower and such Bank; (iii) the Agent, such Transferee and the other Banks shall acquire the same rights and benefits and assume the same obligations between themselves as they would have acquired and assumed had such Transferee been an original party hereto as a Bank with the rights, benefits and/or obligations acquired or assumed by it as a result of such transfer; and (iv) to the extent that in such Transfer Certificate the Bank party thereto seeks to transfer its Commitment, the Transferee shall replace such Bank under the terms of any relevant Letter of Credit or Contract Guarantee. 30.4 On the date upon which a transfer takes effect pursuant to Clause 30.3, the Transferee in respect of such transfer shall pay to the Agent for its own account a transfer fee of L500. 30.5 The Borrower may, at any time and from time to time, upon notice to the Agent, request that a different Lender specified by the Borrower be appointed as the Overdraft Provider. Promptly upon such other Lender agreeing to such request and repayment of all outstanding Short-Term Advances together with accrued interest thereon to the existing Overdraft Provider, the existing Overdraft Provider shall transfer to such Lender all (but not part) of its rights, benefits and obligations hereunder as the Overdraft Provider. Any transfer contemplated by this Clause 30.5 shall be effected by the delivery to the Borrower and the Agent of a duly completed and duly executed Overdraft Provider Transfer Certificate in which event, on the later of the Transfer Date specified in such certificate and the fifth business day after (or such earlier business day endorsed by the Agent on such certificate falling on or after) the date of delivery of such certificate to the Agent: (i) the Borrower and the Overdraft Provider shall be released from further obligations towards one another hereunder and their respective rights against one another shall be cancelled; (ii) the Borrower and the Overdraft Facility Transferee shall acquire the same rights and benefits and assume the same obligations towards one another as they would have acquired and assumed had the Overdraft Facility Transferee been an original party hereto as the Overdraft Provider; and (iii) the Agents, the Overdraft Facility Transferee and the other parties hereto shall acquire the same rights and benefits and assume the same obligations between themselves as they would have acquired and assumed had the Overdraft Facility Transferee been an original party hereto as the Overdraft Provider with the rights, benefits and/or obligations acquired or assumed by it as a result of such transfer. -30- 31. DISCLOSURE OF INFORMATION Each Lender shall take normal and reasonable precautions to maintain the confidentiality of all information obtained pursuant to the requirements of any Finance Document which has been identified as such by the Borrower (including, without limitation, the reports delivered pursuant to the Third Schedule to the Original Agreement) but may, in any event, make disclosures reasonably required by any bona fide assignee, Transferee, Overdraft Facility Transferee or participant (or prospective assignee, Transferee or participant) in connection with the contemplated assignment or transfer of any of its rights and obligations thereunder Provided that (a) such assignee, Transferee, Overdraft Facility Transferee, participant or person agrees to comply with the provisions of this Clause 31, (b) such prospective assignee, Transferee, Overdraft Facility Transferee or participant shall have executed a confidentiality agreement substantially in the form of the Exhibit, and (c) no Lender shall be obliged or required to return any written information or other materials furnished by the Borrower in connection with any Finance Document. Notwithstanding the foregoing, the Agents and/or any Lender shall be entitled to disclose any such information: (i) if required to do so by an order of a court of a competent jurisdiction whether in pursuance of any procedure for discovering documents or otherwise; or (ii) if required by any law or regulation having the force of law; or (iii) pursuant to any requirement or request of any fiscal, monetary, tax, governmental or other competent authority; or (iv) to its auditors, legal or other professional advisors; or (v) which is in the public domain, and unless specifically prohibited by applicable law or court order, such Lender shall notify the Borrower of any disclosure pursuant to paragraphs (i), (ii) and (iii). 32. CALCULATIONS AND EVIDENCE OF DEBT 32.1 Interest and Commitment Fee shall accrue from day to day and shall be calculated on the basis of a year of 365 days or (in the case of interest payable on an amount denominated in an Optional Currency) 360 days and the actual number of days elapsed. 32.2 Letter of Credit and Contract Guarantee commission in respect of any Letter of Credit or Contract Guarantee, and any period of the Term thereof determined pursuant to Clause 9, shall be calculated on the basis of a year of 365 days or (in the case of a Letter of Credit or Contract Guarantee denominated in an Optional Currency) 360 days and the actual number of days in such period (or, in any case where market practice differs, in accordance with market practice). 32.3 If on any occasion a Reference Bank or Bank fails to supply the Agent with a quotation required of it under the foregoing provisions of this Agreement, the rate for which such quotation was required shall be determined from those quotations which are supplied to the Agent. 32.4 Each Lender shall maintain in accordance with its usual practice accounts evidencing the amounts from time to time lent by and owing to it hereunder. 32.5 The Agent shall maintain on its books a control account or accounts in which shall be -31- recorded (i) the amount of any Advance made or arising hereunder (and the name of the Lender to which such sum relates) and the face amount of any Letter of Credit issued or Contract Guarantee (and each Lender's share therein), (ii) the amount of all principal, interest and other sums due or to become due from the Borrower to any of the Lenders hereunder and each Lender's share therein and (iii) the amount of any sum received or recovered by the Agent hereunder and each Lender's share therein. 32.6 In any legal action or proceeding arising out of or in connection with this Agreement, the entries made in the accounts maintained pursuant to Clauses 32.4 and 32.5 shall in the absence of manifest error be conclusive evidence of the existence and amounts of the obligations of the Borrower therein recorded. 32.7 A certificate of a Lender as to (i) the amount by which a sum payable to it hereunder is to be increased under Clause 14 or (ii) the amount for the time being required to indemnify it against any such cost, payment or liability as is mentioned in Clause 15 shall, in the absence of manifest error, be conclusive for the purposes of this Agreement. 32.8 Each Lender hereby represents that as at 24th February, 1995 (i) its participation as a Lender hereunder and extension of credit in respect hereof will not require registration or qualification under any applicable securities laws nor is it illegal (as referred to in Clause 16), and (ii) it is a Qualifying Lender. 33. REMEDIES AND WAIVERS No failure to exercise, nor any delay in exercising, on the part of the Agent and the Lenders or any of them, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 34. PARTIAL INVALIDITY If, at any time, any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. -32- 35. NOTICES 35.1 Each communication to be made hereunder shall, unless otherwise stated, be made in writing by telex, telefax or letter. 35.2 Any communication or document (unless made by telefax) to be made or delivered by one person to another pursuant to this Agreement shall (unless that other person has by fifteen days' written notice to the Agent specified another address) be made or delivered to that other person at the address identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee, or in the case of an Overdraft Facility Transferee, at the end of the Overdraft Provider Transfer Certificate to which it is a party of the Overdraft Facility Transferee) and shall be deemed to have been made or delivered when despatched and the appropriate answerback received (in the case of any communication made by telex) or (in the case of any communication made by letter) when left at that address or (as the case may be) ten days after being deposited in the post postage prepaid in an envelope addressed to it at that address. Provided that any communication or document to be made or delivered to the Agent shall be effective only when received by the Agent and then only if the same is expressly marked for the attention of the department or officer identified with the Agent's signature below (or such other department or officer as the Agent shall from time to time specify for this purpose). 35.3 Where any provision of this Agreement specifically contemplates telephone or telefax communication made by one person to another, such communication shall be made to that other person at the relevant telephone number specified by it from time to time for the purpose and shall be deemed to have been received when made (in the case of any communication by telephone) or when transmission has been completed (in the case of any telecommunication by telefax). Each such telefax communication, if made to the Agent by the Borrower shall be signed by the person or persons authorized by the Borrower in the certificate delivered pursuant to the Third Schedule of the Original Agreement and shall be expressed to be for the attention of the department or officer whose name has been notified for the time being for that purpose by the Agent to the Borrower. 35.4 Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the English language or accompanied by a translation thereof into English certified (by an officer of the person making or delivering the same) as being a true and accurate translation thereof. 36. COUNTERPARTS This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts each of which, when executed and delivered, shall constitute an original, but all the counterparts shall together constitute but one and the same instrument. Faxes of signatures shall be binding and effective as originals. -33- 37. AMENDMENTS To the extent not otherwise expressly provided in any Finance Document, no amendment, modification, termination or waiver of any provision of any Finance Document or consent to any departure by the Borrower therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders and the Borrower; except that any amendment, modification, termination, or waiver that (i) changes the amount of the Commitments or the principal amount of the Advances or extends the scheduled maturity thereof or changes the currency of any payment hereunder; (ii) changes any Proportion or the definition of "Requisite Lenders"; (iii) extends the dates on which interest is or fees are payable hereunder, or the maximum duration of interest periods; or (iv) reduces any interest rates payable on the Advances or any fees (other than administrative fees) payable hereunder or under any Finance Document, each shall be effective only if evidenced by a writing signed by or on behalf of all Lenders under this Agreement and the Borrower; Provided, however, that (A) the First Schedule and the Commitments and Proportions shall be amended from time to time to give effect to the Commitments and Proportions of each new Bank that becomes a party to this Agreement at the time such Bank becomes a Bank and (B) any amendment, modification or waiver that changes any administrative fees, or the times at which such fees are payable hereunder shall be effective only it evidenced by a writing signed by or on behalf of the Borrower and each Lender affected thereby. Any amendment, modification, termination or waiver of any of the conditions precedent to funding an Advance shall be effective only if evidenced by a writing signed by or on behalf of the Requisite Lenders and the Borrower. No amendment, modification, termination or waiver of any provision of the agency provisions of this agreement shall be effective without the written concurrence of the Agents, the Requisite Lenders and the Borrower. No amendment, modification, termination, or waiver of any Finance Document that releases any guarantor or releases any collateral under the Debenture not otherwise permitted under the Credit Agreement or the Debenture shall be effective unless evidenced by a writing signed by or on behalf of Banks having 80 percent, or more of the combined aggregate amount of the Commitments under this Agreement or, in the case of the Commitment under this Agreement that has been terminated, the Outstandings, if any, made hereunder. The Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrower shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent with respect to this Agreement effected in accordance with this Clause 37 shall be binding upon the Borrower. 38. GOVERNING LAW This Agreement shall be governed by, and shall be construed in accordance with, English law. 39. WAIVERS Borrower hereby expressly acknowledges and agrees that, as of the Closing Date, save and except the Hedging Documents, it does not have any setoffs, counterclaims, adjustments, recoupments, defenses, claims or actions of any character, whether contingent, non-contingent, liquidated, unliquidated, fixed, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, against any Bank, the Agent, the Documentation Agent, the Collateral Agent, the Fronting Bank, or the Overdraft Provider or any grounds or cause for reduction, modification or subordination of the obligations of Borrower under this Agreement and/or any Finance Document or any liens or security interests of any Bank, the Agent, the Documentation Agent, the Collateral Agent, the Fronting Bank, or the Overdraft Provider. To the extent Borrower possesses, as of the Closing Date, any such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds or causes, -34- Borrower hereby waives, and hereby releases each Bank, the Agent, the Documentation Agent, the Collateral Agent, the Fronting Bank, and the Overdraft Provider from, any and all of such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds and causes, such waiver and release being with full knowledge and understanding of the circumstances and effects of such waiver and release and after having consulted counsel with respect thereto. Borrower hereby acknowledges that it is indebted to Banks with respect to Advances in the principal amount of L6,275,000, including L1,275,000 Short Term Advances, which are outstanding on the date hereof. Borrower hereby ratifies and confirms its obligations under the Finance Documents. This Agreement amends and restates the Original Agreement in its entirety. AS WITNESS the hands of the duly authorized representatives of the parties hereto the day and year first before written. -35- THE FIRST SCHEDULE The Banks BANK COMMITMENT (L) Barclays Bank PLC 878,500.00 NationsBank, N.A. 2,073,887.50 Commerzbank AG 627,500.00 Deutsche Bank AG 627,500.00 The First National Bank of Chicago 627,500.00 Societe Generale 618,087.50 ABN AMRO Bank, N.V. 411,012.50 Credit Lyonnais, S.A. 411,012.50 -36- THE SECOND SCHEDULE FORM OF TRANSFER CERTIFICATE To: Barclays Bank PLC Pelikan Scotland Limited TRANSFER CERTIFICATE relating to the third amended and restated agreement dated 31 July, 1997 (the "FACILITY AGREEMENT") whereby a revolving credit facility was made available to Pelikan Scotland Limited as borrower by a group of banks on whose behalf Barclays Bank PLC acted as agent in connection therewith. 1. Terms defined in the Facility Agreement shall, subject to any contrary indication, have the same meanings herein. The terms Bank and Transferee are defined in the schedule hereto. 2. The Bank (i) confirms that the details in the schedule hereto under the heading "Bank's Commitment" or "Advance(s)" accurately summarizes its Commitment and/or, as the case may be, the Term and Repayment Date of one or more existing Advances made by it and (ii) requests the Transferee to accept and procure the transfer to the Transferee of the portion specified in the schedule hereto of, as the case may be, its Commitment and/or such Advance(s) by counter-signing and delivering this Transfer Certificate to the Agent at its address for the service of notices specified in the Facility Agreement. 3. The Transferee hereby requests the Agent to accept this Transfer Certificate as being delivered to the Agent pursuant to and for the purposes of Clause 30.3 of the Facility Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Transferee confirms that it has received a copy of the Facility Agreement together with such other information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Bank to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such information and further agrees that it has not relied and will not rely on the Bank to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower. 5. The Transferee hereby undertakes with the Borrower, the Bank and each of the other parties to the Facility Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Facility Agreement will be assumed by it after delivery of this Transfer Certificate to the Agent and satisfaction of the conditions (if any) subject to which this Transfer Certificate is expressed to take effect. The Transferee hereby makes the representations made by each Bank in Clause 32.8 of the Facility Agreement as though made on and as of the date hereof. 6. The Bank makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of the Facility Agreement or any document relating thereto and assumes no responsibility for the financial condition of the Borrower or for the performance and observance by the Borrower of any of its obligations under the Facility Agreement or any document relating thereto and any and all such conditions and warranties, whether -37- express or implied by law or otherwise, are hereby excluded. 7. The Bank hereby gives notice that nothing herein or in the Facility Agreement (or any document relating thereto) shall oblige the Bank to (i) accept a re-transfer from the Transferee of the whole or any part of its rights, benefits and/or obligations under the Facility Agreement transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Transferee for any reason whatsoever including, without limitation, the non-performance by the Borrower or any other party to the Facility Agreement (or any document relating thereto) of its obligations under any such document. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (i) or (ii) above. 8. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. THE SCHEDULE 1. Bank: 2. Transferee: 3. Transfer Date: 4. Commitment: Bank's Commitment Portion Transferred 5. Advance(s): Term and Repayment Date Portion Transferred [Transferor Bank] [Transferee Bank] By: By: Date: Date: ADMINISTRATIVE DETAILS OF TRANSFEREE Address: Contact Name: Account for Payments: Telex: Telefax: Telephone: -38- THE THIRD SCHEDULE CONDITIONS PRECEDENT Each of the following: 1. A certificate of the secretary or a director of the Borrower certifying that the copy of its constitutive documents delivered to the Agent in connection with the Original Agreement (as amended, where applicable, by any variation thereof which has itself been delivered to the Agent and certified correct, complete and in full force and effect) remains correct, complete and in full force and effect. 2. A copy of a resolution of the Board of Directors of the Borrower: (a) approving the terms of this Agreement and all other documents to be executed by the Borrower in connection herewith; and (b) authorizing a specified person or persons: (i) to execute this Agreement and all other documents to be executed by it hereunder or thereunder in connection herewith or therewith; and (ii) (unless previously so appointed and unchanged) to give all notices, requests, instructions, certificates and other documents to the Agent in connection with each of the Finance Documents to which it is a party. 3. A certificate of a director of the Borrower certifying that the utilization of the Facility in full would not cause any borrowing or other limit binding on it to be exceeded. 4. A copy of the signature of each of the persons authorized by the resolutions referred to in paragraph 2(b) above. 5. A certificate of a director of the Borrower confirming that no Event of Default or Potential Event of Default will be in existence immediately after the transactions due to take place on the Closing Date (as defined in the Credit Agreement) have taken place. 6. A legal opinion relating to this Agreement from Allen & Overy, English legal advisers to the Agent, in form and substance satisfactory to the Agent. Each copy document delivered under this part of this schedule by the Borrower shall be certified by a director or the secretary of the Borrower, as at the date hereof (or such other date as the Agent may agree), to be correct, complete and in full force and effect as at such date. -39- THE FOURTH SCHEDULE UTILIZATION REQUEST From: Pelikan Scotland Limited To: [Barclays Bank PLC]/[Overdraft Provider] Dated: Dear Sirs, 1. We refer to the third amended and restated agreement dated 31 July, 1997 (the "Facility Agreement") and made between Pelikan Scotland Limited as borrower, Barclays Bank PLC as agent, NationsBank of Texas, N.A. as collateral and documentation agent, Barclays Bank PLC as fronting bank, Barclays Bank PLC as overdraft provider and the financial institutions named therein as banks. Terms defined in the Facility Agreement shall have the same meaning in this notice. 2. We hereby give you notice that, pursuant to the Facility Agreement, we wish [the Banks/Overdraft Provider to make Advances/the Fronting Bank to issue a Letter of Credit/Contract Guarantee] * as follows: (i) Aggregate *[principal/face] amount: (ii) Utilization Date: (iii) Term: (iv) Currency: (v) *[Repayment Date/Expiry Date]: 3. *[The proceeds of this Utilization should be credited to [insert account details]]/[The Letter of Credit/Contract Guarantee should be issued in favour of [name of recipient in the form attached and delivered to the recipient at the address of recipient]]. Yours faithfully - ------------------------------- for and on behalf of PELIKAN SCOTLAND LIMITED * Delete as appropriate -40- THE FIFTH SCHEDULE TIMETABLES UTILIZATION BY MEANS OR ADVANCES OTHER THAN SHORT-TERM ADVANCES "D" Utilization Date "Bs" Banks "A" Agent "( )" Clause number of Agreement 1. Utilization Request to A (6. 1) D-2 9:30 a.m. 2. A to notify Bs of allocations by (6.4) D-2 10:30 a.m. 3. LIBOR fixing (1.1) D-2 11:00 a.m. UTILIZATION BY MEANS OF SHORT-TERM ADVANCES "D" - Utilization Date "OP" - Overdraft Provider "( )" - Clause number of Agreement Utilization Request to OP (6.1) D 9:30 a.m. UTILIZATION BY MEANS OF LETTERS OF CREDIT "D" = Utilization Date "D-x" = x business days prior to Utilization Date "Bs" = Banks "A" = Agent "( )" = Clause number of Agreement 1. Utilization Request to A (6.1) D-3 9:30 a.m. 2. Bs to have agreed identity of D-3 3:00 p.m. recipient of Letter of Credit (7.2(iii)) 3. Where applicable, form of Letter D-3 3:00 p.m. of Credit/Contract Guarantee to be agreed (7.2(iv)) 4. A to notify Bs of allocations (6.4) D 10:00 a.m. 5. Letter of Credit/Contract Guarantee to be issued (7.2) D 3:00 p.m. -41- THE SIXTH SCHEDULE MANDATORY LIQUID ASSET COSTS RATE FORMULA The Mandatory Liquid Asset Costs Rate to compensate the Banks for the cost attributable to an Advance or other sum denominated in sterling for any period for which such cost is to be computed under this Agreement resulting from the imposition from time to time by the Bank of England (or other Governmental authorities or agencies) of a requirement to place non-interest-bearing deposits with the Bank of England, for the payment of Special Deposits and the maintenance of secured money with certain financial institutions (recognized for this purpose by the Bank of England) will be the rate determined by the Agent (rounded upwards, if necessary, to four decimal places) on the first day of the relevant period and for the duration of such period (but in respect of such a period of longer than three months, the average of the rates (rounded upwards as aforesaid) computed on a three monthly basis during such period) in accordance with the following formula: rate = XL + B(L-C + S(L-D) ------------------- 100 - (X + S) Where: "X" is the amount required to be maintained by Barclays Bank PLC on non-interest-bearing balances with the Bank of England expressed as a percentage of eligible liabilities fixed by the Bank of England (or other Governmental authorities or agencies). For the purpose of this formula, this percentage will be expressed as a number. "L" is the average of the offered quotations by the Reference Banks for sterling deposits for the period for which the formula is being applied in the London Interbank Market at or about 11.00 a.m. on the day of quotation, expressed as a number and not as a percentage rate per annum. "B" is the average level of secured deposits expressed as a percentage of eligible liabilities which Barclays Bank PLC is required by the Bank of England to maintain with certain financial institutions (recognized for this purpose by the Bank of England). For the purpose of this formula this percentage will be expressed as a number. "C" is the average of the rates at which certain financial institutions (recognized for this purpose by the Bank of England) bid for sterling deposits for the period for which the formula is being applied from the Reference Banks at or about 11.00 a.m. on the day of quotation, expressed as a number and not as a percentage rate per annum. "S" is the amount of Special Deposits required to be maintained by Barclays Bank PLC expressed as a percentage of eligible liabilities fixed by the Bank of England (or other Governmental authorities or agencies). For the purposes of this formula this percentage will be expressed as a number. "D" is the rate of interest paid by the Bank of England on Special Deposits, expressed as a number and not as a percentage rate per annum. In the event of any change in circumstances (including the imposition of alternative or additional official requirements) which renders the above formula inapplicable the Agent shall notify the Borrower and the Banks in reasonable detail of the manner (including the basis and computation) in which the Mandatory Liquid Asset Costs Rate shall be determined thereafter and, if appropriate, substitute a new -42- formula for that set out above. -43- THE SEVENTH SCHEDULE FORM OF OVERDRAFT PROVIDER TRANSFER CERTIFICATE To: Barclays Bank PLC, as Agent Pelikan Scotland Limited OVERDRAFT PROVIDER TRANSFER CERTIFICATE relating to the third amended and restated agreement (the "FACILITY AGREEMENT") dated 31 July, 1997 whereby a revolving credit facility was made available to Pelikan Scotland Limited as borrower by a group of banks on whose behalf Barclays Bank PLC acted as agent in connection therewith. 1. Terms defined in the Facility Agreement shall, subject to any contrary indication, have the same meanings herein. The terms Overdraft Provider and Overdraft Facility Transferee are defined in the schedule hereto. 2. The Overdraft Provider requests the Overdraft Facility Transferee to accept and procure the transfer to the Overdraft Facility Transferee the obligation to make Short-Term Advances pursuant to the Facility Agreement by counter-signing and delivering this Overdraft Provider Transfer Certificate to the Agent at its address for the service of notices specified in the Facility Agreement. 3. The Overdraft Facility Transferee hereby requests the Agent to accept this Overdraft Provider Transfer Certificate as being delivered to the Agent pursuant to and for the purposes of Clause 30.5 of the Facility Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Overdraft Facility Transferee confirms that it has received a copy of the Facility Agreement, together with such other information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Overdraft Provider to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy, or completeness of any such information and further agrees that it has not relied and will not rely on the Overdraft Provider to assess or keep under review on its behalf the financial conditions, creditworthiness, condition, affairs, status or nature of the Borrower. 5. The Overdraft Facility Transferee hereby undertakes with the Borrower, the Overdraft Provider and each of the other parties to the Facility Agreement that it will perform in accordance with their terms all the obligations of the Overdraft Provider under the Facility Agreement after delivery of this Overdraft Provider Transfer Certificate to the Agent and satisfaction of the conditions (if any) subject to which this Overdraft Provider Transfer Certificate is expressed to take effect. The Overdraft Facility Transferee hereby makes the representations made by the Overdraft Provider in Clause 32.8 of the Facility Agreement as though made on and as of the date hereof. 6. The Overdraft Provider makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of the Facility Agreement or any document relating thereto and assumes no responsibility for the financial condition of the Borrower or for the performance and observance by the Borrower of any of their respective obligations under the Facility Agreement or any document relating thereto and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 7. The Overdraft Provider hereby gives notice that nothing herein or in the Facility -44- Agreement (or any document relating thereto) shall oblige the Overdraft Provider to (i) accept a re-transfer from the Overdraft Facility Transferee of the whole or any part of its rights, benefits and/or obligations under the Facility Agreement transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Overdraft Facility Transferee for any reason whatsoever including, without limitation, the non-performance by the Borrower or any other party to the Facility Agreement (or any documents relating thereto) of its obligations under any such document. The Overdraft Facility Transferee hereby acknowledges the absence of any such obligation as it referred to in (i) or (ii) above. 8. This Overdraft Provider Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. THE SCHEDULE 1. Overdraft Provider: 2. Overdraft Facility Transferee: 3 Transfer Date: [TRANSFEROR OVERDRAFT [TRANSFEREE OVERDRAFT PROVIDER] PROVIDER] By: By: Date: Date: ADMINISTRATIVE DETAILS OF OVERDRAFT FACILITY TRANSFEREE Address: Telex: Contact Name: Telefax: Account for Payments: Telephone: -45- SIGNATORIES THE BORROWER PELIKAN SCOTLAND LIMITED By: -------------------------- HANS PAFFHAUSEN Title: Address: Forchstrasse 100 CH-8132 Egg Switzerland Fax: (41-1) 9861 394 THE AGENT BARCLAYS BANK PLC By: ------------------------------- Name: ------------------------ Title: ----------------------- Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer THE FRONTING BANK BARCLAYS BANK PLC By: ------------------------------- Name: ------------------------ Title: ----------------------- Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer THE OVERDRAFT PROVIDER BARCLAYS BANK PLC By: ------------------------------- Name: ------------------------ Title: ----------------------- Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer THE COLLATERAL AGENT NATIONSBANK OF TEXAS, N.A. By: ----------------------------- WILLIAM E. LIVINGSTONE, IV Senior Vice President Address: 901 Main Street 66th Floor Dallas, Texas 75202 U.S.A. Fax: (214) 508 0604 THE DOCUMENTATION AGENT NATIONSBANK OF TEXAS, N.A. By: ----------------------------- WILLIAM E. LIVINGSTONE, IV Senior Vice President Address: 901 Main Street 66th Floor Dallas, Texas 75202 U.S.A. Fax: (214) 508 0604 THE BANKS BARCLAYS BANK PLC By: ------------------------------- Name: ------------------------ Title: ----------------------- Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer NATIONSBANK, N.A. By: ---------------------------- WILLIAM E. LIVINGSTONE, IV Senior Vice President Address: 901 Main Street 66th Floor Dallas, Texas 75202 U.S.A. Fax: (214) 508 0604 THE FIRST NATIONAL BANK OF CHICAGO By: ---------------------------- Name: --------------------- Title: -------------------- Notice Address: The First National Bank of Chicago One First National Plaza, Mail Suite 0088 Chicago, Illinois 60670-0088 Attention: Richard A. Peterson COMMERZBANK AG By: ---------------------------- Name: --------------------- Title: -------------------- By: ---------------------------- Name: --------------------- Title: -------------------- Address: Atlanta Agency Promenade Two, Suite 3500 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 Attn: Harry P. Yergey Fax: (404) 888 6539 DEUTSCHE BANK AG LONDON By: ---------------------------- Name: --------------------- Title: -------------------- By: ---------------------------- Name: --------------------- Title: -------------------- Notice Address: Deutsche Bank, A.G., New York Branch and/or Cayman Islands Branch 31 West 52nd Street, 24th Floor New York, New York 10019 Attention: Ralf Hoffmann SOCIETE GENERALE By: ---------------------------- Name: --------------------- Title: -------------------- Address: Trammell Crow Center 2001 Ross Avenue, Suite 4800 Dallas, Texas 75201 Fax: (214) 979 1104 ABN AMRO BANK, N.V. By: ---------------------------- Name: --------------------- Title: -------------------- By: ---------------------------- Name: --------------------- Title: -------------------- Notice Address: ABN AMRO Bank, N.V. 10 E. 53rd Street, 37th Floor New York, New York 10022 Attention: Ronald O. Drake CREDIT LYONNAIS, S.A. By: ---------------------------- Name: --------------------- Title: -------------------- Notice Address: Credit Lyonnais 1301 Avenue of the Americas, 18th Floor New York, New York 10019 Attention: Alan Sidrane THE EXHIBIT [FORM OF CONFIDENTIALITY AGREEMENT] The undersigned, ______________________________________ a prospective [assignee/Transferee/participant/Overdraft Facility Transferee] to that certain Third Amended and Restated Revolving Credit Facility Agreement dated as of 31 July, 1997 (such agreement, as so amended and restated and as it may be amended, amended and restated, supplemented or otherwise modified from time to time, being the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement between Pelikan Scotland Limited as borrower, Barclays Bank PLC, as agent, NationsBank of Texas, N.A., as collateral agent, NationsBank of Texas, N.A., as documentation agent, and the Lenders party thereto, ("Prospective [assignee/ Transferee/participant/Overdraft Facility Transferee]"), hereby agrees as follows for the benefit of the Borrower: Prospective [assignee/Transferee/participant/Overdraft Facility Transferee] agrees that all financial statements, financial projections, operating or other data, tax returns, reports and other information, that have been or may be provided to (i) Prospective [assignee/Transferee/participant/Overdraft Facility Transferee], (ii) the employees and agents of Prospective [assignee/Transferee/ participant/Overdraft Facility Transferee], and/or (iii) accountants, attorneys or other professionals retained by such parties whether delivered by either Borrower or otherwise shall be kept strictly confidential by such recipients, and shall be used solely in connection with its consideration of [an assignment/ a transfer/a participation/the appointment of a new Overdraft Provider] in respect of the Credit Agreement; PROVIDED, that Prospective [assignee)Transferee/participant/Overdraft Facility Transferee] may, in any event, disclose any such information: (i) if required to do so by an order of a court of competent jurisdiction whether in pursuance of any procedure for discovering documents or otherwise; or (ii) if required by any law or regulation having the force of law; or (iii) pursuant to any requirement or request of any fiscal, monetary, tax, governmental or other competent authority; or (iv) to its auditors, legal or other professional advisors; or (v) which is in the public domain, and unless specifically prohibited by applicable law or court order, the prospective assignee/Transferee/or participant shall notify the Borrowers of any disclosure pursuant to paragraphs (i), (ii) and (iii). In no event shall Prospective [assignee/Transferee/participant/Overdraft Facility Transferee] be obligated or required to return any materials furnished by either Borrower. This deed shall be governed by and construed and enforced in accordance with, the laws of England. Prospective [assignee/Transferee/participant/Overdraft Facility Transferee] hereby irrevocably agrees for the benefit of the Borrower that the courts of England shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this deed and, for such purposes, irrevocably submits to the jurisdiction of such courts. Prospective [assignee/Transferee/participant/Overdraft Facility Transferee] hereby irrevocably waives any objection which it might now or hereafter have to the courts of England being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this deed and agrees not to claim that any such court is not a convenient or appropriate forum. The submission to the jurisdiction of the courts of England shall not (and shall not be construed so as to) limit the right of the Borrower to take proceedings against Prospective [assignee/Transferee/participant/Overdraft Facility Transferee] in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdiction preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. IN WITNESS WHEREOF, this confidentiality agreement has been executed as a deed by the Prospective [assignee/Transferee/participant/Overdraft Facility Transferee] delivered on the date specified below. ____________________________, 19___ EXECUTED AND DELIVERED AS A DEED BY [INSERT NAME IN BLOCK CAPITALS OF PROSPECTIVE ASSIGNEE/TRANSFEREE/PARTICIPANT/OVERDRAFT FACILITY TRANSFEREE] Name: --------------------------------- Title: -------------------------------- Name: --------------------------------- Title: -------------------------------- TABLE OF CONTENTS Page ---- 1. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. THE FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . 10 5. NATURE OF LENDERS' OBLIGATIONS . . . . . . . . . . . . . . . . . . . 10 6. UTILIZATION OF THE FACILITY . . . . . . . . . . . . . . . . . . . . 10 7. ISSUE OF LETTERS OF CREDIT AND CONTRACT GUARANTEES . . . . . . . . . 13 8. INDEMNITY (INCLUDING BANK INDEMNITY FOR SHORT-TERM ADVANCES) . . . . 14 9. LETTER OF CREDIT AND CONTRACT GUARANTEE COMMISSIONS AND FEES . . . . 15 10. MAKING OF ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . 16 11. INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 12. REPAYMENT OF ADVANCES . . . . . . . . . . . . . . . . . . . . . . . 18 13. CANCELLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 14. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 15. INCREASED COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 20 16. ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 17. MITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 18. MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES . . . . . . . . . . 24 19. ACCELERATION EVENT . . . . . . . . . . . . . . . . . . . . . . . . . 24 20. DEFAULT INTEREST AND INDEMNITIES . . . . . . . . . . . . . . . . . . 25 21. CURRENCY OF ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . 26 22. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 -i- TABLE OF CONTENTS (Continued) Page ---- 23. SET-OFF AND NETTING OF PAYMENTS . . . . . . . . . . . . . . . . . . 27 24. REDISTRIBUTION OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . 28 25. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 26. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . 29 27. THE AGENTS AND THE LENDERS . . . . . . . . . . . . . . . . . . . . . 30 28. BENEFIT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 34 29. ASSIGNMENTS AND TRANSFERS BY THE BORROWER . . . . . . . . . . . . . 34 30. ASSIGNMENTS AND TRANSFERS BY BANKS . . . . . . . . . . . . . . . . . 34 31. DISCLOSURE OF INFORMATION . . . . . . . . . . . . . . . . . . . . . 37 32. CALCULATIONS AND EVIDENCE OF DEBT . . . . . . . . . . . . . . . . . 38 33. REMEDIES AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 39 34. PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . 39 35. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 36. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 37. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 38. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 39. WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 The Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Form of Transfer Certificate . . . . . . . . . . . . . . . . . . . . 43 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . 46 Utilization Request . . . . . . . . . . . . . . . . . . . . . . . . 47 Timetables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Mandatory Liquid Asset Costs Rate Formula . . . . . . . . . . . . . 49 Form of Overdraft Provider Transfer Certificate . . . . . . . . . . 51 SIGNATORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 FORM OF CONFIDENTIALITY AGREEMENT . . . . . . . . . . . . . . . 65 -ii- EX-10.3 4 EX-10.3 CHF 50,000,000 THIRD AMENDED AND RESTATED REVOLVING CREDIT FACILITY AGREEMENT DATED 31 JULY, 1997 BETWEEN PELIKAN PRODUKTIONS AG AND PELIKAN HARDCOPY (INTERNATIONAL) AG AS BORROWERS BARCLAYS BANK PLC AS AGENT NATIONSBANK OF TEXAS, N.A. AS COLLATERAL AGENT NATIONSBANK OF TEXAS, N.A. AS DOCUMENTATION AGENT AND OTHERS THIS THIRD AMENDED AND RESTATED AGREEMENT is made the 31st day of July, 1997 BETWEEN: (1) PELIKAN PRODUKTIONS AG and PELIKAN HARDCOPY (INTERNATIONAL) AG (together the "BORROWERS" and individually a "BORROWER"); (2) BARCLAYS BANK PLC as agent (the "AGENT"); (3) NATIONSBANK OF TEXAS, N.A. as collateral agent (the "COLLATERAL AGENT", the Agent and the Collateral Agent being hereinafter referred to collectively as the "AGENTS"); (4) NATIONSBANK OF TEXAS, N.A. as documentation agent (the "DOCUMENTATION AGENT"); (5) BARCLAYS BANK PLC as fronting bank (the "FRONTING BANK"); (6) BARCLAYS BANK PLC as overdraft provider (the "OVERDRAFT PROVIDER"), and (7) THE FINANCIAL INSTITUTIONS named in the First Schedule (the "BANKS"). WHEREAS the parties hereto wish further to amend and restate the Amended and Restated Revolving Credit Facility dated 15th October, 1996 (as so amended, the "ORIGINAL AGREEMENT"). NOW IT IS HEREBY AGREED that the Original Agreement is hereby further amended and restated as follows: 1. INTERPRETATION 1.1 In this Agreement: "ADVANCE" means, save as otherwise provided herein, an advance made or to be made by a Lender pursuant to the terms hereof; "AGENT'S SPOT RATE OF EXCHANGE" means the Agent's spot rate of exchange for the purchase of the relevant Optional Currency in the London foreign exchange market with Swiss francs on or about 11.00 a.m. on a particular day; "APPLICABLE MARGIN" means four percent (4%) per annum through June 30, 1998, and five percent (5%) per annum thereafter; "AVAILABLE COMMITMENT" means. in relation to a Bank at any time and save as otherwise provided herein, its Commitment at such time LESS (i) its share of the Outstandings (other than any outstanding Short-Term Advance) at such time (and for the purposes of determining a Bank's share of Outstandings which comprise L/C Outstandings, such Bank's share shall be the amount that it may become obliged to pay to the Fronting Bank pursuant to Clause 8.6) and (ii) except for the purposes of Clause 25, its share of any Advance which it is obliged, or may become obliged, to make pursuant to Clause 6.5 in respect of (a) any outstanding Short-Term Advance at close of business on the day before the proposed Utilization Date and (b) any Short-Term Advance requested to be made no later than the specified time on such proposed Utilization Date; "AVAILABLE FACILITY" means, at any time, the aggregate of the Available Commitments at such time adjusted, in the case of a proposed Utilization only. so as to take into account: (i) any reduction in the Commitment of a Bank which will occur prior to the commencement of, or during, the Term relating to the proposed Utilization consequent upon a cancellation of the whole or any part of the Commitment of such Bank pursuant to the terms hereof; (ii) the amounts of any Advances (other than any Short-Term Advances), and/or Letters of Credit which, pursuant to any other Utilization, any Bank or the Fronting Bank, as the case may be, are then obliged to make or, as the case may be, issue on or before the proposed Utilization Date relating to such proposed Utilization; and (iii) the amounts of any Advances and/or Letters of Credit which were made or, as the case may be, issued by any Bank or the Fronting Bank, as the case may, be pursuant hereto and which are due to be repaid or, as the case may be, expire on or before the proposed Utilization Date relating to such Utilization; "BARCLAYS OVERDRAFT AGENT" means Barclays Bank (Schweiz) AG, a company incorporated in Switzerland; "BASLE PAPER" means the paper entitled International Convergence of Capital Measurement and Capital Standards dated July 1988 prepared by the Basle Committee on Banking Regulations and Supervisory Practices. as amended in November 1991; "BORROWER SECESSION MEMORANDUM" means a memorandum delivered to the Agent by the Borrowers pursuant to Clause 38 in the form set out in the Sixth Schedule; "CLOSING DATE" has the meaning given it in the Credit Agreement; "COLLATERAL DOCUMENTS" has the meaning given it in the Credit Agreement; "COMMITMENT" means, in relation to a Bank at any time and save as otherwise provided herein, the amount set opposite its name in the First Schedule; "COMMITMENT FEE" has the meaning given to it in Clause 25; "COMMITMENT FEE PERCENTAGE" has the meaning given to it in the Credit Agreement; "CREDIT AGREEMENT" means the Second Amended and Restated Credit Agreement of even date hereof between Nu-kote Holding, Inc. as guarantor, Nu-kote International, Inc. as borrower, Barclays Bank PLC as documentation agent, NationsBank of Texas, N.A. as administrative agent and collateral agent and others; "EVENT OF DEFAULT" means an "Event of Default" referred to in Section 5 of the Nu-kote Guarantees; "EXPIRY DATE" means, in relation to any Letter of Credit, the date on which the maximum aggregate liability thereunder is to be reduced to zero; -3- "FACILITY" means the revolving cash advances and letter of credit facility granted to the Borrowers in this Agreement; "FACILITY OFFICE" means, in relation to any of the Agent, the Fronting Bank or the banks, the office identified with its signature below or such other office as it may from time to time select which is located in the same jurisdiction as the office identified with its signature below (or, in the case of a Transferee as the office identified in the Transfer Certificate pursuant to which it became a party hereto) or, such other office as may be agreed pursuant to Clause 17; "FINANCE DOCUMENTS" means this Agreement, the Nu-kote Guarantees, the Collateral Documents, the Security Documents, the Hedging Documents and any other document designated as such in writing by the Agent and the Borrowers; "GUARANTORS" means Nu-kote Holding, Inc., Nu-kote International, Inc., International Communication Materials, Inc., Future Graphics, Inc., Nu-kote Imaging International, Inc. and Nu-kote Imperial, Ltd. and "GUARANTOR" means any one of them; "HEDGING DOCUMENTS" means any and all currency or interest rate swap and/or interest cap and/or other hedging agreements entered into, or to be entered into by a Borrower with a Bank in relation to the obligations of such Borrower hereunder; "INTELLECTUAL PROPERTY RIGHTS PLEDGE AGREEMENT" means the Intellectual Property Rights Pledge Agreement dated 24th February, 1995 between Pelikan Produktions AG and the Agent; "INVENTORY PLEDGE AGREEMENT" means the Inventory Pledge Agreement dated 24th February, 1995 between Pelikan Produktions AG and the Agent; "L/C OUTSTANDINGS" means, at any time, the amount that is the sum of (i) the maximum aggregate amount that is or at any time thereafter may become available for drawings under each Letter of Credit outstanding at such time and (ii) the aggregate amount of all drawings under each Letter of Credit honored by the Fronting Bank and not theretofore reimbursed by the Borrower hereunder; "LENDERS" means the Banks and the Overdraft Provider; "LETTER OF CREDIT" means a documentary or standby letter of credit issued or to be issued by the Fronting Bank pursuant to Clause 7 in each case, in such form as may be requested by a Borrower and which is acceptable to the Fronting Bank; "LIBOR" means, in relation to any Advance (other than a Short-Term Advance) or unpaid sum, the rate per annum determined by the Agent to be equal to the arithmetic mean (rounded upwards, if necessary, to four decimal places) of the rates (as notified to the Agent) at which each of the Reference Banks was offering to prime banks in the London Interbank Market deposits in the currency of the relevant Advance and for the specified period at or about 11:00 a.m. on the Quotation Date for such specified period and, for the purposes of this definition, "SPECIFIED PERIOD" means the Term of such Advance or, as the case may be, the relevant period in respect of which LIBOR fails to be determined in relation to such unpaid sum; -4- "MANDATORY LIQUID ASSET COSTS RATE" means in relation to any Advance or unpaid sum denominated in sterling, the rate determined in accordance with the Seventh Schedule; "MORTGAGE TRANSFER AGREEMENT" means the Mortgage Transfer Agreement dated 24th February, 1995 between Pelikan Produktions AG and the Agent; "NU-KOTE GUARANTEES" means the guarantees dated 24th February, 1995 given by the Guarantors in favor of the Agent for itself and on behalf of the Lenders; "OBLIGORS" means the Borrowers and the Guarantors and "OBLIGOR" means any one of them; "OPTIONAL CURRENCY" means dollars, deutschmarks and sterling; "ORIGINAL SWISS FRANC AMOUNT" means: (i) the principal amount (in the case of an Advance), or the face value (in the case of a Letter of Credit), of a Utilization denominated in Swiss francs; or (ii) the principal amount (in the case of an Advance), or the face value (in the case of a Letter of Credit), of a Utilization denominated in an Optional Currency, translated into Swiss francs on the basis of the Agent's Spot Rate of Exchange on the date of receipt by the Agent of the Utilization Request for that Utilization; "OUTSTANDINGS" means, at any time, the aggregate of: (i) the principal amount of each outstanding Advance at such time; and (ii) the L/C Outstandings at such time; "OVERDRAFT FACILITY TRANSFEREE" means a Lender to which the Overdraft Provider transfers all (but not part) of its rights and obligations hereunder as the Overdraft Provider in accordance with Clause 30.5; "OVERDRAFT PROVIDER" means: (i) Barclays Bank PLC in its capacity as overdraft provider hereunder (and not, for the avoidance of doubt, Barclays Overdraft Agent through which Barclays Bank PLC acts in connection with Short-Term Advances) until the date, if any, that is 30 days after the date Barclays Bank PLC notifies the Borrowers that no more Short-Term Advances will be made by it; or (ii) any other Lender that may, from time to time, be appointed to act as the overdraft provider hereunder in accordance with Clause 30.5; "OVERDRAFT PROVIDER TRANSFER CERTIFICATE" means a certificate substantially in the form set out in the Eighth Schedule signed by the Overdraft Provider and the Overdraft Facility Transferee whereby: (i) the Overdraft Provider seeks to procure the transfer to the Overdraft Facility Transferee of all (but not part) of the Overdraft Provider's rights and obligations hereunder upon and subject to the conditions set out in Clause 30.5; and -5- (ii) the Overdraft Facility Transferee undertakes to perform all (but not part) of the Overdraft Provider's obligations hereunder as a result of delivery of such certificate to the Borrowers and the Agent as is contemplated in Clause 30.5; "OVERDRAFT RATE" means on any day the rate per annum notified by Barclays Overdraft Agent (or if any other Lender is the Overdraft Provider, such Overdraft Provider) to the Agent and the relevant Borrower as being the rate per annum for or with effect from such day (including a margin of 2% per annum); "OVERDRAFT REPAYMENT DATE" means, in relation to any Short-Term Advance, the earlier of (1) the date falling five business days after demand for repayment made to the relevant Borrower by the Overdraft Provider and (2) the Termination Date; "PELIKAN HARDCOPY INTERNATIONAL AG ASSIGNMENT AGREEMENT" means the Assignment Agreement dated 24th February, 1995 between Pelikan Hardcopy (International) AG and the Agent; "PELIKAN PRODUKTIONS AG ASSIGNMENT AGREEMENT" means the Assignment Agreement dated 24th February, 1995 between Pelikan Produktions AG and the Agent; "POTENTIAL EVENT OF DEFAULT" has the meaning given to it in the Nu-kote Guarantees; "PROPORTION" means, in relation to a Bank, the proportion borne by its Commitment to the Total Commitments (or, if the Total Commitments are then zero, by its Commitment to the Total Commitments immediately prior to their reduction to zero); "QUALIFYING LENDER" means a person recognized as a bank pursuant to Clause 232 of the Circular of the Swiss Federal Tax Authorities, dated 29 October 1992, regarding the tax treatment of syndicated loans, debt certificate issues, promissory notes and subparticipations. Provided that if that circular is amended or repealed, the Agent shall have power to amend this definition in a manner consistent with such amendment or repeal as soon as practically possible; "QUOTATION DATE" means, in relation to any period for which an interest rate is to be determined hereunder (other than a Short-Term Advance), the day on which quotations would ordinarily be given by prime banks in the London Interbank Market for deposits in the currency in relation to which such rate is to be determined for delivery on the first day of that period. Provided that, if for any such period quotations would ordinarily be given on more than one date, the Quotation Date for that period shall be the last of those dates; "REFERENCE BANKS" means the principal London office of Barclays Bank PLC or the principal London offices of other bank or banks as may from time to time be agreed between the Borrowers and the Agent acting on the instructions of the Requisite Lenders; "REPAYMENT DATE" means, in relation to any Advance hereunder (other than a Short-Term Advance), the last day of the Term thereof; "REQUISITE LENDERS" has the meaning given to it in the Credit Agreement; "REQUESTED AMOUNT" means, in relation to any Utilization Request, the aggregate principal amount of the Advances or, as the case may be, face amount of the Letter of Credit therein requested; -6- "SECURITY DOCUMENTS" means the Pelikan Produktions AG Assignment Agreement, the Pelikan Hardcopy International AG Assignment Agreement, the Intellectual Property Rights Pledge Agreement, the Inventory Pledge Agreement, the Mortgage Transfer Agreement and the Share Pledge Agreement; "SHARE PLEDGE AGREEMENT" means the Share Pledge Agreement dated 24th February, 1995 between Pelikan Produktions AG and the Agent; "SHORT-TERM ADVANCE" means any Advance denominated in Swiss francs made by the Overdraft Provider in that capacity pursuant to the terms hereof'; "TERM" means, save as otherwise provided herein, in relation to any Advance hereunder (other than a Short-Term Advance), the period for which such Advance is borrowed (as specified in the Utilization Request relating thereto) and, in relation to any Letter of Credit, the period from the date on which such Letter of Credit is issued until its Expiry Date (as specified in the Utilization Request relating thereto); "TERMINATION DATE" means January 4, 1999, or such earlier date on which the Revolving Credit Commitments, under and as defined in the Credit Agreement, shall terminate; "TOTAL COMMITMENTS" means the aggregate for the time being of the Banks' Commitments; "TRANSFER CERTIFICATE" means a certificate substantially in the form set out in the Second Schedule signed by a Bank and a Transferee whereby: (i) such Bank seeks to procure the transfer to such Transferee of all or a part of such Bank's rights and obligations hereunder upon and subject to the terms and conditions set out in Clause 30; and (ii) such Transferee undertakes to perform the obligations it will assume as a result of delivery of such certificate to the Borrowers and the Agent as is contemplated in Clause 30; "TRANSFER DATE" means, in relation to any Transfer Certificate or Overdraft Provider Transfer Certificate, the date for the making of the transfer as specified in the schedule to such Transfer Certificate or Overdraft Provider Transfer Certificate (as the case may be); "TRANSFEREE" means a bank or other financial institution to which a Bank transfers all or part of such Bank's rights and obligations hereunder in accordance with Clause 30; "UK FACILITY" means the third amended and restated revolving credit, letter of credit and contract guarantee facility made available to Pelikan Scotland Limited by Barclays Bank PLC and NationsBank, N.A. of even date hereof; "UTILIZATION" means a utilization of the Facility hereunder; "UTILIZATION DATE" means the date of a Utilization, being the date on which the Advances in respect thereof are to be made or the Letter of Credit in respect thereof is to be issued; and -7- "UTILIZATION REQUEST" means a notice given to the Agent pursuant to Clause 6.1 substantially in the form set out in the Fourth Schedule. 1.2 Any reference in this Agreement to: an "AFFILIATE" of the Agent shall be construed as a reference to a subsidiary or holding company, or to a subsidiary of a holding company, of the Agent; the "AGENT", the "COLLATERAL AGENT" or any "LENDER" or any "OVERDRAFT PROVIDER" shall be construed so as to include its and any subsequent successors, Transferees, Overdraft Facility Transferees and permitted assigns in accordance with their respective interests; a "BUSINESS DAY" shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks generally are open for business in London and Zurich and (but only in relation to a transaction involving an Optional Currency) the principal financial centre of the country of that Optional Currency; a "MONTH" is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month save that, where any such period would otherwise end on a day which is not a business day, it shall end on the next succeeding business day, unless that day falls in the calendar month succeeding that in which it would otherwise have ended, in which case it shall end on the immediately preceding business day; provided that, if a period starts on the last business day in a calendar month or if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last business day in that later month (and references to "MONTHS" shall be construed accordingly); "TAX" shall be construed so as to include any tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and "VAT" shall be construed as a reference to value added tax including any similar tax which may he imposed in place thereof from time to time. 1.3 "CHF" and "SWISS FRANCS" denote the lawful currency of Switzerland, "US$" and "DOLLARS" denote the lawful currency of the United States of America, "DM" and "DEUTSCHMARKS" denote the lawful currency of the Federal Republic of Germany and "L" and "STERLING" denote the lawful currency of the United Kingdom. 1.4 Save where the contrary is indicated, any reference in this Agreement to; (i) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may front time to time be, amended, restated, varied, novated or supplemented; and (ii) a time of day shall be construed as a reference to London time. 1.5 There are set out in the Fifth Schedule timetables of certain of the procedures provided for in this Agreement. For the purpose of construction, any reference herein to a specified time shall be construed as a reference to the relevant time set forth in the relevant timetable. -8- 2. THE FACILITY 2.1 The Lenders grant to the Borrowers, upon the terms and subject to the conditions hereof, a revolving cash advance and letter of credit facility in an aggregate Original Swiss Franc Amount of CHF 50,000,000. 2.2 Subject to Clause 2.1 above, the aggregate amount of all Utilizations denominated in an Optional Currency outstanding at any time shall not: (i) in the case of Utilizations denominated in dollars, exceed US$20,000,000; (ii) in the case of Utilizations denominated in deutschmarks, exceed DM30,000,000; and (iii) in the case of Utilizations denominated in sterling, exceed L15,000,000. 2.3 Notwithstanding Clause 2.2 above, that part of the Facility comprising Letters of Credit is limited to an Original Swiss Franc Amount of CHF 12,000,000. 2.4 That part of the Facility comprising Short-Term Advances will be provided by the Overdraft Provider and is limited to CHF 6,250,000. 3. PURPOSE 3.1 The Facility is intended to be used for general corporate purposes including. but not limited to: (i) working capital; (ii) capital and other expenditures and expenses; and (iii) refinancing existing indebtedness and other indebtedness, including reimbursement to the Fronting Bank of any amounts drawn under any Letters of Credit; and, accordingly, each Borrower shall apply all amounts raised by it hereunder in or toward satisfaction of such purposes. 3.2 Without prejudice to the obligations of the Borrowers under Clause 3.1, the Agents and the Lenders shall not be obliged to concern themselves with the application of amounts raised by a Borrower hereunder. 3.3 During the period while Barclays Bank PLC is the Overdraft Provider, Barclays Bank PLC shall cause Barclays Overdraft Agent to act as its agent in relation to Short-Term Advances made to the Borrower by Barclays Bank PLC as Overdraft Provider. 4. CONDITIONS PRECEDENT (a) Neither Borrower may utilize the Facility unless the Agent has confirmed to the Borrowers and the Lenders that it has received all of the documents listed in the Third Schedule and that each is, in form and substance, satisfactory to the Agent. -9- (b) By signing this Agreement, each of Pelikan Produktions AG and Pelikan Hardcopy (International) AG, in their capacities as pledgors and assignors under the Security Documents, acknowledge and agree that their obligations under the Security Documents remain fully applicable and extend to cover all of the obligations owed by each of them in their capacities as borrowers (and, in the case of Pelikan Produktions AG, as the Swiss Guarantor) under this Agreement. 5. NATURE OF LENDERS' OBLIGATIONS 5.1 The obligations of each Lender hereunder are several. 5.2 The failure by a Lender to perform its obligations hereunder shall not affect the obligations of any other Lender or a Borrower towards any other party hereto nor shall any other party be liable for the failure by such Lender to perform its obligations hereunder. 6. UTILIZATION OF THE FACILITY 6.1 Save as otherwise provided herein. Advances will be made by the Banks or, as the case may be, a Letter of Credit will be issued by the Fronting Bank or, as the case may be, Short-Term Advances will be made by the Overdraft Provider to a Borrower if: (i) no later than the specified time in respect of the proposed Utilization, the Agent or, in the case of a Short-Term Advance, the Overdraft Provider, has received from the relevant Borrower a Utilization Request therefor; (ii) the proposed Utilization Date in respect to such Utilization Request is a business day; (iii) the Requested Amount is: (a) in the case of a Utilization by means of Advances (other than Short-Term Advances), an amount which does not exceed the Available Facility at such time and which, if less than the Available Facility at such time; (1) if no other Advance (other than a Short-Term Advance) of less than an Original Swiss Amount of CHF 2,000,000 is outstanding at such time is: (A) if the currency is Swiss Francs, a minimum amount of CHF 1,000,000 and in additional integral multiples of CHF 2,000,000; or (B) if the currency is an Optional Currency, a minimum Original Swiss Franc Amount of CHF 1,000,000 (or an approximate amount thereof) and in additional integral multiples of an Original Swiss Franc Amount of CHF 2,000,000 (or as approximate amount thereof); or (2) if an Advance (other than a Short-Term Advance) of less than CHF 2,000,000 is outstanding at such time is: (A) if the currency is Swiss francs, a minimum amount of CHF 2,500,000 and in additional integral multiples of CHF 1,000,000; -10- or (B) if the currency is an Optional Currency, a minimum Original Swiss Franc Amount of CHF 2,500,000 (or an approximate amount thereof) and in additional integral multiples of an Original Swiss France Amount of CHF 1,000,000 (or an approximate amount thereof); or (b) in the case of a Utilization by means of a Letter of Credit, an amount which does not exceed the Available Facility at such time and which when aggregated with the L/C Outstandings at the time of such Utilization does not exceed an Original Swiss Franc Amount of CHF 12,000,000; or (c) in the case of a Utilization by means of Short-Term Advances, an amount which does not exceed the Available Facility at such time and which when aggregated with all other Short-Term Advances then outstanding, does not exceed CHF 6,250,000; (iv) in the case of a Utilization to be denominated in an Optional Currency, its principal amount (in the case of an Advance) or face value (in the case of a Letter of Credit), when aggregated with the aggregate principal amounts and/or face values, as the case may be, of all outstanding Utilizations denominated in the same Optional Currency, would not exceed the limits set out in Clause 2.2; and (v) the Term requested by the relevant Borrower in such Utilization Request for any Advance (other than Short-Term Advances) will end on a business day which is or precedes the Termination Date and will be: (a) in respect of any such Advance with a proposed Utilization Date falling during the period expiring on the earlier of the date that is two (2) months after the Closing Date, a period not exceeding 14 days. (b) in respect of any such Advance to which Clause 6.1(v)(a) does not apply, a period of one, three or six months; (c) in respect of a Letter of Credit; (1) if denominated in Swiss Francs, any period of 18 months or less; or (2) if denominated in an Optional Currency, any period of twelve months or less; (d) in respect of a Short-Term Advance, any period of one month or less; and (vi) the making of such Advance (other than a Short-Term Advance) will not result in there being more than 5 outstanding Advances (other than Short-Term Advances); and (vii) in the case of a Utilization by means of a Short-Term Advance, there is an Overdraft Provider. -11- 6.2 If and whenever, on the occasion of a Utilization, the Banks are required to make Advances or the Fronting Bank is required to issue a Letter of Credit pursuant hereto, the aggregate principal amount of the Advances to be so made or, as the case may be, the face amount of the Letter of Credit to be so issued shall be allocated to, and apportioned among, the Banks rateably to their respective Available Commitments for such Utilization. Provided that no amount shall be allocated to any Bank in respect of any Utilization if such Bank's Commitment will be cancelled pursuant to the terms hereof prior to or during the Term of the proposed Advances or, as the case may be, the Term of the proposed Letter of Credit. 6.3 Each Bank shall, subject to the terms hereof, be obliged, through its Facility Office, to make an Advance on the proposed Utilization Date in a principal amount equal to the amount allocated to it pursuant to this Clause 6. 6.4 The Agent shall not later than the specified time notify each Bank by telephone of the principal amount or, as the case may be, the amount allocated to it pursuant to this Clause 6, such notice to be promptly confirmed by the Agent by telex or telefax. 6.5 The Overdraft Provider may at any time request by notice to a Borrower (through the Agent) which at such time has an outstanding Short-Term Advance made by such Overdraft Provider that the Banks make an Advance to such Borrower on a business day specified by the Overdraft Provider in such notice (such date falling no earlier than five business days after receipt of such notice) and upon receiving such notice such Borrower shall, unless such outstanding Short-Term Advance has been repaid within three business days of receipt of such notice, be deemed to have served a Utilization Request for an Advance to be made by the Banks in an amount equal to, and in the same currency as, such outstanding Short-Term Advance on such business date specified by the Overdraft Provider for a Term of one month whereupon, notwithstanding the provisions of Clause 6.1(iii) or (v) or the conditions to making an Advance contained in Clause 10 or any cancellation of the Available Facility following the making of such Short-Term Advance, the Banks shall make such Advance available to such Borrower rateably to their respective Available Commitments at such time (or immediately prior to any such cancellation) and interest on such Advance shall be determined in accordance with Clause 11.2 and the Agent is hereby authorized to pay the proceeds of such Advance to the Overdraft Provider on behalf of the relevant Borrower to be applied in discharge of such outstanding Short-Term Advance. 6.6 For the avoidance of any doubt, since the definition of Commitment only applies to Banks and not the Overdraft Provider or the Fronting Bank, any Bank that is also an Overdraft Provider or Fronting Bank may be obliged to have Outstandings that, including its Advances as a Bank, its Short-Term Advances as Overdraft Provider and its L/C Outstandings as Fronting Bank, exceed the amount of its Commitment and any such Bank, in its capacity as Overdraft Provider and Fronting Bank, has the benefit of the Banks' obligations under Clauses 6.5 and 8.6 in respect of its Short-Term Advances and L/C Outstandings as Fronting Bank. 7. ISSUE OF LETTERS OF CREDIT 7.1 Each Utilization Request in respect of a Letter of Credit shall, in addition to the information required pursuant to Clause 6.1, specify the name and address of the recipient to which the relevant Letter of Credit should be delivered and shall have the proposed form of the Letter of Credit attached to it. 7.2 Subject to the provisions hereof, the Fronting Bank shall issue a Letter of Credit in accordance with Clause 7.1 if: -12- (i) no Event of Default or Potential Event of Default has occurred which is continuing; (ii) the representations and warranties set out in Section 3 of the Nu-kote Guarantees are true in all material respects on and as of such Utilization Date to the same extent as though made on and as of such Utilization Date, except to the extent that such representations and warranties specifically relate to an earlier date, in which case, such representations and warranties shall have been true and correct in all material respects as of such earlier date; and (iii) the form of the Letter of Credit has been agreed between the relevant Borrower and the Fronting Bank by no later than the specified time. 8. INDEMNITY (INCLUDING BANK INDEMNITY FOR SHORT-TERM ADVANCES) 8.1 If, at any time, a demand for payment in the amount so demanded (being herein referred to as the "AMOUNT DEMANDED") is made under a Letter of Credit by the beneficiary thereof, the Agent shall notify the relevant Borrower of such demand and make demand of that Borrower for an amount equal to the Amount Demanded. 8.2 A Borrower shall pay to the Agent an amount equal to the Amount Demanded following receipt by it of a demand made on it by the Agent under this Clause 8. Such payment shall be made on the second business day following the business day on which such Borrower receives such demand from the Agent, or, in the event that the Borrower receives such demand after 9:00 a.m. on such business day, on the third business day following. 8.3 Each Borrower hereby irrevocably and unconditionally agrees to indemnify and keep indemnified the Fronting Bank against each and every sum paid or payable by the Fronting Bank under any Letter of Credit issued at its request and also undertakes to indemnify and hold harmless the Fronting Bank on demand from and against all actions, proceedings, liabilities, costs (including, without limitation, any costs incurred in funding any amount which falls due from the Fronting Bank under any Letter of Credit in connection with any such Letter of Credit as certified by the Fronting Bank to the relevant Borrower), claims, losses, damages and expenses which the Fronting Bank may at any time incur or sustain in connection with or arising out of any Letter of Credit issued at its request. Provided that a Borrower shall not be obliged to pay any amount under this Clause 8.3 to the extent that such obligation has arisen as a result of (i) the fraud, gross negligence or wilful misconduct of the Fronting Bank or (ii) the failure by the Fronting Bank to use reasonable care to determine that the documents and certificates required to be delivered under any Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit before making any payment thereunder. 8.4 The Fronting Bank shall be entitled to make any payment under any Letter of Credit for which a demand has been made without any reference to or further authority from the Borrower at whose request such Letter of Credit was issued or any other investigation or enquiry, need not concern itself with the propriety of any demand made or purported to be made under and in the manner required by the terms of any such Letter of Credit and shall be entitled to assume that any person expressed in any Letter of Credit or in any notice served pursuant to any such Letter of Credit to be entitled to make demands is so entitled and that any individual purporting to sign any such demand or notice on behalf of such person is duly authorized to do so unless it has actual knowledge that such person is not so entitled or not so authorized; accordingly, it shall not (save as provided in this Clause 8) be a defense to any demand made of a Borrower, nor shall a Borrower's obligations -13- hereunder be impaired by the fact (if it be the case), that the Fronting Bank was or might have been justified in refusing payment, in whole or in part, of the amounts so demanded. Provided that the Fronting Bank shall use reasonable care to determine that the documents and certificates required to be delivered under any Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit before making any payment thereunder. 8.5 Save as otherwise provided in this Clause 8, the obligations of each Borrower to the Fronting Bank in connection with any such Letter of Credit shall not be discharged, lessened or impaired by any act, omission or circumstance whatsoever which, but for this provision, might operate to release or exonerate such Borrower from all or part of such obligations or in any other way discharge, lessen or impair the same. 8.6 Each Bank hereby irrevocably and unconditionally agrees to indemnify and keep indemnified the Fronting Bank and the Overdraft Provider on demand and in its Proportion against each and every sum payable hereunder by either Borrower to the Fronting Bank and the Overdraft Provider in respect of a Letter of Credit or Short-Term Advance but which is not paid on the due date therefor. 9. LETTER OF CREDIT COMMISSIONS AND FEES Each Borrower agrees to pay the following amounts with respect to each Letter of Credit issued by the Fronting Bank hereunder at its request; (i) (a) in respect of each documentary Letter of Credit with a term (on issue thereof) of less than one year, a commission of 0.625% per annum on the weighted average maximum amount available from time to time to be drawn under such Letter of Credit. Such commission shall be paid to the Agent for the account of each Bank and for distribution by the Agent to each Bank in proportion to each Bank's allocation pursuant to Clause 6.2 in arrear on and to (but excluding) each 31st March, 30th June, 30th September and 31st December in each year during the term thereof and on the Expiry Date thereof, the first such payment to be made on 31st March, 1995 in respect of any documentary Letter of Credit issued prior to such date; (b) in respect of each documentary Letter of Credit with a term (on issue thereof) of one year or more and each standby Letter of Credit, a commission equal to the product of (A) the weighted average Applicable Margin applicable to the Advances (other than Short-Term Advances) outstanding hereunder during the period of calculation multiplied by (B) the weighted average maximum amount available from time to time to be drawn during such period under such Letter of Credit. Such commission shall be paid to the Agent for the account of each Bank and for distribution by the Agent to each Bank in proportion to each Bank's allocation pursuant to Clause 6.2 in arrear on and to (but excluding) each 31st March, 30th June, 30th September and 31st December in each year during the term thereof and on the Expiry Date thereof, the first such payment to be made on 31st March, 1995; (ii) a fronting fee, for the account of the Fronting Bank, of 0.20% per annum on the face amount of such Letter of Credit in arrear on and to (but excluding) each 31st March, 30th June, 30th September and 31st December in each year during the term thereof and on the Expiry Date thereof, the first such payment to be made on 31st March, 1995 in respect of any such Letter of Credit issued prior to such date; and (iii) with respect to the issuance, any amendment and any transfer thereof and each drawing thereunder, in each case reasonable documentary and processing charges in -14- accordance with the Fronting Bank's standard schedule for such charges in effect at the date of issue or the relevant amendment, transfer or drawing (as the case may be) of the relevant Letter of Credit. 10. MAKING OF ADVANCES 10.1 If any Bank or the Overdraft Provider has been requested to make any Advance in accordance with the provisions hereof, and if on the proposed Utilization Date relating to such an Advance; (i) no Event of Default or Potential Event of Default has occurred which is continuing; and (ii) the representations and warranties set out in Section 3 of the Nu-kote Guarantees arc true in all material respects on and as of such Utilization Date to the same extent as though made on and as of such Utilization Date, except to the extent that such representations and warranties specifically relate to an earlier date, in which case, such representations and warranties shall have been true and correct in all material respects as of such earlier date; then, on such Utilization Date, such Bank or the Overdraft Provider (as the case may be) shall save as otherwise provided herein, make such Advance (through its Facility Office in the case of such Bank and if Barclays Bank PLC is the Overdraft Provider, through Barclays Overdraft Agent in the case of Short-Term Advances) to the relevant Borrower in accordance with the provisions of Clause 22. Advances made hereunder shall not be represented by notes or other instruments evidencing indebtedness. 10.2 If, before 9.00 a.m. on the Utilization Date of an Advance to be denominated in an Optional Currency, the Agent receives notice from a Lender that; (i) it is impracticable for the affected Lender to fund its participation in such Advance for its Term in that Optional Currency in the ordinary course of business in the London interbank market; or (ii) the use of the proposed Optional Currency might contravene any law or regulation relevant to the affected Lender; then the Agent shall promptly notify the relevant Borrower and that Advance shall not be made. 10.3 The Agent shall notify each relevant Party of any applicable Agent's Spot Rate of Exchange or Original Swiss Franc Amount as soon as practicable after it is ascertained. 11. INTEREST 11.1 On the last business day of each month and on the Repayment Date relating to each Advance (other than a Short-Term Advance) made to it the relevant Borrower shall pay accrued interest on that Advance. 11.2 On the earlier of: (i) the last business day of each month; and -15- (ii) the Overdraft Repayment Date, the relevant Borrower shall pay accrued interest on any Short Term Advance made to it. 11.3 The rate of interest applicable to an Advance (other than a Short-Term Advance) made by a Bank during the Term of such Advance shall be the rate per annum determined by the Agent to be the sum of: (i) LIBOR on the Quotation Date for such Advance; (ii) the Applicable Margin; and (iii) (in the case of an Advance denominated in sterling) the Mandatory Liquid Asset Costs Rate in respect thereof. 11.4 The rate of interest applicable to a Short-Term Advance shall be the Overdraft Rate. 11.5 The Agent shall promptly notify the Borrowers and the relevant Banks of each determination of an interest rate made by it pursuant to this Clause 11. 12. REPAYMENT OF ADVANCES 12.1 Each Borrower shall repay each Advance (other than a Short-Term Advance) made to it in full on the Repayment Date relating thereto. 12.2 Each Borrower shall repay each Short-Term Advance made to it in full on or before the Overdraft Repayment Date. 12.3 Neither Borrower shall repay all or any part of any Advance outstanding hereunder except at the times and in the manner expressly provided herein. 13. CANCELLATION 13.1 The Borrowers may, by giving to the Agent not less than three business days' prior notice to that effect, cancel the whole or any part (being a minimum amount of CHF 2,500,000 and in additional integral multiples of CHF 1,000,000) of the Available Facility. Any such cancellation shall reduce the Commitment of each Bank rateably. 13.2 Any notice of cancellation given by the Borrowers pursuant to Clause 13.1 shall be irrevocable and shall specify the date upon which such cancellation is to be made and the amount of such cancellation. 13.3 If (i) a Borrower is required to make any additional payment to a Lender pursuant to Clauses 14 or 18.2 or (ii) any Lender claims indemnification under Clauses 15.1 or 15.2, the Borrowers may, within thirty days thereafter and by not less than fifteen days' prior notice to the Agent (which notice shall be irrevocable), cancel all or any part of such Lender's Commitment whereupon on the date specified in such notice its Commitment shall be reduced by the amount so cancelled. 13.4 If the Borrowers give notice of cancellation pursuant to Clause 13.3, they may at the same time as such notice expires repay each outstanding Advance (or, as the case may be, the relevant proportion thereof) of the relevant Lender together with accrued interest thereon and may procure that such Lender's liability under all outstanding Letters of Credit (or, as the case may be, the relevant proportion thereof) will be secured in a manner acceptable to such Lender, it being understood that in -16- no event shall any Letter of Credit or the obligations of the Fronting Bank thereunder be cancelled, and security equal to, and in the same currency as, the maximum amount that can be drawn under each outstanding Letter of Credit issued by the Fronting Bank shall be acceptable to the Fronting Bank. 13.5 If on or after July 31, 1997, Nu-kote International, Inc. gives notice in accordance with the Credit Agreement to cancel the whole or any part of a Bank's commitment under the Credit Agreement, the Borrowers shall, at the same time, give notice in accordance with Clause 13.1 to cancel the whole or a proportion equal to the proportion to be cancelled under the Credit Agreement, of such Bank's Commitment hereunder. If the Borrowers fail to give such a notice in accordance with Clause 13.1, the notice given in accordance with the Credit Agreement shall be deemed to be a notice under Clause 13, MUTATIS MUTANDIS. Requisite Lenders hereby waive compliance with this Section 13.5 with respect to reductions occurring on the Closing Date. 14. TAXES 14.1 All payments to be made by a Borrower to the Agent, any Lender or the Fronting Bank hereunder shall be made free and clear of and without deduction for or on account of tax unless such Borrower is required to make such a payment subject to the deduction or withholding of tax, in which case the relevant Borrower shall promptly upon becoming aware thereof notify the Agent thereof and the relevant Borrower shall pay to the relevant taxing or other governmental authority the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by such Borrower pursuant to the succeeding sentence) promptly upon becoming aware of the same. If such deduction or withholding is required, the sum payable by the relevant Borrower in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, the Agent, such Lender or, as the case may be, the Fronting Bank receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made provided that the relevant Borrower shall not be required to make any additional payment to any Lender pursuant to this Clause 14.1 if: (i) the law, regulation or other administrative circular requiring such deduction or withholding was in existence on 24th February, 1995; (ii) the requirement to deduct or withhold arises as a result of such Lender not being at the time it becomes a party to this Agreement or having ceased to be a Qualifying Lender; (iii) the requirement to deduct or withhold could have been avoided or reduced as a result of such Lender complying with any obligation it may have to provide documentation in accordance with Clause 17.1; or (iv) the requirement to deduct or withhold would not have arisen but for a transfer or assignment or participation in breach of Clause 30. 14.2 If a Lender shall become aware that it is eligible for a refund in respect of any taxes actually paid by a Borrower pursuant to Clause 14.1 hereof, it shall promptly notify the relevant Borrower of the availability of such refund and shall, within 30 days after receipt of a request by the relevant Borrower, apply for such refund or shall furnish to the relevant Borrower such forms, duly completed, as will enable that Borrower to claim such refund on its own behalf. The relevant Borrower shall reimburse such Lender for all costs reasonably incurred by it in applying for and seeking such refund. If any Lender determines that it has received a refund in respect of any taxes paid by a -17- Borrower pursuant to Clause 14.1 hereof, it shall repay such refund within 30 days after receipt to the relevant Borrower to the extent of amounts not in excess of the amounts actually paid by such Borrower and not previously reimbursed in respect of the taxes giving rise to such refund net of all out-of-pocket expenses reasonably incurred by such Lender not previously reimbursed and without interest (other than interest received from the relevant taxing authority with respect to such refund). The relevant Borrower, upon request of the relevant Lender, agrees to return to such Lender the amount paid to it by the applicable Lender with respect to such refund (plus applicable penalties, interest or other charges) in the event that such Lender is required to repay such refund. In addition the Agent and each Lender shall reasonably cooperate with a Borrower, at that Borrower's expense, in contesting any taxes that such Borrower is required to bear pursuant to Clause 14.1 hereof and shall pay to such Borrower, on a net after tax basis, any refunds obtained as a result of such contest, together with any interest thereon, within 30 days of receipt. Nothing in this Clause 14.2 shall interfere with the right of any person to arrange its tax affairs in whatever manner it thinks fit nor oblige any person to disclose any information relating to its tax affairs or any computations in respect thereof to any other person. 15. INCREASED COSTS 15.1 If, after 24th February, 1995 by reason of, (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of tax or reserve requirements) in or in the official interpretation of any law or regulation by the authority charged with the administration or interpretation thereof, or (ii) the compliance with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law) but being a guideline or request with which banks are generally accustomed to comply; (i) a Lender incurs a cost as a result of such Lender's having entered into and/or performing its obligations under this Agreement and/or assuming or maintaining a commitment under this Agreement and/or participating in one or more Advances and/or one or more Letters of Credit hereunder; (ii) there is an increase in the cost to a Lender of funding or maintaining its participation in (a) all or any of the advances comprised in a class of advances formed by or including the Advances made or to be made hereunder and/or (b) all or any of the letters of credit comprised in a class of letters of' credit formed by or including the Letters of Credit made or to be made hereunder; or (iii) a Lender becomes liable to make any payment on account of tax or otherwise (not being a tax imposed on or measured by the net income or capital of such Lender's Facility Office by the jurisdiction in which it is incorporated or in which it or its Facility Office is located or centrally managed or controlled) on or calculated by reference to the amount of such Lender's participation in the Advances made or to be made hereunder and/or any Letter of Credit issued or to be issued hereunder and/or to any sum received or receivable by it hereunder, then the relevant Lender shall, through the Agent, notify Pelikan Produktions AG of such cost, such increased cost or, as the case may be, such liability within 30 days of becoming aware of the same, demanding indemnification in respect thereof and upon receipt of such notice and demand, Pelikan Produktions AG shall pay to the Agent for the account of that Lender, within five business days after receipt of such notice and demand, additional amounts sufficient to indemnify that Lender against such cost, such increased cost or such liability. A certificate in reasonable detail as to the amount of such cost, increased cost or such liability submitted to the Borrowers and the Agent by that Lender, shall, -18- except for manifest error, be final, conclusive and binding for all purposes. 15.2 In the event that any Lender shall have reasonably determined that the adoption or implementation after 24th February, 1995 of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy (other than (i) the terms, proposals and recommendations contained in the Basle Paper or (ii) any other rule, regulation, guideline or order regarding capital adequacy in effect on 24th February, 1995 affecting such Lender), including without limitation, a request or requirement (but being a request or requirement with which banks are generally accustomed to comply) which affects the manner in which a Lender is required to or does maintain capital resources having regard to such Lender's obligations hereunder and to amounts owing to it hereunder or any change therein or in the interpretation or application thereof or compliance by any Lender with any request or directive regarding capital adequacy (whether or not having the force of law and whether or not failure to comply therewith would be unlawful but if not having the force of law, being a request or directive with which banks are generally accustomed to comply and in any event excluding the terms, proposals and recommendations contained in the Basle Paper or any other rule, regulation, guideline or order regarding capital adequacy in effect on 24th February, 1995 affecting such Lender) from any central bank or governmental agency or body having jurisdiction, has the effect of increasing the amount of capital required to be maintained by such Lender and thereby reducing the rate of return on such Lender's overall capital as a consequence of such Lender's obligations hereunder to a level below that which such Lender would have achieved but for the occurrence of such circumstances, then the relevant Lender shall, through the Agent, notify Pelikan Produktions AG of such event within 30 days of becoming aware of the same demanding indemnification in respect thereof and including in such notification and demand a certificate stating (a) that one of the events described in this Clause 15.2 has occurred and describing in reasonable detail the nature of such event, (b) the amount of the reduction in the rate of return on such Lender's capital reasonably determined by such Lender to be allocable to the existence of such Lender's obligations hereunder and (c) setting forth in reasonable detail the manner of calculation of the reduction in the rate of return on such Lender's capital and such allocated amount thereof and Pelikan Produktions AG shall upon receipt of such notice and demand pay to the Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of such compensation, submitted to the Borrowers and the Agent by such Lender shall, in the absence of manifest error, be final, conclusive and binding for all purposes. In determining such amount, a Lender may use any reasonable averaging and attribution method. Nothing in this Clause 15.2 is intended to provide to the Borrowers the right to inspect the records, files or books of any Lender. 15.3 Pelikan Produktions AG shall not be required to pay any amounts pursuant to Clauses 15.1 or 15.2; (i) to the extent that such amounts are recovered under Clause 14, Clause 18 or any other sub-clause of Clause 15; (ii) to the extent that such cost, increased cost or liability would not have arisen but for a transfer or assignment in breach of Clause 30; (iii) unless the relevant Lender has delivered a notice and demand in the manner required by Clause 15.1 or, as the case may be, Clause 15.2 and such certificates as are referred to in Clause 5.1 or, as the case may be, 15.2; or (iv) to the extent that such cost, increased cost or liability has already been compensated for by the application of the Mandatory Liquid Asset Costs Rate. -19- 16. ILLEGALITY If, at any time after 24th February, 1995 it is unlawful for a Lender to make, fund or allow to remain outstanding all or any of the Advances made or to be made by it hereunder then that Lender shall, promptly after becoming aware of the same, deliver to Pelikan Produktions AG through the Agent a certificate to that effect and, unless such illegality is avoided in accordance with Clause 17 or Clause 38 taking into account any grace period allowed by any such order, request or requirement: (i) such Lender shall not thereafter he obliged to make any Advances and the amount of its Commitment shall be immediately reduced to zero; and (ii) if the Agent on behalf of such Lender so requires, Pelikan Produktions AG shall on such date as the Agent shall have specified; (a) repay each outstanding Advance together with accrued interest thereon and all other amounts owing to such Lender; and/or (b) procure that such Lender's obligations under any Letters of Credit will be secured in a manner acceptable to such Lender, it being understood that in no event shall any Letter of Credit or the obligations of the Fronting Bank thereunder be cancelled, and security in Swiss francs equal to the maximum amount that can be drawn under each Letter of Credit outstanding at such time shall be acceptable to the Fronting Bank. 17. MITIGATION 17.1 If, in respect of any Lender, circumstances arise which would or would upon the giving of notice result in; (i) the reduction of its Commitment to zero pursuant to Clause 16(i); (ii) an increase in the amount of any payment to be made to it or for its account pursuant to Clause 14 or Clause 18.2; or (iii) a claim for indemnification pursuant to Clause 15.1 or 15.2, then, without in any way limiting, reducing or otherwise qualifying the rights of such Lender or the obligations of the Borrowers under any of the Clauses referred to in (i), (ii) or (iii) above such Lender shall promptly upon becoming aware of the same notify the Agent thereof and, in consultation with the Agent and the Borrowers to the extent that it can do so without prejudice to its own position, take such steps as it determines are available to it (acting reasonably) to mitigate the effects of such circumstances at the request and expense of Pelikan Produktions AG including (i) the transfer of its Facility Office; (ii) (subject to Clause 30) the transfer of its rights and obligations hereunder to another financial institution acceptable to the Borrowers and willing to participate in the Facility; and/or (iii) within 30 days of becoming aware of the same, the execution and delivery to the relevant authorities (and/or the Borrowers) of any documentation necessary to secure the benefit of any applicable double taxation treaty or any relevant domestic law which would operate to mitigate any of the circumstances referred to above. Provided that such Lender shall be under no obligation to take any such action if, in the reasonable opinion of such Lender, to do so might have any adverse effect upon its business. operations or financial condition. -20- 17.2 The Borrowers hereby agree to pay all expenses reasonably incurred by any Lender in taking steps to mitigate the effects of circumstances giving rise to any of the matters referred to in Clause 17.1(i), (ii) and (iii) by transferring its Facility Office pursuant to Clause 17.1 to the extent that such expenses would not have occurred but for such transfer. 18. MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES 18.1 If, in relation to any Utilization by way of Advances (other than a Short Term Advance), the Agent determines that at or about 11.00 a.m. on the Quotation Date for the Term in respect of such Advances none of the Reference Banks was offering to prime banks in the London Interbank Market deposits in the relevant currency for the proposed duration of such Term, then, notwithstanding such failure to offer deposits in that currency: (i) the Agent shall notify the other parties hereto of such event; (ii) such Advances shall, nevertheless, be made and the amount of interest payable in respect of any such Advance during its Term shall be determined in accordance with the following provisions of this Clause 18; and (iii) if the Agent so requires, within five days of such notification the Agent and the relevant Borrower shall enter into negotiations with a view to agreeing upon a substitute basis for determining the rates of interest which may be applicable to such Advances and Advances in the future and any such substitute basis that is agreed shall take effect in accordance with its terms and be binding on each party hereto. Provided that the Agent may not agree any such substitute basis without the prior written consent of each Bank. 18.2 If no substitute basis is agreed upon within 10 business days pursuant to Clause 18.1(iii) in respect of such Advances, any such Advance made by a Bank pursuant to Clause 18.1(ii) shall bear interest during its Term at the rate per annum equal to the sum of the Applicable Margin at such time, the Mandatory Liquid Assets Costs Rate (if applicable) and the cost to such Bank (as certified by it in good faith to the Agent with a copy to the Borrowers and expressed as a rate per annum) of funding such Advance from whatever sources it may reasonably select. 19. ACCELERATION EVENT If one or more Events of Default shall have occurred then at any time thereafter and so long as the Event of Default in question is continuing unremedied or unwaived, the Agent (if so instructed by the Requisite Lenders) shall: (i) cancel the Commitments whereupon the same shall be so cancelled and reduced to zero; and/or (ii) declare any outstanding Advances to be immediately due and payable, whereupon the same shall become so due and payable, together with accrued interest thereon and all other sums due hereunder forthwith; and/or (iii) require each Borrower to provide security in respect of each Letter of Credit issued at its request in a manner acceptable to the Fronting Bank in the currency of each such Letter of Credit, it being understood that in no event shall any Letter of Credit or the obligations of the Fronting Bank thereunder be cancelled and security equal to, and in the same currency as, the maximum amount that can be drawn under each Letter of Credit outstanding at such time shall be acceptable to the Fronting Bank. -21- 20. DEFAULT INTEREST AND INDEMNITIES 20.1 If any amount of principal, Commitment Fee, or interest due and payable by a Borrower hereunder is not paid on the due date therefor, a Borrower does not reimburse the Fronting Lender for any drawing under a Letter of Credit hereunder on the due date therefor, any fees (other than the Commitment Fee) and other amounts payable by a Borrower hereunder are not paid within ten days of the due date therefor, or if any sum due and payable by a Borrower under any judgment of any court in connection herewith is not paid in accordance with the requirements of such judgment, the period beginning on such due date or, as the case may be, the date required by such judgment and ending on the date upon which the obligation of the relevant Borrower to pay such sum (the balance thereof for the time being unpaid being herein referred to as an "UNPAID SUM") is discharged shall be divided into successive periods, each of which (other than the first) shall start on the last day of the preceding such period and the duration of each of which shall (except as otherwise provided in this Clause 20) be reasonably selected by the Agent. 20.2 During each such period relating thereto as is mentioned in Clause 20.1 an unpaid sum shall bear interest at the rate per annum which is the sum from time to time of two percent, the Applicable Margin at such time, the Mandatory Liquid Asset Costs Rate Formula (if applicable) and LIBOR on the Quotation Date therefor. Provided that; (i) if, for any such period, LIBOR cannot be determined, the rate of interest applicable to such unpaid sum in respect of the Agent or any Lender shall be the sum from time to time of two percent, the Applicable Margin at such time, the Mandatory Liquid Asset Costs Rate Formula (if applicable) and the rate per annum notified to the Agent by such person (as certified by it in good faith to the relevant Borrower with a copy to the Agent) to be that which expresses as a percentage rate per annum the cost to such person of funding from whatever sources it may reasonably select its portion of such unpaid sum for such period; and (ii) if such unpaid sum is all or part of an Advance which became due and payable on a day other than the last day of the Term thereof, the first such period applicable thereto shall be of a duration equal to the unexpired portion of that Term and the rate of interest applicable thereto from time to time during such period shall be that which exceeds by one percent the rate which would have been applicable to it had it not so fallen due. 20.3 Any interest which shall have accrued under Clause 20.2 in respect of an unpaid sum shall be due and payable and shall be paid by the relevant Borrower at the end of the period by reference to which it is calculated. 20.4 If any Lender or the Agent on its behalf receives or recovers all or any part of an Advance made by such Lender otherwise than on the last day of the Term thereof, the Borrower to whom such Advance was made shall pay to the Agent on demand for the account of such Lender an amount equal to the amount (if any) by which (i) the additional interest which would have been payable on the amount so received or recovered had it been received or recovered on the last day of the Term thereof exceeds (ii) the amount of interest which in the opinion of the Agent would have been payable to the Agent on the last day of the Term thereof in respect of a deposit in the currency of the amount so received or recovered equal to the amount so received or recovered placed by it with a prime bank in the London Interbank Market for a period starting on the third business day following the date of such receipt or recovery and ending on the last day of the Term thereof. 20.5 Any unpaid sum shall (for the purposes of' this Clause 20 and Clause 15) be treated as an advance and accordingly in this Clause 20 and Clause 15 the term "Advance" includes any unpaid -22- sum and "Term", in relation to an unpaid sum, includes each such period relating thereto as is mentioned in Clause 20.1. 20.6 If any person receives an amount in respect of a Borrower's liability under the Finance Documents or if that liability is converted into a claim, proof, judgment or order in a currency other than the currency (the "CONTRACTUAL CURRENCY") in which the amount is expressed to be payable under the relevant Finance Document: (i) that Borrower shall indemnify that person as an independent obligation against any loss or liability arising out of or as a result of the conversion; (ii) if the amount received by that person, when converted into the contractual currency at a market rate in the usual course of its business, is less than the amount owed in the contractual currency, that Borrower shall forthwith on demand pay to that person an amount in the contractual currency equal to the deficit; and (iii) that Borrower shall pay to the person concerned on demand any exchange costs and taxes payable in connection with any such conversion. Each Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable. 21. CURRENCY OF ACCOUNT 21.1 A repayment or prepayment of an Advance or a payment by a Borrower under Clause 8.2, is payable in the currency in which that Advance or relevant Amount Demanded, as the case may be, is denominated. 21.2 Interest is payable in the currency in which the relevant amount in respect of which it is payable is denominated. 21.3 Amounts payable in respect of costs, expenses, taxes and the like are payable in the currency in which they are incurred. 21.4 Any other amount payable under this Agreement is, except as otherwise provided in this Agreement, payable in Swiss francs. 22. PAYMENTS 22.1 On each date on which this Agreement requires an amount to be paid by a Borrower or any of' the Lenders hereunder, the relevant Borrower or, as the case may be, such Lender shall make the same available in same day funds to the Agent or to its account at such office or bank as it may notify to the Borrower or Lender for this purpose. 22.2 On each date on which this Agreement requires an amount to be paid by a Borrower or the Overdraft Provider in respect of any Short-Term Advances, the relevant Borrower or, as the case may be, the Overdraft Provider shall make the same available for value the same day by transfer to such account with such bank in Zurich as the Overdraft Provider or, as the case may be, such Borrower shall have specified for this purpose. 22.3 Save as otherwise provided herein, each payment received by the Agent for the account of another person shall be made available by the Agent to such other person (in the case of a -23- Bank, for the account of its Facility Office) for value the same day by transfer to such account of such person with such bank in the principal financial centre of the relevant currency as such person shall have previously notified to the Agent. 22.4 All payments required to be made by a Borrower hereunder shall be calculated without reference to any set-off or counterclaim and shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 22.5 Where a sum is to be paid hereunder to the Agent for account of another person, the Agent shall not be obliged to make the same available to that other person until it has been able to establish to its satisfaction that it has actually received such sum, but if it does so and it proves to be the case that it had not actually received such sum, then the person to whom such sum was so made available shall on request refund the same to the Agent together with an amount sufficient to indemnify the Agent against any cost or loss it may have suffered or incurred by reason of its having paid out such sum prior to its having received such sum. 23. SET-OFF AND NETTING OF PAYMENTS 23.1 Each Borrower authorizes each Lender upon the occurrence of an Event of Default and consequent acceleration of the obligations of such Borrower hereunder pursuant to Clause 19 hereof to apply any credit balance to which such Borrower is entitled on any account of that Borrower with that Lender in satisfaction of any sum due and payable from such Borrower to such Lender hereunder but unpaid; for this purpose, each Lender is authorized to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application. Such Lender shall notify the relevant Borrower of any such application. No Lender shall be obliged to exercise any right given to it by this Clause 23. 23.2 If, on any occasion, the Agent receives a payment for the account of a Borrower pursuant to Clause 22.1, the Agent may make available such payment to the relevant Borrower by application: (i) first, in or towards payment the same day of any amount then due from such Borrower hereunder to the person from whom the amount was so received, and (ii) secondly, in or towards payment the same day to the account of such Borrower with such Lender in Zurich as such Borrower shall have previously notified to the Agent for this purpose. 24. REDISTRIBUTION OF PAYMENTS 24.1 Subject to Clause 24.2, if, at any time, the proportion which any Bank (a "Recovering Bank") has received or recovered (whether by payment, the exercise of a right of set-off or combination of accounts or otherwise) in respect of its portion of any payment (a "RELEVANT PAYMENT") to be made under this Agreement by either Borrower for account of such Recovering Bank and one or more other Banks is greater (the portion of such receipt or recovery giving rise to such excess proportion being herein called an "EXCESS AMOUNT") than the proportion thereof so received or recovered by the Bank or Banks so receiving or recovering the smallest proportion thereof, then: (i) such Recovering Bank shall pay to the Agent an amount equal to such excess amount; (ii) there shall thereupon fall due from the relevant Borrower to such Recovering -24- Bank an amount equal to the amount paid out by such Recovering Bank pursuant to paragraph (i) above, the amount so due being, for the purposes hereof, treated as if it were an unpaid part of such Recovering Bank's portion of such relevant payment; and (iii) the Agent shall treat the amount received by it from such Recovering Bank pursuant to paragraph (i) above as if such amount had been received by it from the relevant Borrower in respect of such relevant payment and shall pay the same to the persons entitled thereto (including such Recovering Bank) PRO RATA to their respective entitlements thereto. 24.2 If any Bank shall commence any action or proceeding in any court to enforce its rights hereunder and, as a result thereof or in connection therewith, shall receive any excess amount (as defined in Clause 24.1), then such Bank shall not be required to share any portion of such excess amount with any Bank which has the legal right to, but does not, join in such action or proceeding or commence and diligently prosecute a separate action or proceeding to enforce its rights in another court. 25. FEES Pelikan Produktions AG shall pay to the Agent for account of each Bank a Commitment Fee (the "COMMITMENT FEE") on the amount of such Bank's Available Commitment (less, if such Bank is also the Overdraft Provider, the Overdraft Provider's outstanding Short-Term Advances on such day) from day to day during the period beginning on 24th February, 1995 and ending on the Termination Date at the applicable Commitment Fee Percentage per annum and payable in arrears on and to (but excluding) each 31st March, 30th June, 30th September and 31st December falling during the term of this Agreement and on the Termination Date. For this purpose, Utilizations are taken at their Original Swiss Franc Amount. 26. COSTS AND EXPENSES 26.1 Except as otherwise agreed in writing by the Agents and the Borrowers, whether or not the Closing Date shall occur, Pelikan Produktions AG shall, on demand of an Agent, reimburse such Agent to the extent not recovered under any other Loan Document (as defined in the Credit Agreements) or other Finance Documents, for: (i) all reasonable costs of furnishing all opinions required hereunder by counsel for the Borrowers (including, without limitation, any opinions reasonably requested by such Agent as to any legal matters arising hereunder or under any Security Document) and of the Borrowers' compliance with all agreements and conditions contained herein or in any Finance Document on its part to be performed or complied with together with any VAT thereon; (ii) the reasonable fees, expenses and disbursements of counsel to such Agent together with any VAT thereon properly incurred in connection with the negotiation, preparation, execution and administration of this Agreement and the Finance Documents, each Advance made, and each Letter of Credit issued, thereunder and any amendments and waivers thereto; (iii) all the actual costs and expenses of creating and perfecting any encumbrance in favor of the Lenders contemplated by the Finance Documents including filing and recording fees and expenses, stamp duty or similar taxes, reasonable fees and expenses of legal counsel for providing such legal opinions as such Agent may reasonably request in connection therewith and reasonable fees and expenses of legal counsel to such Agent; -25- (iv) all costs and expenses (including reasonable legal fees) incurred by such Agent in connection with the preservation and enforcement of any of the rights of such Agent and the Lenders in connection with any workout or collection of any of the obligations of the Borrowers under this Agreement and the Finance Documents or enforcement of this Agreement or the Finance Documents; (v) all reasonable accountable out-of-pocket expenses (including travel and due diligence expenses) incurred by the Lenders in connection with the negotiation and closing of the Finance Documents; and (vi) all other actual and reasonable out-of-pocket expenses incurred by the Agent in connection with the making of Advances and issuance of Letters of Credit hereunder. 26.2 If Pelikan Produktions AG fails to perform any of their obligations under Clause 26.1, each Bank shall, in its Proportion, indemnify each Agent and Arranger against any loss incurred by it as a result of such failure and the Borrowers shall forthwith reimburse each Bank for any payment made by it pursuant to Clause 26.1. 26.3 In addition to the provisions of Clause 26.1 and whether or not the Closing Date shall occur, Pelikan Produktions AG agrees to indemnify, pay and hold each Agent and each Lender, and their respective officers, directors, employees, agents, and affiliates (collectively called the "INDEMNITEES") harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and out-of-pocket costs, expenses and disbursements of any kind or nature whatsoever including, without limitation, reasonable legal fees) in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto, that may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement or any Security Document, or the use or intended use of the proceeds thereof or in any way relating to or resulting from the actions or assets of the Borrowers or any of their respective subsidiaries (the "INDEMNIFIED LIABILITIES"), provided that the Borrowers shall have no obligation under this Clause 26.3 to any Indemnitee arising from the fraud, gross negligence, willful misconduct or willful breach of this Agreement or any Security Document by any party hereto and its related Indemnitees. 27. THE AGENTS AND THE LENDERS 27.1 Each Lender hereby appoints the Agent to act as its agent in connection with this Agreement and the Finance Documents and the Collateral Agent to act as its agent in connection with the Collateral Documents and authorizes each of the Agent and the Collateral Agent to exercise such rights, powers, authorities and discretions as are specifically delegated to the Agent by the terms hereof together with all such rights, powers, authorities and discretions as are reasonably incidental thereto. 27.2 Each of the Agent and the Collateral Agent may: (i) assume that: (a) any representation made by any Obligor in connection with any Finance Document is true; (b) no Event of Default has occurred; (c) no Obligor is in breach of or default under its obligations under any Finance Document; and -26- (d) any right, power, authority or discretion vested in a Finance Document upon the Requisite Lenders, the Lenders or any other person or group of persons has not been exercised, unless it has, in its capacity as agent for the Lenders hereunder, received notice to the contrary from any other party hereto; (ii) assume that the Facility Office of each Bank is that identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) until it has received from such Bank a notice designating some other office of such Bank to replace its Facility Office and act upon any such notice until the same is superseded by a further such notice; (iii) engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (iv) rely as to any matters of fact which might reasonably be expected to be within the knowledge of the Borrowers upon a Certificate signed by or on behalf of the Borrowers; (v) rely upon any communication or document believed by it to be genuine; (vi) refrain from exercising any right, power or discretion vested in it as Agent under any Finance Document unless and until instructed by the Requisite Lenders as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should he exercised; and (vii) refrain from acting in accordance with any instructions of the Requisite Lenders to begin any legal action or proceeding arising out of or in connection with this Agreement or any other Finance Document until it shall have received such security as it may require (whether by way of payment in advance or otherwise) for all costs, claims, losses, expenses (including without limitation, legal fees) and liabilities together with any VAT thereon which it will or may expend or incur in complying with such instructions. 27.3 Each of the Agent and the Collateral Agent shall: (i) promptly inform each Lender of the contents of any notice or document received by it in its capacity as Agent or, as the case may be, Collateral Agent from an Obligor under a Finance Document; (ii) promptly notify each Lender of the occurrence of any Event of Default or any default by an Obligor in the due performance of or compliance with its obligations under a Finance Document of which it has notice from any other party hereto; (iii) save as otherwise provided herein, act as agent hereunder in accordance with any instructions given to it by the Requisite Lenders, which instructions shall be binding on all of the Lenders; and (iv) if so instructed by the Requisite Lenders, refrain from exercising any right, power or discretion vested in it as agent hereunder. -27- 27.4 Notwithstanding anything to the contrary expressed or implied herein, neither the Agent nor the Collateral Agent shall: (i) be bound to enquire as to: (a) whether or not any representation made by an Obligor in connection with a Finance Document is true; (b) the occurrence or otherwise of any Event of Default; (c) the performance by each Obligor of its obligations under each Finance Document to which it is a party; or (d) any breach of or default by an Obligor of or under its obligations under any Finance Document. (ii) be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account; (iii) be bound to disclose to any other person any information relating to the Borrower if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or (iv) be under any obligations other than those for which express provision is made herein. 27.5 Each Lender shall, in its Proportion, from time to time on demand by the Agent or as the case may be, the Collateral Agent, indemnify the Agent or as the case may be, the Collateral Agent against any and all costs, claims, losses, expenses (including, without limitation, legal fees) and liabilities together with any VAT thereon which it may incur, otherwise than by reason of its own gross negligence or willful misconduct, in acting in its capacity as agent hereunder. 27.6 The Agent and the Collateral Agent do not accept any responsibility for the accuracy and/or completeness of any information supplied by either Borrower in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of this Agreement or any other Finance Document and the Agent and the Collateral Agent shall not be under any liability as a result of taking or omitting to take any action in relation to this Agreement or any other Finance Document, save in the case of fraud, gross negligence or wilful misconduct. 27.7 Each of the Lenders agrees that it will not assert or seek to assert against any director, officer or employee of the Agent or the Collateral Agent any claim it might have against any of them in respect of the matters referred to in Clause 27.6. 27.8 The Agent and the Collateral Agent may accept deposits from, lend money to and generally engage in any kind of banking or other business with either Borrower. 27.9 Each of the Agent and the Collateral Agent may resign its appointment hereunder at any time without assigning any reason therefor by giving not less than thirty days' prior written notice to that effect to each of the other parties hereto and by appointing any of its affiliates in its stead, such appointment to take effect from the date of resignation of the resigning agent. 27.10 If a successor to the Agent or the Collateral Agent is appointed under the provisions of -28- Clause 27.9, then (i) the retiring Agent shall he discharged from any further obligation hereunder but shall remain entitled to the benefit of the provisions of this Clause 27 and (ii) its successor and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor had been a party hereto. 27.11 It is understood and agreed by each Lender that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of the Borrowers and, accordingly, each Lender warrants to the Agent and the Collateral Agent that it has not relied on and will not hereafter rely on the Agent and the Collateral Agent or any one of them: (i) to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Borrowers in connection with any Finance Document or the transactions therein contemplated (whether or not such information has been or is hereafter circulated to such Lender by the Agent and the Collateral Agent or any one of them); or (ii) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of either Borrower. 27.12 In acting as agent and/or collateral agent for the Lenders, the agency division of each of the Agent and the Collateral Agent shall be treated as a separate entity from any other of its divisions or departments and, notwithstanding the foregoing provisions of this Clause 27, in the event that the Agent or the Collateral Agent should act for either Borrower in any capacity in relation to any other matter, any information given by the relevant Borrower to the Agent or the Collateral Agent in such other capacity may be treated as confidential by the Agent or the Collateral Agent. 28. BENEFIT OF AGREEMENT This Agreement shall be binding upon and enure to the benefit of each party hereto and its or any subsequent successors, Transferees, Overdraft Facility Transferees and permitted assigns. 29. ASSIGNMENTS AND TRANSFERS BY THE BORROWERS Neither Borrower shall be entitled to assign or transfer all or any of its rights, benefits and obligations hereunder. 30. ASSIGNMENTS AND TRANSFERS BY BANKS, CHANGE OF OVERDRAFT PROVIDER 30.1 Any Bank may, at any time, assign all or any of its rights and benefits hereunder, sell participations in, or transfer in accordance with Clause 30.3 (but not otherwise) all or any of its rights, benefits and obligations hereunder to any person provided that: (i) no such assignment or transfer may be made; (a) unless the Bank also transfers or assigns to the same person a pro rata share of its rights, benefits and obligations (if any) under the Credit Agreement and the UK Facility (unless such assignment or transfer is to an Eligible Assignee as defined in the Credit Agreement with the prior written consent of the Agent, which consent shall not be unreasonably withheld); (b) without the prior written consent of the Fronting Bank, the Overdraft -29- Provider and the Agent, such consent not to be unreasonably withheld or delayed, and the prior written consent of the Borrowers if such assignment or transfer is made to any person that is not an Eligible Assignee as defined in the Credit Agreement and no Event of Default has occurred and is continuing, such consent not to be unreasonably withheld or delayed; (c) if the result thereof would be that either Borrower would be liable to pay an additional amount or amounts pursuant to Clauses 14 or 15 which additional amount or amounts would not have been payable had no such transfer or assignment occurred unless such Transferee or assignee agrees to waive its rights to receive such additional amount or amounts and any rights under Clause 24 with respect to such amounts; and (ii) no such participation may be made unless: (a) the relevant Bank remains the lender of record hereunder and the proposed participant does not become the lender of record hereunder; (b) the relevant Bank's obligations hereunder shall remain unchanged and it shall remain solely responsible for the performance thereof; (c) all parties hereto shall be entitled to deal solely with the relevant Bank in connection with its Commitment and other rights and obligations of the relevant Bank under the Finance Documents; (d) such Bank shall be solely responsible for any withholding taxes or filing or reporting requirements relating to such participation and shall hold harmless each Borrower and the Agent against the same; (e) such participant shall represent and warrant that it does not engage in the same line of business as, or derive more than 10% of its revenues in the same line of business as, either Borrower; and (f) any such participant which is not an affiliate of the relevant Bank shall not be entitled to require the relevant Bank to take or omit to take any action under any Finance Document except action directly affecting the extension of the "Termination Date" hereunder or the reduction of the principal amount or the decrease in the rate of interest payable hereunder or any fees related thereto. 30.2 If any Bank assigns all or any of its rights and benefits hereunder in accordance with Clause 30.1, then, unless and until the assignee has agreed with the Agent and the other Banks that it shall be under the same obligations towards each of them as it would have been under if it had been an original party hereto as a Bank, the Agent and the other Banks shall not be obliged to recognize such assignee as having the rights against each of them which it would have had if it had been such a party hereto. 30.3 If any Bank wishes to transfer all or any of its rights, benefits and/or obligations hereunder as contemplated in Clause 30.1, then such transfer shall be effected by the delivery to the Borrowers and the Agent of a duly completed and duly executed Transfer Certificate in which event, on the later of the Transfer Date specified in such Transfer Certificate and the fifth business day after (or such earlier business day endorsed by the Agent on such Transfer Certificate falling on or after) the date of delivery of such Transfer Certificate to the Agent; -30- (i) to the extent that in such Transfer Certificate the Bank party thereto seeks to transfer its rights, benefits and obligations hereunder, the Borrowers and such Bank shall be released from further obligations towards one another hereunder and their respective rights against one another shall be cancelled (such rights, benefits and obligations being referred to in this Clause 30.3 as "discharged rights and obligations"); (ii) the Borrowers and the Transferee party thereto shall assume obligations towards one another and/or acquire rights against one another which differ from such discharged rights and obligations only insofar as the Borrowers and such Transferee have assumed and/or acquired the same in place of the Borrowers and such Bank; (iii) the Agent, such Transferee and the other Banks shall acquire the same duties and benefits and assume the same obligations between themselves as they would have acquired and assumed had such Transferee been an original party hereto as a Bank with the rights, benefits and/or obligations acquired or assumed by it as a result of such transfer; and (iv) to the extent that in such Transfer Certificate the Bank party thereto seeks to transfer its Commitment, the Transferee shall replace such Bank under the terms of any relevant Letter of Credit. 30.4 On the date upon which a transfer takes effect pursuant to Clause 30.3, the Transferee in respect of such transfer shall pay to the Agent for its own account a transfer fee of L500. 30.5 Pelikan Produktions AG may, at any time and from time to time, upon notice to the Agent, request that a different Lender specified by Pelikan Produktions AG be appointed as the Overdraft Provider. Promptly upon such other Lender agreeing to such request and repayment of all outstanding Short-Term Advances together with accrued interest thereon to the existing Overdraft Provider, the existing Overdraft Provider shall transfer to such Lender all (but not part) of its rights, benefits and obligations hereunder as the Overdraft Provider. Any transfer contemplated by this Clause 30.5 shall be effected by the delivery to the Borrowers and the Agent of a duly completed and duly executed Overdraft Provider Transfer Certificate in which event, on the later of the Transfer Date specified in such certificate and the fifth business day after (or such earlier business day endorsed by the Agent on such certificate falling on or after) the date of delivery of such certificate to the Agent; (i) the Borrowers and the Overdraft Provider shall be released from further obligations towards one another hereunder and their respective rights against one another shall be cancelled; (ii) the Borrowers and the Overdraft Facility Transferee shall acquire the same rights and benefits and assume the same obligations towards one another as they would have acquired and assumed had the Overdraft Facility Transferee been an original party hereto as the Overdraft Provider; and (iii) the Agents, the Overdraft Facility Transferee and the other parties hereto shall acquire the same rights and benefits and assume the same obligations between themselves as they would have acquired and assumed had the Overdraft Facility Transferee been an original party hereto as the Overdraft Provider with the rights, benefits and/or obligations acquired or assumed by it as a result of such transfer. -31- 31. DISCLOSURE OF INFORMATION Each Lender shall take normal and reasonable precautions to maintain the confidentiality of all information obtained pursuant to the requirements of any Finance Document which has been identified as such by the Borrowers (including, without limitation, the reports delivered pursuant to the Third Schedule to the Original Agreement) but may, in any event, make disclosures reasonably required by any bona fide assignee, Transferee, Overdraft Facility Transferee or participant (or prospective assignee, Transferee or participant) in connection with the contemplated assignment or transfer of any of its rights and obligations thereunder provided that (a) such assignee, Transferee, Overdraft Facility Transferee, participant or person agrees to comply with the provisions of this Clause 31; (b) such prospective assignee, Transferee, Overdraft Facility Transferee or participant shall have executed a confidentiality agreement substantially in the form of the Exhibit; and (c) no Lender shall be obliged or required to return any written information or other materials furnished by the Borrowers in connection with any Finance Document. Notwithstanding the foregoing, the Agents and/or any Lender shall be entitled to disclose any such information; (i) if required to do so by an order of a court of competent jurisdiction whether in pursuance of any procedure for discovering documents or otherwise; or (ii) if required by any law or regulation having the force of law; or (iii) pursuant to any requirement or request of any fiscal, monetary, tax, governmental or other competent authority; or (iv) to its auditors, legal or other professional advisors; or (v) which is in the public domain, and unless specifically prohibited by applicable law or court order, such Lender shall notify the Borrowers of any disclosure pursuant to paragraphs (i), (ii) and (iii). 32. CALCULATIONS AND EVIDENCE OF DEBT 32.1 Interest and Commitment Fee shall accrue from day to day and shall be calculated on the basis of a year of 360 days or (in the case of interest payable on an amount denominated in sterling) 365 days and the actual number of days elapsed. 32.2 Letter of Credit commission in respect of any Letter of Credit, and any period of the Term thereof determined pursuant to Clause 9, shall be calculated on the basis of a year of 360 days or (in the case of a Letter of Credit denominated in sterling) 365 days and the actual number of days in such period (or, in any case where market practice differs, in accordance with market practice). 32.3 If on any occasion a Reference Bank or Bank fails to supply the Agent with a quotation required of it under the foregoing provisions of this Agreement, the rate for which such quotation was required shall be determined from those quotations which are supplied to the Agent. 32.4 Each Lender shall maintain in accordance with its usual practice accounts evidencing the amounts from time to time lent by and owing to it hereunder. 32.5 The Agent shall maintain on its books a control account or accounts in which shall be recorded (i) the amount of any Advance made or arising hereunder (and the name of the Lender to -32- which such sum relates) and the face amount of any Letter of Credit issued (and each Lender's share therein), (ii) the amount of all principal. interest and other sums due or to become due from either Borrower to any of the Lenders hereunder and each Lender's share therein and (iii) the amount of any sum received or recovered by the Agent hereunder and each Lender's share therein. 32.6 In any legal action or proceedings arising out of or in connection with this Agreement, the entries made in the accounts maintained pursuant to Clauses 32.4 and 32.5 shall in the absence of manifest error be conclusive evidence of the existence and amounts of the obligations of the Borrowers therein recorded. 32.7 A certificate of a Lender as to (i) the amount by which a sum payable to it hereunder is to be increased under Clause 14 or (ii) the amount for the time being required to indemnify it against any such cost, payment or liability as is mentioned in Clause 15 shall, in the absence of manifest error, be conclusive for the purposes of this Agreement. 32.8 Each Lender hereby represents that as at 24th February, 1995 (i) its participation as a Lender hereunder and extension of credit in respect hereof will not require registration or qualification under any applicable securities laws nor is it illegal (as referred to in Clause 16), and (ii) it is a Qualifying Lender. Barclays Bank PLC represents that as at the date hereof Barclays Overdraft Agent is a person recognized as a bank pursuant to Clause 232 of the Circular of Swiss Federal Tax Authorities, dated 29th October, 1992 regarding the tax treatment of syndicated loans, debt certificate issues, promissory notes and subparticipations. 33. REMEDIES AND WAIVERS No failure to exercise, nor any delay in exercising, on the part of the Agent and the Lenders or any of them, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 34. PARTIAL INVALIDITY If, at any time, any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 35. NOTICES 35.1 Each communication to be made hereunder shall, unless otherwise stated, be made in writing by telex, telefax or letter. 35.2 Any communication or document (unless made by telefax) to be made or delivered by one person to another pursuant to this Agreement shall (unless that other person has by fifteen days' written notice to the Agent specified another address) be made or delivered to that other person at the address identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee, or in the case of an Overdraft Facility Transferee, at the end of the Overdraft Provider Transfer Certificate to which it is a party as the Overdraft Facility Transferee) and shall be deemed to have been made or delivered when despatched and the appropriate answerback received (in the case of any communication made by telex) or (in the case of any communication made by letter) when left at that address or (as the case may be) ten days after being -33- deposited in the post postage prepaid in an envelope addressed to it at that address provided that any communication or document to be made or delivered to the Agent shall be effective only when received by the Agent and then only if the same is expressly marked for the attention of the department or officer identified with the Agent's signature below (or such other department or officer as the Agent shall from time to time specify for this purpose). 35.3 Where any provision of this Agreement specifically contemplates telephone or telefax communication made by one person to another, such communication shall be made to that other person at the relevant telephone number specified by it from time to time for the purpose and shall be deemed to have been received when made (in the case of any communication by telephone) or when transmission has been completed (in the case of any telecommunication by telefax). Each such telefax communication, if made to the Agent by a Borrower shall be signed by the person or persons authorized by that Borrower in the certificate delivered pursuant to the Third Schedule and shall be expressed to be for the attention of the department or officer whose name has been notified for the time being for that purpose by the Agent to the Borrowers, 35.4 Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the English language or accompanied by a translation thereof into English certified (by an officer of the person making or delivering the same) as being a true and accurate translation thereof. 36. COUNTERPARTS This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts each of which, when executed and delivered, shall constitute an original, but all the counterparts shall together constitute but one and the same instrument. Faxes of signatures shall be binding and effective as originals. -34- 37. AMENDMENTS To the extent not otherwise expressly provided in any Finance Document, no amendment, modification, termination or waiver of any provision of any Finance Document or consent to any departure by a Borrower therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders and the Borrowers; except that any amendment, modification, termination, or waiver that (i) changes the amount of the Commitments or the principal amount of the Advances or extends the scheduled maturity thereof or changes the currency of any payment hereunder; (ii) changes any Proportion or the definition of "Requisite Lenders"; (iii) extends the dates on which interest is or fees are payable hereunder, or the maximum duration of interest periods; or (iv) reduces any interest rates payable on the Advances or any fees (other than administrative fees) payable hereunder or under any other Finance Document, each shall be effective only if evidenced by a writing signed by or on behalf of all Lenders under this Agreement and the Borrowers; provided, however, that (A) the First Schedule and the Commitments and Proportions shall be amended from time to time to give effect to the Commitments and Proportions of each new Bank that becomes a party to this Agreement at the time such Bank becomes a Bank and (B) any amendment, modification or waiver that changes any administrative fees, or the times at which such fees are payable hereunder shall be effective only if evidenced by a writing signed by or on behalf of the Borrowers and each Lender affected thereby. Any amendment, modification, termination or waiver of any of the conditions precedent to funding an Advance shall be effective only if evidenced by a writing signed by or on behalf of the Requisite Lenders and the Borrowers. No amendment, modification, termination or waiver of any provision of the agency provisions of this Agreement shall be effective without the written concurrence of the Agents, the Requisite Lenders and the Borrowers. No amendment, modification, termination or waiver of any Finance Document that releases any guarantor or releases any collateral under the Security Documents not otherwise permitted under the Credit Agreement or such Security Document shall be effective unless evidenced by a writing signed by or on behalf of Banks having 80% or more of the combined aggregate amount of the Commitments under this Agreement or, in the case of the Commitment under this Agreement that has been terminated, the Outstandings, if any, made hereunder. The Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on either Borrower shall entitle such Borrower to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent with respect to this Agreement effected in accordance with this Clause 37 shall be binding upon the Borrowers. 38. BORROWER SECESSION In the event that any Borrower is required to make any additional payment to a Lender pursuant to Clauses 14 or 18.2 or any Lender claims indemnification under Clauses 15.1 or 15.2 or an event referred to in Clause 16 occurs and such requirement, claim or consequence of such event would be avoided or mitigated by that Borrower ceasing to be a Borrower hereunder then subject to the Borrower being under no actual obligation or contingent payment obligation under or pursuant to any Finance Document, it may cease to be a Borrower hereunder with the prior written consent of the Agent and upon receipt by the Agent of a Borrower Secession Memorandum. -35- 39. GUARANTEE BY PELIKAN PRODUKTIONS AG 39.1 As consideration for Banks and the Overdraft Provider agreeing to enter into this Agreement and extend the Commitments and Short-Term Advances, as applicable, hereunder, Pelikan Produktions AG hereby unconditionally and irrevocably guarantees the due and punctual payment when due of all Obligations of Pelikan Hardcopy (International) AG. For purposes of this Clause 39: (i) Pelikan Produktions AG is referred to as the "Swiss Guarantor" and the obligations of Pelikan Produktions AG under this Clause 39.1 are referred to as this "Guarantee" and (ii) "Obligations" shall mean all obligations and liabilities of Pelikan Hardcopy (International) AG owed to Agents, Arrangers, the Fronting Bank, or Lenders (or any of them) under this Agreement or any of the other Finance Documents. 39.2 The Swiss Guarantor waives presentation of, demand of, payment from and protest of any Obligation of Pelikan Hardcopy (International) AG and also waives notice of protest for non-payment. The obligations of the Swiss Guarantor under the Guarantee shall not be affected by, and the Swiss Guarantor hereby waives its rights (to the extent permitted by applicable law) in connection with: (a) the failure of any Agent, the Fronting Bank or any Lender to assert any claim or demand or to enforce any right or remedy against Pelikan Hardcopy (International) AG under the provisions of this Agreement or any other agreement or otherwise; (b) any extension or renewal of any provision thereof; (c) any increase in the amount of the Obligations; (d) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement (subject to Clause 37) or any instrument executed pursuant hereto; (e) the release of any of the security held by any party for the Obligations of Borrowers; (f) the failure of any Agent, the Fronting Bank or any Lender to exercise any right or remedy against any other guarantor of the Obligations; (g) any Agent, the Fronting Bank or any Lender taking and holding security or collateral for the payment of this Guarantee, any other guarantees of the Obligations or other liabilities of Pelikan Hardcopy (International) AG and the Obligations guaranteed hereby, and exchanging, enforcing, waiving and releasing any such security or collateral; (h) any Agent, the Fronting Bank or any Lender applying any such security or collateral and directing the order or manner of sale thereof as Collateral Agent and Agent in their discretion, may determine; or (i) any Agent, the Fronting Bank or any Lender settling, releasing, compromising, collecting or otherwise liquidating the Obligations and any security or collateral therefor in any manner determined by the applicable Agent, the Fronting Bank or such Lender. The obligations of the Swiss Guarantor under this Guarantee shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim -36- of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations, discharge of Pelikan Hardcopy (International) AG from the Obligations in a bankruptcy or similar proceeding or otherwise. Without limiting the generality of the foregoing, the obligations of the Swiss Guarantor under this Guarantee shall not be discharged or impaired or otherwise affected by the failure of any Agent, the Fronting Bank or any Lender to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing that may or might in any manner or to any extent vary the risk of the Swiss Guarantor or would otherwise operate as a discharge of the Swiss Guarantor as a matter of law or equity. Any Agent may, at its or their election, foreclose on any security held by them by one or more judicial or nonjudicial sales, or exercise any other right or remedy any Agent may have against Swiss Guarantor, Pelikan Hardcopy (International) AG or any security without affecting or impairing in any way the liability of the Swiss Guarantor hereunder except to the extent the Obligations have been paid. The Swiss Guarantor waives any defense arising out of such election by an Agent, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of the Swiss Guarantor against Pelikan Hardcopy (International) AG or any security, so long as such Agent has acted in a commercially reasonable manner. The Swiss Guarantor further agrees that this Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any of the Obligations is rescinded or must otherwise be restored by any Agent, the Fronting Bank or any Lender upon the bankruptcy or reorganization of Pelikan Hardcopy (International) AG or otherwise. The Swiss Guarantor further agrees, in furtherance of the foregoing and not in limitation of any other right that any Agent, the Fronting Bank or any Lender may have at law or in equity against the Swiss Guarantor by virtue hereof, upon the failure of Pelikan Hardcopy (International) AG to pay any of the Obligations when and as the same shall become due (whether by required prepayment, declaration, demand or otherwise), the Swiss Guarantor will forthwith pay, or cause to be paid, in cash, to an Agent an amount equal to the sum of the unpaid principal amount of such Obligations, accrued and unpaid interest on such Obligations and all other Obligations of Pelikan Hardcopy (International) AG to any Agent, the Fronting Bank or such Lender. So long as any of the Obligations shall remain outstanding hereunder, the Swiss Guarantor hereby irrevocably waives any right of subrogation, contribution, indemnity or otherwise against Pelikan Hardcopy (International) AG that may arise out of or be caused by this Guarantee, all rights and/or claims against Pelikan Hardcopy (International) AG which may arise against Pelikan Hardcopy (International) AG by reason of this Guarantee, any right to enforce any remedy that any Lenders now have or may hereafter have against Pelikan Hardcopy (International) AG and any benefit of, and any right to participate in, any security now or hereafter held by or on behalf of Lenders. Notwithstanding anything contained in this Clause 39.2 to the contrary, this Guarantee shall not be effective or in full force and effect until the Closing Date. -37- 40. LAW This Agreement shall be governed by, and shall be construed in accordance with, English law. 41. JURISDICTION 41.1 Each Borrower hereby irrevocably agrees for the benefit of each of the other parties hereto that the courts of England shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes which may arise out of or in connection with this Agreement and, for such purposes irrevocably submits to the jurisdiction of such courts. 41.2 Each Borrower irrevocably waives any objection which it might now or hereafter have to the courts referred to in Clause 41.1 being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and agrees not to claim that any such court is not a convenient or appropriate forum. 41.3 Each Borrower agrees that the process by which any suit, action or proceeding is begun may be served on it by being delivered in connection with any suit, action or proceeding in England to Pelikan Scotland Limited at Newcastle Way, Orton, Southgate, Peterborough PE2 AUJ or otherwise its registered office for the time being. If the appointment of the person mentioned in this Clause 41.3 ceases to be effective each Borrower shall immediately appoint a further person in England to accept service of process on its behalf in England and, failing such appointment within 15 days, the Agent shall be entitled to appoint such a person by notice to the Borrowers. Nothing contained herein shall affect the right to serve process in any other manner permitted by law. 41.4 The submission to the jurisdiction of the courts referred to in Clause 41 shall not (and shall not be construed so as to) limit the right of any party to take proceedings against any other party in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. 42. WAIVERS; RATIFICATIONS Borrowers each hereby expressly acknowledge and agree that, as of the Closing Date, save and except the Hedging Documents, neither of them has any setoffs, counterclaims, adjustments, recoupments, defenses, claims or actions of any character, whether contingent, non-contingent, liquidated, unliquidated, fixed, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, against any Bank, the Agent, the Documentation Agent, the Collateral Agent, the Fronting Bank, or the Overdraft Provider or any grounds or cause for reduction, modification or subordination of the obligations of Borrowers under this Agreement and/or any Security Document or any liens or security interests of any Bank, the Agent, the Documentation Agent, the Collateral Agent, the Fronting Bank, or the Overdraft Provider. To the extent either Borrower possesses, as of the Closing Date, any such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds or causes, each Borrower hereby waives, and hereby releases each Bank, the Agent, the Documentation Agent, the Collateral Agent, the Fronting Bank, and the Overdraft Provider from, any and all of such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds and causes, such waiver and release being with full knowledge and understanding of the circumstances and effects of such waiver and release and after having consulted counsel with respect thereto. Borrowers hereby acknowledge that they are indebted to Banks with respect to Advances in the principal amount of CHF 49,750,000, including CHF 6,000,000 Short Term Advances, which are outstanding on the date hereof. Borrowers hereby ratify and confirm their -38- respective obligations under the Security Documents. This Agreement amends and restates the Original Agreement in its entirety. AS WITNESS the hands of the duly authorized representatives of the parties hereto the day and year first before written. -39- THE FIRST SCHEDULE THE BANKS BANK COMMITMENT (CHF) Barclays Bank PLC 7,000,000 NationsBank N.A. 16,525,000 Commerzbank AG 5,000,000 Deutsche Bank AG 5,000,000 The First National Bank of Chicago 5,000,000 Societe Generale 4,925,000 ABN AMRO Bank N.V. 3,275,000 Credit Lyonnais, S.A. 3,275,000 -40- THE SECOND SCHEDULE FORM OF TRANSFER CERTIFICATE To Barclays Bank PLC Pelikan Produktions AG Pelikan Hardcopy (International) AG TRANSFER CERTIFICATE relating to the third amended and restated agreement (the "FACILITY AGREEMENT") dated 31 July, 1997 whereby a revolving credit facility was made available to Pelikan Produktions AG and Pelikan Hardcopy (International) AG as borrowers by a group of banks on whose behalf Barclays Bank PLC acted as agent in connection therewith. 1. Terms defined in the Facility Agreement shall, subject to any contrary indication, have the same meanings herein. The terms Bank and Transferee are defined in the schedule hereto. 2. The Bank (i) confirms that the details in the schedule hereto under the heading "BANK'S COMMITMENT" or "ADVANCE(S)" accurately summarizes its Commitment and/or, as the case may be, the Term and Repayment Date of one or more existing Advances made by it and (ii) requests the Transferee to accept and procure the transfer to the Transferee of the portion specified in the schedule hereto of, as the case may be, its Commitment and/or such Advance(s) by counter-signing and delivering this Transfer Certificate to the Agent at its address or the service of notices specified in the Facility Agreement. 3. The Transferee hereby requests the Agent to accept this Transfer Certificate as being delivered to the Agent pursuant to and for the purposes of Clause 30.3 of the Facility Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Transferee confirms that it has received a copy of the Facility Agreement, together with such other information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Bank to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such information and further agrees that it has not relied and will not rely on the Bank to assess or keep under review on its behalf the financial condition, creditworthiness. condition, affairs, status or nature of the Borrowers. 5. The Transferee hereby undertakes with the Borrowers. the Bank and each of the other parties to the Facility Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Facility Agreement will be assumed by it after delivery of this Transfer Certificate to the Agent and satisfaction of the conditions (if any) subject to which this Transfer Certificate is expressed to take effect. The Transferee hereby makes the representations made by each Bank in Clause 32.8 of the Facility Agreement as though made on and as of the date hereof. 6. The Bank makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of the Facility Agreement or any document relating thereto and assumes no responsibility for the financial condition of the Borrowers or for the performance and observance by the Borrowers of any of their respective obligations under the Facility Agreement or my document relating thereto and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. -41- 7. The Bank hereby gives notice that nothing herein or in the Facility Agreement (or any document relating thereto) shall oblige the Bank to (i) accept a re-transfer from the Transferee of the whole or any part of its rights, benefits and/or obligations under the Facility Agreement transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Transferee for any reason whatsoever including, without limitation, the non-performance by the Borrowers or any other party to the Facility Agreement (or any document relating thereto) of its obligations under any such document. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (i) or (ii) above. 8. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. THE SCHEDULE 1. Bank: 2. Transferee: 3. Transfer Date: 4. Commitment: Bank's Commitment Portion Transferred 5. Advance(s): Term and Repayment Date Portion Transferred [Transferor Bank] [Transferee Bank] By: By: Date: Date: ADMINISTRATIVE DETAILS OF TRANSFEREE Address: Contact Name: Account for Payments: Telex: Telefax: Telephone: -42- THE THIRD SCHEDULE CONDITIONS PRECEDENT Each of the following: 1. A certificate of the secretary or a director of each Borrower certifying that the copy of its constitutive documents delivered to the Agent in connection with the Original Agreement (as amended, where applicable, by any variation thereof which has itself been delivered to the Agent and certified correct, complete and in full force and effect) remains correct, complete and in full force and effect. 2. A copy of a resolution of the Board of Directors of each Borrower; (a) approving the terms of this Agreement and all other documents to be executed by such Borrower in connection herewith; and (b) authorizing a specified person or persons: (i) to execute this Agreement and all other documents to be executed by it hereunder or thereunder in connection herewith or therewith; and (ii) (unless previously so appointed and unchanged) to give all notices, requests, instructions, certificates and other documents to the Agent in connection with each of the Finance Documents to which it is a party. 3. A certificate of a director of each Borrower certifying that the utilization of the Facility in full would not cause any borrowing or other limit binding on it to be exceeded. 4. A copy of the signature of each of the persons authorized by the resolutions referred to in paragraph 2(b) above. 5. A certificate of a director of each Borrower confirming that no Event of Default or Potential Event of Default will be in existence immediately after the transactions due to take place on the Closing Date (as defined in the Credit Agreement) have taken place. 6. A legal opinion relating to this Agreement from Allen & Overy, English legal advisers to the Agent, in form and substance satisfactory to the Agent. Each copy document delivered under this part of this schedule by a Borrower shall be certified by a director or the secretary of the relevant Borrower. as at the date hereof (or such other date as the Agent may agree), to be correct, complete and in full force and effect as at such date. -43- THE FOURTH SCHEDULE UTILIZATION REQUEST From: Pelikan Produktions AG/Pelikan Hardcopy (International) AG To: [Barclays Bank PLC]/[Overdraft Provider] Dated: Dear Sirs, 1. We refer to the third amended and restated agreement (the "FACILITY AGREEMENT") dated 31 July, 1997 and made between Pelikan Produktions AG and Pelikan Hardcopy (International) AG as borrowers, Barclays Bank PLC as agent, NationsBank of Texas, N.A. as collateral and documentation agent, Barclays Bank PLC as fronting bank, Barclays Bank PLC as overdraft provider and the financial institutions named therein as banks. Terms defined in the Facility Agreement shall have the same meaning in this notice. 2. We hereby give you notice that, pursuant to the Facility Agreement, we wish [the Banks/ Overdraft Provider to make Advances/the Fronting Bank to issue a Letter of Credit] as follows: (i) Aggregate *[principal/face] amount: (ii) Utilization Date: (iii) *Term: (iv) Currency: (v) **[Repayment Date/Expiry Date]: 3. *[The proceeds of this Utilization should be credited to [insert account details]]/[The Letter of Credit should be issued in favor of [name of recipient] in the form attached and delivered to the recipient at [address of recipient]]. Yours faithfully -------------------------------------- for and on behalf of PELIKAN PRODUKTIONS AG/PELIKAN HARDCOPY (INTERNATIONAL) AG - ----------- * Delete 15 Short-Term Advance ** Delete as appropriate -44- THE FIFTH SCHEDULE TIMETABLES UTILIZATION BY MEANS OF ADVANCES OTHER THAN SHORT-TERM ADVANCES "D" = Utilization Date "D-x" = x business days prior to Utilization Date "Bs" = Banks "A" = Agent "( )" = Clause number of Agreement 1. Utilization Request to A (6. 1) D-2 9.30 a.m. 2. A to notify Bs of allocations by (6.4) D-2 10.30 a.m. 3. LIBOR fixing(l.1) D-2 11.00 a.m. UTILIZATION BY MEANS OF SHORT-TERM ADVANCES "D" = Utilization Date "Op" = Overdraft Provider "( )" = Clause number of Agreement Utilization Request to OP (6. 1) D 9.30 a.m. UTILIZATION BY MEANS OF LETTERS OF CREDIT "D" = Utilization Date "D-x" = x business days prior to Utilization Date "Bs" = Banks "A" = Agent "( )" = Clause number of Agreement 1. Utilization Request to A (6. 1) 9.30 a.m. 2. Bs to have agreed identity of recipient D3 9:30 a.m. of Letter of Credit (7.2(iii)) D3 3:00 p.m. 3. where applicable, form of Letter of Credit to be agreed (7.2(iv)) D-3 3: 00 p.m. 4. A to notify Bs of allocations (6.4) D 10:00 a.m. 5. Letter of Credit to be issued (7.2) D 3:00 p. m. THE SIXTH SCHEDULE FORM OF BORROWER SECESSION MEMORANDUM To: Barclays Bank PLC From: Pelikan Produktions AG and Pelikan Hardcopy (International) AG -45- Dated: Dear Sirs, 1. We refer to the third amended and restated agreement (the "FACILITY AGREEMENT") dated 31 July, 1997 and made between ourselves as borrowers, Barclays Bank PLC as agent, NationsBank of Texas, N.A. as collateral and documentation agent, the financial institutions defined therein as Banks and others. 2. Terms defined in the Facility Agreement shall bear the same meaning herein. 3. We hereby declare that [name of Borrower] is under no actual or contingent obligation under or pursuant to any Finance Document in its capacity as a Borrower. 4. Accordingly, pursuant to Clause 38 of the Facility Agreement and with effect from receipt of this notice, [name of relevant Borrower] shall cease to be a Borrower under the Facility Agreement. Yours faithfully, For and on behalf of Pelikan Produktions AG and Pelikan Hardcopy (international) AG -46- THE SEVENTH SCHEDULE MANDATORY LIQUID ASSET COSTS RATE FORMULA The Mandatory Liquid Asset Costs Rate to compensate the Banks for the cost attributable to an Advance or other sum denominated in sterling for any period for which such cost is to be computed under this Agreement resulting from the imposition from time to time by the Bank of England (or other Governmental authorities or agencies) of a requirement to place non-interest-bearing deposits with the Bank of England, for the payment of Special Deposits and the maintenance of secured money with certain financial institutions (recognized for this purpose by the Bank of England) will be the rate determined by the Agent (rounded upwards, if necessary, to four decimal places) on the first day of the relevant period and for the duration of such period (but in respect of such a period of longer than three months, the average of the rates (rounded upwards as aforesaid) computed on a three monthly basis during such period) in accordance with the following formula: rate = XL + B(L-C) + S(L-D) -------------------- 100 - (X+s) Where: "X" is the amount required to be maintained by Barclays Bank PLC on non-interest-bearing balances with the Bank of England expressed as a percentage of eligible liabilities fixed by the Bank of England (or other Governmental authorities or agencies). For the purpose of this formula, this percentage will be expressed as a number. "L" is the average of the offered quotations by the Reference Banks for sterling deposits for the period for which the formula is being applied in the London Interbank Market at or about 11.00 a.m. on the day of quotation, expressed as a number and not as a percentage rate per annum. "B" is the average level of secured deposits expressed as a percentage of eligible liabilities which Barclays Bank PLC is required by the Bank of England to maintain with certain financial institutions (recognized for this purpose by the Bank of England). For the purpose of this formula this percentage will be expressed as a number. "C" is the average of the rates at which certain financial institutions (recognized for this purpose by the Bank of England) bid for sterling deposits for the period for which the formula is being applied from the Reference Banks at or about 11.00 a.m. on the day of quotation, expressed as a number and not as a percentage rate per annum. "S" is the amount of Special Deposits required to be maintained by Barclays Bank PLC expressed as a percentage of eligible liabilities fixed by the Bank of England (or other Governmental authorities or agencies). For the purposes of this formula this percentage will be expressed as a number. "D" is the rate of interest paid by the Bank of England on Special Deposits, expressed as a number and not as a percentage rate per annum. In the event of any change in circumstance (including the imposition of alternative or additional official requirements) which renders the above formula inapplicable the Agent shall notify the Borrower and the Banks in reasonable detail of the manner (including the basis and computation) in which the Mandatory Liquid Asset Costs Rate shall he determined thereafter and, if appropriate, -47- substitute a new formula for that set out above. -48- THE EIGHTH SCHEDULE FORM OF OVERDRAFT PROVIDER TRANSFER CERTIFICATE To: Barclays Bank PLC, as Agent Pelikan Produktions AG Pelikan Hardcopy (International) AG OVERDRAFT PROVIDER TRANSFER CERTIFICATE relating to the third amended and restated agreement (the "FACILITY AGREEMENT") dated 31 July, 1997 whereby a revolving credit facility was made available to Pelikan Produktions AG and Pelikan Hardcopy (International) AG as borrowers by a group of banks on whose behalf Barclays Bank PLC acted as agent in connection therewith. 1. Terms defined in the Facility Agreement shall, subject to any contrary indication, have the same meanings herein. The terms Overdraft Provider and Overdraft Facility Transferee are defined in the schedule hereto. 2. The Overdraft Provider requests the Overdraft Facility Transferee to accept and procure the transfer to the Overdraft Facility Transferee the obligation to make Short-Term Advances pursuant to the Facility Agreement by counter-signing and delivering this Overdraft Provider Transfer Certificate to the Agent at its address for the service of notices specified in the Facility Agreement. 3. The Overdraft Facility Transferee hereby requests the Agent to accept this Overdraft Provider Transfer Certificate as being delivered to the Agent pursuant to and for the purposes of Clause 30.5 of the Facility Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Overdraft Facility Transferee confirms that it has received a copy of the Facility Agreement, together with such other information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Overdraft Provider to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy, or completeness of any such information and further agrees that it has not relied and will not rely on the Overdraft Provider to assess or keep under review on its behalf the financial conditions, creditworthiness, condition, affairs, status or nature of the Borrowers. 5. The Overdraft Facility Transferee hereby undertakes with the Borrowers, the Overdraft Provider and each of the other parties to the Facility Agreement that it will perform in accordance with their terms all the obligations of the Overdraft Provider under the Facility Agreement after delivery of this Overdraft Provider Transfer Certificate to the Agent and satisfaction of the conditions (if any) subject to which this Overdraft Provider Transfer Certificate is expressed to take effect. The Overdraft Facility Transferee hereby makes the representations made by the Overdraft Provider in Clause 32.8 of the Facility Agreement as though made on and as of the date hereof. 6. The Overdraft Provider makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of the Facility Agreement or any document relating thereto and assumes no responsibility for the financial condition of the Borrowers or for the performance and observance by the Borrowers of any of their -49- respective obligations under the Facility Agreement or any document relating thereto and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 7. The Overdraft Provider hereby gives notice that nothing herein or in the Facility Agreement (or any document relating thereto) shall oblige the Overdraft provider to (i) accept a re-transfer from the Overdraft Facility Transferee of the whole or any part of its rights, benefits and/or obligations under the Facility Agreement transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Overdraft Facility Transferee for any reason whatsoever including, without limitation, the non-performance by the Borrowers or any other party to the Facility Agreement (or any documents relating thereto) of its obligations under any such document. The Overdraft Facility Transferee hereby acknowledges the absence of any such obligation as it referred to in (i) or (ii)) above. 8. This Overdraft Provider Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. THE SCHEDULE 1. Overdraft Provider: 2. Overdraft Facility Transferee: 3. Transfer Date: [TRANSFEREE OVERDRAFT [TRANSFEROR OVERDRAFT PROVIDED] PROVIDER] By: By: Date: Date: ADMINISTRATIVE DETAILS OF OVERDRAFT FACILITY TRANSFEREE Address: Telex: Contact Name: Telefax: Account for Payments: Telephone: -50- SIGNATORIES THE BORROWERS PELIKAN PRODUKTIONS AG By: -------------------------------- HANS PAFFHAUSEN Title: -------------------- Address: Forchstrasse 100 CH-8132 Egg Switzerland Fax: (41-1) 9861 394 PELIKAN HARDCOPY (INTERNATIONAL) AG By: -------------------------------- HANS PAFFHAUSEN Title: -------------------- Address: Forchstrasse 100 CH-8132 Egg Switzerland Fax: (41-1) 9861 394 -51- THE AGENT BARCLAYS BANK PLC By: -------------------------------- Name: --------------------- Title: -------------------- Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer THE FRONTING BANK BARCLAYS BANK PLC By: -------------------------------- Name: --------------------- Title: -------------------- Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer THE OVERDRAFT PROVIDER BARCLAYS BANK PLC By: -------------------------------- Name: --------------------- Title: -------------------- Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer -52- THE COLLATERAL AGENT NATIONSBANK OF TEXAS, N.A. By: -------------------------------- WILLIAM E. LIVINGSTONE, IV Senior Vice President Address: 901 Main Street 66th Floor Dallas, Texas 75202 U.S.A. Fax: (214) 508 0604 THE DOCUMENTATION AGENT NATIONSBANK OF TEXAS, N.A. By: -------------------------------- WILLIAM E. LIVINGSTONE, IV Senior Vice President Address: 901 Main Street 66th Floor Dallas, Texas 75202 U.S.A. Fax: (214) 508 0604 -53- THE BANKS BARCLAYS BANK PLC By: -------------------------------- Name: --------------------- Title: -------------------- Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer -54- NATIONSBANK, N.A. By: ------------------------------------- WILLIAM E. LIVINGSTONE, IV Senior Vice President Address: 901 Main Street 66th Floor Dallas, Texas 75202 U.S.A. Fax: (214) 508 0604 -55- THE FIRST NATIONAL BANK OF CHICAGO By: ------------------------------------- Name: ------------------------- Title: ------------------------- Notice Address: The First National Bank of Chicago One First National Plaza, Mail Suite 0088 Chicago, Illinois 60670-0088 Attention: Richard A. Peterson -56- COMMERZBANK AG By: ------------------------------------- Name: ------------------------- Title: ------------------------- By: ------------------------------------- Name: ------------------------- Title: ------------------------- Address: Atlanta Agency Promenade Two, Suite 3500 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 Attn: Harry P. Yergey Fax: (404) 888 6539 -57- DEUTSCHE BANK AG LONDON By: ------------------------------------- Name: ------------------------- Title: ------------------------- By: ------------------------------------- Name: ------------------------- Title: ------------------------- Notice Address: Deutsche Bank, A.G., New York Branch and/or Cayman Islands Branch 31 West 52nd Street, 24th Floor New York, New York 10019 Attention: Ralf Hoffmann -58- SOCIETE GENERALE By: ------------------------------------- Name: ------------------------- Title: ------------------------- Address: Trammell Crow Center 2001 Ross Avenue, Suite 4800 Dallas, Texas 75201 Fax: (214) 979 1104 -59- ABN AMRO BANK, N.V. By: ------------------------------------- Name: ------------------------- Title: ------------------------- By: ------------------------------------- Name: ------------------------- Title: ------------------------- Notice Address: ABN AMRO Bank, N.V. 10 E. 53rd Street, 37th Floor New York, New York 10022 Attention: Ronald O. Drake -60- CREDIT LYONNAIS, S.A. By: ------------------------------------- Name: ------------------------- Title: ------------------------- Notice Address: Credit Lyonnais 1301 Avenue of the Americas, 18th Floor New York, New York 10019 Attention: Alan Sidrane -61- THE EXHIBIT [FORM OF CONFIDENTIALITY AGREEMENT] The undersigned, ____________________, a prospective [assignee/Transferee/participant/Overdraft Facility Transferee] to that certain Third Amended and Restated Revolving Credit Facility Agreement dated as of 31 July, 1997 (such agreement, as so amended and restated and as it may be amended and restated, supplemented or otherwise modified from time to time, being the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement between Pelikan Produktions AG and Pelikan Hardcopy (International) AG as borrowers, Barclays Bank PLC, as agent, NationsBank of Texas, N.A., as collateral agent, NationsBank of Texas, N.A., as documentation agent, and the Lenders party thereto, ("Prospective [assignee/-Transferee/participant/ Overdraft Facility Transferee]"), hereby agrees as follows for the benefit of the Borrowers; Prospective [assignee/Transferee/participant/Overdraft Facility Transferee] agrees that all financial statements, financial projections, operating or other data, tax returns, reports and other information, that have been or may be provided to (i) Prospective [assignee/Transferee/participant/Overdraft Facility Transferee], (ii) the employees and agents of Prospective [assignee/Transferee/participant/Overdraft Facility Transferee], and/or (iii) accountants, attorneys or other professionals retained by such parties whether delivered by either Borrower or otherwise shall be kept strictly confidential by such recipients, and shall be used solely in connection with its consideration of [an assignment/ a transfer/a participation/the appointment of a new Overdraft Provider] in respect of the Credit Agreement; PROVIDED, that Prospective [assignee/ Transferee/participant/Overdraft Facility Transferee] may, in any event, disclose any such information: (i) if required to do so by an order of a court of competent jurisdiction whether in pursuance of any procedure for discovering documents or otherwise; or (ii) if required by any law or regulation having the force of law; or (iii) pursuant to any requirement or request of any fiscal. monetary, tax, governmental or other competent authority; or (iv) to its auditors, legal or other professional advisors; or (v) which is in the public domain. and unless specifically prohibited by applicable law or court order, the prospective assignee/Transferee/or participant shall notify the Borrowers of any disclosure pursuant to paragraphs (i), (ii) and (iii). In no event shall Prospective [assignee/Transferee/participant/Overdraft Facility Transferee] be obligated or required to return any materials furnished by either Borrower. This deed shall be governed by and construed and enforced in accordance with, the laws of England. Prospective [assignee/Transferee/participant/Overdraft Facility Transferee] hereby irrevocably agrees for the benefit of the Borrowers that the courts of England shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this deed and, for such purposes, irrevocably submits to the jurisdiction of such courts. -62- Prospective[assignee/Transferee/participant/Overdraft Facility Transferee] hereby irrevocably waives any objection which it might now or hereafter have to the courts of England being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this deed and agrees not to claim that any such court is not a convenient or appropriate forum. The submission to the jurisdiction of the courts of England shall not (and shall not be construed so as to) limit the right of either Borrower to take proceedings against Prospective [assignee/Transferee/participant/ Overdraft Facility Transferee] in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdiction preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law, IN WITNESS WHEREOF, this confidentiality agreement has been executed as a deed by the Prospective [assignee/Transferee/ participant/Overdraft Facility Transferee] delivered on the date specified below. _____________________, 19__ EXECUTED AND DELIVERED AS A DEED BY [INSERT NAME IN BLOCK CAPITALS OF PROSPECTIVE ASSIGNEE/TRANSFEREE/ PARTICIPANT/OVERDRAFT FACILITY TRANSFEREE] Name: ------------------------- Title: ------------------------- Name: ------------------------- Title: ------------------------- -63- TABLE OF CONTENTS Page ---- 1. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. THE FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 11 5. NATURE OF LENDERS' OBLIGATIONS . . . . . . . . . . . . . . . . . 11 6. UTILIZATION OF THE FACILITY . . . . . . . . . . . . . . . . . . 12 7. ISSUE OF LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . 15 8. INDEMNITY (INCLUDING BANK INDEMNITY FOR SHORT-TERM ADVANCES) . . 15 9. LETTER OF CREDIT COMMISSIONS AND FEES . . . . . . . . . . . . . 16 10. MAKING OF ADVANCES . . . . . . . . . . . . . . . . . . . . . . . 17 11. INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12. REPAYMENT OF ADVANCES . . . . . . . . . . . . . . . . . . . . . 19 13. CANCELLATION . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 15. INCREASED COSTS . . . . . . . . . . . . . . . . . . . . . . . . 21 16. ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 17. MITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 18. MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES . . . . . . . . 24 19. ACCELERATION EVENT . . . . . . . . . . . . . . . . . . . . . . . 25 20. DEFAULT INTEREST AND INDEMNITIES . . . . . . . . . . . . . . . . 26 21. CURRENCY OF ACCOUNT . . . . . . . . . . . . . . . . . . . . . . 27 22. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 23. SET-OFF AND NETTING OF PAYMENTS . . . . . . . . . . . . . . . . 28 -i- TABLE OF CONTENTS (Continued) 24. REDISTRIBUTION OF PAYMENTS . . . . . . . . . . . . . . . . . . . 29 25. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 26. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 30 27. THE AGENTS AND THE LENDERS . . . . . . . . . . . . . . . . . . . 31 28. BENEFIT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 35 29. ASSIGNMENTS AND TRANSFERS BY THE BORROWERS . . . . . . . . . . . 35 30. ASSIGNMENTS AND TRANSFERS BY BANKS, CHANGE OF OVERDRAFT PROVIDER . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 31. DISCLOSURE OF INFORMATION . . . . . . . . . . . . . . . . . . . 38 32. CALCULATIONS AND EVIDENCE OF DEBT . . . . . . . . . . . . . . . 38 33. REMEDIES AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . 39 34. PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . 40 35. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 36. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 41 37. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 38. BORROWER SECESSION . . . . . . . . . . . . . . . . . . . . . . . 42 39. GUARANTEE BY PELIKAN PRODUKTIONS AG . . . . . . . . . . . . . . 42 40. LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 41. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . 44 42. WAIVERS; RATIFICATIONS . . . . . . . . . . . . . . . . . . . . . 45 -ii- SCHEDULES 1. The Banks 2. Form of Transfer Certificates 3. Conditions Precedent 4. Utilization Request 5. Timetables 6. Form of Borrower Secession Memorandum 7. Mandatory Liquid Asset Costs Rate Formula 8. Form of Overdraft Provider Transfer Certificate EXHIBIT Form of Confidentiality Agreement -iii- EX-10.4 5 EX-10.4 WARRANT AGREEMENT BETWEEN NU-KOTE HOLDING, INC. AND THE WARRANTHOLDERS --------------------------------------- DATED AS OF JULY 31, 1997 WARRANT AGREEMENT WARRANT AGREEMENT (the "Agreement") dated as of July 31, 1997, between Nu-kote Holding, Inc., a Delaware corporation (the Company"), and each of the persons listed on the signature pages hereto (the "Warrantholders"). RECITALS: The Company proposes to issue and deliver its warrant certificates to the Warrantholders (the "Warrant Certificates") evidencing Warrants to purchase up to an aggregate of 1,704,763 shares, subject to adjustment as provided herein, of its Common Stock. Each such Warrant will entitle the registered owner thereof to purchase one Stock Unit, subject to adjustment as provided herein. In consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder of the Company and the record holders of the Warrants, the Company and each of the Warrantholders hereby agrees as follows: 1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: ADDITIONAL SHARES OF COMMON STOCK: All shares of Common Stock issued by the Company after the date of this Agreement other than Underlying Common Stock. AFFILIATE: Of any Person, any person directly or indirectly controlling or controlled by or under direct or indirect common control with 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. BUSINESS DAY: Any day excluding Saturday, Sunday and any day which either is a legal holiday under the laws of either the State of Texas or the State of New York or is a day on which banking institutions located in either state are authorized or required by law or other governmental action to close. COMMON STOCK: The Class A Common Stock, par value $.01 per share, of the Company and any other capital stock of the Company into which such Common Stock may be converted or reclassified or that may be issued in respect of, in exchange for, or in substitution of, such Common Stock by reason of any stock splits, stock dividends, distributions, mergers, consolidations or other like events. COMPANY: Nu-kote Holding, Inc., a Delaware corporation, and its successors and assigns. CONVERTIBLE SECURITIES: Evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable, with or without payment of additional consideration in cash or property, for Additional Shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event. CURRENT MARKET PRICE: Per share of Common Stock, on any date herein specified, shall be deemed to be (i) the average of the daily market prices (determined as set forth in the next sentence), if any, for 30 consecutive Business Days commencing 45 Business Days before such date; or (ii) in the event that there is not a public market in the Common Stock and a Majority of Holders shall, at their option, request such appraisal, the appraised value thereof as determined by an investment banking firm selected by the Company and acceptable to such Holders. The market price for each such Business Day shall be (a) the average of the last sale prices on such day on all domestic stock exchanges on which the Common Stock may then be listed; or (b) if no sales take place on such day on any such exchange, the average of the closing bid and asked prices on such as officially quoted on such exchanges; or (c) if the Common Stock is not then listed or admitted to trading on any domestic stock exchange, the average of the reported bid and asked prices on such day in the over-the-counter market, as furnished by the National Quotation Bureau, Inc. or, if such firm at the time is not engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business and selected by the Company or, if there is no such firm, as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Company. CURRENT WARRANT PRICE: Per share of Common Stock, at any date herein specified, the amount equal to the quotient resulting from dividing the applicable purchase price per Stock Unit provided for in this Agreement, as in effect on such date, by the number of shares (including any fractional share) of Common Stock comprising a Stock Unit on such date, but in no event shall the Current Warrant Price be less than the par value of the Common Stock. EMPLOYEE OPTIONS: Options granted after the date hereof to purchase in the aggregate up to 1,088,765 shares of Common Stock to employees of the Company or any of its subsidiaries. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXPIRATION DATE: July 31, 2002. HOLDERS: From time to time, the registered holders of the Warrants and, unless otherwise provided or indicated herein, the beneficial owners of shares of Underlying Common Stock. INITIAL HOLDERS: The Holders of the Warrants as of the date hereof. MAJORITY OF HOLDERS: Holders of Warrants representing at least 50.1% in the aggregate of the Underlying Common Stock. NEW COMMON STOCK: Shares of Common Stock newly issued by the Company. OTHER SECURITIES: Any stock and other securities of the Company (other than the Common Stock) or of any other Person that the Holder of this Warrant shall become entitled to receive upon exercise of a Warrant. PERSON: Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. SEC: The Securities and Exchange Commission, or any successor agency. STOCKHOLDERS: The holders of all outstanding shares of Common Stock. STOCK UNIT: Shall mean with respect to the Warrants, one share of Common Stock, as such stock was constituted on the date hereof, and thereafter, in either case, shall mean such number of shares (including any fractional share) of such stock as shall result from the adjustments specified in -2- Section 5 hereof. UNDERLYING COMMON STOCK: The shares of Common Stock issuable or issued upon the exercise of the Warrants. WARRANT CERTIFICATES: The meaning set forth in the preamble to this Agreement. WARRANTS: Those certain Warrants to purchase initially up to an aggregate of 1,704,763 shares of Common Stock, subject to adjustment, substantially in the form of Exhibit A attached hereto. 2. ORIGINAL ISSUE OF WARRANTS. 2.1 FORM OF WARRANT CERTIFICATES. The Warrant Certificates representing Warrants shall be in registered form only and substantially in the forms attached hereto as Exhibit A, shall be dated the date on which signed by the Company and may have such legends and endorsements typed, stamped, printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation pursuant thereto or with any rule or regulation of any securities exchange on which the Warrants may be listed, or to conform to usage, including, without limitation, the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED TO THE REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATION THAT THESE SECURITIES HAVE BEEN TAKEN FOR INVESTMENT. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SHALL HAVE BEEN RECEIVED BY THE COMPANY TO THE EFFECT THAT SUCH SALE, TRANSFER OR ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, AND OTHER APPLICABLE STATE SECURITIES LAWS. Pending the preparation of definitive Warrant Certificates, temporary Warrant Certificates may be issued, which may be printed, lithographed, typewritten, mimeographed or otherwise produced, and which will be substantially of the tenor of the definitive Warrant Certificates in lieu of which they are issued. If temporary Warrant Certificates are issued, the Company will cause definitive Warrant Certificates to be prepared without unreasonable delay. After the preparation of definitive Warrant Certificates, the temporary Warrant Certificates shall be exchangeable for definitive Warrant Certificates upon surrender of the temporary Warrant Certificates to the Company, without charge to the Holder. Until so exchanged, the temporary Warrant Certificates shall in all respects be entitled to the same benefits under this Agreement as definitive Warrant Certificates. 2.2 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant Certificates evidencing Warrants to purchase initially an aggregate of up to 1,704,763 shares of New Common Stock may be executed, on or after the date of this Agreement, by the Company, and the Company shall thereupon deliver such Warrant Certificates upon the written order and at the direction of the Company to the respective Persons entitled thereto. The Warrant Certificates shall be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer or President or by any of its Vice -3- Presidents, either manually or by facsimile signature printed thereon. In case any officer of the Company whose signature shall have been placed upon any of the Warrant Certificates shall cease to be such officer of the Company before issue and delivery thereof, such Warrant Certificates may, nevertheless, be issued and delivered with the same force and effect as though such person had not ceased to be such officer of the Company. 3. EXERCISE PRICE; EXERCISE OF WARRANTS GENERALLY. 3.1 EXERCISE PRICE. Each Warrant Certificate shall entitle the Holder thereof, subject to the provisions of this Agreement, to receive one Stock Unit for each Warrant represented thereby at the price of $3.57 per Stock Unit (the "Exercise Price"). 3.2 EXERCISE OF WARRANTS. Subject to the terms and conditions set forth herein, the Warrants shall be exercisable at any time or from time to time on or after the date hereof and prior to the Expiration Date. 3.3 EXPIRATION OF WARRANTS. The Warrants shall terminate and become void as of the close of business on the Expiration Date. The Company shall give notice not less than 90, and not more than 120, days prior to the Expiration Date to the Holders of all then outstanding Warrants to the effect that the Warrants will terminate and become void as of the close of business on the Expiration Date. 3.4 METHOD OF EXERCISE. In order to exercise a Warrant or to sell a Warrant to the Company, the Holder thereof must surrender the Warrant Certificate evidencing such Warrant to the Company, with one of the forms on the reverse of or attached to the Warrant Certificate duly executed. If fewer than all the Warrants represented by a Warrant Certificate are surrendered, such Warrant Certificate shall be surrendered and a new Warrant Certificate of the same tenor and for the number of Warrants that were not surrendered shall be executed by the Company. The Company shall sign the new Warrant Certificate, register it in such name or names as may be directed in writing by the Holder and deliver the new Warrant Certificate to the Person or Persons entitled to receive the same. Upon surrender of a Warrant Certificate in conformity with the foregoing provisions, the Company shall transfer to the Holder of such Warrant Certificate appropriate evidence of ownership of any shares of Underlying Common Stock, or other securities or property (including any money) to which the Holder is entitled, registered or otherwise placed in, or payable to the order of, such name or names as may be directed in writing by the Holder, and shall deliver such evidence of ownership and any other securities or property (including any money) to the Person or Persons entitled to receive the same, together with an amount in cash in lieu of any fraction of a share as provided in Section 5.3 hereof. 4. DISSOLUTION, LIQUIDATION OR WINDING UP. If, prior to the Expiration Date, the Company or any other Person shall propose a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, the Company shall give written notice thereof to the Holders of Warrants, at the earliest practicable time, but in no event less than 30 days prior to the date on which such transaction is expected to become effective or, if earlier, the record date for such transaction. -4- 5. ADJUSTMENTS AND DISTRIBUTIONS WITH RESPECT TO THE WARRANTS. 5.1 ANTIDILUTION PROVISIONS. The Exercise Price and the number of shares of New Common Stock constituting a Stock Unit shall be subject to adjustment from time to time as set forth below: (a) ADJUSTMENT FOR STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time, or from time to time after the date hereof, the holders of Common Stock (or Other Securities) shall have received, or (on or after the record date fixed for determination of Stockholders eligible to receive same) shall have become entitled to receive, without payment therefor: (i) other or additional stock or other securities or property (other than cash) by way of dividends; or (ii) other or additional stock or other securities or property by way of stock split, spin-off, split-up, recapitalization, reclassification, combination of shares, or similar corporate rearrangement, other than additional shares of Common Stock (or Other Securities) or Convertible Securities or any rights or options to acquire any of the foregoing, adjustments in respect of which are provided for in paragraph (d) of this Section 5, then in each such case the holder of this Warrant, upon the exercise hereof, shall be entitled to receive the amount of stock and other securities and property which such Holder would hold on the date of such exercise if on the date of this Warrant (the "Original Issue Date") it had been the holder of record of the number of shares of Common Stock called for on the face of this Warrant and had thereafter, during the period from the Original Issue Date to and including the date of such exercise, retained such shares and all other or additional stock and other securities and properties receivable by it as aforesaid during such period, giving effect to all adjustments called for during such period by subparagraphs (c) and (d) of this Section 5. (b) ADJUSTMENT FOR CASH DIVIDENDS OR DISTRIBUTIONS. If at any time, or from time to time, after the date hereof, the Holders of the Common Stock (or Other Securities) shall have received, or (on or after the record date fixed for determination of Stockholders eligible to receive same) shall have become entitled to receive, any cash paid or payable (including, without limitation, by way of dividends) then, in each such case, the Current Warrant Price of each Warrant shall be reduced by an amount equal to the amount of cash each Holder would receive or would be entitled to receive if such Warrant had been exercised immediately prior to the date of such cash distribution (or immediately prior to the record date fixed for determination of Stockholders eligible to receive the same). (c) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case of any reorganization of the Company (or any other issuer of Other Securities) after the Original Issue Date, or in case, after such date, the Company (or such other issuer) shall transfer all or substantially all of its properties or assets to or consolidate with or merge into any other person (corporate or otherwise), then and in each such case the Holder of this Warrant, upon the exercise hereof, at any time after the consummation of such reorganization, conveyance, consolidation or merger, shall be entitled to receive, in lieu of the Common Stock (or Other Securities) issuable upon such exercise prior to such consummation, the stock and Other Securities or properties (including cash) to which such Holder would have been entitled upon -5- such consummation, if such Holder had so exercised this Warrant immediately prior thereto, all subject to further adjustments thereafter as provided in subparagraphs (a) and (d); in each such case, the terms of this Warrant shall be applicable to the shares of Common Stock and Other Securities receivable upon the exercise of this Warrant after such consummation, and shall be binding upon the issuer thereof. (d) ADJUSTMENT FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN FAIR VALUE. (i) ADJUSTMENT OF EXERCISE PRICE. In the event the Company shall issue or sell any shares of Common Stock or Other Securities for a consideration per share less than the Current Market Price in effect immediately prior to the time of such issue or sale, the Exercise Price shall be reduced by multiplying the then existing Exercise Price by a fraction the numerator of which is (A) the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the applicable Current Market Price immediately prior to such issue or sale PLUS (y) consideration received by the Company upon such issue or sale, DIVIDED BY (B) the total number of shares of Common Stock outstanding immediately after such issue or sale, and the denominator of which shall be the Current Market Price immediately prior to such issue or sale. For purposes of this subparagraph, the date as of which the Current Market Price shall be computed shall be the earlier of the date upon which the Company shall either enter into a firm contract for the issuance of such shares, or issue such shares. (ii) ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE. Upon any adjustment of the Exercise Price as provided in subparagraph (d)(i) above, the Holder shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable hereunder immediately prior to such adjustment, and dividing the product thereof by the Exercise Price resulting from such adjustment. (iii) ISSUANCE OF RIGHTS, OPTIONS OR WARRANTS. In case at any time the Company shall grant (whether directly or by assumption in a merger or otherwise) or issue any rights to subscribe for or to purchase, or any option for the purchase of, Common Stock or Convertible Securities (other than Employee Options), whether or not such rights or options or warrants or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such rights or options or warrants or upon conversion or exchange of such Convertible Securities (determined by dividing (a) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options or warrants, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of such rights or options or warrants, plus in the case of such rights or options or warrants which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (b) the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or warrants or upon the conversion or exchange of all such rights or options or warrants) shall be less than the Current Market Price existing immediately prior to the time of the granting thereof, then the number of shares of Common Stock constituting a Stock Unit and the -6- respective Exercise Price shall be adjusted as provided in subsections (d)(i) and (d)(ii) above, on the basis that the maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon conversion or exchange at the maximum amount of such Convertible Securities issuable upon the exercise of such rights or options shall be deemed to be outstanding and to have been issued for such price per share. Adjustments of the Exercise Price shall be made upon the actual issue of such Common Stock or, with respect to Convertible Securities, upon exercise of such rights or options or warrants or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. For purposes of this subparagraph (iii), the date on which the Current Market Price shall be computed shall be the earlier of the date upon which the Company shall either enter into a firm contract for the issuance of such rights or other options, or issue such rights or other options. (iv) ISSUANCE OF CONVERTIBLE SECURITIES. In case the Company shall in any manner issue or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which shares of Common Stock are issuable upon such conversion or exchange shall be less than the Current Market Price existing immediately prior to the time of such issue or sale, then the number of shares of Common Stock constituting a Stock Unit and the respective Exercise Price shall be adjusted as provided in subsections (d)(i) and (d)(ii) above on the basis that the maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date for the determination of the Current Market Price as hereinafter provided) be deemed to be outstanding and to have been issued for such price per share; provided, however (1) no further adjustments of the Exercise Price or the number of shares of Common Stock for which this Warrant is exercisable shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities, and (2) if any such issue or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Exercise Price have been or are to be made pursuant to other provisions of this Section 5, no further adjustment of the Exercise Price or the number of shares of Common Stock for which the Warrant is exercisable shall be made by reason of such issue or sale. The price per share for which shares of Common Stock are issuable upon conversion or exchange shall be determined by dividing (x) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock, issuable upon the conversion or exchange of all Convertible Securities. For purposes hereof, the date on which the Current Market Price of Common Stock shall be computed shall be the earlier of the date upon which either the Company shall enter into a firm contract for the issuance of such Convertible Securities, or the date such Convertible Securities are actually issued. (e) RIGHTS OFFERINGS. In the event the Company shall effect an offering of Common Stock or Other Securities pro rata among its Stockholders, the Holder shall be entitled, at its option, to elect to participate in each and every offering as though this Warrant had been exercised and the Holder were, at the time of any such rights offering, then a holder of that number of shares of Common Stock to which the Holder is then entitled on the exercise hereof. -7- (f) DISTRIBUTIONS TO HOLDERS. In the event the Company shall make any distribution of its assets (other than cash) or any debt securities or any rights, options or warrants to purchase assets (other than cash) or debt securities of the Company, the Holder of each Warrant shall be entitled to receive, at the time of such distribution, such non-cash assets or debt securities as such Holder would have been entitled to receive if such Warrant had been exercised immediately prior to such distribution (or immediately prior to the record date fixed for determination of Stockholders eligible to receive the same). (g) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS. (i) ADJUSTMENTS NOT REQUIRED. In the event any adjustment of the Exercise Price pursuant to this Section 5 shall result in an adjustment of less than one percent (1%) of the Exercise Price in effect immediately preceding such adjustment, no adjustment shall be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment, subject to the provisions of this subsection (g)(i). (ii) DETERMINATION OF CONSIDERATION. Any stock dividends or distributions of securities shall be deemed to have been issued or sold without consideration. If any shares of Common Stock, or Convertible Securities or any rights or options to purchase same shall be issued for a consideration other than cash, the amount of the consideration other than cash shall be deemed to be the fair market value on the date of issuance of the securities, as determined in good faith by the board of directors of the Company. Any securities issued in connection with any merger and consolidation in which the Company is a surviving corporation shall be valued at the fair market value thereof on the date of issue, as determined in good faith by the board of directors of the Company. In the event of any merger or consolidation of the Company in which the Company is not the surviving corporation or in the event of the sale of all or substantially all the assets of the Company, stock or other securities of any other corporation, the Company shall be deemed to have issued a number of shares of its Common Stock for stock or securities of the other corporation, computed on the basis of the actual exchange ratio on which the transaction was predicated, for a consideration equal to the fair market value on the date of such transaction of such stock or securities of the other corporation. (iii) CERTIFICATE OF ADJUSTMENT. Upon any adjustment of the Exercise Price or the number of shares of Common Stock constituting a Stock Unit, a certificate signed by the President or any Vice President of the Company setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated, shall be mailed (by certified mail, return receipt requested, postage prepaid) to the Holder specifying the adjusted Exercise Price and the number of shares of Common Stock purchasable on exercise of this Warrant after giving effect of the adjustment of such number of shares pursuant to Section 5 hereof. (h) OTHER ACTION AFFECTING COMMON STOCK. If at any time or from time to time the Company shall take any action affecting its Common Stock, other than an action described in any of the foregoing subsections (a) through (g) and in this Section 5, then, unless in the opinion of the board of directors of the Company such action will not have a materially adverse effect upon the rights of the Holders of the Warrants, the number of shares of New Common Stock, constituting a Stock Unit, or the purchase price thereof, shall be adjusted in such -8- manner and at such time as the board of directors of the Company may in good faith determine to be equitable in the circumstances. (i) CERTAIN ADJUSTMENT EVENTS. Anything herein to the contrary notwithstanding, the Company agrees not to enter into any transaction that would cause an adjustment of the Current Warrant Price per share to an amount that is less than the par value per share of the Common Stock. 5.2 STATEMENT ON WARRANTS. Irrespective of any adjustment in the number or kind of shares issuable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. 5.3 FRACTIONAL INTEREST. The Company may, but shall not be required to issue fractional shares of Common Stock on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same Holder, the number of full shares of Common Stock which shall be issuable upon such exercise thereof shall be computed on the basis of the aggregate number of shares of Common Stock purchasable on exercise of the Warrants so presented. If any fraction of a share of Common Stock would, except for the provisions of this Section 5.3, be issuable on the exercise of any Warrant (or specified portion thereof), the Company may, in lieu of issuing fractional shares, at its option, but it shall have no obligation to do so, pay an amount in cash calculated by it to be equal to the then Current Market Value per share of Common Stock multiplied by such fraction computed to the nearest whole cent. 6. WARRANT TRANSFER BOOKS. The Warrant Certificates shall be issued in registered form only. The Company shall cause to be kept a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Warrant Certificates and of transfers or exchanges of Warrant Certificates as herein provided. At the option of the Holder, Warrant Certificates may be exchanged at such office, upon payment of the charges hereinafter provided. Whenever any Warrant Certificates are so surrendered for exchange, the Company shall execute and deliver the Warrant Certificates that the Holder making the exchange is entitled to receive. All Warrant Certificates issued upon any registration of transfer or exchange of Warrant Certificates shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant Certificates surrendered for such registration of transfer or exchange. Every Warrant Certificate surrendered for registration of transfer or exchange shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company, duly executed by the Holder thereof or his attorney duly authorized in writing. Before any disposition is made of any Warrant, or any part thereof, by sale, gift, pledge or otherwise, the Holder thereof shall deliver to the Company written notice describing briefly the manner of such proposed disposition. No such disposition shall be made unless and until (i) the Holder shall have furnished to the Company an opinion of counsel in form and substance satisfactory to the Company to the effect that such proposed disposition does not require registration pursuant to the Securities Act of 1933, as amended, and the Company shall have advised the holder in writing that such opinion of counsel is satisfactory to the Company, or (ii) an appropriate registration statement -9- with respect to the Warrants shall have been declared effective by the SEC. Any attempted transfer of any Warrants without compliance with the foregoing requirement shall be null and void. No service charge shall be made for any registration of transfer or exchange of Warrant Certificates. The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Warrant Certificates. Any Warrant Certificate when duly endorsed in blank shall be deemed negotiable and when a Warrant Certificate shall have been so endorsed, the Holder thereof may be treated by the Company and all other persons dealing therewith as the absolute owner thereof for any purpose and as the person entitled to exercise the rights represented thereby, or to the transfer thereof on the register of the Company, any notice to the contrary notwithstanding; but until such transfer on such register, the Company may treat the registered Holder thereof as the owner for all purposes. 7. WARRANT HOLDERS. 7.1 VOTING RIGHTS. Prior to the exercise of the Warrants, no Holder of a Warrant Certificate, as such, shall be entitled to any rights of a stockholder of the Company, including, without limitation, the right to vote, to consent or to exercise any preemptive right, except as may be specifically provided for herein. 7.2 RIGHT TO APPROVE RECLASSIFICATION. Notwithstanding the foregoing, the Holders of the Warrants shall be entitled to vote on any proposed recapitalization or reclassification of the Common Stock if such recapitalization or reclassification would, notwithstanding Sections 5 and 6 hereof, adversely affect, in any manner, the Holders of the Warrants. In such event, any such proposed recapitalization or reclassification shall require the approval of a Majority of Holders. 7.3 RIGHT OF ACTION. All rights of action in respect of this Agreement are vested in the Holders of the Warrants, and any Holder of any Warrant, without the consent of the Warrant Agent or the Holder of any other Warrant, may, in such Holder's own behalf and for such Holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, such Holder's right to exercise such Holder's Warrants in the manner provided in this Agreement. 8. COVENANTS OF THE COMPANY. 8.1 RESERVATION OF STOCK FOR ISSUANCE ON EXERCISE OF WARRANTS. The Company covenants that it will at all times reserve and keep available, free from pre-emptive rights, out of its authorized but unissued Common Stock solely for the purpose of issuance upon exercise of Warrants as herein provided, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be so issuable shall, upon such issuance, be duly and validly issued and fully paid and nonassessable. 8.2 NOTICES TO HOLDERS. If the Company shall propose (a) to pay any dividend payable in stock of any class to the holders of its Common Stock or to make any other distribution to the holders of its Common Stock; (b) to offer to the holders of its Common Stock rights to subscribe for or to purchase any Convertible Securities or Additional Shares of Common Stock, Other Securities or shares of stock of any class or any other securities, rights or options; (c) to effect any reclassification of its Common Stock; (d) to effect any capital reorganization; (e) to effect any consolidation, merger or sale, transfer or other disposition of all or substantially all its property, assets or business; (f) to effect the -10- liquidation, dissolution or winding up of the Company; or (g) to hold a special meeting of the holders of its Common Stock (a "Stockholders' Meeting"), then in each such case, the Company shall give to each Holder of a Warrant, in accordance with Section 9.5 hereof, a notice of such proposed action. Such notice (i) shall specify the date on which a record is to be taken for the purposes of such stock dividend, distribution or rights or the date on which such reclassification, reorganization, consolidation, merger, sale, transfer, disposition, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and (ii) shall set forth such facts as shall be reasonably necessary to indicate the effect of such action on the Common Stock, the number and kind of any other shares of stock that will constitute a Stock Unit and the purchase price or prices thereof after giving effect to any adjustment that will be required as a result of such action. Such notice shall be given, in the case of any action covered by clause (a) or (b) above, at least 30 days prior to the record date for determining holders of the Common Stock for purposes of such action and, in the case of any action covered by clauses (c) through (g), at least 30 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. The Company will allow each Holder of Warrants to attend any Stockholders' Meeting held during the terms of this Agreement. 8.3 REPORTS TO HOLDERS. (a) The Company will supply without cost to each Holder within 15 days after the Company is required to file the same with the SEC, copies of the annual reports and quarterly reports which the Company may be required to file with the SEC pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act. (b) If the Company is not required to file with the SEC such reports and other information and documents referred to in Section 8.3(a) hereof, the Company shall supply without cost to each Holder of the Warrants (i) within 90 days after the end of each fiscal year, annual reports containing substantially the information required to be contained in Form 10-K promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form, (ii) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, quarterly reports containing substantially the information required to be contained in Form 10-Q promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form, and (iii) promptly from time to time after the occurrence of an event required to be therein reported, such other reports containing information required to be contained in Form 8-K promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form. The Company shall also make such reports available to Holders upon their request. 9. MISCELLANEOUS. 9.1 MONEY AND OTHER PROPERTY. Any moneys, securities or other property which at any time shall be held by the Company pursuant to this Agreement shall be set over in trust for the purpose for which such moneys, securities or other property shall have been held; but such moneys, securities or other property need not be segregated from other funds, securities or other property, except to the extent required by law. The Company shall distribute any money held by it for payment and distribution to the Holders by mailing by first-class mail a check in such amount as is appropriate, to each such Holder at the address shown on the Warrant register of the Company, or as it may be otherwise directed in writing by such Holder, upon surrender of such Holder's Warrants or shares of Underlying Common Stock, as the case may be. 9.2 PAYMENT OF TAXES. The Company shall pay all taxes and other governmental charges -11- that may be imposed on the Company or on the Warrants or on any securities deliverable upon exercise of Warrants with respect thereto. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock or other securities underlying the Warrants or payment of cash to any Person other than the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and in case of such transfer, the Company shall not be required to issue any stock certificate or pay any cash until such tax or charge has been paid or it has been established to the Company's satisfaction that no such tax or other charge is due. 9.3 SURRENDER OF CERTIFICATES. Any Warrant Certificate surrendered for exercise shall be surrendered to the Company and all Warrant Certificates surrendered shall be promptly cancelled by the Company and shall not be reissued by the Company. 9.4 MUTILATED, DESTROYED, LOST AND STOLEN WARRANT CERTIFICATES. If (a) any mutilated Warrant Certificate is surrendered to the Company or (b) the Company receives evidence to its satisfaction of the destruction, loss or theft of any Warrant Certificate, and there is delivered to the Company such security or indemnity as may be required by it to save it harmless, then, in the absence of notice to the Company that such Warrant Certificate has been acquired by a bona fide purchaser, the Company shall execute and deliver, in exchange for any such mutilated Warrant Certificate or in lieu of any such destroyed, lost or stolen Warrant Certificate, a new Warrant Certificate of like tenor and for a like aggregate number of Warrants. Upon the issuance of any new Warrant Certificate under this Section 9.4, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and other expenses (including the reasonable fees and expenses of counsel to the Company) in connection therewith. Every new Warrant Certificate executed and delivered pursuant to this Section 9.4 in lieu of any destroyed, lost or stolen Warrant Certificate shall constitute an original contractual obligation of the Company, whether or not the destroyed, lost or stolen Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Section 9.4 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, destroyed, lost or stolen Warrant Certificates. 9.5 NOTICES. Any notice, demand or delivery authorized by this Agreement shall be sufficiently given or made when mailed if sent by first-class mail, postage prepaid, addressed to any Holder of a Warrant at such Holder's address shown on the register of the Company and to the Company as follows: If to the Company: Nu-kote Holding, Inc. 17950 Preston Road, Suite 690 Dallas, Texas 75252 Attn: Secretary With a copy to: Nu-kote Holding, Inc. 17950 Preston Road, Suite 690 Dallas, Texas 75252 -12- Attn: General Counsel or such other address as shall have been furnished to the party giving or making such notice, demand or delivery. 9.6 APPLICABLE LAW. This Agreement and each Warrant issued hereunder and all rights arising hereunder shall be governed by the laws of the State of Texas. 9.7 PERSONS BENEFITING. This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns, beneficiaries, executors and administrators, and the Holders from time to time of the Warrants and their respective successors, assigns, beneficiaries, executors and administrators. Nothing in this Agreement is intended or shall be construed to confer upon any Person, other than the Company and the Holders of the Warrants, any right, remedy or claim under or by reason of this Agreement or any part hereof. 9.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument. 9.9 AMENDMENTS. The Company may, without the consent of the Holders of the Warrants, by supplemental agreement or otherwise, make any changes or corrections in this Agreement that it shall have been advised by counsel (a) are required to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein or (b) add to the covenants and agreements of the Company for the benefit of the Holders, or surrender any rights or power reserved to or conferred upon the Company in this Agreement; PROVIDED, that, in each case, such changes or corrections shall not adversely affect the interests of the Holders in any material respect. 9.10 HEADINGS. The descriptive headings of the several Sections of this Agreement are inserted for convenience and shall not control or affect the meaning or construction of any of the provisions hereof. 9.11 ENTIRE AGREEMENT. This Agreement, together with the Warrant Certificates and the Registration Rights Agreement referenced herein, shall constitute the entire agreement of the Company and the Holders with respect to the subject matter hereof. 10. AGREEMENT REGARDING REGISTRATION RIGHTS. Concurrently with the original issuance of the Warrants to the Initial Holders thereof, the Company and the Initial Holders have entered into a Registration Rights Agreement (the "Registration Rights Agreement") granting the Initial Holders (and certain of their permitted successors and assigns) certain registration rights with respect to the Warrants and the Underlying Common Stock. The terms of the Registration Rights Agreement are incorporated by reference in this Agreement as fully as if the same were set forth herein. A copy of the Registration Rights Agreement is on file and available for inspection at the principal offices of the Company, and a copy of the Registration Rights Agreement will be furnished, free of charge, to any Holder hereof upon written request to the Company. -13- DA972030201 073197 v9 111:9766-391 -14- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. NU-KOTE HOLDING, INC. By: ------------------------------------------ Name: ------------------------------------- Title: ------------------------------------- Initial Holders: NATIONSBANK OF TEXAS, N.A. By: ------------------------------------------- Name: ------------------------------------ Title: ------------------------------------ Notice Address: NationsBank of Texas, N.A. 901 Main Street, 66th Floor Dallas, Texas 75202 Attention: William E. Livingstone, IV Senior Vice President BARCLAYS BANK PLC By: ------------------------------------------ Name: ------------------------------------ Title: ------------------------------------ Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention:Ronald E. Spitzer COMMERZBANK AKTIENGESELLSCHAFT ATLANTA AGENCY By: ------------------------------------------ Name: ------------------------------------ Title: ------------------------------------ Notice Address: Commerzbank Aktiengesellschaft Atlanta Agency Promenade Two, Suite 3500 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 Attention: Harry P. Yergey CREDIT LYONNAIS, NEW YORK BRANCH By: ------------------------------------------ Name: ------------------------------------ Title: ------------------------------------ Notice Address: Credit Lyonnais 1301 Avenue of the Americas, 18th Floor New York, New York 10019 Attention: Alan Sidrane THE FIRST NATIONAL BANK OF CHICAGO By: ------------------------------------------ Name: ------------------------------------ Title: ------------------------------------ Notice Address: The First National Bank of Chicago One First National Plaza, Mail Suite 0088 Chicago, Illinois 60670-0088 Attention: Richard A. Peterson SOCIETE GENERALE By: ------------------------------------------ Name: ------------------------------------ Title: ------------------------------------ Notice Address: Societe Generale Trammell Crow Center, Suite 4800 2001 Ross Avenue Dallas, Texas 75201 Attention: Richard M. Lewis FIRST AMERICAN NATIONAL BANK By: ---------------------------------- Name: ---------------------------- Title: --------------------------- Notice Address: First American National Bank 4th & Union Street AA-0310, 10th Floor Nashville, Tennessee 37238 Attention: Zachry F. Martin DEUTSCHE BANK, A.G., NEW YORK BRANCH AND/OR CAYMAN ISLAND BRANCH By: ---------------------------------- Name: ---------------------------- Title: --------------------------- By: ---------------------------------- Name: ---------------------------- Title: --------------------------- Notice Address: Deutsche Bank, A.G., New York Branch and/or Cayman Islands Branch 31 West 52nd Street, 24th Floor New York, New York 10019 Attention: Ralf Hoffmann ABN AMRO BANK, N.V. By: ---------------------------------- Name: ---------------------------- Title: --------------------------- By: ---------------------------------- Name: ---------------------------- Title: --------------------------- Notice Address: ABN AMRO Bank, N.V. 10 E. 53rd Street, 37th Floor New York, New York 10022 Attention: Ronald O. Drake EXHIBIT A THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED TO THE REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATION THAT THESE SECURITIES HAVE BEEN TAKEN FOR INVESTMENT. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SHALL HAVE BEEN RECEIVED BY THE COMPANY TO THE EFFECT THAT SUCH SALE, TRANSFER OR ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, AND OTHER APPLICABLE STATE SECURITIES LAWS. THE STOCK ISSUABLE UPON EXERCISE OF THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SHALL HAVE BEEN RECEIVED BY THE COMPANY TO THE EFFECT THAT SUCH SALE, TRANSFER OR ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER AND OTHER APPLICABLE SECURITIES LAWS. FORM OF FACE OF WARRANT CERTIFICATE WARRANTS TO PURCHASE STOCK UNITS OF NU-KOTE HOLDING, INC. Certificate for ------- No. Warrants ----- This certifies that _________________, or registered assigns, is the registered holder of the number of warrants set forth above. Each Warrant entitles the holder thereof (a "Holder"), subject to the provisions contained herein and in the Warrant Agreement referred to below, to receive from Nu-kote Holding, Inc., a Delaware corporation (the "Company"), one Stock Unit of the Company at the exercise price of $3.57 per Stock Unit. This Warrant Certificate shall terminate and become void as of the close of business on July 31, 2002 (the "Expiration Date"). This Warrant Certificate is issued under and in accordance with the Warrant Agreement, dated as of July 31, 1997 (the "Warrant Agreement"), between the Company and the Warrantholders (as such term is defined in the Warrant Agreement) and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company and the Holders of the Warrants. As provided in the Warrant Agreement and subject to the terms and conditions therein set forth, the Warrants shall be exercisable on or prior to the Expiration Date at any time or from time to time on or after the date hereof. -1- The number of shares of Common Stock constituting a Stock Unit is subject to adjustment as provided in the Warrant Agreement. All shares of Common Stock issuable by the Company upon the exercise of Warrants shall, upon such issuance, be duly and validly issued and fully paid and nonassessable. In order to exercise a Warrant, the registered holder hereof must surrender this Warrant Certificate at the office of the Company, with the Exercise Subscription Form on the reverse hereof duly executed by the Holder hereof, with signature guaranteed as therein specified. The Company shall pay all taxes and other governmental charges that may be imposed on the Company or on the Warrants or on any securities deliverable upon exercise of Warrants. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock or other securities underlying the Warrants or payment of cash to any person other than the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and in case of such transfer, the Company shall not be required to issue any stock certificate or pay any cash until such tax or other charge has been paid or it has been established to the Company's satisfaction that no such tax or other charge is due. This Warrant Certificate and all rights hereunder are transferable by the registered holder hereof, in whole or in part, on the register of the Company, upon surrender of this Warrant Certificate for registration of transfer at the office of the Company duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company, duly executed by the Holder hereof or his attorney duly authorized in writing, with signature guaranteed as specified in the attached Form of Assignment. Upon any partial transfer, the Company will issue and deliver to such holder a new Warrant Certificate or Certificates with respect to any portion not so transferred. No service charge shall be made for any registration of transfer or exchange of the Warrant Certificates, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Each taker and holder of this Warrant Certificate by taking or holding the same, consents and agrees that this Warrant Certificate when duly endorsed in blank shall be deemed negotiable and that when this Warrant Certificate shall have been so endorsed, the holder hereof may be treated by the Company and all other persons dealing with this Warrant Certificate as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, or to the transfer hereof on the register of the Company, any notice to the contrary notwithstanding, but until such transfer on such register, the Company may treat the registered Holder hereof as the owner for all purposes. This Warrant Certificate and the Warrant Agreement are subject to amendment as provided in the Warrant Agreement. All terms used in this Warrant Certificate that are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement. Copies of the Warrant Agreement are on file at the office of the Company and may be obtained by writing to the Company at the following address: 17950 Preston Road, Suite 690, Dallas, Texas 75252, Attention: Secretary. -2- This Warrant Certificate shall not be valid for any purpose until it shall have been countersigned by the Warrant Agent. Dated: , 199 . --------------------- ---- NU-KOTE HOLDING, INC. By: ------------------------------ Name: ------------------------- Title: ------------------------ -3- FORM OF REVERSE OF WARRANT CERTIFICATE EXERCISE SUBSCRIPTION FORM (To be executed only upon exercise of Warrant) To: ------------------------- The undersigned irrevocably exercises ___________________ of the Warrants for the purchase of one Stock Unit of Nu-kote Holding, Inc., for each Warrant represented by the Warrant Certificate, on the terms and conditions specified in the within Warrant Certificate and the Warrant Agreement therein referred to, surrenders this Warrant Certificate and all right, title and interest therein to _____________________ and directs that the shares of New Common Stock deliverable upon the exercise of such Warrants be registered or placed in the name and at the address specified below and delivered thereto. Date: , . ---------------- -------- (1) ------------------------------- (Signature of Owner) ------------------------------- (Street Address) ------------------------------- (City) (State) (Zip Code) Signature Guaranteed by: ------------------------------- - -------------------- (1) The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a national bank or trust company or by a member firm of any national securities exchange. -4- Securities and/or check to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: Any unexercised Warrants evidenced by the within Warrant Certificate to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: -5- FORM OF ASSIGNMENT FOR VALUE RECEIVED the undersigned registered holder of the within Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrants constituting a part of the Warrants evidenced by the within Warrant Certificate not being assigned hereby) all of the right of the undersigned under the within Warrant Certificate, with respect to the number of Warrants set forth below. Social Security or other identifying Names of number of Number of Assignee(s) Address Assignee(s) Warrants - ----------- ------- --------------- --------- and does hereby irrevocably constitute and appoint ____________________________ the undersigned's attorney to make such transfer on the books of Nu-kote Holdings, Inc. maintained for that purpose, with full power of substitution in the premises. Date: , . ----------------- ----- (1) ------------------------------- (Signature of Owner) ------------------------------- (Street Address) ------------------------------- (City) (State) (Zip Code) Signature Guaranteed by: ------------------------------- - -------------------- (1) The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a national bank or trust company or by a member firm of any national securities exchange. -6- TABLE OF CONTENTS 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Additional Shares of Common Stock . . . . . . . . . . . . . . . . . . . 1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Convertible Securities. . . . . . . . . . . . . . . . . . . . . . . . . 2 Current Market Price. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Current Warrant Price . . . . . . . . . . . . . . . . . . . . . . . . . 2 Employee Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Initial Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Majority of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 3 New Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Other Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Stock Unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Underlying Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 3 Warrant Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 3 Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. ORIGINAL ISSUE OF WARRANTS. . . . . . . . . . . . . . . . . . . . . . . 3 2.1 Form of Warrant Certificates. . . . . . . . . . . . . . . . . . . 3 2.2 Execution and Delivery of Warrant Certificates. . . . . . . . . . 4 3. EXERCISE PRICE; EXERCISE OF WARRANTS GENERALLY. . . . . . . . . . . . . 4 3.1 Exercise Price. . . . . . . . . . . . . . . . . . . . . . . . . . 4 3.2 Exercise of Warrants. . . . . . . . . . . . . . . . . . . . . . . 4 3.3 Expiration of Warrants. . . . . . . . . . . . . . . . . . . . . . 5 3.4 Method of Exercise. . . . . . . . . . . . . . . . . . . . . . . . 5 4. DISSOLUTION, LIQUIDATION OR WINDING UP. . . . . . . . . . . . . . . . . 5 5. ADJUSTMENTS AND DISTRIBUTIONS WITH RESPECT TO THE WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5.1 Antidilution Provisions . . . . . . . . . . . . . . . . . . . . . 5 (a) Adjustment For Stock Dividends, Subdivisions and Combinations . . . . . . . . . . . . . . . . . . . . . . 5 (b) Adjustment For Cash Dividends or Distributions . . . . . . . 6 (c) Adjustment For Reorganization, Consolidation, Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . 6 (d) Adjustment For Issue or Sale of Common Stock at Less Than Fair Value . . . . . . . . . . . . . . . . . . . . 7 (e) Rights Offerings . . . . . . . . . . . . . . . . . . . . . . 9 (f) Distributions to Holders . . . . . . . . . . . . . . . . . . 9 (g) Other Provisions Applicable to Adjustments . . . . . . . . . 9 -i- TABLE OF CONTENTS (continued) (h) Other Action Affecting Common Stock. . . . . . . . . . . . . 10 (i) Certain Adjustment Events. . . . . . . . . . . . . . . . . . 10 5.2 Statement on Warrants. . . . . . . . . . . . . . . . . . . . . . 10 5.3 Fractional Interest . . . . . . . . . . . . . . . . . . . . . . . 10 6. WARRANT TRANSFER BOOKS. . . . . . . . . . . . . . . . . . . . . . . . . 11 7. WARRANT HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.1 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.2 Right to Approve Reclassification . . . . . . . . . . . . . . . . 12 7.3 Right of Action . . . . . . . . . . . . . . . . . . . . . . . . . 12 8. COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . 12 8.1 Reservation of Stock for Issuance on Exercise of Warrants . . . . 12 8.2 Notices to Holders. . . . . . . . . . . . . . . . . . . . . . . . 12 8.3 Reports to Holders. . . . . . . . . . . . . . . . . . . . . . . . 13 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9.1 Money and Other Property Deposited with the Warrant Agent . . . . 14 9.2 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 14 9.3 Surrender of Certificates . . . . . . . . . . . . . . . . . . . . 14 9.4 Mutilated, Destroyed, Lost and Stolen Warrant Certificates. . . . 14 9.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 9.6 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . 15 9.7 Persons Benefiting. . . . . . . . . . . . . . . . . . . . . . . . 15 9.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 15 9.9 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 9.10 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 9.11 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 16 10. AGREEMENT REGARDING REGISTRATION RIGHTS . . . . . . . . . . . . . . . . 16 EXHIBIT A - Form of Warrant Certificate A-1 -ii- EX-10.5 6 EX-10.5 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT") is entered into as of July 31, 1997, by and between Nu-kote Holding, Inc., a Delaware corporation (the "COMPANY"), and each of Warrantholders (as hereinafter defined). W I T N E S S E T H: WHEREAS, the Company has agreed to grant certain registration rights to the Warrantholders with respect to the Registrable Securities (as hereinafter defined). NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. "AGREEMENT" will be deemed to have the meaning set forth in the preamble to this document. "COMMISSION" means the Securities and Exchange Commission or any other Federal agency administering the Securities Act at the time in question. "COMPANY" will be deemed to have the meaning set forth in the preamble to this Agreement. "DEMAND NOTICE" will be deemed to have the meaning set forth in SUBSECTION 2(a). "DEMAND REGISTRATION" means the registration of Registrable Securities pursuant to the terms and conditions of Subsection 2(a). "DEMANDING HOLDER(S)" will be deemed to have the meaning set forth in SUBSECTION 2(f). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any similar or successor Federal statute, and the rules and regulations of the Commission thereunder, all as in effect at the time in question. Reference to a particular section of the Exchange Act will include a reference to the comparable section, if any, of any such similar or successor Federal statute. "HOLDER" means any Warrantholder, and, subject to SUBSECTION 10(f), any permitted assignee or transferee of Warrants and/or a Registrable Security, which assignee or transferee expressly is granted rights as a Holder under this Agreement at the time of such transfer. "INDEMNIFIED PARTY" means a party who is to be indemnified pursuant to SECTION 7. "INDEMNIFYING PARTY" means a party who will indemnify an Indemnified Party pursuant to SECTION 7. "INSPECTORS" will be deemed to have the meaning set forth in SUBSECTION 5(h). "LOSSES" will be deemed to have the meaning set forth in SUBSECTION 7(a). "MAJORITY DEMANDING HOLDERS" will be deemed to have the meaning set forth in SUBSECTION 2(f). "MATERIAL ADVERSE EFFECT" will be deemed to have the meaning set forth in SUBSECTION 2(e). "NASD" means the National Association of Securities Dealers, Inc. "NASDAQ" means the National Association of Securities Dealers Automated Quotation System. "PIGGY-BACK REGISTRATION" means the registration of Registrable Securities pursuant to the terms and conditions of SUBSECTION 3(a). "PRO RATA BASIS" means a pro rata allocation based on the number of Registrable Securities held by each Holder requesting that Registrable Securities be included in a Registration Statement offering pursuant to this Agreement. "RECORDS" will be deemed to have the meaning set forth in Subsection 5(h). "REGISTRABLE SECURITIES" means the shares of Common Stock issued or issuable pursuant to the Warrants, and any and all securities of the Company issued or issuable with respect to such shares by way of a dividend, reclassification, stock split, or other distribution or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. For purposes of computing the number of Registrable Securities held by a Holder, each Warrant held by such Holder will be deemed to represent the number of shares of Common Stock issuable upon exercise of such Warrant. Any Registrable Security will cease to be a Registrable Security when (i) a Registration Statement covering such Registrable Security has been declared effective by the Commission and the Registrable Security has been disposed of pursuant to such effective Registration Statement, (ii) the Registrable Security is sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, (iii) the Registrable Security has been otherwise transferred, the Company has delivered a new certificate or other evidence of ownership with respect to such Registrable Security not bearing a legend restricting further transfer, and such Registrable Security may be resold without subsequent registration under the Securities Act, (iv) the Registrable Security is eligible for sale pursuant to Rule 144(k) (or any successor provision) under the Securities Act or (v) the Registrable Security is transferred by any Holder to any transferee who is not entitled to the benefits of this Agreement as contemplated by SUBSECTION 10(f). "REGISTRATION EXPENSES" means those expenses associated with any Registration Statement filed hereunder, as described in SECTION 6. "REGISTRATION STATEMENT" means a form of registration statement promulgated under the Securities Act. "SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar or successor Federal statute, and the rules and regulations of the Commission thereunder, all as in effect at the time in question. Reference to a particular section of the Securities Act will include a reference to the comparable section, if any, of any such similar or successor Federal statute. -2- "SELLING DEMAND HOLDERS" will be deemed to have the meaning set forth in SUBSECTION 2(c). "SELLING PIGGY-BACK HOLDERS" will be deemed to have the meaning set forth in SUBSECTION 3(b). "TERM" will be deemed to have the meaning set forth in SUBSECTION 10(b). "UNDERWRITER" means a securities dealer which purchases any Registrable Securities as principal and not as part of such dealer's market-making activities. "WARRANT" means one of the warrants to purchase shares of Common Stock issued pursuant to that certain Warrant Agreement, of even date herewith, by and between the Company and the Warrantholders. "WARRANTHOLDER" means each of NationsBank of Texas, N.A.; Barclays Bank PLC; Commerzbank Aktiengesellschaft Atlanta Agency; Credit Lyonnais, New York Branch; The First National Bank of Chicago; Societe Generale; First American National Bank; Deutsche Bank, A.G., New York Branch and/or Cayman Islands Branch; and ABN Amro Bank, N.V. 2. DEMAND REGISTRATION. (a) REQUEST FOR REGISTRATION. At any time subsequent to the date which is one hundred eighty (180) days subsequent to the date hereof, any Holder who owns or group of Holders who own in the aggregate, thirty percent (30%) or more of the Registrable Securities then issued and outstanding may make a written request ("DEMAND NOTICE") for registration under the Securities Act (a "DEMAND REGISTRATION") of all or any portion of the then issued and outstanding Registrable Securities owned by such Holder or Holders, but not less than twenty percent (20%) of the then issued and outstanding Registrable Securities, subject to the terms and conditions of this Agreement and in no event less than 340,953 shares. Each Demand Notice will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method(s) of disposition thereof. Within ten (10) days after receipt of each Demand Notice, the Company will give written notice of the Company's receipt of such Demand Notice to all other Holders at least twenty (20) days before the anticipated filing date of such Registration Statement, and such Holders will be given the opportunity to participate in such Demand Registration and will be deemed a Demanding Holder (as hereinafter defined) for purposes of this Agreement. Subject to SUBSECTION 2(d), the Company will include in such Demand Registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) days after the delivery to the applicable Holders of the Company's notice of receipt of a Demand Notice. Each such Holder's request to participate in such Demand Registration must also specify the number of Registrable Securities to be registered and, subject to SUBSECTION 2(f) and SECTION 8, the intended method(s) of disposition thereof. Demand Registrations will be on such appropriate registration form of the Commission as the Company will determine. (b) LIMITATION ON DEMAND REGISTRATION. The Company will not be obligated to effect any more than two (2) Demand Registrations at any time during the Term when the Company is not eligible to use a Form S-3 or Form S-2 Registration Statement (or, in each case, any successor or similar forms promulgated under the Securities Act that may be in effect and under which the Company is eligible to register the Registrable Securities for offer and sale under the Securities Act). There will be no limitation on the number of times that a Demand Registration may be requested pursuant to this SECTION 2 at any time during the Term when the Company is eligible to use a Form S-3 or Form S-2 Registration Statement (or, in each case, any successor or similar forms promulgated under the -3- Securities Act that may be in effect and under which the Company is eligible to register the Registrable Securities for offer and sale under the Securities Act). Notwithstanding any provision of this Agreement to the contrary, the Company will not be obligated to honor any Demand Notice requesting a Demand Registration, or otherwise cause a Demand Registration to become effective, hereunder if: (i) the Demand Notice is delivered to the Company during the period beginning ninety (90) days before the effective date of a Demand Registration that is being effected pursuant to a previously delivered Demand Notice and ending (A) if such Demand Registration is an underwritten offering, one hundred eighty (180) days after the closing date of any such offering and (B) if such Demand Registration is not an underwritten offering, ninety (90) days after the closing date of any such offering; or (ii) the Demand Notice is delivered to the Company during the period commencing ninety (90) days before the effective date of a Registration Statement pursuant to which the Company is offering shares of any class of equity securities of the Company in an underwritten offering and ending one hundred eighty (180) days after the closing date of any such offering. (c) EFFECTIVE REGISTRATION AND EXPENSES. Upon receipt of a written request for a Demand Registration, the Company will (i) take appropriate action, on a reasonable, timely basis, to prepare and file a Registration Statement covering the Registrable Shares requested to be included in such Demand Registration (subject to SUBSECTION 2(e)) and (ii) use its commercially reasonable efforts to cause each Demand Registration to become effective under the Securities Act and thereafter to keep it effective under the Securities Act for a period of one hundred eighty (180) days (subject to extension pursuant to SECTION 5). A registration will not count as a Demand Registration (i) unless a Registration Statement with respect thereto has become effective, (ii) if after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Holders whose Registrable Securities are included in such Demand Registration ("SELLING DEMAND HOLDERS"), or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Selling Demand Holders. The Company will pay all Registration Expenses in connection with any Demand Registration as set forth in Section 6, whether or not it becomes effective. (d) NO THIRD-PARTY PIGGY-BACK ON DEMAND REGISTRATIONS. Neither the Company nor any of its respective securityholders (other than the Holders of Registrable Securities in such capacity pursuant to SECTION 3 hereof) may include securities of the Company in any Demand Registration without the prior written consent of the Demanding Holder or, if more than one (1) Demanding Holder, the Majority Demanding Holders. (e) PRIORITY ON DEMAND REGISTRATIONS. In the event the offering of Registrable Shares pursuant to a Demand Registration will be in the form of an underwritten offering pursuant to SUBSECTION 2(f) below, if the managing Underwriter or Underwriters of such offering advise the Company and the Selling Demand Holders in writing that, in their good faith judgment, the number of Registrable Securities to be included in such offering is sufficiently large to materially and adversely affect the success of such offering (a "MATERIAL ADVERSE EFFECT"), the Company will include in such registration the aggregate number of Registrable Securities which in the good faith judgment of such managing Underwriter or Underwriters can be sold without any such Material Adverse Effect, and such amount will be allocated, subject to any written agreement among the Selling Demand Holders, on a Pro Rata Basis among the Selling Demand Holders, unless any of the Selling Demand Holders desires to sell a number of Registrable Securities that is less than the total pro rata amount that such Selling Demand Holder is entitled to sell, in which event the number of Registrable Securities not so elected to be sold will be allocated among the other Selling Demand Holders on a Pro Rata Basis. In -4- the event that the Demanding Holder or, if more than one (1) Demanding Holder, the Majority Demanding Holders have consented to the inclusion of securities other than Registrable Securities in a Demand Registration and the managing Underwriter or Underwriters of such offering advise the Company and the Selling Demand Holders in writing that, in their good faith judgment, the inclusion of such other securities will have a Material Adverse Effect, the Demanding Holder or, if more than one (1) Demanding Holder, the Majority Demanding Holders may revoke such consent, without liability to the holders of such other securities, and such other securities will be excluded from such Demand Registration. (f) MANNER OF OFFERING; SELECTION OF UNDERWRITERS. If the Holder(s) requesting (whether initially or in response to a notice from the Company of the submission of a Demand Notice) a Demand Registration ("DEMANDING HOLDER(S)") so requests (or if more than one Demand Holder, if the Demanding Holders owning a majority of the Registrable Securities requested to be included in the Demand Registration by the Demanding Holders so requests (the "MAJORITY DEMANDING HOLDERS")), the offering of Registrable Securities pursuant to a Demand Registration will be in the form of an underwritten offering, and all Holders electing to participate in such Demand Registration will be bound by such determination. If a Demand Registration is in the form of an underwritten offering, the Majority Demanding Holders will select the managing Underwriter or Underwriters to be used in connection with the offering; PROVIDED, HOWEVER, that such Underwriter or Underwriters must be reasonably satisfactory to the Company. 3. PIGGY-BACK REGISTRATION. (a) REQUEST FOR REGISTRATION. At any time, if the Company proposes to file a Registration Statement under the Securities Act (other than a Registration Statement on Form S-4 or S-8 (or any successor or similar forms promulgated under the Securities Act that may be in effect and under which the Company is eligible to register securities for offer and sale under the Securities Act) or a Registration Statement filed in connection with an exchange offer or offering of securities or debt solely to the Company's existing security or debt holders) with respect to an offering of any class of equity securities by the Company for its own account or for the account of any of its security holders and such Registration Statement is capable of being used to register Registrable Securities, then the Company will give written notice of such proposed filing to each Holder as soon as practicable (but in no event less than twenty (20) days before the anticipated filing date). Such notice will offer each Holder the opportunity to have all or any of the Registrable Securities held by such Holder included in the Registration Statement proposed to be filed or, at the Company's option, in a separate Registration Statement to be filed concurrently with such Registration Statement (the "PIGGY-BACK REGISTRATION"). Within ten (10) days after receiving such notice, each Holder may make a written request to the Company that any or all of such Holder's Registrable Securities be included in the Piggy-back Registration, which notice will specify the number of shares to be so included and, subject to SUBSECTION 3(c) and SECTION 8, the intended method(s) of disposition thereof. Subject to SUBSECTIONS 3(b) AND (c) and SECTION 8, the Company will include in the Piggy-back Registration (or in a separate Registration Statement filed concurrently therewith) all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) days after the receipt by each Holder of the Company's notice. The Company may in its discretion withdraw any Registration Statement filed pursuant to this SUBSECTION 3(a) subsequent to its filing without liability to the Holders except with respect to Registration Expenses. Any Holder will be permitted to withdraw all or part of such Holder's Registrable Securities requested to be included in a Piggy-back Registration at any time prior to the effective date of such Piggy-back Registration without any liability for any Registration Expenses. (b) PRIORITY ON PIGGY-BACK REGISTRATION. If any Piggy-back Registration is to be an underwritten offering, the Company will use commercially reasonable efforts to cause the managing -5- Underwriter or Underwriters to permit the shares of Registrable Securities requested by the Holders of Registrable Securities ("SELLING PIGGY-BACK HOLDERS") to be included in the Piggy-back Registration (on the same terms and conditions as similar securities of the Company included therein to the extent appropriate). Notwithstanding the foregoing, if the managing Underwriter or Underwriters of such offering advise the Company in writing that, in their good faith judgment, the number of Registrable Securities and any other securities requested to be included in such offering is sufficiently large to have Material Adverse Effect, then if such Piggy-back Registration is incident to a primary registration on behalf of the Company, the amount of securities to be included in the Piggy-back Registration for all persons (other than the Company) will first be reduced, subject to any written agreement among the Selling Piggy-back Holders and other participants, on a Pro Rata Basis so that the total number of securities to be included in the offering will be the total number of securities recommended by such managing Underwriter or Underwriters, unless any of the Selling Piggy-back Holders or other participants desires to sell a number of Registrable Securities that is less than the total pro rata amount that such Selling Piggy-back Holder or other participants is entitled to sell, in which event the number of Registrable Securities not so elected to be sold will be allocated among the other Selling Piggy-back Holders and other participants on a Pro Rata Basis. 4. HOLDBACK AGREEMENTS. (a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE SECURITIES. Upon inclusion by the Company of any Holder's Registrable Securities in a Registration Statement filed pursuant to SECTIONS 2 OR 3, such Holder agrees not to effect any public sale or distribution of the issue of securities being registered or a similar security of the Company or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act, during the fourteen (14) days prior to, and during the one hundred eighty (180) day period beginning on, the effective date of such Registration Statement (except as part of such registration), if and to the extent requested by the Company in the case of a non-underwritten public offering or if and to the extent requested by the managing Underwriter or Underwriters in the case of an underwritten public offering. (b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company agrees that it will not effect any public or private sale or distribution of the Registrable Securities or a similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities (except pursuant to a Registration Statement on Form S-4 or S-8 or any successor or similar forms promulgated under the Securities Act that may be in effect and under which the Company is eligible to register securities for offer and sale under the Securities Act), during the fourteen (14) days prior to, and during the one hundred eighty (180) day period beginning on, the effective date of any Demand Registration Statement other than a Shelf Registration. 5. REGISTRATION PROCEDURES. Subject to the other provisions and limitations contained in this Agreement, whenever any Holder has requested that any Registrable Securities be registered pursuant to SECTIONS 2 OR 3, the Company will use commercially reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method(s) of disposition thereof as quickly as practicable, and in connection with any such request, the Company will as expeditiously as possible: (a) prepare and file with the Commission a Registration Statement on any form of Registration Statement for which the Company then qualifies and which counsel for the Company deems appropriate and which form is available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and use its best efforts to cause such filed Registration Statement to become effective -6- under the Securities Act; PROVIDED, HOWEVER, that, (i) at least five (5) days before filing a Registration Statement or prospectus or as promptly as practicable prior to filing any amendments or supplements thereto, the Company will furnish to one counsel selected by the Holder or Holders of the Registrable Securities covered by such Registration Statement copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel, and (ii) after the filing of the Registration Statement, the Company will promptly notify each such Holder and such counsel of comments received from, or any stop order issued or threatened by, the Commission and take all reasonable actions required to respond to such comments or, as the case may be, prevent the entry of such stop order or to remove it if it has been entered; (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the applicable period required by the terms of this Agreement, which will terminate when all Registrable Securities covered by such Registration Statement have been sold or, in the case of Piggy-back Registrations pursuant to SECTION 3, for such time period as the Company will determine in its sole discretion (but not before the expiration of the ninety (90) day period referred to in subsection 4(3) of the Securities Act and Rule 174 thereunder, if applicable); (c) furnish to each Holder of Registrable Securities covered by such Registration Statement, prior to filing the Registration Statement, if requested, copies of such Registration Statement as proposed to be filed, and thereafter furnish to each such Holder such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated or deemed to be incorporated therein by reference), the prospectus included in such Registration Statement (including each preliminary prospectus and supplement), and such other documents as each such Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by each such Holder and covered by such Registration Statement in accordance with the intended method(s) of disposition as set forth in such Registration Statement; (d) use commercially reasonable efforts to register or qualify such Registrable Securities under such other securities/blue sky laws of such jurisdictions as each Holder of Registrable Securities covered by such Registration Statement reasonably (in light of each such Holder's intended plan of distribution) requests and do any and all other acts and things which are reasonably necessary to enable each such Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by each such Holder and covered by such Registration Statement and keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is effective; PROVIDED, HOWEVER, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this SUBSECTION 5(d), (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction; -7- (e) use commercially reasonable efforts to cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable each Holder of Registrable Securities covered by the Registration Statement to consummate the disposition of such Registrable Securities in accordance with the intended method(s) of disposition as set forth in such Registration Statement; PROVIDED, HOWEVER, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this SUBSECTION 5(e), (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction; (f) at any time when a prospectus relating to Registrable Securities is required to be delivered under the Securities Act, (i) notify each Holder of Registrable Securities covered by the Registration Statement of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus, (ii) prepare and file such supplement, amendment or any other required document so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an 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, and (iii) promptly make available to each such Holder any such supplement, amendment or other document; (g) enter into and perform customary agreements (including an underwriting agreement in customary form with the managing Underwriter or Underwriters, if any), use commercially reasonable efforts to obtain any necessary consents in connection with any proposed registration and sale of Registrable Securities in accordance with the intended method(s) of disposition as set forth in such Registration Statement, and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities in accordance with the intended method(s) of disposition as set forth in such Registration Statement; (h) make available for inspection during business hours on reasonable advance notice by each Holder of Registrable Securities covered by the Registration Statement, any Underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant, or other professional retained by any such Holder or such Underwriter (collectively, the "INSPECTORS"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "RECORDS") as may be reasonably necessary to enable them to exercise their due diligence responsibilities, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspectors in connection with such Registration Statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential will not be disclosed by the Inspectors unless (i) in the reasonable judgment of counsel to the Company the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction. Each Holder agrees that information obtained by such Holder as a result of such inspections will be deemed confidential and will not be used by such Holder as the basis for any market transactions in the securities of the Company or for any other purpose unless and until such information is made generally available to the public. Each Holder further agrees that such Holder will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential; -8- (i) if such sale is pursuant to an underwritten offering, use commercially reasonable efforts to obtain a comfort letter or comfort letters from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by comfort letters as any Holder of Registrable Securities covered by the Registration Statement or the managing Underwriter or Underwriters may reasonably request; (j) otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders as soon as reasonably practicable, an earnings statement covering a period of twelve (12) months, beginning within three (3) months after the effective date of the Registration Statement, which earnings statement will satisfy the provisions of section 11(a) of the Securities Act; (k) if requested by the managing Underwriter or Underwriters, if any, or any Holder of Registrable Securities covered by the Registration Statement in connection with an underwritten offering pursuant to SECTIONS 2 OR 3 hereof, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing Underwriter or Underwriters, if any, and/or any such Holder reasonably requests to be included therein, as may be required by applicable laws and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; PROVIDED, HOWEVER, that the Company will not be required to take any actions pursuant to this SUBSECTION 5(k) that are not, in the reasonable opinion of counsel for the Company, in compliance with applicable law; (l) use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement filed in connection herewith, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest possible moment; (m) cooperate with each Holder of Registrable Securities covered by the Registration Statement and the managing Underwriter or Underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates will not bear any restrictive legends and will be in a form eligible for deposit with the transfer agent for the Common Stock; and enable such Registrable Securities to be in such denominations and registered in such names as the managing Underwriter or Underwriters, if any, or Holders of Registrable Securities covered by the Registration Statement may request at least two (2) business days prior to any sale of such Registrable Securities; (n) comply (during the effectiveness of any Registration Statement filed hereunder) with the provisions of all applicable securities/blue sky laws, including, without limitation, the Securities Act, with respect to the disposition of Registrable Securities covered by such Registration Statement in accordance with the intended method(s) of distribution as set forth in such Registration Statement; (o) cause all Registrable Securities included in a Registration Statement filed hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be listed on the automated quotation system of the NASD and, if listed on the automated quotation system of the NASD, use its best efforts to secure designation of all such Registrable Securities covered by such Registration Statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Exchange Act or, failing that, to secure NASDAQ authorization for such Registrable Securities -9- and, without limiting the generality of the foregoing, use its reasonable best efforts to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD; (p) to provide, in accordance with the requirements of applicable law, a transfer agent and registrar for all Registrable Securities covered by a Registration Statement filed hereunder not later than the effective date of such Registration Statement; and (q) take all such other actions as the managing Underwriter or Underwriters (or if there is no managing Underwriter or Underwriters, the Majority Demanding Holders), reasonably request to expedite or facilitate the disposition of Registrable Securities covered by a Registration Statement filed hereunder (including, without limitation, effecting a stock split or a combination of shares) in accordance with the intended method(s) of distribution as set forth in such Registration Statement. Notwithstanding the provisions of this SECTION 5, the Company will be entitled to postpone, for a reasonable period of time, the filing or effectiveness of any Registration Statement under SECTIONS 2 OR 3 if (i) the Company determines, in the good faith exercise of its reasonable business judgment, that such registration and offering could materially interfere with or adversely affect bona fide financing, acquisition, or other material business plans of the Company (including a proposed primary offering by the Company of its own securities) at the time the right to delay is exercised or would require disclosure of non-public information, the premature disclosure of which could materially and adversely affect the business, properties, operations or financial results of the Company; PROVIDED, HOWEVER, that the Company will not be required to disclose to the Holders requesting registration any such transaction, plan or non-public information and, PROVIDED FURTHER, the Company may delay such registration or effectiveness for no more than six (6) months and may not exercise such right more than once in any eighteen (18) month period or (ii) at any time prior to the effectiveness of any Demand Registration or Piggy-back Registration the Company determines that it is unable to comply with the provisions of Article 3 or Article 11 of Regulation S-X under the Securities Act, to the extent then applicable to the Company. If the Company postpones the filing or effectiveness of a Registration Statement pursuant hereto, it will promptly notify in writing the Holders of Registrable Securities requesting such registration when the events or circumstances permitting such postponement have ended and at such time will proceed with the filing of the Registration Statement if so requested. If the Company postpones the filing or effectiveness of a Registration Statement filed pursuant hereto, then the Holders of Registrable Securities demanding such registration will have the right to withdraw their request for registration by giving written notice to the Company at any time within five (5) days after the date the Company notifies such Holders of Registrable Securities of its willingness to proceed with the filing of the Registration Statement and, if such registration was to be made pursuant to a Demand Registration, upon such withdrawal the withdrawn demand will not count as a Demand Registration. The Company may require each Holder of Registrable Securities covered by the Registration Statement to promptly furnish in writing to the Company such information regarding the distribution of such Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration. Each Holder requesting registration of Registrable Securities pursuant to SECTIONS 2 OR 3 will cooperate with the Company and, if applicable, the managing Underwriter or Underwriters in providing such information and executing and delivering such documents as the Company or the managing Underwriter or Underwriters reasonably request in connection with any such registration, and the Company will not be obligated to include in any such registration any Registrable Securities of any Holder who does not so comply. Each Holder of Registrable Securities covered by a Registration Statement agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in SUBSECTION 5(f), such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Holder's receipt of the copies of the -10- supplemented or amended prospectus contemplated by SUBSECTION 5(f), and, if so directed by the Company, such Holder will deliver to the Company all copies, other than permanent file copies then in such Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. If the Company gives such notice, the Company will extend the period during which such Registration Statement will be maintained effective (including the period referred to in SUBSECTION 5(b)) by the number of days during the period from and including the date of the giving of notice pursuant to SUBSECTION 5(f) to the date when the Company makes available to such Holder a prospectus supplemented or amended to conform with the requirements of SUBSECTION 5(f). 6. REGISTRATION EXPENSES. In connection with any Registration Statement required to be filed hereunder, the Company will pay the following registration expenses (the "REGISTRATION EXPENSES"): (i) all registration and filing fees; (ii) fees and expenses of compliance with securities/blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications (or exemptions from qualifications of the Registrable Securities); (iii) printing expenses (including expenses of printing certificates for Registrable Securities); (iv) internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties); (v) any fees and expenses incurred in connection with the listing of the Registrable Securities in accordance with the requirements of SUBSECTION 5(o); (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the costs associated with the delivery by independent certified public accountants of the comfort letter or comfort letters requested pursuant to SUBSECTION 5(i)); (vii) the reasonable fees and expenses of any special experts or other persons retained by the Company in connection with such registration; (viii) reasonable fees and expenses of one legal counsel (who will be reasonably acceptable to the Company) for the Holders incurred in connection with any registration hereunder, (ix) the expenses associated with obtaining liability insurance and (ix) messenger, delivery and telephone expenses related to any registration contemplated hereunder. The Company will not have any obligation to pay any underwriting fees, discounts, or commissions attributable to the sale of Registrable Securities, or any out-of-pocket expenses of any Holder (or the agents who manage such Holder's accounts), which amounts will be the responsibility of the selling Holder or Holders. -11- 7. INDEMNIFICATION; CONTRIBUTION. (a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless each Holder of Registrable Securities covered by a Registration Statement filed pursuant to this Agreement and, if applicable, such Holder's directors and officers and each person who controls such Holder within the meaning of either section 15 of the Securities Act or section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities and expenses (including reasonable attorney's fees and legal and other costs of investigation and defense) (collectively, "LOSSES") arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or prospectus relating to the Registrable Securities or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Losses arise out of, or are based upon, any such untrue statement or omission or allegation thereof based upon information furnished in writing to the Company by such Holder or on such Holder's behalf expressly for use therein; PROVIDED, HOWEVER, that with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary or final prospectus, the indemnity agreement contained in this SUBSECTION 7(a) will not apply to the extent that any such Losses result from the fact that a current copy of the prospectus was not sent or given to the person asserting any such Losses at or prior to the written confirmation of the sale of the applicable Registrable Securities to such person if it is determined that it was the responsibility of such Holder to provide such person with a current copy of the prospectus and such current copy of the prospectus would have cured the defect giving rise to such Losses. The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors, and each person who controls such Underwriters within the meaning of either section 15 of the Securities Act or section 20 of the Exchange Act to the extent reasonably required by such Underwriters. (b) INDEMNIFICATION BY HOLDERS. Each Holder agrees to indemnify and hold harmless the Company, its directors and officers, and each person, if any, who controls the Company within the meaning of either section 15 of the Securities Act or section 20 of the Exchange Act (other than such Holder), from and against any and all Losses arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus relating to the Registrable Securities of such Holder or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only insofar as such Losses arise out of, or are based upon, any such untrue statement or omission or allegation thereof based upon information furnished in writing to the Company by such Holder or on such Holder's behalf, in such Holder's capacity as a Holder and not in his capacity as a director or officer of the Company, if applicable, expressly for use therein; PROVIDED, HOWEVER, that with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary or final prospectus, the indemnity agreement contained in this SUBSECTION 7 will not apply to the extent that any such Losses result from the fact that a current copy of the prospectus was not sent or given to the person asserting any such Losses at or prior to the written confirmation of the sale of the applicable Registrable Securities to such person if it is determined that it was the responsibility of the Company or any other person or entity (other than such Holder or such Holder's agent) to provide such person with a current copy of the prospectus and such current copy of the prospectus would have cured the defect giving rise to such Losses. Each Holder also agrees to indemnify and hold harmless any Underwriters of the Registrable Securities, their officers and directors, and each person who controls such Underwriters within the meaning of either section 15 of the Securities Act or section 20 of the Exchange Act to the extent reasonably required by such Underwriters. -12- (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any action or proceeding (including any governmental investigation) is brought or asserted against any person entitled to indemnification under SUBSECTIONS 7(a) OR (b) (an "INDEMNIFIED PARTY") in respect of which indemnity may be sought from any party who has agreed to provide such indemnification (an "INDEMNIFYING PARTY"), the Indemnified Party will promptly notify the Indemnifying Party in writing, and the Indemnifying Party will assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and will assume the payment of all expenses related thereto. The Indemnified Party will have the right to employ separate legal counsel reasonably satisfactory to the Indemnifying Party in any such action and to participate in the defense thereof, but the fees and expenses of such counsel will be at the expense of such Indemnified Party unless (i) the Indemnifying Party agrees to pay such fees and expenses, (ii) the Indemnifying Party fails to promptly assume the defense of such action or proceeding and to employ counsel reasonably satisfactory to the Indemnified Party, (iii) the named parties to any such action or proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party has been advised by legal counsel that there is a conflict of interest on the part of counsel employed by the Indemnifying Party to represent such Indemnified Party, or (iv) the Indemnified Party's counsel has advised the Indemnified Party that there may be defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party and that the Indemnifying Party is not able to assert on behalf of or in the name of the Indemnified Party (in which case of either (iii) or (iv), if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate legal counsel at the expense of the Indemnifying Party, the Indemnifying Party will not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Party); it being understood, however, that the Indemnifying Party will not, in connection with any one (1) such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one (1) separate firm of attorneys (together with any appropriate local counsel) at any time for all such Indemnified Parties, which firm will be designated in writing by such Indemnified Parties. The Indemnifying Party will not be liable for any settlement of any such action or proceeding effected without its written consent, which consent will not be unreasonably withheld, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, the Indemnifying Party will indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. (d) CONTRIBUTION. If the indemnification provided for in this SECTION 7 is unavailable to the Indemnified Parties in respect of any Losses (other than by reason of exceptions provided in SUBSECTIONS 7(a) OR (b)) or is inadequate to hold harmless each Indemnified Party, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, will contribute to the amount paid or payable by such Indemnified Party as a result of such Losses (i) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand, with respect to the statements or omissions which resulted in such Losses, or action in respect thereof, as well as any other relevant equitable considerations or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as will be appropriate to reflect the relative benefits received by the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand, from the offering of the securities covered by such Registration Statement. The relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and such party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other will be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and -13- commissions and after deducting expenses) received by the Indemnifying Party bears to the total proceeds (net of underwriting discounts and commissions and after deducting expenses) received by the Indemnified Party. The Indemnifying Party and the Indemnified Party agree that it would not be just and equitable if contribution pursuant to this SUBSECTION 7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in this SUBSECTION 7(d). Notwithstanding the provisions of this SUBSECTION 7(d), no Holder will be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Holder were offered to the public pursuant to the applicable Registration Statement exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of subsection 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) SURVIVAL. The indemnity and contribution agreements contained in this SECTION 7 will remain operative and in full force and effect regardless of (i) any termination of this Agreement or any underwriting agreement, (ii) any investigation made by or on behalf of any Indemnified Party, and (iii) the consummation of the sale or successive resale of the Registrable Securities. 8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may participate in any underwritten registration hereunder unless such Holder (i) agrees to sell such Holder's securities on the basis provided in any underwriting arrangements approved by the persons or entities entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, and other documents reasonably required under the terms of such underwriting arrangements and this Agreement; provided, however, that no such Holder will be required to make any representations or warranties in connection with any such registration other than representations and warranties as to (i) such Holder's ownership of such Holder's Registrable Securities to be sold or transferred free and clear of all liens, claims and encumbrances, (ii) such Holder's power and authority to effect such transfer, (iii) such matters pertaining to compliance by such Holder with securities/blue sky laws as may be reasonably requested and (iv) any transaction between the Company and the Holder. 9. SPECIAL COVENANTS. (a) RULE 144. The Company covenants that it will use its reasonable best efforts file any reports required to be filed by it under the Securities Act and the Exchange Act, and it will take such further action that any Holder may reasonably request to enable such Holder to sell Registrable Securities, from time to time, without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such information and requirements. (b) FORM S-3/FORM S-2 AVAILABILITY. The Company covenants that it will use its reasonable best efforts timely file all reports required to be filed by it under the Securities Act and the Exchange Act, and it will take such other action as may be necessary and within its control, to cause the Company to become and/or remain eligible to register on Form S-3 or Form S-2 (or any successor or similar form that may hereafter be adopted by the Commission) securities of the same class or series as the Registrable Securities. -14- (c) COMPANY PURCHASE OPTION. Notwithstanding the terms of this Agreement, if at any time that any Holder requests that Registrable Securities be included in a Registration Statement filed or to be filed pursuant to this Agreement (pursuant to a Demand Registration or a Piggy-back Registration) securities of the same class or series as the Registrable Securities are traded on a national securities exchange or authorized to be quoted on the NASDAQ or any other recognized quotation system which regularly provides quotes on such securities (a "Trading Forum"), the Company will have the right and option, in its sole discretion, to, in lieu of including such Registrable Securities in such Registration Statement, purchase all but not less than all of such Registrable Securities requested to be included in such Registration Statement at the closing or last sales price of such security reported by such Trading Forum on the date the Demand Notice or written notice requesting the inclusion of such Registrable Securities in such Registration Statement is received by the Company or, if there is no such reported quote for such date by any Trading Forum, the last reported closing or sales price, as applicable, of such security by a Trading Forum. (d) LIMITS REGARDING WARRANTS. Notwithstanding anything in this Agreement to the contrary, (i) no Holder may request registration of any Registrable Security unless the Warrant pursuant to which such Registrable Securities are issuable, is exercisable for the number of Registrable Securities for which registration is requested at, or within 60 days after, the date the request for registration (or inclusion in a Piggy-back Registration) is delivered to the Company and (ii) in the event any Holder requests to have any unissued Registrable Securities which are issuable pursuant to any Warrant included in a Registration Statement pursuant to this Agreement as permitted under clause (i) above, the Warrant pursuant to which such Registrable Securities are issuable must be exercised by such Holder for the number of Registrable Securities requested to be included in such Registration Statement upon the later to occur of (A) the effective date of the Registration Statement in which such Registrable Securities are included or (B) the first date the Warrant may be exercised for such Registrable Securities. 10. MISCELLANEOUS. (a) REMEDIES. In addition to being entitled to exercise all rights provided herein and granted by law, including recovery of damages, each Holder will be entitled to specific performance of such Holder's rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive that defense in any action for specific performance. (b) TERM. The term of this Agreement will terminate on the earlier to occur of (i) the fifth anniversary of the date hereof or (ii) the first date on which there are no longer any Registrable Securities issued and outstanding (the "TERM"). (c) NO INCONSISTENT AGREEMENTS. The Company represents and warrants that has not previously entered into any agreement with respect to its securities which grants any existing registration rights to any other person or entity. (d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified, or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of a majority of the then issued and outstanding Registrable Securities. (e) NOTICES. All notices, demands, requests or other communications that may be or are required to be given, served or sent by any party to this Agreement to any other party to this Agreement must be in writing and must be mailed by first-class, registered or certified mail, return -15- receipt requested, postage prepaid, or transmitted by hand delivery, telegram or facsimile transmission addressed as follows: (i) if to any Warrantholder, at the most current address given to the Company and thereafter at such other address as may be designated from time to time by notice given in accordance with the provisions of this SUBSECTION 10(e), which address initially is set forth below the signature of each Warrantholder on this Agreement. (ii) if to the Company, at its most current address and thereafter at such other address as may be designated from time to time by notice given in accordance with the provisions of this SUBSECTION 10(e), which address initially is: Nu-kote Holding, Inc. 17950 Preston Road, Suite 690 Dallas, Texas 75252 Attention: Secretary Telecopier: (972) 250-4097 (iii) if to any other Holder, at such address set forth on the Addendum to this Agreement executed and delivered by such Holder pursuant to SUBSECTION 10(f) or at such other address as may be designated from time to time by notice given in accordance with the provisions of this SUBSECTION 10(e). Any party to this Agreement may designate by written notice a new address to which any notice, demand, request or communication will thereafter be given, served or sent. Each notice, demand, request or communication that is mailed, delivered or transmitted in the manner described above will be deemed sufficiently given, served, sent and received for all purposes at such time as it is delivered to the addressee with the return receipt, the delivery receipt, the affidavit of messenger or (with respect to a facsimile transmission) the answer back being deemed conclusive evidence of such delivery or at such time as delivery is refused by the addressee upon presentation. (f) SUCCESSORS AND ASSIGNS. The Company will not assign its rights or obligations hereunder without the prior written consent of the Holders of a majority of the then issued and outstanding Registrable Securities. Each Holder may assign such Holder's respective rights and obligations hereunder to persons to whom such Holder transfers or otherwise assigns Warrants and/or Registrable Securities; PROVIDED, HOWEVER, that the Warrants and/or Registrable Securities assigned to any person by such Holder must equal and/or be exercisable for an aggregate of at least four-tenths of one percent (.4%) of the Company's outstanding Common Stock at the time of any such transfer or assignment. In the event of any such assignment, such assignees will be entitled to the rights of the assignor under this Agreement only to the extent such rights expressly are assigned to such assignee. Any assignment of rights under this Agreement in violation of the foregoing will be null and void. Subject to the foregoing, this Agreement will inure to the benefit of and be binding upon the successors and assigns of the Company and each Holder; PROVIDED, HOWEVER, that any assignee or transferee of Registrable Securities that is deemed a Holder under this Agreement will be entitled to the rights and benefits afforded such person by this Agreement only upon such person's execution and delivery of an addendum to this Agreement, in form and substance acceptable to the Company, agreeing to be bound by the duties and obligations of a Holder under this Agreement. Upon disposition of all Warrants and/or Registrable Securities, a Holder will no longer be deemed to be a party to this Agreement; PROVIDED, HOWEVER, such Holder's rights and obligations under SECTION 7 will continue for two years following the date of such disposition. (g) COUNTERPARTS. This Agreement may be executed in a number of identical -16- counterparts and it will not be necessary for the Company and each Holder to execute each of such counterparts, but when all parties have executed and delivered one or more of such counterparts, the several parts, when taken together, will be deemed to constitute one and the same instrument, enforceable against each party in accordance with its terms. In making proof of this Agreement, it will not be necessary to produce or account for more than one such counterpart executed by the party against whom enforcement of this Agreement is sought. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and will not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW PRINCIPLES) AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN DALLAS COUNTY, TEXAS. COURTS WITHIN THE STATE OF TEXAS WILL HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER IN FEDERAL OR STATE COURT, WILL BE LAID IN DALLAS COUNTY, TEXAS. EACH OF THE PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (i) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (ii) SUCH PARTY AND/OR SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (iii) ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM. (j) SEVERABILITY. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the Term, such provision will be fully severable; this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid, and enforceable. (k) ENTIRE AGREEMENT. This Agreement is intended by the Company and the Holders as a final expression of their agreement and is intended to be a complete and exclusive statement of their agreement and understanding in respect of the subject matter contained herein. This agreement supersedes all prior agreements and understandings between the Company and the Holders with respect to such subject matter. (l) THIRD PARTY BENEFICIARIES. Subject to the terms of SECTION 7 and SUBSECTION 10(f) hereof, this Agreement is intended for the benefit of the Company and the Holders and their respective successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity. (m) ATTORNEYS' FEES. In any proceeding brought to enforce any provision of this -17- Agreement, the successful party will be entitled to recover reasonable attorneys' fees in addition to its costs and expenses and any other available remedy. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] -18- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. Company: NU-KOTE HOLDING, INC. By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Nu-kote Holding, Inc. Suite 690, LB 21 17950 Preston Road Dallas, Texas 75252 Attention: Treasurer Warrantholders: NATIONSBANK OF TEXAS, N.A. By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: NationsBank of Texas, N.A. 901 Main Street, 66th Floor Dallas, Texas 75202 Attention: William E. Livingstone, IV Senior Vice President BARCLAYS BANK PLC By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Barclays Bank PLC 75 Wall Street, 12th Floor New York, New York 10265 Attention: Ronald E. Spitzer COMMERZBANK AKTIENGESELLSCHAFT ATLANTA AGENCY By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Commerzbank Aktiengesellschaft Atlanta Agency Promenade Two, Suite 3500 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 Attention: Harry P. Yergey CREDIT LYONNAIS, NEW YORK BRANCH By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Credit Lyonnais 1301 Avenue of the Americas, 18th Floor New York, New York 10019 Attention: Alan Sidrane THE FIRST NATIONAL BANK OF CHICAGO By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: The First National Bank of Chicago One First National Plaza, Mail Suite 0088 Chicago, Illinois 60670-0088 Attention: Richard A. Peterson SOCIETE GENERALE By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Societe Generale Trammell Crow Center, Suite 4800 2001 Ross Avenue Dallas, Texas 75201 Attention: Richard M. Lewis FIRST AMERICAN NATIONAL BANK By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: First American National Bank 4th & Union Street AA-0310, 10th Floor Nashville, Tennessee 37238 Attention: Zachry F. Martin DEUTSCHE BANK, A.G., NEW YORK BRANCH AND/OR CAYMAN ISLAND BRANCH By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: Deutsche Bank, A.G., New York Branch and/or Cayman Islands Branch 31 West 52nd Street, 24th Floor New York, New York 10019 Attention: Ralf Hoffmann ABN AMRO BANK, N.V. By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ Notice Address: ABN AMRO Bank, N.V. 10 E. 53rd Street, 37th Floor New York, New York 10022 Attention: Ronald O. Drake EX-11.1 7 EXHIBIT 11.1 EXHIBIT 11.1 NU-KOTE HOLDING, INC. AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) FOR THE THREE MONTHS ENDED -------------------------- JUNE 27, JUNE 28, 1997 1996 -------- -------- PRIMARY: Shares outstanding: Weighted average number of shares outstanding 21,775 21,751 Net effect of dilutive stock options (1) 748 -------- -------- 21,775 22,499 -------- -------- -------- -------- Net income (loss) $(5,972) $ 1,795 -------- -------- -------- -------- Net income (loss) per common share $ (0.27) $ 0.08 -------- -------- -------- -------- FULLY DILUTED: Shares outstanding: Weighted average number of shares outstanding 21,775 21,751 Net effect of dilutive stock options (1) 748 -------- -------- 21,775 22,499 -------- -------- -------- -------- Net income (loss) $(5,972) $ 1,795 -------- -------- -------- -------- Net income (loss) per common share $ (0.27) $ 0.08 -------- -------- -------- -------- - --------------------- (1) The net effects of dilutive stock options for periods resulting in income are based upon the treasury stock method using average market price during the period for the primary amounts, and the higher of the average market price or the market price at the end of the period for the fully diluted amounts. For periods resulting in losses, stock options are considered anti-dilutive and are excluded from the computation. 20 EX-27 8 EX 27
5 1,000 3-MOS MAR-31-1998 APR-01-1997 JUN-27-1997 7556 0 76190 4372 99895 194451 105387 31357 296934 98925 137545 0 0 223 42367 42590 79727 79727 63944 63944 18790 0 2965 (5972) 0 (5972) 0 0 0 (5972) (0.27) (0.27)
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