-----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, KXYO0szIK2CDJXX0mrXAp37mGmlNH7D7IWonj7ID0stZkvINFglfYlG35ODUg2KQ mC/ikxH/iRu5ujov+z7G9A== 0000903893-96-000126.txt : 19960329 0000903893-96-000126.hdr.sgml : 19960329 ACCESSION NUMBER: 0000903893-96-000126 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 32 CONFORMED PERIOD OF REPORT: 19960313 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 19960328 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARED TECHNOLOGIES INC CENTRAL INDEX KEY: 0000817632 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 870424558 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17366 FILM NUMBER: 96539427 BUSINESS ADDRESS: STREET 1: 100 GREAT MEADOW RD STREET 2: STE 104 CITY: WETHERSFIELD STATE: CT ZIP: 06109 BUSINESS PHONE: 8602582500 MAIL ADDRESS: STREET 1: 100 GREAT MEADOW ROAD SUITE 104 STREET 2: 100 GREAT MEADOW ROAD SUITE 104 CITY: WETHERSFIELD STATE: CT ZIP: 06109 8-K 1 CURRENT REPORT ON FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): March 13, 1996 Shared Technologies Fairchild Inc. (Exact name of registrant as specified in charter) Delaware 0-17366 87-0424558 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 100 Great Meadow Road, Suite 104, Wethersfield, CT 06109 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (860) 258-2400 Shared Technologies Inc. (Former name or former address, if changed since last report). Item 2. Acquisition or Disposition of Assets. Pursuant to an Agreement and Plan of Merger dated as of November 9, 1995, as amended on February 2, 1996, February 24, 1996 and March 1, 1996 (collectively, the "Merger Agreement"), among Shared Technologies Fairchild Inc. (formerly named Shared Technologies Inc. and referred to herein before the Merger, as defined below, as "STI"), Fairchild Industries, Inc. ("FII"), RHI Holdings, Inc. ("RHI") and The Fairchild Corporation ("TFC"), STI completed the merger of FII with and into STI on March 13, 1996 (the "Merger") and the surviving corporation was renamed Shared Technologies Fairchild Inc. ("STFI" or the "Company"). The Merger combines the businesses of STI and FII, which will be conducted by STFI and its subsidiaries following the Merger. These businesses include (a) shared telecommunications services and (b) telecommunications systems. The Acquired Business had combined pro forma sales of approximately $204.0 million for the twelve month period ended September 30, 1995. Upon consummation of the Merger, STFI issued to RHI (a) 6.0 million shares of STFI's common stock, par value $.004 par value per share ("Common Stock"), representing approximately 41.4% of the Common Stock after such issuance, (b) Series G Cumulative Convertible Preferred Stock of STFI with an initial liquidation preference of $25.0 million (the "Series G Preferred") and (c) Series H Special Preferred Stock of STFI with an initial liquidation preference of $20.0 million (the "Series H Preferred"). In connection with the financing transactions described in the following paragraph, STFI entered into an agreement with RHI under which the Series G Preferred and the Series H Preferred will be exchanged for STFI's Series I Cumulative Convertible Preferred Stock and Series J Special Preferred Stock, respectively, having terms substantially identical to the Series G Preferred and Series H Preferred. The Company's sources of capital to finance the foregoing acquisition are (a) approximately $112.0 million in cash representing all of the proceeds from the issuance and sale of $163,637,000 aggregate principal amount ($115 million aggregate initial accreted value) of STFI's 12 1/4% Senior Subordinated Discount Notes Due March 1, 2006 and (b) approximately $125 million from borrowings under a $145 million term and revolving credit facility with Credit Suisse, Citicorp USA, Inc. and NationsBank. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. At the time of the filing of this Form 8-K, it is impracticable for the Company to provide the pro forma financial statements required by Rule 3-05(b) of Regulation S-X with respect to the Merger. Such required financial information will be filed by amendment under cover of Form 8-K/A not later than May 27, 1996, in accordance with Item 7, paragraph (a)(4) of Form 8-K. (b) PRO FORMA FINANCIAL INFORMATION. At the time of the filing of this Form 8-K, it is impracticable for the Company to provide the pro forma financial information required by Rule 11-01(c) of Regulation S-X with respect to the Merger. Such required financial information will be filed by amendment under cover of Form 8 not later than May 27, 1996, in accordance with Item 7, paragraph (b)(2) of Form 8-K. (c) EXHIBITS. 1. Purchase Agreement dated March 8, 1996 among the Company, STI, the guarantors named therein and CS First Boston Corporation and Citicorp Securities, Inc. (filed herewith). 2.1 Agreement and Plan of Merger dated as of November 9, 1995 among Shared Technologies Fairchild Inc. (formerly Shared Technologies Inc.)("STFI"), Fairchild Industries, Inc. ("FII"), RHI Holdings, Inc. ("RHI") and The Fairchild Corporation ("TFC") filed herewith). 2.2 First Amendment to Agreement and Plan of Merger dated as of February 2, 1996 among STFI, FII, RHI and TFC (filed herewith). 2.3 Second Amendment to Agreement and Plan of Merger dated as of February 24, 1996 among STFI, FII, RHI and TFC (filed herewith). 2.4 Third Amendment to Agreement and Plan of Merger dated as of March 1, 1996 among STFI, FII, RHI and TFC (filed herewith). 3(i).1 Restated Certificate of Incorporation of the Company (filed herewith). 3(i).2 Certificate of Merger of STI and FII (filed herewith). 3(i).3 Certificate of Incorporation of Shared Technologies Fairchild Communications Corp. ("STFCC") (filed herewith). 3(ii).1 Amended and Restated By-laws of STI (filed herewith). 3(ii).2 Amendment to Amended and Restated By-laws of STI (filed herewith). 3(ii).3 By-laws of STFCC (filed herewith). 4.1 Certificate of Designations of Series G 6% Cumulative Convertible Preferred Stock of STFI (filed herewith). 4.2 Certificate of Designations of Series H Special Preferred Stock of STFI (filed herewith). 4.3 Certificate of Designations of Series I 6% Cumulative Convertible Preferred Stock of STFI (filed herewith). 4.4 Certificate of Designations of Series J Special Preferred Stock of STFI (filed herewith). 4.5 Indenture dated as of March 1, 1996 among the Company, the guarantors named therein and United States Trust Company of New York, as trustee (filed herewith). 4.6 First Supplemental Indenture dated as of March 13, 1996 among the Company, the guarantors named therein and United States Trust Company of New York, as trustee (filed herewith). 10.1 Registration Rights Agreement dated March 8, 1996 among the Company, STFI, the guarantors named therein and CS First Boston Corporation and Citicorp Securities, Inc. (filed herewith). 10.2 Registration Rights Agreement dated March 13, 1996 among STI, RHI and TFC (filed herewith). 10.3 Credit Agreement dated as of March 12, 1996 among the Company, STFI, Credit Suisse, Citicorp USA, Inc., NationsBank and the other lenders named therein (filed herewith). 10.4 Security Agreement dated as of March 13, 1996 among STFCC, STFI, each subsidiary of STFCC named therein and Credit Suisse, as collateral agent for the secured parties (filed herewith). 10.5 Pledge Agreement dated as of March 13, 1996 among STFCC, STFI, each subsidiary of STFCC named therein and Credit Suisse, as collateral agent for the secured parties (filed herewith). 10.6 Pledge Agreement dated as of March 13, 1996 among STFI, RHI and Gadsby & Hannah, as interim pledge agent. 10.7 Parent Guarantee Agreement dated as of March 12, 1996 between STI and Credit Suisse, as collateral agent for the secured parties (filed herewith). 10.8 Subsidiary Guarantee Agreement dated as of March 12, 1996 among the subsidiaries of STFCC and STFI named therein and Credit Suisse, as collateral agent for the secured parties (filed herewith). 10.9 Agreement to Exchange 6% Cumulative Convertible Preferred Stock and Special Preferred Stock dated as of March 1, 1996 among STI, FII, RHI and TFC (filed herewith). 10.10 Shareholders' Agreement dated as of March 13, 1996 among STI, RHI and Anthony D. Autorino (filed herewith). 10.11 Tax Sharing Agreement dated as of March 13, 1996 between STI and RHI (filed herewith). 10.12 Indemnification Agreement dated as of March 13, 1996 between STI and Fairchild Holdings Corp. (filed herewith). 10.13 Indemnification Agreement dated as of March 13, 1996 among STI, TFC and RHI (filed herewith). 10.14 Indemnity, Subrogation and Contribution Agreement dated as of March 12, 1996 between STFCC and and Credit Suisse, as collateral agent for the secured parties (filed herewith). 23.1 Consent of Rothstein, Kass & Company, P.C. (to be filed by amendment). 23.2 Consent of Arthur Andersen LLP (to be filed by amendment). SHARED TECHNOLOGIES FAIRCHILD INC. By /s/ Vincent DiVincenzo -------------------------------------- Vincent DiVincenzo Senior Vice President-Administration, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer)
Exhibit Index Exhibit No. Exhibit Description Page No. 1. Purchase Agreement dated March 8, 1996 among the Company, STI, the guarantors named therein and CS First Boston Corporation and Citicorp Securities, Inc. (filed herewith). 2.1 Agreement and Plan of Merger dated as of November 9, 1995 among Shared Technologies Fairchild Inc. (formerly Shared Technologies Inc.)("STFI"), Fairchild Industries, Inc. ("FII"), RHI Holdings, Inc. ("RHI") and The Fairchild Corporation ("TFC") filed herewith). 2.2 First Amendment to Agreement and Plan of Merger dated as of February 2, 1996 among STFI, FII, RHI and TFC (filed herewith). 2.3 Second Amendment to Agreement and Plan of Merger dated as of February 24, 1996 among STFI, FII, RHI and TFC (filed herewith). 2.4 Third Amendment to Agreement and Plan of Merger dated as of March 1, 1996 among STFI, FII, RHI and TFC (filed herewith). 3(i).1 Restated Certificate of Incorporation of the Company (filed herewith). 3(i).2 Certificate of Merger of STI and FII (filed herewith). 3(i).3 Certificate of Incorporation of Shared Technologies Fairchild Communications Corp. ("STFCC") (filed herewith). 3(ii).1 Amended and Restated By-laws of STI (filed herewith). 3(ii).2 Amendment to Amended and Restated By-laws of STI (filed herewith). 3(ii).3 By-laws of STFCC (filed herewith). 4.1 Certificate of Designations of Series G 6% Cumulative Convertible Preferred Stock of STFI (filed herewith). 4.2 Certificate of Designations of Series H Special Preferred Stock of STFI (filed herewith). 4.3 Certificate of Designations of Series I 6% Cumulative Convertible Preferred Stock of STFI (filed herewith). 4.4 Certificate of Designations of Series J Special Preferred Stock of STFI (filed herewith). 4.5 Indenture dated as of March 1, 1996 among the Company, the guarantors named therein and United States Trust Company of New York, as trustee (filed herewith). 4.6 First Supplemental Indenture dated as of March 13, 1996 among the Company, the guarantors named therein and United States Trust Company of New York, as trustee (filed herewith). 10.1 Registration Rights Agreement dated March 8, 1996 among the Company, STFI, the guarantors named therein and CS First Boston Corporation and Citicorp Securities, Inc. (filed herewith). 10.2 Registration Rights Agreement dated March 13, 1996 among STI, RHI and TFC (filed herewith). 10.3 Credit Agreement dated as of March 12, 1996 among the Company, STFI, Credit Suisse, Citicorp USA, Inc., NationsBank and the other lenders named therein (filed herewith). 10.4 Security Agreement dated as of March 13, 1996 among STFCC, STFI, each subsidiary of STFCC named therein and Credit Suisse, as collateral agent for the secured parties (filed herewith). 10.5 Pledge Agreement dated as of March 13, 1996 among STFCC, STFI, each subsidiary of STFCC named therein and Credit Suisse, as collateral agent for the secured parties (filed herewith). 10.6 Pledge Agreement dated as of March 13, 1996 among STFI, RHI and Gadsby & Hannah, as interim pledge agent. 10.7 Parent Guarantee Agreement dated as of March 12, 1996 between STI and Credit Suisse, as collateral agent for the secured parties (filed herewith). 10.8 Subsidiary Guarantee Agreement dated as of March 12, 1996 among the subsidiaries of STFCC and STFI named therein and Credit Suisse, as collateral agent for the secured parties (filed herewith). 10.9 Agreement to Exchange 6% Cumulative Convertible Preferred Stock and Special Preferred Stock dated as of March 1, 1996 among STI, FII, RHI and TFC (filed herewith). 10.10 Shareholders' Agreement dated as of March 13, 1996 among STI, RHI and Anthony D. Autorino (filed herewith). 10.11 Tax Sharing Agreement dated as of March 13, 1996 between STI and RHI (filed herewith). 10.12 Indemnification Agreement dated as of March 13, 1996 between STI and Fairchild Holdings Corp. (filed herewith). 10.13 Indemnification Agreement dated as of March 13, 1996 among STI, TFC and RHI (filed herewith). 10.14 Indemnity, Subrogation and Contribution Agreement dated as of March 12, 1996 between STFCC and and Credit Suisse, as collateral agent for the secured parties (filed herewith). 23.1 Consent of Rothstein, Kass & Company, P.C. (to be filed by amendment). 23.2 Consent of Arthur Andersen LLP (to be filed by amendment).
EX-1 2 PURCHASE AGREEMENT SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP. $163,637,000 12 1/4% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2006 PURCHASE AGREEMENT March 8, 1996 CS First Boston Corporation Citicorp Securities Inc. c/o CS First Boston Corporation Park Avenue Plaza New York, NY 10055 Ladies and Gentlemen: 1. Introductory. Shared Technologies Fairchild Communications Corp., a Delaware corporation (the "Issuer"), proposes to issue and sell to the initial purchasers named in Schedule A hereto (the "Initial Purchasers") $163,637,000 principal amount of its 12 1/4% Senior Subordinated Discount Notes Due 2006 (the "Notes") to be unconditionally guaranteed on a senior subordinated basis ("the Guaranties") by Shared Technologies Inc. to be renamed Shared Technologies Fairchild Inc. ("STFI") and by each subsidiary of the Issuer listed on the signature pages hereto (each a "Subsidiary"; collectively, the "Subsidiaries" and, together with STFI, the "Guarantors"). The Notes and the Guaranties are collectively referred to as the "Offered Securities". The Offered Securities are to be issued under an Indenture, to be dated as of March 1, 1996 (the "Indenture"), between the Issuer, the Guarantors named therein and the United States Trust Company of New York as trustee (the "Trustee"). Pursuant to an Agreement and Plan of Merger, dated as of November 9, 1995, as amended on February 2 and 23, 1996 (the "Merger Agreement"), among the Issuer, Shared Technologies Inc. ("STI"), Fairchild Industries, Inc. ("FII"), RHI Holdings, Inc. ("RHI") and The Fairchild Corporation ("TFC"), FII will be merged with and into STI (the "Merger") and STI, as the surviving corporation, will be renamed Shared Technologies Fairchild Inc. ("STFI"). As preconditions to the Merger, (i) FII will undergo a recapitalization (the "FII Recapitalization") pursuant to which FII will transfer all of its assets to, and cause all of its liabilities to be assumed by, its immediate parent, RHI or RHI's affiliates except for the assets and liabilities of the communication services business of FII and certain other specified liabilities and (ii) STI will cause the Issuer to be incorporated. As part of the Merger, RHI, TFC and Fairchild Holding Corp. will enter into indemnification agreements (the "Indemnification Agreements") pursuant to which they will indemnify STFI with respect to the liabilities assumed by RHI as part of the FII Recapitalization. The Offered Securities will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933 (the "Securities Act"), in reliance on an exemption therefrom. The Issuer has prepared a preliminary offering circular dated February 17, 1966 (such preliminary offering circular being hereinafter referred to as the "Preliminary Offering Circular"), and an offering circular dated March 8, 1996 (such offering circular, in the form first furnished to the Initial Purchasers for use in connection with the offering of the Securities, being hereinafter referred to as the "Offering Circular"), setting forth information regarding the Issuer, the Guarantors and the Offered Securities. The Issuer and each Guarantor, jointly and severally, hereby confirm that they have authorized the use of the Preliminary Offering Circular and the Offering Circular in connection with the offering and sale of the Securities. Holders (including subsequent transferees) of the Offered Securities will have the registration rights set forth in the Exchange and Registration Rights Agreement of even date herewith (the "Registration Rights Agreement"), between the Issuer and the Initial Purchasers. Pursuant to the Registration Rights Agreement, the Issuer has agreed to file with the Securities and Exchange Commission (the "Commission") (i) a registration statement (the "Exchange Offer Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), registering an issue of a series of senior notes (the "Exchange Securities") identical in all material respects to the Offered Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) to be offered in exchange for the Offered Securities (the "Exchange Offer") and (ii) under certain circumstances specified in the Registration Rights Agreement, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). This Agreement, the Indenture, the Registration Rights Agreement and each Guaranty are referred to herein collectively as the "Operative Documents". The Issuer and each Guarantor are referred to herein individually as a "Relevant Company" and collectively as the "Relevant Companies". 2 The Issuer, each Subsidiary and STFI, jointly and severally, agree with the several Initial Purchasers as follows: 2. Representations and Warranties of the Issuer. As used in this Section 2, references to the "Issuer" or "its subsidiaries" shall mean the Issuer or its subsidiaries prior to the consummation of the Merger and shall mean the Issuer or its subsidiaries, effective upon the consummation of the Merger. The Issuer, STFI and the Subsidiaries jointly and severally represent and warrant to, and agree with, the several Initial Purchasers as of the date hereof and as of the Closing Date (as defined in Section 3 hereof) that: (a) Each of the Preliminary Offering Circular and the Offering Circular has been prepared by the Issuer and STI. Such Preliminary Offering Circular and Offering Circular, as supplemented as of the date of this Agreement and any other document approved by the Issuer for use in connection with the contemplated resale of the Offered Securities, are hereinafter collectively referred to as the "Offering Documents". As of their respective dates and, in the case of the Offering Circular, as of the date of this Agreement, no Offering Document includes any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from an Offering Document based upon written information furnished to the Issuer by any Initial Purchaser through CS First Boston Corporation ("CSFBC") specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b). Except disclosed in the Offering Documents, on the date of this Agreement each of FII's and STI's Annual Report on Form 10-K most recently filed with the Commission and all subsequent reports which have been filed with the Commission or sent to stockholders pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. Such documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder. (b) Each of STFI and the Issuer has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Documents; and each of STFI and the Issuer is duly qualified to do business as a foreign corporation in good standing in all 3 other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to so qualify would not have a material adverse effect on STFI and the Issuer. (c) Each of the Issuer and STFI has an authorized capitalization as set forth in the Offering Documents and all of the issued shares of capital stock of each of the Issuer and STFI have been duly authorized and validly issued and are fully paid and nonassessable. The Capital Stock of each of the Issuer and STFI conforms in all material respects to the description thereof contained in the Offering Documents. (d) Each subsidiary of the Issuer that is a corporation or limited partnership has been duly incorporated and is an existing corporation or limited partnership in good standing under the laws of the jurisdiction of its incorporation or organization, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Documents; and each subsidiary of the Issuer that is a corporation or limited partnership is duly qualified to do business as a foreign corporation or limited partnership in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to so qualify would not have a material adverse effect on such subsidiaries, taken as a whole; all of the issued and outstanding capital stock of each subsidiary of the Issuer has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Issuer, directly or through subsidiaries, is owned free from liens, encumbrances and defects, except that (1) STI owns 99% of the interests in Financial Place Communications Company, an Illinois general partnership, (2) STI's interests in its wholly-owned subsidiary, Access Telemanagement, Inc., a Texas corporation ("Access"), have been pledged in favor of Martnet Inc. pursuant to a Pledge Agreement dated as of June 27, 1994 (the "Pledge Agreement"), (3) STI's 99% limited partnership interest in Access Telecommunication Group L.P., a Texas limited partnership ("Access L.P."), have been pledged pursuant to the Pledge Agreement and (4) Access L.P., all interests in which have been pledged pursuant to the Pledge Agreement, is the holder of 100% of the common stock of Access Network Services, Inc. (e) STFI owns all of the issued and outstanding capital stock of the Issuer and the Issuer owns all of the issued and outstanding capital stock or equity interests of the Subsidiaries, except as described in paragraph (d) above, and all such capital stock has been duly authorized and validly issued and is fully paid and nonassessable; and, except as described in paragraph (d) above, the capital stock or equity interests of each subsidiary owned by a Subsidiary, 4 directly or through subsidiaries, is owned free from liens, encumbrances and defects; there are no outstanding subscriptions, rights, warrants, calls, commitments of sale or options to acquire, or instruments convertible into or exchangeable for, any such shares of capital stock or other equity interest of the Subsidiaries. (f) The Notes have been duly authorized by the Issuer; the Indenture has been duly authorized by the Issuer and the Guarantors; each Guaranty has been duly authorized by each Guarantor party to it; and when the Offered Securities are delivered and paid for pursuant to this Agreement on the Closing Date (as defined below) and authenticated by the Trustee, the Indenture will have been duly executed and delivered by the Issuer, STFI and the Subsidiaries and such Offered Securities will have been duly executed, authenticated, issued and delivered and will conform in all material respects to the description thereof contained in the Offering Documents; and when the Merger is consummated each Guaranty will have been duly executed and delivered by each Guarantor party to it. The Indenture conforms in all material respects to the requirements of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; and the Indenture, each Guaranty and such Offered Securities will constitute valid and legally binding obligations of the Issuer and the Guarantors and each of the Indenture, each Guaranty and such Offered Securities will be enforceable in accordance with their terms subject to (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws relating to creditors' rights and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). (g) The Registration Rights Agreement has been duly authorized, executed and delivered by each of the Issuer and the Guarantors and conforms in all material respects to the description thereof contained in the Offering Documents. The Registration Rights Agreement constitutes a valid and legally binding obligation of the Issuer and each Guarantor and is enforceable in accordance with its terms. (h) This Agreement has been duly authorized, executed and delivered by the Issuer, STFI and the Subsidiaries. (i) Except as contemplated by this Agreement or disclosed in the Offering Documents, there is no broker, finder or other party that is entitled to receive from the Issuer, any of its subsidiaries or any Initial Purchaser any brokerage or finder's fee or other fee or commission as a result of the transactions contemplated by this Agreement. 5 (j) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 4 of this Agreement, no consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions, other than the Merger, as contemplated by the Operative Documents or in connection with the issuance and sale of the Offered Securities by the Issuer, except such as have been obtained or made or as may be required under the Securities Act and the Rules and Regulations of the Commission thereunder with respect to the Registration Rights Agreement, the Exchange Offer and the transactions contemplated thereunder or state or foreign securities laws or by the regulations of the National Association of Securities Dealers, Inc. (k) The execution, delivery and performance by each of the Issuer, STFI and the Subsidiaries of the Operative Documents to which it is a party and the issuance and sale of the Offered Securities and compliance with the terms and provisions of the Operative Documents and the Offered Securities will not result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) any material statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over any Relevant Company or any subsidiary of any Relevant Company or any of their respective properties; (ii) any material agreement or instrument relating to borrowed money to which any Relevant Company or any such subsidiary is a party or by which any Relevant Company or any such subsidiary is bound or to which any of the properties of any Relevant Company or any such subsidiary is subject; (iii) any other material agreement or instrument to which any Relevant Company or any such subsidiary is a party or by which any Relevant Company or any such subsidiary is bound or to which any of the properties of any Relevant Company or any such subsidiary is subject which would individually or in the aggregate have a material adverse effect on the condition (financial or other), results of operations, business or prospects of STFI, the Issuer and its subsidiaries taken as a whole (a "Material Adverse Effect"); or (iv) the charter or by-laws of any Relevant Company or any such subsidiary. The Issuer and each Guarantor has full power and authority to authorize, issue and sell the Notes and the Guaranties respectively, as contemplated by this Agreement. (l) The Merger Agreement has been duly authorized, executed and delivered by each of the parties thereto and conforms in all material respects to the description thereof in the Offering Documents. The Merger Agreement constitutes a valid and legally binding obligation of each of the parties thereto and is enforceable in accordance with its terms subject to (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws relating to 6 creditors' rights and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). (m) Each Indemnification Agreement has been duly authorized, executed and delivered by each of the parties thereto and conforms in all material respects to the description thereof in the Offering Documents. Each Indemnification Agreement constitutes a valid and legally binding obligation of each of the parties thereto and is enforceable in accordance with its terms subject to (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws relating to creditors' rights and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). (n) The execution, delivery and performance by each of STI, FII and, to the best of the Issuer's knowledge after due inquiry, by RHI and TFC of the Merger Agreement and compliance with the terms and provisions of the Merger Agreement will not result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) any material statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Issuer, STI, FII, RHI, TFC or any of their respective subsidiaries or any of their properties; (ii) any material agreement or instrument relating to borrowed money to which the Issuer, STI, FII, RHI, TFC or any of their respective subsidiaries is a party or by which the Issuer, STI, FII, RHI, TFC or any of their respective subsidiaries is bound or to which any of the properties of the Issuer, STI, FII, RHI, TFC or any of their respective subsidiaries is subject; (iii) any other material agreement or instrument to which the Issuer, STI, FII, RHI, TFC or any of their respective subsidiaries is a party or by which the Issuer, STI, FII, RHI, TFC or any of their respective subsidiaries is bound or to which any of the properties of the Issuer, STI, FII, RHI, TFC or any of their respective subsidiaries is subject, which would individually or in the aggregate have a material adverse effect on the condition (financial or other) business or results of operations of (A) the Issuer and its subsidiaries taken as a whole (B) STI and its subsidiaries taken as a whole; or (iv) the charter or by-laws of the Issuer, STI, FII, RHI, TFC or any of their respective subsidiaries. (o) Each Relevant Company and its subsidiaries has good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially interfere with the use made or to be made thereof by them; and each Relevant Company and its Subsidiaries hold any leased real or personal property under valid and enforceable leases 7 with no exceptions that would materially interfere with the use made or to be made thereof by them. (p) Each Relevant Company and its subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to any Relevant Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (q) No labor dispute with the employees of any Relevant Company or any subsidiary exists or, to the knowledge of the Issuer, is imminent that might have a Material Adverse Effect. (r) Each Relevant Company and its subsidiaries owns, possesses or can acquire on reasonable terms adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "intellectual property rights") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to any Relevant Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (s) Except as disclosed in the Offering Documents, no Relevant Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "environmental laws"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and no Relevant Company is aware of any pending investigation which might lead to such a claim. (t) Except as disclosed in the Offering Documents, there are no pending nor threatened actions, suits or proceedings against or affecting any Relevant Company, any of its subsidiaries or any of their respective properties that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, or would materially and 8 adversely affect the ability of any Relevant Company to perform its obligations under the Operative Documents to which it is a party or the Merger Agreement or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings are threatened or, to STFI's or Issuer's knowledge, contemplated. (u) The Issuer has delivered to the Initial Purchasers true and correct copies of the Merger Agreement, the Indenture and the Registration Rights Agreement, in the form as originally executed, and there have been no amendments, alterations, modifications or waivers thereto or in the exhibits or schedules thereto other than those as to which the Initial Purchasers shall have been advised. The Merger Agreement, the Indenture and the Registration Rights Agreement conform in all material respects to the descriptions thereof in the Offering Documents. (v) The historical financial statements (including the related notes and supporting schedules, if any) included in the Preliminary Offering Circular and the Offering Circular comply in all material respects with the requirements applicable to a Registration Statement on Form S-1. (w) The financial statements with respect to the Issuer included in the Offering Documents present fairly the financial position of the Issuer and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise stated in the Offering Documents, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis. (x) The financial statements with respect to STFI included in the Offering Document present fairly the financial position of STFI and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise stated in the Offering Documents, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis. (y) The financial statements with respect to STI included in the Offering Documents present fairly the financial position of STI and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise stated in the Offering Documents, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis. (z) The financial statements with respect to FII included in the Offering Documents present fairly the 9 financial position of FII and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise stated in the Offering Documents, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis. (aa) Except as disclosed in the Offering Circular, since the date of the latest audited consolidated financial statements of each of STI and FII included in the Offering Documents there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of either STI or FII and their respective subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Offering Documents, there has been no dividend or distribution of any kind declared, paid or made by either STI or FII on any class of its respective capital stock. (bb) No Relevant Company is an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940 (the "Investment Company Act"), nor is it a closed-end investment company required to be registered, but not registered, thereunder; and no Relevant Company is, and after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Offering Documents, will not be an "investment company" as defined in the Investment Company Act. (cc) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on any national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated interdealer quotation system. The Issuer and STFI have been advised that the Offered Securities have been designated as Private Offerings, Resale and Trading through Automated Linkages ("PORTAL") securities in accordance with the rules and regulations of NASD. (dd) Assuming the accuracy of the representations, of the Initial Purchasers contained herein, the offer and sale of the Offered Securities in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof, Regulation D thereunder and Regulation S thereunder; and it is not necessary to qualify an indenture in respect of the Offered Securities under the United States Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (ee) No Relevant Company, no affiliate of a Relevant Company, nor any person acting on their behalf 10 (i) has, within the six-month period prior to the date hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S under the Securities Act) the Offered Securities, or any security of the same class or series as the Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A) in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act or (B) with respect to any such securities sold in reliance on Rule 903 of Regulation S ("Regulation S") under the Securities Act, by means of any directed selling efforts within the meaning of Rule 902(b) of Regulation S. The Relevant Companies, their affiliates and any person acting on their behalf have complied and will comply with the offering restrictions requirement of Regulation S. The Issuer has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for this Agreement. (ff) No Relevant Company owns any "margin securities" as that term is defined in Regulations G and U of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), and none of the proceeds of the sale of the Offered Securities will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Offered Securities to be considered a "purpose credit" within the meanings of Regulation G, T, U or X of the Federal Reserve Board. (gg) The Offered Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (hh) The Issuer has not taken nor has any Guarantor taken, nor will they take, directly or indirectly, any action prohibited by Rule 10b-6 under the Exchange Act in connection with the offering of the Offered Securities. (ii) STFI is subject to Section 13 or 15(d) of the Exchange Act. (jj) There is no "substantial U.S. market interest" as defined in Rule 902(n) of Regulation S in the Issuer's debt securities. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Issuer agrees to sell to the Initial Purchasers, and the Initial Purchasers agree, severally and not jointly, to purchase from the Issuer the respective principal amounts of Offered Securities set forth 11 opposite the names of the Initial Purchasers in Schedule A hereto, at a purchase price of 67.817% of the principal amount thereof plus accrued interest from March 13, 1996 to the Closing Date (as hereinafter defined). The Issuer will deliver against payment of the purchase price the Offered Securities in the form of one or more permanent global Securities in definitive form (the "Global Securities") deposited with the Trustee as custodian for The Depository Trust Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC. Interests in any permanent global Securities will be held only in book-entry form through DTC, except in the limited circumstances described in the Offering Document. Payment for the Offered Securities shall be made by the Initial Purchasers in Federal (same-day) funds by wire transfer to an account in New York previously designated to CSFBC by the Issuer at a bank acceptable to CSFBC at the office of Cravath, SwaineE& Moore at 10:00 a.m. (New York time), on March 13, 1996, or at such other time not later than seven full business days thereafter as CSFBC and the Issuer determine, such time being herein referred to as the "Closing Date", against delivery to the Trustee as custodian for DTC of the Global Securities representing all of the Offered Securities. The Global Securities will be made available for checking at the above office of Cravath, SwaineE& Moore at least 24Ehours prior to the Closing Date. Notwithstanding the foregoing, any Offered Securities sold to Institutional Accredited Investors (as hereinafter defined) pursuant to Section 4(c) shall be issued in definitive, fully registered form and shall bear the legend relating thereto set forth under "Transfer Restrictions" in the Offering Documents, but shall be paid for in the same manner as any Offered Securities to be purchased by the Initial Purchasers hereunder and to be offered and sold by them in reliance on Rule 144A under the Securities Act. 4. Representations by Initial Purchasers; Resale by Initial Purchasers. (a) Each Initial Purchaser represents and warrants to the Issuer that it is an "accredited investor" within the meaning of Regulation D under the Securities Act. (b) Each Initial Purchaser severally acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each Initial Purchaser severally represents and agrees that it has offered and sold the Offered Securities and will offer and sell the Offered Securities only in accordance with Rule 903 or Rule 144A under the Securities Act ("Rule 144A") or, in the case of CSFBC or any other Initial 12 Purchaser authorized by CSFBC, to a limited number of Institutional Accredited Investors (as hereinafter defined) in accordance with subsectionE(c). Each Initial Purchaser severally represents, warrants and agrees that neither such Initial Purchaser nor its affiliates, nor any persons acting on its or their behalf, have engaged or will engage in any directed selling efforts with respect to the Offered Securities, and such Initial Purchaser, its affiliates and all persons acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S and any applicable foreign securities laws, regulations or restrictions, in connection with the offering of the Offered Securities outside the United States. Each Initial Purchaser severally agrees that, at or prior to confirmation of sale of the Offered Securities, other than a sale pursuant to Rule 144A or a sale to an Institutional Accredited Investor in accordance with subsectionE(c), such Initial Purchaser will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Offered Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the 'Securities Act') and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the date of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meanings given to them by Regulation S." Unless otherwise defined herein, terms used in this subsectionE(b) have the meanings given to them by Regulation S. (c) CSFBC and any other Initial Purchaser authorized by CSFBC may offer and sell Offered Securities in definitive, fully registered form to a limited number of institutions, each of which is reasonably believed by the applicable Initial Purchaser to be an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (each, an "Institutional Accredited Investor"); provided, however, that each such Institutional Accredited Investor executes and delivers to such Initial Purchaser and the Issuer, prior to the consummation of any sale of Offered Securities to such Institutional Accredited Investor, an Initial Purchaser's Letter in substantially the form attached 13 as Annex A to the Offering Circular (an "Initial Purchaser's Letter"). (d) Each Initial Purchaser severally agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for any such arrangements with the other Initial Purchasers or affiliates of the other Initial Purchasers or with the prior written consent of the Issuer. (e) Each Initial Purchaser severally agrees that it and each of its affiliates or any one acting in its behalf will not offer or sell the Offered Securities purchased hereby in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Initial Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. (f) Each of the Initial Purchasers severally represents and agrees that (i) it has not offered or sold and prior to the date six months after the date of issue of the Offered Securities will not offer or sell any Offered Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Offered Securities in, from or otherwise involving the United Kingdom and (iii) it has only issued or passed on, and will only issue or pass on, in the United Kingdom, any document received by it in connection with the issue of the Offered Securities to a person who is of a kind described in ArticleE11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) OrderE1995 or is a person to whom such document may otherwise lawfully be issued or passed on. 14 (g) Each Initial Purchaser represents and agrees that (i) it has not solicited, and will not solicit, offers to purchase any of the Offered Securities from, (ii) it has not sold, and will not sell, any of the Offered Securities to, and (iii) it has not distributed, and will not distribute, the Preliminary Offering Circular or the Offering Circular to, any person or entity in any jurisdiction outside of the United States except, in each case, in compliance in all material respects with all applicable laws. For the purpose of this Agreement, "United States" means the United States of America, its territories, its possessions and other areas subject to its jurisdiction. 5. Certain Agreements of the Issuer. The Issuer and, unless otherwise specified, the Guarantors jointly and severally agree with the several Initial Purchasers that: (a) The Issuer will advise CSFBC promptly of any proposal to amend or supplement the Offering Documents and will not effect such amendment or supplementation without CSFBC's consent. If, at any time prior to the completion of the initial resale of the Offered Securities by the Initial Purchasers, any event occurs as a result of which the Offering Documents as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer promptly will notify CSFBC of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission. Neither CSFBC's consent to, nor the Initial Purchasers' delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. (b) The Issuer will furnish to CSFBC copies of the Preliminary Offering Circular, the Offering Documents and all amendments and supplements to such documents, in each case as soon as available and in such quantities as CSFBC reasonably requests, and the Issuer will furnish to CSFBC on the date hereof three copies of the Offering Documents signed by a duly authorized officer of the Issuer, one of which will include the independent accountants' reports therein manually signed by such independent accountants. At any time when the Issuer is not subject to Section 13 or 15(d) of the Exchange Act, the Issuer will promptly furnish or cause to be furnished to CSFBC (and, upon request, to each of the other Initial Purchasers) and, upon request of holders and prospective purchasers of the Offered Securities, to such holders and purchasers, a reasonable number of copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such 15 holders of the Offered Securities. The Issuer will pay the expenses of printing and distributing to the Initial Purchasers all such documents. (c) The Issuer will arrange for the qualification of the Offered Securities for sale and the determination of their eligibility for investment under the laws of such jurisdictions in the United States and Canada as CSFBC designates and will continue such qualifications in effect so long as required for the resale of the Offered Securities by the Initial Purchasers; provided, however, that neither the Issuer nor any Guarantor will be required to qualify as a foreign corporation or to file a general consent to service of process in any such jurisdiction. (d) During the period of five years after the Closing Date, each of STFI and the Issuer will furnish to CSFBC and, upon request, to each of the other Initial Purchasers, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Issuer will furnish to CSFBC and upon request, to each of the other Initial Purchasers (i) as soon as available, a copy of each report and any definitive proxy statement of STFI or the Issuer (as applicable) filed with the Commission under the Exchange Act or mailed to stockholders and (ii) from time to time, such other information concerning the Issuer and the Guarantors as CSFBC may reasonably request. (e) During the period of three years after the Closing Date, the Issuer will, upon request, furnish to CSFBC, each of the other Initial Purchasers and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities. (f) During the period of three years after the Closing Date, the Issuer will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Offered Securities that have been reacquired by any of them. (g) During the period of three years after the Closing Date, the Issuer will not be or become an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Issuer Act and is not, and will not be or become, a closed-end investment company required to be registered, but not registered, under the Investment Issuer Act. (h) Except following the effectiveness of the Exchange Offer or Shelf Registration Statement, as the case may be, the Issuer will not, and will not permit any affiliate (as such term is defined in Rule 501(b) under the Securities Act) of the Issuer or authorize or knowingly permit any person 16 acting on its or their behalf to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising (as such terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (i) The Issuer will pay all expenses incidental to the performance of the Issuer's and each Guarantors' obligations (as applicable) under the Operative Documents, including (i) the fees and expenses of the Trustee; (ii) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Offered Securities, the preparation and printing of this Agreement, the Registration Rights Agreement, the Offered Securities, the Indenture, the Guaranties, the Offering Documents and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Offered Securities; (iii) the cost of qualifying the Offered Securities for trading in the PORTAL market and any expenses incidental thereto; and (iv) the cost of any advertising approved by the Issuer in connection with the issue of the Offered Securities. The Issuer will also pay or reimburse the Initial Purchasers (to the extent incurred by them) for any reasonable expenses (including the reasonable fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions in the United States and Canada as CSFBC designates and the printing of memoranda relating thereto, for any fees charged by investment rating agencies for the rating of the Offered Securities, for all reasonable travel expenses of the Issuer's officers and employees and any other reasonable out-of-pocket expenses of the Issuer in connection with attending meetings with prospective purchasers of the Offered Securities from the Initial Purchasers and for expenses incurred in distributing the Preliminary Offering Circular and the Offering Documents (including any amendments and supplements thereto). (j) In connection with the offering, until CSFBC shall have notified the Issuer and the other Initial Purchasers of the completion of the resale of the Offered Securities, neither the Issuer nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Securities. (k) For a period of 180 days after the date of the Offering Circular, none of STFI, the Issuer or any of its 17 subsidiaries will offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, except to an affiliate which agrees to be bound by the provisions of this Section, any United States dollar-denominated debt securities issued or guaranteed by STFI, the Issuer or any of its subsidiaries and having a maturity of more than one year from the date of issue or publicly disclose the intention to make any such offer, sale, pledge or disposal, without the prior written consent of CSFBC. None of STFI, the Issuer or any of its subsidiaries will at any time offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act or the safe harbor of Regulation S thereunder to cease to be applicable to the offer and sale of the Offered Securities. (l) The Issuer will apply the net proceeds of the offering and the sale of the Offered Securities in the manner set forth in the Offering Documents under the caption "Use of Proceeds". (m) The Issuer will use its best efforts to cause the Offered Securities to be eligible for the PORTAL trading system of the National Association of Securities Dealers, Inc. (n) The Issuer will cause each Note to bear the legend set forth in the form of Note attached as ExhibitEA to the Indenture until such legend shall no longer be necessary or advisable because the Offered Securities are no longer subject to the restrictions on transfer described therein. (o) The Issuer will comply with the Registration Rights Agreement and all agreements set forth in the representation letter of the Issuer to The Depository Trust Issuer relating to the approval of the Offered Securities for "book-entry" transfer. 6. Conditions of the Obligations of the Initial Purchasers. The obligations of the several Initial Purchasers to purchase and pay for the Offered Securities will be subject to the accuracy of the representations and warranties on the part of the Issuer and the Guarantors herein, to the accuracy of the statements of officers of the Issuer and the Guarantors made pursuant to the provisions hereof, to the performance by the Issuer and the Guarantors of their obligations hereunder and to the following additional conditions precedent: (a) The Initial Purchasers shall have received: (i) a letter, dated the date of this Agreement, of Arthur Andersen LLP confirming that they are independent public accountants within the meaning of the Securities Act 18 and the applicable published rules and regulations thereunder ("Rules and Regulations") and to the effect that: (A) in their opinion the financial statements and schedules examined by them and included in the Offering Documents comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations that would apply to the Offering Documents if the Offering Documents were prospectuses included in a registration statement on FormES-1 under the Securities Act; (B) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No.E71, Interim Financial Information, on the unaudited financial statements with respect to FII included in the Offering Documents; (C) on the basis of the review referred to in clauseE(B) above, a reading of the latest available interim financial statements of FII, inquiries of officials of FII who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (1) the unaudited financial statements with respect to FII included in the Offering Documents do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations that would apply to the Offering Documents if the Offering Documents were prospectuses included in a registration statement on FormES-1 under the Securities Act or any material modifications should be made to such unaudited financial statements for them to be in conformity with generally accepted accounting principles; (2) at the date of the latest available balance sheet of FII read by such accountants, or at a subsequent specified date not more than five days prior to the date of this Agreement, there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of FII and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net current assets (working capital) or net assets as compared with amounts shown on the latest balance sheet included in the Offering Documents; or (3) for the period from the closing date of the latest income statement with respect to FII included in the Offering Documents to a subsequent date not more than five days prior to the date of this agreement the closing date of the latest available income statement read by such 19 accountants there were any decreases, as compared with the corresponding period of the previous year, in consolidated net sales, consolidated income before extraordinary items or net income, except in all cases set forth in clausesE(2) and (3) above for changes, increases or decreases which the Offering Documents disclose have occurred or may occur and which are fully described and set out in such letter; (D) on the basis of an examination of the unaudited pro forma financial statements included in the Offering Documents and inquiries of officials of the Issuer and FII respectively, who have responsibility for financial and accounting matters, nothing came to their attention that caused them to believe that the pro forma financial statements included in the Offering Documents do not comply in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such financial statements or on the pro forma basis described in the notes thereto; and (E) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Offering Documents (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of FII and its subsidiaries subject to the internal controls of FII's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specifically set forth in such letter. (ii) a letter, dated the date of this Agreement, of Rothstein, KassE& Company, P.C. confirming that they are independent public accountants within the meaning of the Securities Act and the Rules and Regulations and confirming each matter set forth in subsectionsEa(i)(A), (B), (C), (D) and (E) above as if each reference to FII was to STI. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) a change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls that would, in the judgment of CSFBC, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market, or (ii)(A) any change, or any development or event involving a 20 prospective change, in the condition (financial or other), business, properties or results of operations of the Issuer or its subsidiaries which, in the judgment of a majority in interest of the Initial Purchasers including CSFBC, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities; (B) any downgrading in the rating of any debt securities of the Issuer by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act) or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Issuer (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (C) any suspension or limitation of trading in securities generally on the New York Stock Exchange, The Nasdaq Stock Market's National Market, the American Stock Exchange or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Issuer, STI or FII on any exchange or in the over-the-counter market; (D) any banking moratorium declared by U.S. Federal or New York authorities; or (E) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Initial Purchasers including CSFBC, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Offered Securities. (c) Each condition (other than the issuance and sale of the Offered Securities) to the closing contemplated by the Merger Agreement shall have been satisfied or waived. There shall exist at and as of the Closing Date (after giving effect to the transactions contemplated by this Agreement) no condition that would constitute a default (or an event that with notice or the lapse of time, or both, would constitute a default) under the Merger Agreement, which has not been waived. Concurrently with the issue and sale of the Offered Securities, the Merger shall be consummated on terms that conform in all material respects to the description thereof in the Offering Documents and the Initial Purchasers shall have received true and correct copies of all documents pertaining thereto and evidence satisfactory to the Initial Purchasers of the consummation thereof. (d) The offer to purchase for cash the 12 1/4% Senior Secured Notes due 1999 of FII and the solicitation of consents to an amendment of the indenture relating to such notes by FII, pursuant to an Offer to Purchase and Consent Solicitation Statement, the "Debt Tender Offer") shall have expired and the supplemental indenture related thereto shall have been executed and remain in full force and effect. 21 (e) The Issuer and the Guarantors shall have entered into the Credit Facility ("Credit Facility") with Credit Suisse, Citicorp USA, Inc. and NationsBank providing for up to $160.0 million of loans and the closing thereunder shall have occurred no later than the Closing Date. The Initial Purchasers shall have received counterparts, conformed and executed, thereof and all other documents and agreements entered into and received thereunder in connection with the closing of the Credit Facility. There shall exist at and as of the Closing Date (after giving effect to the transactions contemplated by this Agreement and the Merger) no condition that would constitute a default (or an event that with notice or lapse of time, or both, would constitute a default) under the Credit Facility. (f) The Initial Purchasers shall have received an opinion, dated the Closing Date, of GadsbyE& Hannah counsel for STI, the Issuer and the Guarantors, to the effect that: (i) Each of the Issuer and STFI has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its businesses as described in the Offering Documents and is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which it owns or leases substantial properties or in which the conduct of its business requires such qualification, except where the failure to so qualify would not have a material adverse effect on the Issuer and STFI and their consolidated subsidiaries, taken as a whole; (ii) Each subsidiary of the Issuer is duly incorporated or organized and is an existing corporation or limited partnership in good standing under the laws of the jurisdiction of its incorporation or organization; and each such subsidiary is duly qualified to do business as a foreign corporation or limited partnership and is in good standing in each jurisdiction in which it owns or leases substantial properties or in which the conduct of its business requires such qualification, except where the failure to so quality would not have a material adverse effect on the Issuer and STFI and such subsidiaries, taken as a whole; (iii) The descriptions in the Offering Documents of statutes, legal and governmental proceedings and of contracts as they relate to STI before the Merger are accurate and to our knowledge fairly present, as to such statutes, legal or governmental proceedings and contracts described therein, the descriptions that would be required to be presented with respect thereto if the Offering Documents were prospectuses included in registration statements on FormES-1 under the Act; as of its date and at the date hereof, the Offering Circular complies (with respect to form only) in all material respects with the requirements of PartEI (other than in relation to the outside front cover) of FormES-1 under the Act, as such provisions are applicable to a prospectus forming part of a registration statement on FormES-1 under the Act (it being understood that such counsel express no opinions as to the sufficiency of the content thereof, the financial statements or other financial data contained in the Offering Circular or as to whether independent comments of the Securities and Exchange Commission would be received and would need to be accommodated). Nothing in such opinion shall be construed to be an opinion that there are no material omissions with respect to statutes, legal and governmental proceedings or of contracts; (iv) STFI owns all of the capital stock of the Issuer and the Issuer owns all of the issued and outstanding capital stock of, or equity interests in, the Subsidiaries and all such capital stock has been duly authorized and validly issued and is fully paid and nonassessable; and such capital stock or equity interests are owned free from liens, encumbrances and defects, except that (1) STI owns 99% of the interests in Financial Place Communications Company, an Illinois general partnership, (2) STI's interests in its wholly-owned subsidiary, Access Telemanagement, Inc., a Texas corporation ("Access"), have been pledged in favor of Martnet Inc. pursuant to a Pledge Agreement dated as of JuneE27, 1994 (the "Pledge Agreement"), (3) STI's 99% limited partnership interest in Access Telecommunication Group L.P., a Texas limited partnership ("Access L.P."), have been pledged pursuant to the Pledge Agreement and (4) Access L.P., all interests in which have been pledged pursuant to the Pledge Agreement, is the holder of 100% of the common stock of Access Network Services, Inc.; and to such counsel's knowledge there are no outstanding subscriptions, rights, warrants, calls, commitments of sale or options to acquire, or instruments convertible into or exchangeable for, any such shares of capital stock or other equity interest of the Subsidiaries; (v) The Issuer and each Guarantor has full legal right, power and authority to execute and deliver the Operative Documents and to perform its respective obligations hereunder and thereunder; and all corporate or other action required to be taken for the due and proper authorization, execution and delivery of the Operative Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly taken; (vi) The Operative Documents and the Offered Securities constitute valid and legally binding obligations of the Issuer and the Guarantors; and each Operative Document and such Offered Securities will be enforceable in accordance with their terms; 23 (vii) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 4 of this Agreement, no consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by the Operative Documents or in connection with the issuance and sale of the Offered Securities by the Issuer, except such as have been obtained or made or as may be required under the Securities Act or the Exchange Act and the Rules and Regulations of the Commission thereunder with respect to the Registration Rights Agreement, the Exchange Offer and the transactions contemplated thereunder or state or foreign securities laws or by the regulations of the National Association of Securities Dealers, Inc.; (viii) The execution, delivery and performance by the Issuer and each Guarantor of the Operative Documents to which it is a party and the issuance and sale of the Offered Securities and compliance with the terms and provisions of the Operative Documents and the Offered Securities will not result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) any material statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over such Relevant Company or any subsidiary of any Relevant Company or any of their properties; (ii) any agreement or instrument to which any Relevant Company or any such subsidiary is a party or by which any Relevant Company or any such subsidiary is bound or to which any of the properties of any Relevant Company or any such subsidiary is subject, which agreement or instruments have been filed by STI under the Securities Act or the Exchange Act which would individually or in the aggregate have a material adverse effect on the condition (financial or other), business or results of operations of any Relevant Company and its subsidiaries taken as a whole; or (iii) the charter or by-laws of any Relevant Company or any such subsidiary; (ix) The execution, delivery and performance by STI and compliance with the terms and provisions of the Merger Agreement will not result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) any material statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over STI or any of its subsidiaries or any of their properties; (ii) any agreement or instrument to which the STI or any of its subsidiaries is a party or by which STI or any of its subsidiaries is bound or to which any of the properties of the STI or any of its subsidiaries is subject, which agreement or instruments have been filed by STI under the Securities Act or the Exchange Act which would individually or in the aggregate have a material adverse effect on the condition (financial or other) business, 24 properties or results of operations of STI and its subsidiaries taken as a whole; or (iii) the charter or by-laws of STI or any of its subsidiaries; (x) Except for the filing of the Certificate of Merger with the Secretary of State of Delaware, each consent, authorization, order and approval of, and filing and registration with, any governmental commission, board or other regulatory body required to be made or obtained by STI for the execution and delivery of the Merger Agreement by the Issuer of the transactions contemplated thereby has been made or obtained; (xi) Upon the filing of the Certificate of Merger with the Secretary of State of Delaware in accordance with the Merger Agreement, the Merger became effective in accordance with the General Corporation Law of the State of Delaware. (xii) Except as disclosed in the Offering Documents, there are, to the knowledge of such counsel, no pending or threatened actions, suits or proceedings against or affecting the Issuer, the Guarantors or any of their subsidiaries or any of their respective properties that if determined adversely would be reasonably likely to have, individually or in the aggregate, a material adverse effect on the condition (financial or other), business or results of operations of the Issuer and the Guarantors and their respective subsidiaries taken as a whole, or would materially and adversely affect the ability of the Issuer or the Guarantors to perform their obligations under the Operative Documents, the Merger Agreement or which are otherwise material in the context of the sale of the Offered Securities; (xiii) Neither the Issuer nor any Guarantor is an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940 (the "Investment Company Act"), nor is it a closed-end investment company required to be registered, but not registered, thereunder; and each of the Issuer and each Guarantor is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Offering Documents, will not be an "investment company" as defined in the Investment Company Act; (xiv) The Indenture conforms as to form in all material respects with the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; (xv) Assuming the accuracy of the representations and warranties of the Initial Purchasers 25 contained in Section 4 of this Agreement, the offer and sale of the Offered Securities in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act; and it is not necessary to qualify the Indenture under the Trust Indenture Act. (xvi) In addition, such counsel shall state that they have participated in conferences with representatives of the Issuer and the Guarantors, at which conferences the contents of the Offering Documents, any amendment thereof and supplement thereto and related matters were discussed, and nothing has come to the attention of such counsel to cause such counsel to believe that the Offering Documents or any amendment thereof or supplement thereto contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that such counsel need not express any view with respect to the financial statements and schedules or other financial data included therein; and further provided that the statement set forth in this clauseE(xvi) may be set forth in a separate statement in such counsel's opinion and not in a numbered paragraph therein. In rendering such opinion, such counsel may rely as to matters governed by the law of any jurisdiction other than the Commonwealth of Massachusetts, the State of Delaware or the United States of America on local counsel in such jurisdictions; provided, however, that such counsel shall state that they believe that they and the Initial Purchasers are justified in relying on such other counsel. Such opinion shall also state that it is being delivered to the Initial Purchasers at the request of the Issuer and the Guarantors. (g) At the Closing Date, the Initial Purchasers shall have received an opinion of Cahill GordonE& Reindel and Stuart Meister,EEsq., counsel for FII, RHI, TFC and Fairchild Communications Services Company ("FCSC") (divided between such counsel as they deem appropriate, subject to the reasonable satisfaction of the Initial Purchasers), dated as of the Closing Date, in form and substance satisfactory to counsel for the Initial Purchasers, to the effect that: (i) ach of TFC, RHI, FII and Fairchild Holding Corp. are corporations organized, validly existing and in good standing under the laws of the State of Delaware; (ii) ach of TFC, RHI and FII has full corporate power and authority to execute and deliver the Merger Agreement and to perform its respective obligations thereunder; and all necessary corporate action has been taken by TFC, RHI and FII for the due and proper authorization, 26 execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby, including but not limited to the Fairchild Reorganization; the Merger Agreement and all agreements and other documents executed by TFC and its affiliates to effect the FII Reorganization (the "Reorganization Documents") have been duly and validly executed; (iii) ach of the Merger Agreement and Reorganization Documents constitutes a valid and legally binding obligation of each of TFC, RHI and FII and their affiliates who are a party thereto and is enforceable against them in accordance with its terms subject to (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity); (iv) ach of TFC, RHI and Fairchild Holding Corp. has full corporate power and authority to execute and deliver the Indemnification Agreement to which it is a party, the Pledge Agreement and the Registration Rights Agreement and to perform its respective obligations thereunder; and all necessary corporate action has been taken by TFC, RHI and Fairchild Holding Corp. for the due and proper authorization, execution and delivery of the Indemnification Agreement to be signed by them and the Pledge Agreement and the Registration Rights Agreement; (v) ach of the Indemnification Agreements, Pledge Agreement and Registration Rights Agreement constitute a valid and legally binding obligation of TFC, RHI and Fairchild Holding Corp., as the case may be, and are enforceable against them in accordance with their respective terms subject to (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity); (vi) Prior to the Closing Date, FCSC is a general partnership duly organized and validly existing in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of the FII Telecommunications Business requires such qualification; (vii) With respect to FCSC, the execution, delivery and performance by FII and compliance with the terms and provisions of the Merger Agreement will not result in a breach or violation of any of the terms and provisions of, or 27 constitute a default under (a) any material statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction of FCSC or any of their properties which would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operation of FCSC taken as a whole, except as provided in the Offering Circular under the caption "Risk Factors", subheading "Government Regulation" and in paragraphsE3 and 6 of the opinion of Swidler & Berlin addressed to FCSC ("Swidler & Berlin OpinionEI") and paragraphsE5 and 6 of the opinion of Swidler & Berlin addressed to the Lenders and the Initial Purchasers ("Swidler & Berlin OpinionEII"); (b) any agreement or instrument to which FCSC is a party or by which FCSC or any of its subsidiaries is bound or to which any of the properties of FCSC is subject, which would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of FCSC taken as a whole, except as provided in Section 6.13 of the Merger Agreement and Section 6.13 of the Disclosure Statement; or (c) the partnership agreement of FCSC; (viii) With respect to FCSC, the execution, delivery and performance by each of TFC, RHI and Fairchild Holding Corp. and compliance with the terms and provisions of the Indemnification Agreements will not result in a breach or violation of any of the terms and provisions of, or constitute a default or conflict under (a) any material statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction of FCSC or any of their properties which would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of FCSC taken as a whole, except as provided in the Offering Circular under the caption "Risk Factors", subheading "Government Regulation" and in paragraphsE3 and 6 of Swidler & Berlin OpinionEI and paragraphsE5 and 6 of Swidler & Berlin OpinionEII; (b) any agreement or instrument relating to borrowed money to which FCSC is a party or by which FCSC is bound or to which any of the properties of FCSC is subject, except as provided in Section 6.13 of the Merger Agreement and Section 6.13 of the Disclosure Statement; or (c) any other agreement or instrument to which FCSC is bound or to which any of the properties of FCSC is subject, which would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of FCSC taken as a whole, except as provided in Section 6.13 of the Merger Agreement and Section 6.13 of the Disclosure Statement; or (d) the partnership agreement of FCSC; (ix) With respect to FCSC (or directors of officers of FCSC), statements in the Offering Circular under 28 the captions (a) "Offering Circular Summary", subheadings "General" and "Business Strategy", (b) "Risk Factors", subheadings "Business Integration", "Competition", "Operational Demands Resulting from Growth", "Governmental Regulation", "Reliance on Third Parties for Equipment" and "Dependence on Key Personnel", and (c) "Business", subheadings "General", "Business Strategy", "Historical Information Regarding STI and FII", "Description of Business" fairly summarize the matters described therein with respect to FCSC in all material respects. In rendering such opinion, such counsel may rely as to matters governed by the law of any jurisdiction other than the State of New York, Delaware or the United States of America on local counsel in such jurisdictions; provided, however, that such counsel shall state that they believe that they and the Initial Purchasers are justified in relying on such other counsel. Such opinion shall also state that it is being delivered to the Initial Purchasers at the request of the Issuer and the Guarantors. (h) The Initial Purchasers shall have received from Cravath, SwaineE& Moore, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to the incorporation of the Issuer, the validity of the Offered Securities, the Offering Documents, the exemption from registration for the offer and sale of the Offered Securities by the Issuer to the several Initial Purchasers and the resales by the several Initial Purchasers as contemplated hereby and other related matters as CSFBC may require, and the Issuer shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (i) The Initial Purchasers shall have received a certificate dated the Closing Date: (i) of the President or any Vice President and a principal financial or accounting officer of the Issuer in which such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Issuer and its subsidiaries in this Agreement are true and correct, that the Issuer and its subsidiaries have complied with all agreements and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to the Closing Date and that, subsequent to the date of the most recent financial statements with respect to the Issuer and its subsidiaries in the Offering Circular there has been no material adverse change nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of any Relevant Company 29 and its subsidiaries taken as a whole, except as set forth in or contemplated by the Offering Circular or as described in such certificate. (ii) execution of the Guaranties, dated the Closing Date, of the President or any Vice President and a principal financial or accounting officer of STFI confirming each of the matters referred to in sub-paragraphE(i). (j) The Initial Purchasers shall have received: (i) a letter, dated the Closing Date, of Arthur Andersen LLP which meets the requirements of subsectionE(a)(i) of this Section; and (ii) a letter, dated the Closing Date, of Rothstein, KassE& Company, P.C. which meets the requirements of subsectionE(a)(ii) of this Section; except that, in each case, the specified date referred to in such subsection will be a date not more than five days prior to such the Closing Date for the purposes of this subsection. The Issuer will furnish the Initial Purchasers with such conformed copies of such opinions, certificates, letters and documents as the Initial Purchasers reasonably request. CSFBC may in its sole discretion waive on behalf of the Initial Purchasers compliance with any conditions to the obligations of the Initial Purchasers hereunder, whether in respect of the Closing Date or otherwise. Any certificate of the Issuer or any of its subsidiaries signed by any officer thereof and delivered to the Initial Purchasers or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the Issuer or such subsidiary to the Initial Purchasers as to the matters covered thereby and not the representation and warranty of any such officer. 7. Indemnification and Contribution. (a) The Issuer, STFI and the Subsidiaries, jointly and severally, will indemnify and hold harmless each Initial Purchaser against any losses, claims, damages or liabilities, joint or several, to which such Initial Purchaser may become subject, under the Securities Act or the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Documents, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the 30 statements therein, in the light of the circumstances under which they were made, not misleading and will reimburse each Initial Purchaser for any legal or other expenses reasonably incurred by such Initial Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Issuer, STFI and the Subsidiaries will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Issuer, STIF and the Subsidiaries by such Initial Purchaser through CSFBC specifically for use therein, it being understood and agreed that the such information only consists of the information described as such in subsectionE(b) below; and provided further, however, that with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary offering circular the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Initial Purchaser that sold the Offered Securities concerned to the person asserting any such losses, claims, damages or liabilities, to the extent that such sale was an initial resale by such Initial Purchaser and any such loss, claim, damage or liability of such Initial Purchaser results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Offered Securities to such person, a copy of the Offering Documents (exclusive of any material included therein but not attached thereto) if the Issuer had previously furnished copies thereof to such Initial Purchaser. (b) Each Initial Purchaser, severally and not jointly, will indemnify and hold harmless the Issuer, STFI and the Subsidiaries against any losses, claims, damages or liabilities to which the Issuer, STFI and the Subsidiaries may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Documents, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or the alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Issuer, STFI and the Subsidiaries by such Initial Purchaser through CSFBC specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Issuer, STFI and the Subsidiaries 31 in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Initial Purchaser consists of the following information in the Offering Documents furnished on behalf of each Initial Purchaser: the last paragraph at the bottom of the cover page concerning the terms of the offering by the Initial Purchasers; the legend concerning over-allotments and stabilizing on the inside front cover page; and the fifth paragraph, the third and fourth sentences of the seventh paragraph and the eighth paragraph under the caption "Plan of Distribution." (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsectionE(a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsectionE(a) or (b) above except to the extent that the indemnifying party is prejudiced by the failure to give such notice. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, which consent shall not unreasonably be withheld, be counsel to the indemnifying party if such representation of both the indemnifying and the indemnified party would be inappropriate due to an actual or potential conflict of interest between them), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. No indemnifying party shall be liable for any amounts paid in settlement of any action or claim without its written consent, which consent shall not be unreasonably withheld. 32 (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsectionE(a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsectionE(a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuer, STFI and the Subsidiaries on the one hand and the Initial Purchasers on the other from the offering of the Offered Securities or (ii) if the allocation provided by clauseE(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clauseE(i) above but also the relative fault of the Issuer, STFI and the Subsidiaries on the one hand and the Initial Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Issuer, STFI and the Subsidiaries on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Offered Securities (before deducting expenses) received by the Issuer, STIF and the Subsidiaries bear to the total discounts and commissions received by the Initial Purchasers under this Agreement. The relative fault shall 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 the Issuer, STFI and the Subsidiaries or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsectionE(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsectionE(d). Notwithstanding the provisions of this subsectionE(d), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were resold exceeds the amount of any damages which such Initial Purchaser 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 Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations in this subsectionE(d) to contribute are several in proportion to their respective purchase obligations and not joint. 33 (e) The obligations of the Issuer, STIF and the Subsidiaries under this Section shall be in addition to any liability which the Issuer, STFI and the Subsidiaries may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Initial Purchasers under this Section shall be in addition to any liability which the respective Initial Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Issuer, STIF and the Subsidiaries within the meaning of the Securities Act or the Exchange Act. 8. Default of Initial Purchasers. If any Initial Purchaser or Initial Purchasers default in their obligations to purchase Offered Securities hereunder and arrangements satisfactory to CSFBC and the Issuer for the purchase of such Offered Securities by other persons are not made within 36Ehours after such default, this Agreement will terminate without liability on the part of any nondefaulting Initial Purchaser or the Issuer, STIF and the Subsidiaries, except as provided in Section 9. As used in this Agreement, the term "Initial Purchaser" includes any person substituted for a Initial Purchaser under this Section. Nothing herein will relieve a defaulting Initial Purchaser from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Issuer and the Guarantors or their officers and of the several Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Initial Purchaser, the Issuer, the Guarantors or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Initial Purchasers is not consummated, the Issuer and the Guarantors shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Issuer, the Guarantors and the Initial Purchasers pursuant to Section 7 shall remain in effect. If the purchase of the Offered Securities by the Initial Purchasers is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clauseE(C), (D) or (E) of Section 6(b)(ii), the Issuer will reimburse the Initial Purchasers for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them (x) as Initial Purchasers in connection with the offering of the Offered Securities and 34 (y) as Dealer Managers and Solicitation Agents in connection with the Debt Tender Offer. 10. Notices. All communications hereunder will be in writing and, if sent to the Initial Purchasers will be mailed, delivered or telegraphed and confirmed to the Initial Purchasers, c/o CS First Boston Corporation, Park Avenue Plaza, New York, NY 10055, Attention: Investment Banking DepartmentE-- Transactions Advisory Group, or, if sent to the Issuer, will be mailed, delivered or telegraphed and confirmed to it at 100 Great Meadow Road, Wethersfield, CTE06109, Attention: [KennethEM. Dorros, Esq., General Counsel]; provided, however, that any notice to a Initial Purchaser pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Initial Purchaser. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be entitled to enforce the agreements for their benefit contained in the second and third sentences of Section 5(b) hereof against the Issuer as if such holders were parties thereto. 12. Representation of Initial Purchasers. CSFBC will act for the several Initial Purchasers in connection with this purchase, and any action under this Agreement taken by CSFBC will be binding upon all the Initial Purchasers. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEWEYORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. The Issuer hereby submits to the nonexclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If the foregoing is in accordance with the Initial Purchaser's understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement between the Issuer and the several Initial Purchasers in accordance with its terms. Very truly yours, 35 SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP. by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer SHARED TECHNOLOGIES INC. as Guarantor by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer MULTI-TENANT SERVICES, INC., as Guarantor by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer BOSTON TELECOMMUNICATIONS GROUP, INC., as Guarantor by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer OFFICE TELEPHONE MANAGEMENT, as Guarantor by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer 36 STI INTERNATIONAL, INC., as Guarantor by: /s/ Vincent DiVincenzo --------------------- Name: Vincent DiVincenzo Title: Treasurer The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. CS FIRST BOSTON CORPORATION CITICORP SECURITIES, INC. by: CS FIRST BOSTON CORPORATION By: /s/ Richard H. Ivers -------------------------- Name: Richard H. Ivers Title: Managing Director 37 Schedule A Principal Amount Initial Purchaser of Offered Securities CS First Boston $130,909,600 Citicorp Securities, Inc. 32,727,400 ------------ Total 163,637,000 EX-2.1 3 AGREEMENT AND PLAN OF MERGER EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1995, by and among Fairchild Industries, Inc., a Delaware corporation ("Fairchild"), RHI Holdings, Inc., a Delaware corporation ("RHI"), The Fairchild Corporation, a Delaware corporation ("TFC"), and Shared Technologies Inc., a Delaware corporation ("Shared Technologies"). W I T N E S S E T H : WHEREAS, the Boards of Directors of Fairchild and Shared Technologies have approved the merger of Fairchild with and into Shared Technologies (the "Merger") upon the terms and subject to the conditions set forth herein and in accordance with the laws of the State of Delaware; WHEREAS, RHI, which is a wholly owned subsidiary of TFC, is the sole owner of all of the outstanding common stock of Fairchild and has approved the Merger upon the terms and subject to the conditions set forth herein, and RHI has received an irrevocable proxy from the holder of approximately 9.84% of Shared Technologies' common stock (based on the shares outstanding as of the date hereof) agreeing to vote for the Merger; WHEREAS, Fairchild is the sole owner of 100% of the issued and outstanding capital stock of VSI Corporation ("VSI"); NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, agree as follows: ARTICLE I MERGER 1.1 The Merger. At the Effective Time (as hereinafter defined), Fairchild shall be merged with and into Shared Technologies as provided herein. Thereupon, the corporate existence of Shared Technologies, with all its purposes, powers and objects, shall continue unaffected and unimpaired by the Merger, and the corporate identity and existence, with all the purposes, powers and objects, of Fairchild shall be merged with and into Shared Technologies and Shared Technologies as the corporation surviving the Merger shall be fully vested therewith and shall change its name to "Shared Technologies Fairchild Inc." The separate existence and corporate organization of Fairchild shall cease upon the Merger becoming effective as herein provided and thereupon Fairchild and Shared Technologies shall be a single corporation, Shared Technologies Fairchild Inc. (herein sometimes called the "Surviving Corporation"). Prior to the Effective Time, Fairchild and its subsidiaries will undergo a corporate reorganization (the "Fairchild Reorganization") pursuant to which all the assets of Fairchild and its subsidiaries (other than certain indebtedness and preferred stock) will be transferred to, and liabilities of Fairchild and its subsidiaries will be assumed by, RHI except for the assets and liabilities comprising the telecommunications systems and service business of Fairchild Communications Services Company, which as a result of said reorganization, will reside in VSI, all as described on Schedule 9.1. Except where indicated to the contrary, all references herein to "Fairchild" shall be deemed to refer to Fairchild as it will exist following the Fairchild Reorganization and, accordingly, none of the representations, warranties, restrictions or covenants contained in this Agreement apply to the businesses, operations, assets or liabilities of Fairchild Industries, Inc. and its subsidiaries other than as they relate to the telecommunications systems and service business of Fairchild, and each of TFC, RHI and Fairchild may operate such other businesses and assets (including without limitation selling assets and businesses and incurring liabilities) as it deems appropriate in the exercise of its business judgment. 1.2 Filing. As soon as practicable after the requisite approval of the Merger by the stockholders of Shared Technologies and the fulfillment or waiver of the conditions set forth in Sections 9.1, 9.2 and 9.3 or on such later date as may be mutually agreed to between Fairchild and Shared Technologies, the parties hereto will cause to be filed with the office of the Secretary of State of the State of Delaware, a certificate of merger (the "Certificate of Merger"), in such form as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law (the "DGCL"). 1.3 Effective Time of the Merger. The Merger shall be effective at the time that the filing of the Certificate of Merger with the office of the Secretary of State of the State of Delaware is completed, or at such later time specified in such Certificate of Merger, which time is herein sometimes referred to as the "Effective Time" and the date thereof is herein sometimes referred to as the "Effective Date." ARTICLE II CERTIFICATE OF INCORPORATION; BY-LAWS; SHAREHOLDERS AGREEMENT 2.1 Certificate of Incorporation. The Certificate of Incorporation of Shared Technologies, as amended in accordance with this Agreement, shall be the Certificate of Incorporation of the Surviving Corporation. 2.2 By-Laws. The By-Laws of Shared Technologies, as amended in accordance with this Agreement, shall be the By-Laws of the Surviving Corporation until the same shall thereafter be altered, amended or repealed in accordance with law, the Certificate of Incorporation of the Surviving Corporation or said By-Laws. 2.3 Shareholders Agreement. At the Effective Time, Shared Technologies, RHI and Anthony D. Autorino shall enter into a shareholders agreement in the form of Exhibit A hereto (the "Shareholders Agreement") providing for the election of directors and officers of the Surviving Corporation. ARTICLE III CONVERSION OF SHARES 3.1 Conversion. At the Effective Time the issued shares of capital stock of Fairchild shall, by virtue of the Merger and without any action on the part of the holders thereof, become and be converted as follows: (A) each outstanding share of Common Stock, $100.00 par value per share, of Fairchild (the "Fairchild Common Stock") shall be converted into and become the right to receive a Pro Rata Amount (as defined below) of the Merger Consideration (as defined below); and (B) each outstanding share of Series A Preferred Stock, without par value, of Fairchild (the "Series A Preferred Stock") and each outstanding share of Series C Preferred Stock, without par value, of Fairchild (the "Series C Preferred Stock") shall be converted into the right to receive an amount in cash equal to $45.00 per share ($44,237,745 in the aggregate for all such shares of Series A Preferred Stock and Series C Preferred Stock) plus accrued and unpaid dividends thereon to the Effective Time. "Merger Consideration" means (x) 6,000,000 shares of Common Stock, $.004 par value per share, of Shared Technologies (the "Technologies Common Stock"), (y) shares of Convertible Preferred Stock of Shared Technologies (the "Convertible Preferred Stock") having an initial aggregate liquidation value of $25,000,000 and the other terms set forth on the attached Schedule 3.1(a) and (z) shares of Special Preferred Stock of Shared Technologies (the "Special Preferred Stock") having an initial aggregate liquidation value of $20,000,000 and the other terms set forth on the attached Schedule 3.1(b). The Convertible Preferred Stock and Special Preferred Stock are collectively referred to as the "Preferred Stock." With respect to any share of capital stock, "Pro Rata Amount" means the product of the Merger Consideration multiplied by a fraction, the numerator of which is one and the denominator of which is the aggregate number of all issued and outstanding shares of such capital stock on the Effective Date. 3.2 Preferred Stock Pledge. Immediately after the Effective Time, RHI shall pledge all of the shares of Preferred Stock then issued to it (other than shares of Convertible Preferred Stock having an aggregate liquidation preference of $1,500,000) to secure RHI's and Fairchild's obligations under the Indemnification Agreement of TFC and RHI (the form of which is attached as Exhibit B-1 hereto) pursuant to the terms of a Pledge Agreement (the form of which is attached as Exhibit C hereto) and with a pledge agent mutually agreed upon by the parties. Such shares will be released from such pledge on the later to occur of (i) third anniversary of the Effective Time and (ii) the date on which the consolidated net worth (computed in accordance with generally accepted accounting principles) of The Fairchild Corporation at such time (or evidenced by any audited balance sheet) is at least (x) $25 million greater than such net worth at September 30, 1995 (excluding for such purpose any value attributed to the Preferred Stock on such balance sheet) and (y) $225 million (including for such purpose the value of the Preferred Stock). ARTICLE IV CERTAIN EFFECTS OF THE MERGER 4.1 Effect of the Merger. On and after the Effective Time and pursuant to the DGCL, the Surviving Corporation shall possess all the rights, privileges, immunities, powers, and purposes of each of Fairchild and Shared Technologies; all the property, real and personal, including subscriptions to shares, causes of action and every other asset (including books and records) of Fairchild and Shared Technologies, shall vest in the Surviving Corporation without further act or deed; and the Surviving Corporation shall assume and be liable for all the liabilities, obligations and penalties of Fairchild and Shared Technologies; provided, however, that this shall in no way impair or affect the indemnification obligations of any party pursuant to indemnification agreements entered into in connection with this Agreement. No liability or obligation due or to become due and no claim or demand for any cause existing against either Fairchild or Shared Technologies, or any stockholder, officer or director thereof, shall be released or impaired by the Merger, and no action or proceeding, whether civil or criminal, then pending by or against Fairchild or Shared Technologies, or any stockholder, officer or director thereof, shall abate or be discontinued by the Merger, but may be enforced, prosecuted, settled or compromised as if the Merger had not occurred, and the Surviving Corporation may be substituted in any such action or proceeding in place of Fairchild or Shared Technologies. 4.2 Further Assurances. If at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of either of Fairchild or Shared Technologies, the officers of such corporation are fully authorized in the name of their corporation or otherwise to take, and shall take, all such further action and TFC will, and cause each of its subsidiaries (direct or indirect) to, take all actions reasonably requested by the Surviving Corporation (at the Surviving Corporation's expense) in furtherance thereof. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SHARED TECHNOLOGIES Shared Technologies represents and warrants to Fairchild that: 5.1 Organization and Qualification. Each of Shared Technologies and its subsidiaries (which for purposes of this Agreement, unless indicated to the contrary, shall not include Shared Technologies Cellular, Inc.) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of Shared Technologies and its subsidiaries is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except for failures to be so qualified or in good standing which would not, individually or in the aggregate, have a material adverse effect on the general affairs, management, business, operations, condition (financial or otherwise) or prospects of Shared Technologies and its subsidiaries taken as a whole (a "Shared Technologies Material Adverse Effect"). Neither Shared Technologies nor any of its subsidiaries is in violation of any of the provisions of its Certificate of Incorporation (or other applicable charter document) or By-Laws. Shared Technologies has delivered to Fairchild accurate and complete copies of the Certificate of Incorporation (or other applicable charter document) and By-Laws, as currently in effect, of each of Shared Technologies and its subsidiaries. 5.2 Capital Stock of Subsidiaries. The only direct or indirect subsidiaries of Shared Technologies are those listed in Section 5.2 of the Disclosure Statement previously delivered by Shared Technologies to Fairchild (the "Disclosure Statement"). Shared Technologies is directly or indirectly the record (except for directors' qualifying shares) and beneficial owner (including all qualifying shares owned by directors of such subsidiaries as reflected in Section 5.2 of the Disclosure Statement) of all of the outstanding shares of capital stock of each of its subsidiaries, there are no proxies with respect to such shares, and no equity securities of any of such subsidiaries are or may be required to be issued by reason of any options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any capital stock of any such subsidiary, and there are no contracts, commitments, understandings or arrangements by which any such subsidiary is bound to issue additional shares of its capital stock or securities convertible into or exchangeable for such shares. Other than as set forth in Section 5.2 of the Disclosure Statement, all of such shares so owned by Shared Technologies are validly issued, fully paid and nonassessable and are owned by it free and clear of any claim, lien or encumbrance of any kind with respect thereto. Except as disclosed in Section 5.2 of the Disclosure Statement, Shared Technologies does not directly or indirectly own any interest in any corporation, partnership, joint venture or other business association or entity. 5.3 Capitalization. The authorized capital stock of Shared Technologies consists of 20,000,000 shares of Common Stock, par value $.004 per share, and 10,000,000 shares of Preferred Stock, par value $.01 per share. As of the date hereof, 8,495,815 shares of Common Stock were issued and outstanding and 1,527,970 shares of Preferred Stock were issued and outstanding. All of such issued and outstanding shares are validly issued, fully paid and nonassessable and free of preemptive rights. As of the date hereof 5,022,083 shares of Common Stock were reserved for issuance upon exercise of outstanding convertible securities, warrants, options, and options which may be granted under the stock option plans of Shared Technologies (the "Stock Option Plans"), all of which warrants, options and Stock Option Plans are listed and described in Section 5.3 of the Disclosure Statement. Other than the Stock Option Plans, Shared Technologies has no other plan which provides for the grant of options to purchase shares of capital stock, stock appreciation or similar rights or stock awards. Except as set forth above, there are not now, and at the Effective Time, except for shares of Common Stock issued after the date hereof upon the conversion of convertible securities and the exercise of warrants and options outstanding on the date hereof or issued after the date hereof pursuant to the Stock Option Plans, there will not be, any shares of capital stock of Shared Technologies issued or outstanding or any subscriptions, options, warrants, calls, claims, rights (including without limitation any stock appreciation or similar rights), convertible securities or other agreements or commitments of any character obligating Shared Technologies to issue, transfer or sell any of its securities. 5.4 Authority Relative to This Agreement. Shared Technologies has full corporate power and authority to execute and deliver this Agreement and to consummate the Merger and other transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the Merger and other transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Shared Technologies and no other corporate proceedings on the part of Shared Technologies are necessary to authorize this Agreement or to consummate the Merger or other transactions contemplated hereby (other than, with respect to the Merger, the approval of Shared Technologies' stockholders pursuant to Section 251(c) of the DGCL). This Agreement has been duly and validly executed and delivered by Shared Technologies and, assuming the due authorization, execution and delivery hereof by Fairchild, constitutes a valid and binding agreement of Shared Technologies, enforceable against Shared Technologies in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable or fiduciary principles. 5.5 No Violations, etc. (a) Assuming that all filings, permits, authorizations, consents and approvals or waivers thereof have been duly made or obtained as contemplated by Section 5.5(b) hereof, except as listed in Section 5.5 of the Disclosure Statement, neither the execution and delivery of this Agreement by Shared Technologies nor the consummation of the Merger or other transactions contemplated hereby nor compliance by Shared Technologies with any of the provisions hereof will (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or suspension of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Shared Technologies or any of its subsidiaries under, any of the terms, conditions or provisions of (x) their respective charters or by-laws, (y) except as set forth in Section 5.5 of the Disclosure Statement, any note, bond, mortgage, indenture or deed of trust, or (z) any license, lease, agreement or other instrument or obligation to which Shared Technologies or any such subsidiary is a party or to which they or any of their respective properties or assets may be subject, or (ii) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to Shared Technologies or any of its subsidiaries or any of their respective properties or assets, except, in the case of clauses (i)(z) and (ii) above, for such violations, conflicts, breaches, defaults, terminations, suspensions, accelerations, rights of termination or acceleration or creations of liens, security interests, charges or encumbrances which would not, individually or in the aggregate, either have a Shared Technologies Material Adverse Effect or materially impair Shared Technologies' ability to consummate the Merger or other transactions contemplated hereby. (b) No filing or registration with, notification to and no permit, authorization, consent or approval of any governmental entity is required by Shared Technologies in connection with the execution and delivery of this Agreement or the consummation by Shared Technologies of the Merger or other transactions contemplated hereby, except (i) in connection with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (iii) the approval of Shared Technologies' stockholders pursuant to the DGCL, (iv) filings with applicable state public utility commissions and (v) such other filings, registrations, notifications, permits, authorizations, consents or approvals the failure of which to be obtained, made or given would not, individually or in the aggregate, either have a Shared Technologies Material Adverse Effect or materially impair Shared Technologies' ability to consummate the Merger or other transactions contemplated hereby. (c) As of the date hereof, Shared Technologies and its subsidiaries are not in violation of or default under (x) their respective charter or bylaws, and (y) except as set forth in Section 5.5 of the Disclosure Statement, any note, bond, mortgage, indenture or deed of trust, or (z) any license, lease, agreement or other instrument or obligation to which Shared Technologies or any such subsidiary is a party or to which they or any of their respective properties or assets may be subject, except, in the case of clauses (y) and (z) above, for such violations or defaults which would not, individually or in the aggregate, either have a Shared Technologies Material Adverse Effect or materially impair Shared Technologies' ability to consummate the Merger or other transactions contemplated hereby. 5.6 Commission Filings; Financial Statements. (a) Shared Technologies has filed all required forms, reports and documents during the past three years (collectively, the "SEC Reports") with the Securities and Exchange Commission (the "SEC"), all of which complied when filed in all material respects with all applicable requirements of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act") and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act"). As of their respective dates the SEC Reports (including all exhibits and schedules thereto and documents incorporated by reference therein) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited consolidated interim financial statements of Shared Technologies and its subsidiaries included or incorporated by reference in such SEC Reports have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto), and fairly present the consolidated financial position of Shared Technologies and its subsidiaries as of the dates thereof and the consolidated results of operations and consolidated cash flows for the periods then ended (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments and to the extent they may not include footnotes or may be condensed or summary statements). (b) Shared Technologies will deliver to Fairchild as soon as they become available true and complete copies of any report or statement mailed by it to its securityholders generally or filed by it with the SEC, in each case subsequent to the date hereof and prior to the Effective Time. As of their respective dates, such reports and statements (excluding any information therein provided by Fairchild, as to which Shared Technologies makes no representation) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading and will comply in all material respects with all applicable requirements of law. The audited consolidated financial statements and unaudited consolidated interim financial statements of Shared Technologies and its subsidiaries to be included or incorporated by reference in such reports and statements (excluding any information therein provided by Fairchild, as to which Shared Technologies makes no representation) will be prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and will fairly present the consolidated financial position of Shared Technologies and its subsidiaries as of the dates thereof and the consolidated results of operations and consolidated cash flows for the periods then ended (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments and to the extent they may not include footnotes or may be condensed or summary statements). 5.7 Absence of Changes or Events. Except as set forth in Shared Technologies' Form 10-K for the fiscal year ended December 31, 1994, as filed with the SEC, since December 31, 1994: (a) there has been no material adverse change, or any development involving a prospective material adverse change, in the general affairs, management, business, operations, condition (financial or otherwise) or prospects of Shared Technologies and its subsidiaries taken as a whole; (b) there has not been any direct or indirect redemption, purchase or other acquisition of any shares of capital stock of Shared Technologies or any of its subsidiaries, or any declaration, setting aside or payment of any dividend or other distribution by Shared Technologies or any of its subsidiaries in respect of its capital stock (except for the distribution of the shares of Shared Technologies Cellular, Inc.); (c) except in the ordinary course of its business and consistent with past practice neither Shared Technologies nor any of its subsidiaries has incurred any indebtedness for borrowed money, or assumed, guaranteed, endorsed or otherwise as an accommodation become responsible for the obligations of any other individual, firm or corporation, or made any loans or advances to any other individual, firm or corporation; (d) there has not been any change in accounting methods, principles or practices of Shared Technologies or its subsidiaries; (e) except in the ordinary course of business and for amounts which are not material, there has not been any revaluation by Shared Technologies or any of its subsidiaries of any of their respective assets, including, without limitation, writing down the value of inventory or writing off notes or accounts receivables; (f) there has not been any damage, destruction or loss, whether covered by insurance or not, except for such as would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect; and (g) there has not been any agreement by Shared Technologies or any of its subsidiaries to (i) do any of the things described in the preceding clauses (a) through (f) other than as expressly contemplated or provided for in this Agreement or (ii) take, whether in writing or otherwise, any action which, if taken prior to the date of this Agreement, would have made any representation or warranty in this Article V untrue or incorrect. 5.8 Proxy Statement. None of the information supplied by Shared Technologies for inclusion in the proxy statement to be sent to the shareholders of Shared Technologies in connection with the Special Meeting (as hereinafter defined), including all amendments and supplements thereto (the "Proxy Statement"), shall on the date the Proxy Statement is first mailed to shareholders, at the time of the Special Meeting or at the Effective Time, be false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Special Meeting which has become false or misleading. None of the information to be filed by Fairchild and Shared Technologies with the SEC in connection with the Merger or in any other documents to be filed with the SEC or any other regulatory or governmental agency or authority in connection with the transactions contemplated hereby, including any amendments thereto (the "Other Documents"), insofar as such information was provided or supplied by Shared Technologies, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement shall comply in all material respects with the requirements of the Exchange Act. 5.9 Litigation. Except as set forth in Section 5.9 of the Disclosure Statement, there is no (i) claim, action, suit or proceeding pending or, to the best knowledge of Shared Technologies or any of its subsidiaries, threatened against or relating to Shared Technologies or any of its subsidiaries before any court or governmental or regulatory authority or body or arbitration tribunal, or (ii) outstanding judgment, order, writ, injunction or decree, or application, request or motion therefor, of any court, governmental agency or arbitration tribunal in a proceeding to which Shared Technologies, any subsidiary of Shared Technologies or any of their respective assets was or is a party except, in the case of clauses (i) and (ii) above, such as would not, individually or in the aggregate, either have a Shared Technologies Material Adverse Effect or materially impair Shared Technologies' ability to consummate the Merger. 5.10 Insurance. Section 5.10 of the Disclosure Statement lists all insurance policies in force on the date hereof covering the businesses, properties and assets of Shared Technologies and its subsidiaries, and all such policies are currently in effect. True and complete copies of all such policies have been delivered to Fairchild. Except as set forth in Section 5.10 of the Disclosure Statement, Shared Technologies has not received notice of the cancellation of any such insurance policy. 5.11 Title to and Condition of Properties. Except as set forth in Section 5.11 of the Disclosure Statement, Shared Technologies and its subsidiaries have good title to all of the real property and own outright all of the personal property (except for leased property or assets) which is reflected on Shared Technologies' and its subsidiaries' December 31, 1994 audited consolidated balance sheet contained in Shared Technologies' Form 10-K for the fiscal year ended December 31, 1994 filed with the SEC (the "Balance Sheet") except for property since sold or otherwise disposed of in the ordinary course of business and consistent with past practice. Except as set forth in Section 5.11 of the Disclosure Statement, no such real or personal property is subject to claims, liens or encumbrances, whether by mortgage, pledge, lien, conditional sale agreement, charge or otherwise, except for those which would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. Section 5.11 of the Disclosure Statement contains a true and complete list of all real properties owned by Shared Technologies and its subsidiaries. 5.12 Leases. There has been made available to Fairchild true and complete copies of each lease requiring the payment of rentals aggregating at least $35,000 per annum pursuant to which real or personal property is held under lease by Shared Technologies or any of its subsidiaries, and true and complete copies of each lease pursuant to which Shared Technologies or any of its subsidiaries leases real or personal property to others. A true and complete list of all such leases is set forth in Section 5.12 of the Disclosure Statement. All of the leases so listed are valid and subsisting and in full force and effect and are subject to no default with respect to Shared Technologies or its subsidiaries, as the case may be, and, to Shared Technologies' knowledge, are in full force and effect and subject to no default with respect to any other party thereto, and the leased real property is in good and satisfactory condition. 5.13 Contracts and Commitments. Other than as disclosed in Section 5.13 of the Disclosure Statement, no existing contract or commitment contains an agreement with respect to any change of control that would be triggered by the Merger. Other than as set forth in Section 5.13 of the Disclosure Statement, neither this Agreement, the Merger nor the other transactions contemplated hereby will result in any outstanding loans or borrowings by Shared Technologies or any subsidiary of Shared Technologies becoming due, going into default or giving the lenders or other holders of debt instruments the right to require Shared Technologies or any of its subsidiaries to repay all or a portion of such loans or borrowings. 5.14 Labor Matters. Each of Shared Technologies and its subsidiaries is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and neither Shared Technologies nor any of its subsidiaries is engaged in any unfair labor practice. There is no labor strike, slowdown or stoppage pending (or, to the best knowledge of Shared Technologies, any labor strike or stoppage threatened) against or affecting Shared Technologies or any of its subsidiaries. No petition for certification has been filed and is pending before the National Labor Relations Board with respect to any employees of Shared Technologies or any of its subsidiaries who are not currently organized. 5.15 Compliance with Law. Except for matters set forth in the Disclosure Statement, neither Shared Technologies nor any of its subsidiaries has violated or failed to comply with any statute, law, ordinance, regulation, rule or order of any foreign, federal, state or local government or any other governmental department or agency, or any judgment, decree or order of any court, applicable to its business or operations, except where any such violation or failure to comply would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect; the conduct of the business of Shared Technologies and its subsidiaries is in conformity with all foreign, federal, state and local energy, public utility and health requirements, and all other foreign, federal, state and local governmental and regulatory requirements, except where such nonconformities would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. Shared Technologies and its subsidiaries have all permits, licenses and franchises from governmental agencies required to conduct their businesses as now being conducted, except for such permits, licenses and franchises the absence of which would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. 5.16 Board Recommendation. The Board of Directors of Shared Technologies has, by a majority vote at a meeting of such Board duly held on, or by written consent of such Board dated, November 9, 1995, approved and adopted this Agreement, the Merger and the other transactions contemplated hereby, determined that the Merger is fair to the holders of shares of Shared Technologies Common Stock and recommended that the holders of such shares of Common Stock approve and adopt this Agreement, the Merger and the other transactions contemplated hereby. 5.17 Employment and Labor Contracts. Neither Shared Technologies nor any of its subsidiaries is a party to any employment, management services, consultation or other similar contract with any past or present officer, director, employee or other person or, to the best of Shared Technologies' knowledge, any entity affiliated with any past or present officer, director or employee or other person other than those set forth in Section 5.17 of the Disclosure Statement and other than those which (x) have a term of less than one year and (y) involve payments of less than $30,000 per year, in each case true and complete copies of which contracts have been delivered to Fairchild, and other than the agreements executed by employees generally, the forms of which have been delivered to Fairchild. 5.18 Patents and Trademarks. Shared Technologies and its subsidiaries own or have the right to use all patents, patent applications, trademarks, trademark applications, trade names, inventions, processes, know-how and trade secrets necessary to the conduct of their respective businesses, except for those which the failure to own or have the right to use would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect ("Proprietary Rights"). All issued patents and trademark registrations and pending patent and trademark applications of the Proprietary Rights have previously been delivered to Fairchild. No rights or licenses to use Proprietary Rights have been granted by Shared Technologies or its subsidiaries except those listed in Section 5.18 of the Disclosure Statement; and no contrary assertion has been made to Shared Technologies or any of its subsidiaries or notice of conflict with any asserted right of others has been given by any person except those which, even if correct, would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. Shared Technologies has not given notice of any asserted claim or conflict to a third party with respect to Shared Technologies' Proprietary Rights. True and complete copies of all material license agreements under which Shared Technologies or any of its subsidiaries is a licensor or licensee have been delivered to Fairchild. 5.19 Taxes. "Tax" or "Taxes" shall mean all federal, state, local and foreign taxes, duties, levies, charges and assessments of any nature, including social security payments and deductibles relating to wages, salaries and benefits and payments to subcontractors (to the extent required under applicable Tax law), and also including all interest, penalties and additions imposed with respect to such amounts. Except as set forth in Section 5.19 of the Disclosure Statement: (i) Shared Technologies and its subsidiaries have prepared and timely filed or will timely file with the appropriate governmental agencies all franchise, income and all other material Tax returns and reports required to be filed for any period ending on or before the Effective Time, taking into account any extension of time to file granted to or obtained on behalf of Shared Technologies and/or its subsidiaries; (ii) all material Taxes of Shared Technologies and its subsidiaries in respect of the pre-Merger period have been paid in full to the proper authorities, other than such Taxes as are being contested in good faith by appropriate proceedings and/or are adequately reserved for in accordance with generally accepted accounting principles; (iii) all deficiencies resulting from Tax examinations of federal, state and foreign income, sales and franchise and all other material Tax returns filed by Shared Technologies and its subsidiaries have either been paid or are being contested in good faith by appropriate proceedings; (iv) to the best knowledge of Shared Technologies, no deficiency has been asserted or assessed against Shared Technologies or any of its subsidiaries, and no examination of Shared Technologies or any of its subsidiaries is pending or threatened for any material amount of Tax by any taxing authority; (v) no extension of the period for assessment or collection of any material Tax is currently in effect and no extension of time within which to file any material Tax return has been requested, which Tax return has not since been filed; (vi) no material Tax liens have been filed with respect to any Taxes; (vii) Shared Technologies and each of its subsidiaries will not make any voluntary adjustment by reason of a change in their accounting methods for any pre-Merger period that would affect the taxable income or deductions of Shared Technologies or any of its subsidiaries for any period ending after the Effective Date; (viii) Shared Technologies and its subsidiaries have made timely payments of the Taxes required to be deducted and withheld from the wages paid to their employees; (ix) the Tax Sharing Agreement under which Shared Technologies or any subsidiary will have any obligation or liability on or after the Effective Date is attached as Exhibit E; (x) Shared Technologies has foreign losses as defined in Section 904(f)(2) of the Code listed in Section 5.19 of the Disclosure Statement; (xi) Shared Technologies and its subsidiaries have unused foreign tax credits set forth in Section 5.19 of the Disclosure Statement; and (xii) to the best knowledge of Shared Technologies, there are no transfer pricing agreements made with any taxation authority involving Shared Technologies and its subsidiaries. 5.20 Employee Benefit Plans; ERISA. (a) Except as set forth in Section 5.20 of the Disclosure Statement, there are no "employee pension benefit plans" as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), covering employees employed in the United States, maintained or contributed to by Shared Technologies or any of its subsidiaries, or to which Shared Technologies or any of its subsidiaries contributes or is obligated to make payments thereunder or otherwise may have any liability ("Pension Benefits Plans"). (b) Shared Technologies has furnished Fairchild with a true and complete schedule of all "welfare benefit plans" (as defined in Section 3(1) of ERISA) covering employees employed in the United States, maintained or contributed to by Shared Technologies or any of its subsidiaries ("Welfare Plans"), all multiemployer plans as defined in Section 3(37) of ERISA covering employees employed in the United States to which Shared Technologies or any of its subsidiaries is required to make contributions or otherwise may have any liability, and, to the extent covering employees employed in the United States, all stock bonus, stock option, restricted stock, stock appreciation right, stock purchase, bonus, incentive, deferred compensation, severance and vacation plans maintained or contributed to by Shared Technologies or a subsidiary. (c) Shared Technologies and each of its subsidiaries, and each of the Pension Benefit Plans and Welfare Plans, are in compliance with the applicable provisions of ERISA (the "Code") and other applicable laws except where the failure to comply would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. (d) All contributions to, and payments from, the Pension Benefit Plans which are required to have been made in accordance with the Pension Benefit Plans and, when applicable, Section 302 of ERISA or Section 412 of the Code have been timely made except where the failure to make such contributions or payments on a timely basis would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. All contributions required to have been made in accordance with Section 302 of ERISA or Section 412 of the Code to any employee pension benefit plan (as defined in Section 3(2) of ERISA) maintained by an ERISA Affiliate of Shared Technologies or any of its subsidiaries have been timely made except where the failure to make such contributions on a timely basis would not individually or in the aggregate have a Shared Technologies Material Adverse Effect. For purposes of this Agreement, "ERISA Affiliate" shall mean any person (as defined in Section 3(9) of ERISA) that is a member of any group of persons described in Section 414(b), (c), (m) or (o) of the Code of which Shared Technologies or a subsidiary is a member. (e) The Pension Benefit Plans intended to qualify under Section 401 of the Code are so qualified and have been determined by the Internal Revenue Service ("IRS") to be so qualified and nothing has occurred with respect to the operation of such Pension Benefit Plans which would cause the loss of such qualification or exemption or the imposition of any material liability, penalty or tax under ERISA or the Code. Such plans have been or will be, on a timely basis, (i) amended to comply with changes to the Code made by the Tax Reform Act of 1986, the Unemployment Compensation Amendments of 1992, the Omnibus Budget Reconciliation Act of 1993, and other applicable legislative, regulatory or administrative requirements; and (ii) submitted to the Internal Revenue Service for a determination of their tax qualification, as so amended; and no such amendment will adversely affect the qualification of such plans. (f) Each Welfare Plan that is intended to qualify for exclusion of benefits thereunder from the income of participants or for any other tax-favored treatment under any provisions of the Code (including, without limitation, Sections 79, 105, 106, 125 or 129 of the Code) is and has been maintained in compliance with all pertinent provisions of the Code and Treasury Regulations thereunder. (g) Except as disclosed in Shared Technologies' Form 10-K for the fiscal year ended December 31, 1994, there are (i) no investigations pending, to the best knowledge of Shared Technologies, by any governmental entity involving the Pension Benefit Plans or Welfare Plans, (ii) no termination proceedings involving the Pension Benefit Plans and (iii) no pending or, to the best of Shared Technologies' knowledge, threatened claims (other than routine claims for benefits), suits or proceedings against any Pension Benefit or Welfare Plan, against the assets of any of the trusts under any Pension Benefit or Welfare Plan or against any fiduciary of any Pension Benefit or Welfare Plan with respect to the operation of such plan or asserting any rights or claims to benefits under any Pension Benefit or Welfare Plan or against the assets of any trust under such plan, which would, in the case of clause (i), (ii) or (iii) of this paragraph (f), give rise to any liability which would, individually or in the aggregate, have a Shared Technologies Material Adverse Effect, nor, to the best of Shared Technologies' knowledge, are there any facts which would give rise to any liability which would, individually or in the aggregate, have a Shared Technologies Material Adverse Effect in the event of any such investigation, claim, suit or proceeding. (h) None of Shared Technologies, any of its subsidiaries or any employee of the foregoing, nor any trustee, administrator, other fiduciary or any other "party in interest" or "disqualified person" with respect to the Pension Benefit Plans or Welfare Plans, has engaged in a "prohibited transaction" (as such term is defined in Section 4975 of the Code or Section 406 of ERISA) which would be reasonably likely to result in a tax or penalty on Shared Technologies or any of its subsidiaries under Section 4975 of the Code or Section 502(i) of ERISA which would, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. (i) Neither the Pension Benefit Plans subject to Title IV of ERISA nor any trust created thereunder has been terminated nor have there been any "reportable events" (as defined in Section 4043 of ERISA and the regulations thereunder) with respect to either thereof which would, individually or in the aggregate, have a Shared Technologies Material Adverse Effect nor has there been any event with respect to any Pension Benefit Plan requiring disclosure under Section 4063(a) of ERISA or any event with respect to any Pension Benefit Plan requiring disclosure under Section 4041(c)(3)(C) of ERISA which would, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. (j) Neither Shared Technologies nor any subsidiary of Shared Technologies has incurred any currently outstanding liability to the Pension Benefit Guaranty Corporation (the "PBGC") or to a trustee appointed under Section 4042(b) or (c) of ERISA other than for the payment of premiums, all of which have been paid when due. No Pension Benefit Plan has applied for, or received, a waiver of the minimum funding standards imposed by Section 412 of the Code. The information supplied to the actuary by Shared Technologies or any of its subsidiaries for use in preparing the most recent actuarial report for Pension Benefit Plans is complete and accurate in all material respects. (k) Neither Shared Technologies, any of its subsidiaries nor any of their ERISA Affiliates has any liability (including any contingent liability under Section 4204 of ERISA) with respect to any multiemployer plan, within the meaning of Section 3(37) of ERISA, covering employees employed in the United States. (l) Except as disclosed in Section 5.20 of the Disclosure Statement, with respect to each of the Pension Benefit and Welfare Plans, true, correct and complete copies of the following documents have been delivered to Fairchild: (i) the current plans and related trust documents, including amendments thereto, (ii) any current summary plan descriptions, (iii) the most recent Forms 5500, financial statements and actuarial reports, if applicable, (iv) the most recent IRS determination letter, if applicable; and (v) if any application for an IRS determination letter is pending, copies of all such applications for determination including attachments, exhibits and schedules thereto. (m) Neither Shared Technologies, any of its subsidiaries, any organization to which Shared Technologies is a successor or parent corporation, within the meaning of Section 4069(b) of ERISA, nor any of their ERISA Affiliates has engaged in any transaction, within the meaning of Section 4069(a) of ERISA, the liability for which would, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. (n) Except as disclosed in Section 5.20 of the Disclosure Statement, none of the Welfare Plans maintained by Shared Technologies or any of its subsidiaries are retiree life or retiree health insurance plans which provide for continuing benefits or coverage for any participant or any beneficiary of a participant following termination of employment, except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), or except at the expense of the participant or the participant's beneficiary. Shared Technologies and each of its subsidiaries which maintain a "group health plan" within the meaning of Section 5000(b)(1) of the Code have complied with the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder except where the failure to comply would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. (o) No liability under any Pension Benefit or Welfare Plan has been funded nor has any such obligation been satisfied with the purchase of a contract from an insurance company as to which Shared Technologies or any of its subsidiaries has received notice that such insurance company is in rehabilitation. (p) Except pursuant to the agreements listed in Section 5.20 of the Disclosure Statement, the consummation of the transactions contemplated by this Agreement will not result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits or compensation payable to or in respect of any employee of Shared Technologies or any of its subsidiaries. (q) Shared Technologies has disclosed to Fairchild in Section 5.20 of the Disclosure Statement each material Foreign Plan to the extent the benefits provided thereunder are not mandated by the laws of the applicable foreign jurisdiction. Shared Technologies and each of its subsidiaries and each of the Foreign Plans are in compliance with applicable laws and all required contributions have been made to the Foreign Plans, except where the failure to comply or make contributions would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect. For purposes hereof, the term "Foreign Plan" shall mean any plan, with respect to benefits voluntarily provided by Shared Technologies or any subsidiary with respect to employees of any of them employed outside the United States. 5.21 Environmental Matters. (a) Except as set forth in Section 5.21 of the Disclosure Statement: (i) each of Shared Technologies and its subsidiaries, and the properties and assets owned by them, and to the actual knowledge of Shared Technologies, all properties operated, leased, managed or used by Shared Technologies and its subsidiaries are in compliance with all applicable Environmental Laws except where the failure to be in compliance would not, individually or in the aggregate, have a Shared Technologies Material Adverse Effect; (ii) there is no Environmental Claim that is (1) pending or threatened against Shared Technologies or any of its subsidiaries or (2) pending or threatened against any person or entity or any assets owned by Shared Technologies or its subsidiaries whose liability for such Environmental Claim has been retained or assumed by contract or otherwise by Shared Technologies or any of its subsidiaries or can be imputed or attributed by law to Shared Technologies or any of its subsidiaries, the effect of any of which would, individually or in the aggregate, have a Shared Technologies Material Adverse Effect; (iii) there are no past or present actions, activities, circumstances, conditions, events or incidents arising out of, based upon, resulting from or relating to the ownership, operation or use of any property or assets currently or formerly owned, operated or used by Shared Technologies or any of its subsidiaries (or any predecessor in interest of any of them), including, without limitation, the generation, storage, treatment or transportation of any Hazardous Materials, or the emission, discharge, disposal or other Release or threatened Release of any Hazardous Materials into the Environment which is presently expected to result in an Environmental Claim; (iv) no lien has been recorded under any Environmental Law with respect to any material property, facility or asset owned by Shared Technologies or any of its subsidiaries; and to the actual knowledge of Shared Technologies, no lien has been recorded under any Environmental Law with respect to any material property, facility or asset, operated, leased or managed or used by Shared Technologies or its subsidiaries and relating to or resulting from Shared Technologies or its subsidiaries operations, lease, management or use for which Shared Technologies or its subsidiaries may be legally responsible; (v) neither Shared Technologies nor any of its subsidiaries has received notice that it has been identified as a potentially responsible party or any request for information under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the Resource Conservation and Recovery Act, as amended ("RCRA"), or any comparable state law nor has Shared Technologies or any of its subsidiaries received any notification that any Hazardous Materials that it or any of their respective predecessors in interest has used, generated, stored, treated, handled, transported or disposed of, or arranged for transport for treatment or disposal of, or arranged for disposal or treatment of, has been found at any site at which any person is conducting or plans to conduct an investigation or other action pursuant to any Environmental Law; (vi) to the actual knowledge of Shared Technologies, there has been no Release of Hazardous Materials at, on, upon, under, from or into any real property in the vicinity of any property currently or formerly owned by Shared Technologies or any of its subsidiaries that, through soil, air, surface water or groundwater migration or contamination, has become located on, in or under such properties and, to the actual knowledge of Shared Technologies, there has been no release of Hazardous Materials at, on, upon, under or from any property currently or formerly operated, leased, managed or used by Shared Technologies or any of its subsidiaries that through soil, air, surface water or groundwater migration or contamination has become located on, in or under such properties as resulting from or relating to Shared Technologies or any of its subsidiaries operations, lease, management or use thereof of for which Shared Technologies and any of its subsidiaries may be legally responsible; (vii) no asbestos or asbestos containing material or any polychlorinated biphenyls are contained within products presently manufactured and, to the best knowledge of Shared Technologies manufactured at any time by Shared Technologies or any of its subsidiaries and, to the actual knowledge of Shared Technologies there is no asbestos or asbestos containing material or any polychlorinated biphenyl in, on or at any property or any facility or equipment owned, operated, leased, managed or used by Shared Technologies or any of its subsidiaries; (viii) no property owned by Shared Technologies or any of its subsidiaries and to the actual knowledge of Shared Technologies, no property operated, leased, managed or used by Shared Technologies and any of its subsidiaries is (i) listed or proposed for listing on the National Priorities List under CERCLA or (ii) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant to CERCLA, or on any comparable list published by any governmental authority; (ix) no underground storage tank or related piping is located at, under or on any property owned by Shared Technologies or any of its subsidiaries or to the actual knowledge of Shared Technologies, any property operated, leased, managed or used by Shared Technologies, nor to the actual knowledge of Shared Technologies, has any such tank or piping been removed or decommissioned from or at such property; (x) all environmental investigations, studies, audits, assessments or reviews conducted of which Shared Technologies has actual knowledge in relation to the current or prior business or assets owned, operated, leased, managed or used of Shared Technologies or any of its subsidiaries or any real property, assets or facility now or previously owned, operated, leased, managed or used by Shared Technologies or any of its subsidiaries have been delivered to Fairchild; and (xi) each of Shared Technologies and its subsidiaries has obtained all permits, licenses and other authorizations ("Authorizations") required under any Environmental Law with respect to the operation of its assets and business and its use, ownership and operation of any real property, and each such Authorization is in full force and effect. (b) For purposes of Section 5.21(a): (i) "Actual Knowledge of Shared Technologies" means the actual knowledge of individuals at the corporate management level of Shared Technologies and its subsidiaries. (ii) "Environment" means any surface water, ground water, drinking water supply, land surface or subsurface strata, ambient air and including, without limitation, any indoor location; (iii) "Environmental Claim" means any notice or claim by any person alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental costs, or harm, injuries or damages to any person, property or natural resources, and any fines or penalties) arising out of, based upon, resulting from or relating to (1) the emission, discharge, disposal or other release or threatened release in or into the Environment of any Hazardous Materials or (2) circumstances forming the basis of any violation, or alleged violation, of any applicable Environmental Law; (iv) "Environmental Laws" means all federal, state, and local laws, codes, and regulations relating to pollution, the protection of human health, the protection of the Environment or the emission, discharge, disposal or other release or threatened release of Hazardous Materials in or into the Environment; (v) "Hazardous Materials" means pollutants, contaminants or chemical, industrial, hazardous or toxic materials or wastes, and includes, without limitation, asbestos or asbestos-containing materials, PCBs and petroleum, oil or petroleum or oil products, derivatives or constituents; and (vi) "Release" means any past or present spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of Hazardous Materials into the Environment or within structures (including the abandonment or discarding of barrels, containers or other closed receptacles containing any Hazardous Materials). 5.22 Disclosure. No representation or warranty by Shared Technologies herein, or in any certificate furnished by or on behalf of Shared Technologies to Fairchild in connection herewith, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. 5.23 Absence of Undisclosed Liabilities. Neither Shared Technologies nor any of its subsidiaries has any liabilities or obligations (including without limitation any liabilities or obligations related to Shared Technologies Cellular, Inc.) of any nature, whether absolute, accrued, unmatured, contingent or otherwise, or any unsatisfied judgments or any leases of personalty or realty or unusual or extraordinary commitments, except the liabilities recorded on the Balance Sheet and the notes thereto, and except for liabilities or obligations incurred in the ordinary course of business and consistent with past practice since December 31, 1994 that would not individually or in the aggregate have a Shared Technologies Material Adverse Effect. 5.24 Finders or Brokers. Except as set forth in Section 5.24 of the Disclosure Statement, none of Shared Technologies, the subsidiaries of Shared Technologies, the Board of Directors or any member of the Board of Directors has employed any investment banker, broker, finder or intermediary in connection with the transactions contemplated hereby who might be entitled to a fee or any commission in connection with the Merger, and Section 5.24 of the Disclosure Statement sets forth the maximum consideration (present and future) agreed to be paid to each such party. 5.25 State Antitakeover Statutes. Shared Technologies has granted all approvals and taken all other steps necessary to exempt the Merger and the other transactions contemplated hereby from the requirements and provisions of Section 203 of the DGCL and any other applicable state antitakeover statute or regulation such that none of the provisions of such Section 203 or any other "business combination," "moratorium," "control share" or other state antitakeover statute or regulation (x) prohibits or restricts Shared Technologies' ability to perform its obligations under this Agreement or its ability to consummate the Merger and the other transactions contemplated hereby, (y) would have the effect of invalidating or voiding this Agreement any provision hereof, or (z) would subject Fairchild to any material impediment or condition in connection with the exercise of any of its rights under this Agreement. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF TFC, RHI AND FAIRCHILD Each of TFC, RHI and Fairchild represents and warrants to Shared Technologies that: 6.1 Organization and Qualification. Each of Fairchild and its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of Fairchild and its subsidiaries is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, except for failures to be so qualified or in good standing which would not, individually or in the aggregate, have a material adverse effect on the general affairs, management, business, operations, condition (financial or otherwise) or prospects of Fairchild and its subsidiaries taken as a whole (a "Fairchild Material Adverse Effect"). Neither Fairchild nor any of its subsidiaries is in violation of any of the provisions of its Certificate of Incorporation (or other applicable charter document) or By-Laws. Fairchild has delivered to Shared Technologies accurate and complete copies of the Certificate of Incorporation (or other applicable charter document) and By-Laws, as currently in effect, of each of Fairchild and its subsidiaries. 6.2 Capital Stock of Subsidiaries. The only direct or indirect subsidiaries of Fairchild are those listed in Section 6.2 of the Disclosure Statement previously delivered by Fairchild to Shared Technologies (the "Disclosure Statement"). Fairchild is directly or indirectly the record (except for directors' qualifying shares) and beneficial owner (including all qualifying shares owned by directors of such subsidiaries as reflected in Section 6.2 of the Disclosure Statement) of all of the outstanding shares of capital stock of each of its subsidiaries, there are no proxies with respect to such shares, and no equity securities of any of such subsidiaries are or may be required to be issued by reason of any options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any capital stock of any such subsidiary, and there are no contracts, commitments, understandings or arrangements by which any such subsidiary is bound to issue additional shares of its capital stock or securities convertible into or exchangeable for such shares. Other than as set forth in Section 6.2 of the Disclosure Statement, all of such shares so owned by Fairchild are validly issued, fully paid and nonassessable and are owned by it free and clear of any claim, lien or encumbrance of any kind with respect thereto. Except as disclosed in Section 6.2 of the Disclosure Statement, Fairchild does not directly or indirectly own any interest in any corporation, partnership, joint venture or other business association or entity. 6.3 Capitalization. The authorized capital stock of Fairchild consists of 1,400 shares of Common Stock, par value $100.00 per share, and 3,000,000 shares of Preferred Stock, without par value. As of the date hereof, 1,400 shares of Common Stock are issued and outstanding (all of which are owned by RHI), 424,701 shares of Series A Preferred Stock are issued and outstanding, 2,278 shares of Series B Preferred Stock are issued and outstanding (which will be extinguished immediately prior to the Effective Time) and 558,360 shares of Series C Preferred Stock are issued and outstanding. All of such issued and outstanding shares are validly issued, fully paid and nonassessable and free of preemptive rights. Except as set forth above, there are not now, and at the Effective Time, there will not be, any shares of capital stock of Fairchild issued or outstanding or any subscriptions, options, warrants, calls, claims, rights (including without limitation any stock appreciation or similar rights), convertible securities or other agreements or commitments of any character obligating Fairchild to issue, transfer or sell any of its securities. 6.4 Authority Relative to This Agreement. Each of TFC and RHI is a corporation duly organized, validly existing and in good standing under the laws of Delaware. Each of TFC, RHI and Fairchild has full corporate power and authority to execute and deliver this Agreement and to consummate the Merger and other transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the Merger and other transactions contemplated hereby have been duly and validly authorized by the Board of Directors of each of TFC (which owns all of the outstanding common stock of RHI), RHI and Fairchild and no other corporate proceedings on the part of TFC, RHI or Fairchild are necessary to authorize this Agreement or to consummate the Merger or other transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of TFC (which owns all of the outstanding common stock of RHI), RHI and Fairchild and, assuming the due authorization, execution and delivery hereof by Shared Technologies, constitutes a valid and binding agreement of each of TFC, RHI and Fairchild, enforceable against each of TFC, RHI and Fairchild in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable or fiduciary principles. 6.5 No Violations, etc. (a) Assuming that all filings, permits, authorizations, consents and approvals or waivers thereof have been duly made or obtained as contemplated by Section 6.5(b) hereof, neither the execution and delivery of this Agreement by TFC, RHI or Fairchild nor the consummation of the Merger or other transactions contemplated hereby nor compliance by Fairchild with any of the provisions hereof will (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or suspension of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of TFC, RHI or Fairchild or any of their respective subsidiaries under, any of the terms, conditions or provisions of (x) their respective charters or by-laws, (y) except as set forth in Section 6.5 of the Disclosure Statement, any note, bond, mortgage, indenture or deed of trust, or (z) any license, lease, agreement or other instrument or obligation, to which TFC, RHI or Fairchild or any such subsidiary is a party or to which they or any of their respective properties or assets may be subject, or (ii) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to TFC, RHI or Fairchild or any of their respective subsidiaries or any of their respective properties or assets, except, in the case of clauses (i)(z) and (ii) above, for such violations, conflicts, breaches, defaults, terminations, suspensions, accelerations, rights of termination or acceleration or creations of liens, security interests, charges or encumbrances which would not, individually or in the aggregate, either have a Fairchild Material Adverse Effect or materially impair Fairchild's ability to consummate the Merger or other transactions contemplated hereby. (b) No filing or registration with, notification to and no permit, authorization, consent or approval of any governmental entity is required by TFC, RHI or Fairchild or any of their respective subsidiaries in connection with the execution and delivery of this Agreement or the consummation by Fairchild of the Merger or other transactions contemplated hereby, except (i) in connection with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (iii) filings with applicable state public utility commissions, and (iv) such other filings, registrations, notifications, permits, authorizations, consents or approvals the failure of which to be obtained, made or given would not, individually or in the aggregate, either have a Fairchild Material Adverse Effect or materially impair Fairchild's ability to consummate the Merger or other transactions contemplated hereby. (c) As of the date hereof, Fairchild and its subsidiaries are not in violation of or default under (x) their respective charter or bylaws, and (y) except as set forth in Sections 6.5 and 6.9 of the Disclosure Statement, any note, bond, mortgage, indenture or deed of trust, or (z) any license, lease, agreement or other instrument or obligation to which Fairchild or any such subsidiary is a party or to which they or any of their respective properties or assets may be subject, except, in the case of clauses (y) and (z) above, for such violations or defaults which would not, individually or in the aggregate, either have a Fairchild Material Adverse Effect or materially impair Fairchild's ability to consummate the Merger or other transactions contemplated hereby. 6.6 Commission Filings; Financial Statements. (a) Fairchild has filed all required forms, reports and documents during the past three years (collectively, the "SEC Reports") with the Securities and Exchange Commission (the "SEC"), all of which complied when filed in all material respects with all applicable requirements of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act") and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act"). As of their respective dates the SEC Reports (including all exhibits and schedules thereto and documents incorporated by reference therein) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited consolidated interim financial statements of Fairchild and its subsidiaries included or incorporated by reference in such SEC Reports were prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto), and fairly presented the consolidated financial position of Fairchild and its subsidiaries (before giving effect to the Fairchild Reorganization) as of the dates thereof and the consolidated results of operations and consolidated cash flows for the periods then ended (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments and to the extent they may not include footnotes or may be condensed or summary statements). (b) Fairchild will deliver to Shared Technologies as soon as they become available true and complete copies of any report or statement mailed by it to its securityholders generally or filed by it with the SEC, in each case subsequent to the date hereof and prior to the Effective Time. As of their respective dates, such reports and statements (excluding any information therein provided by Shared Technologies, as to which Fairchild makes no representation) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading and will comply in all material respects with all applicable requirements of law. The audited consolidated financial statements and unaudited consolidated interim financial statements of Fairchild and its subsidiaries to be included or incorporated by reference in such reports and statements (excluding any information therein provided by Shared Technologies, as to which Fairchild makes no representation) will be prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and will fairly present the consolidated financial position of Fairchild and its subsidiaries (before giving effect to the Fairchild Reorganization unless otherwise specified therein) as of the dates thereof and the consolidated results of operations and consolidated cash flows for the periods then ended (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments and to the extent they may not include footnotes or may be condensed or summary statements). (c) Fairchild has delivered to Shared Technologies audited financial statements for the three years ended June 30, 1995 (the "Fairchild Financial Statements") which were prepared in accordance with generally accepted accounting principles applied on a consistent basis and which fairly present the consolidated financial position, results of operations and cash flows of Fairchild and its subsidiaries as if the Fairchild Reorganization had occurred at the beginning of such three-year period. In addition, Fairchild has delivered to Shared Technologies an unaudited pro forma balance sheet of each of D-M-E Inc., Fairchild Fasteners Inc. and RHI as of June 30, 1995 which was prepared in accordance with generally accepted accounting principles applied on a consistent basis and which fairly presents the consolidated financial position of such entities if the Fairchild Reorganization had occurred at such date. (d) Fairchild will deliver to Shared Technologies within 45 days of the end of each fiscal quarter subsequent to the date hereof and prior to the Effective Time unaudited consolidated interim financial statements for such quarter prepared in accordance with generally accepted accounting principles on the same basis as the Fairchild Financial Statements were prepared. 6.7 Absence of Changes or Events. Except as set forth in Fairchild's Form 10-K for the fiscal year ended June 30, 1995, as filed with the SEC, since June 30, 1995: (a) there has been no material adverse change, or any development involving a prospective material adverse change, in the general affairs, management, business, operations, condition (financial or otherwise) or prospects of Fairchild and its subsidiaries taken as a whole; (it being understood that no such material adverse change shall be deemed to have occurred with respect to Fairchild and VSI, taken as a whole, if the pro forma consolidated net worth of Fairchild, as evidenced by a pro forma closing date balance sheet to be delivered to Shared Technologies on the Effective Date, is at least $80,000,000); (b) except as contemplated by Schedule 9.1 and except for dividends by Fairchild to RHI in an amount not exceeding capital contributions made to Fairchild by RHI since June 30, 1995 plus $4,000,000, there has not been any direct or indirect redemption, purchase or other acquisition of any shares of capital stock of Fairchild or any of its subsidiaries, or any declaration, setting aside or payment of any dividend or other distribution by Fairchild or any of its subsidiaries in respect of their capital stock; (c) except in the ordinary course of its business and consistent with past practice neither Fairchild nor any of its subsidiaries has incurred any indebtedness for borrowed money, or assumed, guaranteed, endorsed or otherwise as an accommodation become responsible for the obligations of any other individual, firm or corporation, or made any loans or advances to any other individual, firm or corporation; (d) there has not been any change in accounting methods, principles or practices of Fairchild or its subsidiaries; (e) except in the ordinary course of business and for amounts which are not material, there has not been any revaluation by Fairchild or any of its subsidiaries of any of their respective assets, including, without limitation, writing down the value of inventory or writing off notes or accounts receivables; (f) there has not been any damage, destruction or loss, whether covered by insurance or not, except for such as would not, individually or in the aggregate, have a Fairchild Material Adverse Effect; and (g) there has not been any agreement by Fairchild or any of its subsidiaries to (i) do any of the things described in the preceding clauses (a) through (f) other than as expressly contemplated or provided for in this Agreement or (ii) take, whether in writing or otherwise, any action which, if taken prior to the date of this Agreement, would have made any representation or warranty in this Article VI untrue or incorrect. 6.8 Proxy Statement. None of the information supplied by Fairchild or any of its subsidiaries for inclusion in the proxy statement to be sent to the shareholders of Shared Technologies in connection with the Special Meeting (as hereinafter defined), including all amendments and supplements thereto (the "Proxy Statement"), shall on the date the Proxy Statement is first mailed to shareholders, and at the time of the Special Meeting or at the Effective Time, be false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Special Meeting which has become false or misleading. None of the information to be filed by Fairchild and Shared Technologies with the SEC in connection with the Merger or in any other documents to be filed with the SEC or any other regulatory or governmental agency or authority in connection with the transactions contemplated hereby, including any amendments thereto (the "Other Documents"), insofar as such information was provided or supplied by Fairchild or any of its subsidiaries, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement shall comply in all material respects with the requirements of the Exchange Act. 6.9 Litigation. Except as set forth in Section 6.9 of the Disclosure Statement, there is no (i) claim, action, suit or proceeding pending or, to the best knowledge of TFC, RHI, Fairchild or any of their subsidiaries, threatened against or relating to Fairchild or any of its subsidiaries before any court or governmental or regulatory authority or body or arbitration tribunal, or (ii) outstanding judgment, order, writ, injunction or decree, or application, request or motion therefor, of any court, governmental agency or arbitration tribunal in a proceeding to which Fairchild, any subsidiary of Fairchild or any of their respective assets was or is a party except, in the case of clauses (i) and (ii) above, such as would not, individually or in the aggregate, either have a Fairchild Material Adverse Effect or materially impair Fairchild's ability to consummate the Merger or other transactions contemplated hereby. 6.10 Insurance. Section 6.10 of the Disclosure Statement lists all insurance policies in force on the date hereof covering the businesses, properties and assets of Fairchild and its subsidiaries, and all such policies are currently in effect. True and complete copies of all such policies have been delivered to Shared Technologies. Except as set forth in Section 6.10 of the Disclosure Statement, Fairchild has not received notice of the cancellation of any such insurance policy. 6.11 Title to and Condition of Properties. Except as set forth in Section 6.11 of the Disclosure Statement, Fairchild and its subsidiaries have good title to all of the real property and own outright all of the personal property (except for leased property or assets) which is reflected on Fairchild's and its subsidiaries' June 30, 1995 audited consolidated balance sheet contained in the Fairchild Financial Statements (the "Balance Sheet") except for property since sold or otherwise disposed of in the ordinary course of business and consistent with past practice. Except as set forth in Sections 6.9 and 6.11 of the Disclosure Statement, no such real or personal property is subject to claims, liens or encumbrances, whether by mortgage, pledge, lien, conditional sale agreement, charge or otherwise, except for those which would not, individually or in the aggregate, have a Fairchild Material Adverse Effect. Section 6.11 of the Disclosure Statement contains a true and complete list of all real properties owned by Fairchild and its subsidiaries. 6.12 Leases. There has been made available to Shared Technologies true and complete copies of each lease requiring the payment of rentals aggregating at least $35,000 per annum pursuant to which real or personal property is held under lease by Fairchild or any of its subsidiaries, and true and complete copies of each lease pursuant to which Fairchild or any of its subsidiaries leases real or personal property to others. A true and complete list of all such leases is set forth in Section 6.12 of the Disclosure Statement. All of the leases so listed are valid and subsisting and in full force and effect and subject to no default with respect to Fairchild or its subsidiaries, as the case may be, and, to Fairchild's knowledge, are in full force and effect and subject to no default and subject to no default with respect to any other party thereto, and the leased real property is in good and satisfactory condition. 6.13 Contracts and Commitments. Other than as disclosed in Section 6.13 of the Disclosure Statement, no existing contract or commitment contains an agreement with respect to any change of control that would be triggered as a result of the Merger. Other than as set forth in Section 6.13 of the Disclosure Statement, neither this Agreement, the Merger nor the other transactions contemplated hereby will result in any outstanding loans or borrowings by Fairchild or any subsidiary of Fairchild becoming due, going into default or giving the lenders or other holders of debt instruments the right to require Fairchild or any of its subsidiaries to repay all or a portion of such loans or borrowings. 6.14 Labor Matters. Each of Fairchild and its subsidiaries is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and neither Fairchild nor any of its subsidiaries is engaged in any unfair labor practice. There is no labor strike, slowdown or stoppage pending (or, to the best knowledge of Fairchild, any labor strike or stoppage threatened) against or affecting Fairchild or any of its subsidiaries. No petition for certification has been filed and is pending before the National Labor Relations Board with respect to any employees of Fairchild or any of its subsidiaries who are not currently organized. 6.15 Compliance with Law. Except for matters set forth in the Disclosure Statement, neither Fairchild nor any of its subsidiaries has violated or failed to comply with any statute, law, ordinance, regulation, rule or order of any foreign, federal, state or local government or any other governmental department or agency, or any judgment, decree or order of any court, applicable to its business or operations, except where any such violation or failure to comply would not, individually or in the aggregate, have a Fairchild Material Adverse Effect; the conduct of the business of Fairchild and its subsidiaries is in conformity with all foreign, federal, state and local energy, public utility and health requirements, and all other foreign, federal, state and local governmental and regulatory requirements, except where such nonconformities would not, individually or in the aggregate, have a Fairchild Material Adverse Effect. Fairchild and its subsidiaries have all permits, licenses and franchises from governmental agencies required to conduct their businesses as now being conducted, except for such permits, licenses and franchises the absence of which would not, individually or in the aggregate, have a Fairchild Material Adverse Effect. 6.16 Board Recommendation. The Board of Directors of Fairchild has, by a unanimous vote at a meeting of such Board duly held on, or by unanimous written consent of such Board dated, November 9, 1995, approved and adopted this Agreement, the Merger and the other transactions contemplated hereby. 6.17 Employment and Labor Contracts. Neither Fairchild nor any of its subsidiaries is a party to any employment, management services, consultation or other similar contract with any past or present officer, director, employee or other person or, to the best of Fairchild's knowledge, any entity affiliated with any past or present officer, director or employee or other person other than those set forth in Section 6.17 of the Disclosure Statement and other than those which (x) have a term of less than one year and (y) involve payments of less than $30,000 per year, in each case true and complete copies of which contracts have been delivered to Shared Technologies, and other than the agreements executed by employees generally, the forms of which have been delivered to Shared Technologies. 6.18 Patents and Trademarks. Fairchild and its subsidiaries own or have the right to use all patents, patent applications, trademarks, trademark applications, trade names, inventions, processes, know-how and trade secrets necessary to the conduct of their respective businesses, except for those which the failure to own or have the right to use would not, individually or in the aggregate, have a Fairchild Material Adverse Effect ("Proprietary Rights"). All issued patents and trademark registrations and pending patent and trademark applications of the Proprietary Rights have previously been delivered to Shared Technologies. No rights or licenses to use Proprietary Rights have been granted by Fairchild or its subsidiaries except those listed in Section 6.18 of the Disclosure Statement; and no contrary assertion has been made to Fairchild or any of its subsidiaries or notice of conflict with any asserted right of others has been given by any person except those which, even if correct, would not, individually or in the aggregate, have a Fairchild Material Adverse Effect. Fairchild has not given notice of any asserted claim or conflict to a third party with respect to Fairchild's Proprietary Rights. True and complete copies of all material license agreements under which Fairchild or any of its subsidiaries is a licensor or licensee have been delivered to Shared Technologies. 6.19 Taxes. "Tax" or "Taxes" shall mean all federal, state, local and foreign taxes, duties, levies, charges and assessments of any nature, including social security payments and deductibles relating to wages, salaries and benefits and payments to subcontractors (to the extent required under applicable Tax law), and also including all interest, penalties and additions imposed with respect to such amounts. Except as set forth in Sections 6.9 and 6.19 of the Disclosure Statement: (i) Fairchild and its subsidiaries have prepared and timely filed or will timely file with the appropriate governmental agencies all franchise, income and all other material Tax returns and reports required to be filed for any period ending on or before the Effective Time, taking into account any extension of time to file granted to or obtained on behalf of Fairchild and/or its subsidiaries; (ii) all material Taxes of Fairchild and its subsidiaries in respect of the pre-Merger period have been paid in full to the proper authorities, other than such Taxes as are being contested in good faith by appropriate proceedings and/or are adequately reserved for in accordance with generally accepted accounting principles; (iii) all deficiencies resulting from Tax examinations of federal, state and foreign income, sales and franchise and all other material Tax returns filed by Fairchild and its subsidiaries have either been paid or are being contested in good faith by appropriate proceedings; (iv) to the best knowledge of Fairchild, no deficiency has been asserted or assessed against Fairchild or any of its subsidiaries, and no examination of Fairchild or any of its subsidiaries is pending or threatened for any material amount of Tax by any taxing authority; (v) no extension of the period for assessment or collection of any material Tax is currently in effect and no extension of time within which to file any material Tax return has been requested, which Tax return has not since been filed; (vi) no material Tax liens have been filed with respect to any Taxes; (vii) Fairchild and each of its subsidiaries will not make any voluntary adjustment by reason of a change in their accounting methods for any pre-Merger period that would affect the taxable income or deductions of Fairchild or any of its subsidiaries for any period ending after the Effective Date; (viii) Fairchild and its subsidiaries have made timely payments of the Taxes required to be deducted and withheld from the wages paid to their employees; (ix) the Tax Sharing Agreement under which Fairchild or any subsidiary will have any obligation or liability on or after the Effective Date is attached as Exhibit E; (x) Fairchild has foreign losses as defined in Section 904(f)(2) of the Code listed in Section 6.19 of the Disclosure Statement; (xi) Fairchild and its subsidiaries have unused foreign tax credits set forth in Section 6.19 of the Disclosure Statement; and (xii) to the best knowledge of Fairchild, there are no transfer pricing agreements made with any taxation authority involving Fairchild and its subsidiaries. 6.20 Employee Benefit Plans; ERISA. (a) Except as set forth in Section 6.20 of the Disclosure Statement, there are no "employee pension benefit plans" as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), covering employees employed in the United States, maintained or contributed to by Fairchild or any of its subsidiaries, or to which Fairchild or any of its subsidiaries contributes or is obligated to make payments thereunder or otherwise may have any liability ("Pension Benefits Plans"). (b) Fairchild has furnished Shared Technologies with a true and complete schedule of all "welfare benefit plans" (as defined in Section 3(1) of ERISA) covering employees employed in the United States, maintained or contributed to by Fairchild or any of its subsidiaries ("Welfare Plans"), all multiemployer plans as defined in Section 3(37) of ERISA covering employees employed in the United States to which Fairchild or any of its subsidiaries is required to make contributions or otherwise may have any liability, and, to the extent covering employees employed in the United States, all stock bonus, stock option, restricted stock, stock appreciation right, stock purchase, bonus, incentive, deferred compensation, severance and vacation plans maintained or contributed to by Fairchild or a subsidiary. (c) Fairchild and each of its subsidiaries, and each of the Pension Benefit Plans and Welfare Plans, are in compliance with the applicable provisions of ERISA and other applicable laws except where the failure to comply would not, individually or in the aggregate, have a Fairchild Material Adverse Effect. (d) All contributions to, and payments from, the Pension Benefit Plans which are required to have been made in accordance with the Pension Benefit Plans and, when applicable, Section 302 of ERISA or Section 412 of the Code have been timely made except where the failure to make such contributions or payments on a timely basis would not, individually or in the aggregate, have a Fairchild Material Adverse Effect. All contributions required to have been made in accordance with Section 302 of ERISA or Section 412 of the Code to any employee pension benefit plan (as defined in Section 3(2) of ERISA) maintained by an ERISA Affiliate of Fairchild or any of its subsidiaries have been timely made except where the failure to make such contributions on a timely basis would not individually or in the aggregate have a Fairchild Material Adverse Effect. For purposes of this Agreement, "ERISA Affiliate" shall mean any person (as defined in Section 3(9) of ERISA) that is a member of any group of persons described in Section 414(b), (c), (m) or (o) of the Code of which Fairchild or a subsidiary is a member. (e) The Pension Benefit Plans intended to qualify under Section 401 of the Code are so qualified and have been determined by the Internal Revenue Service ("IRS") to be so qualified and nothing has occurred with respect to the operation of such Pension Benefit Plans which would cause the loss of such qualification or exemption or the imposition of any material liability, penalty or tax under ERISA or the Code. Such plans have been or will be, on a timely basis, (i) amended to comply with changes to the Code made by the Tax Reform Act of 1986, the Unemployment Compensation Amendments of 1992, the Omnibus Budget Reconciliation Act of 1993, and other applicable legislative, regulatory or administrative requirements; and (ii) submitted to the Internal Revenue Service for a determination of their tax qualification, as so amended; and no such amendment will adversely affect the qualification of such plans. (f) Each Welfare Plan that is intended to qualify for exclusion of benefits thereunder from the income of participants or for any other tax-favored treatment under any provisions of the Code (including, without limitation, Sections 79, 105, 106, 125, or 129 of the Code) is and has been maintained in compliance with all pertinent provisions of the Code and Treasury Regulations thereunder. (g) Except as disclosed in Fairchild's Form 10-K for the fiscal year ended June 30, 1995, there are (i) no investigations pending, to the best knowledge of Fairchild, by any governmental entity involving the Pension Benefit Plans or Welfare Plans, (ii) no termination proceedings involving the Pension Benefit Plans and (iii) no pending or, to the best of Fairchild's knowledge, threatened claims (other than routine claims for benefits), suits or proceedings against any Pension Benefit or Welfare Plan, against the assets of any of the trusts under any Pension Benefit or Welfare Plan or against any fiduciary of any Pension Benefit or Welfare Plan with respect to the operation of such plan or asserting any rights or claims to benefits under any Pension Benefit or Welfare Plan or against the assets of any trust under such plan, which would, in the case of clause (i), (ii) or (iii) of this paragraph (f), give rise to any liability which would, individually or in the aggregate, have a Fairchild Material Adverse Effect, nor, to the best of Fairchild's knowledge, are there are any facts which would give rise to any liability which would, individually or in the aggregate, have a Fairchild Material Adverse Effect in the event of any such investigation, claim, suit or proceeding. (h) None of Fairchild, any of its subsidiaries or any employee of the foregoing, nor any trustee, administrator, other fiduciary or any other "party in interest" or "disqualified person" with respect to the Pension Benefit Plans or Welfare Plans, has engaged in a "prohibited transaction" (as such term is defined in Section 4975 of the Code or Section 406 of ERISA) which would be reasonably likely to result in a tax or penalty on Fairchild or any of its subsidiaries under Section 4975 of the Code or Section 502(i) of ERISA which would, individually or in the aggregate, have a Fairchild Material Adverse Effect. (i) Neither the Pension Benefit Plans subject to Title IV of ERISA nor any trust created thereunder has been terminated nor have there been any "reportable events" (as defined in Section 4043 of ERISA and the regulations thereunder) with respect to either thereof which would, individually or in the aggregate, have a Fairchild Material Adverse Effect nor has there been any event with respect to any Pension Benefit Plan requiring disclosure under Section 4063(a) of ERISA or any event with respect to any Pension Benefit Plan requiring disclosure under Section 4041(c)(3)(C) of ERISA which would, individually or in the aggregate, have a Fairchild Material Adverse Effect. (j) Neither Fairchild nor any subsidiary of Fairchild has incurred any currently outstanding liability to the Pension Benefit Guaranty Corporation (the "PBGC") or to a trustee appointed under Section 4042(b) or (c) of ERISA other than for the payment of premiums, all of which have been paid when due. No Pension Benefit Plan has applied for, or received, a waiver of the minimum funding standards imposed by Section 412 of the Code. The information supplied to the actuary by Fairchild or any of its subsidiaries for use in preparing the most recent actuarial report for Pension Benefit Plans is complete and accurate in all material respects. (k) Except as set forth in Section 6.20 of the Disclosure Statement, neither Fairchild, any of its subsidiaries nor any of their ERISA Affiliates has any liability (including any contingent liability under Section 4204 of ERISA) with respect to any multiemployer plan, within the meaning of Section 3(37) of ERISA, covering employees employed in the United States. (l) Except as disclosed in Section 6.20 of the Disclosure Statement, with respect to each of the Pension Benefit and Welfare Plans, true, correct and complete copies of the following documents have been delivered to Shared Technologies: (i) the current plans and related trust documents, including amendments thereto, (ii) any current summary plan descriptions, (iii) the most recent Forms 5500, financial statements and actuarial reports, if applicable, (iv) the most recent IRS determination letter, if applicable; and (v) if any application for an IRS determination letter is pending, copies of all such applications for determination including attachments, exhibits and schedules thereto. (m) Neither Fairchild, any of its subsidiaries, any organization to which Fairchild is a successor or parent corporation, within the meaning of Section 4069(b) of ERISA, nor any of their ERISA Affiliates has engaged in any transaction, within the meaning of Section 4069(a) of ERISA, the liability for which would, individually or in the aggregate, have a Fairchild Material Adverse Effect. (n) Except as disclosed in Section 6.20 of the Disclosure Statement, none of the Welfare Plans maintained by Fairchild or any of its subsidiaries are retiree life or retiree health insurance plans which provide for continuing benefits or coverage for any participant or any beneficiary of a participant following termination of employment, except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), or except at the expense of the participant or the participant's beneficiary. Fairchild and each of its subsidiaries which maintain a "group health plan" within the meaning of Section 5000(b)(1) of the Code have complied with the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder except where the failure to comply would not, individually or in the aggregate, have a Fairchild Material Adverse Effect. (o) No liability under any Pension Benefit or Welfare Plan has been funded nor has any such obligation been satisfied with the purchase of a contract from an insurance company as to which Fairchild or any of its subsidiaries has received notice that such insurance company is in rehabilitation. (p) Except pursuant to the agreements listed in Section 6.20 of the Disclosure Statement, the consummation of the transactions contemplated by this Agreement will not result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits or compensation payable to or in respect of any employee of Fairchild or any of its subsidiaries. (q) Fairchild has disclosed to Shared Technologies in Section 6.20 of the Disclosure Statement each material Foreign Plan to the extent the benefits provided thereunder are not mandated by the laws of the applicable foreign jurisdiction. Fairchild and each of its subsidiaries and each of the Foreign Plans are in compliance with applicable laws and all required contributions have been made to the Foreign Plans, except where the failure to comply or make contributions would not, individually or in the aggregate, have a Fairchild Material Adverse Effect. For purposes hereof, the term "Foreign Plan" shall mean any plan with respect to benefits voluntarily provided by Fairchild or any subsidiary with respect to employees of any of them employed outside the United States. 6.21 Environmental Matters. (a) Except as set forth in Section 6.21 of the Disclosure Statement: (i) each of Fairchild and its subsidiaries, and the properties and assets owned by them, and to the actual knowledge of Fairchild, all properties operated, leased, managed or used by Fairchild and its subsidiaries are in compliance with all applicable Environmental Laws except where the failure to be in compliance would not, individually or in the aggregate, have a Fairchild Material Adverse Effect; (ii) there is no Environmental Claim that is (1) pending or threatened against Fairchild or any of its subsidiaries or (2) pending or threatened against any person or entity or any assets owned by Fairchild or its subsidiaries whose liability for such Environmental Claim has been retained or assumed by contract or otherwise by Fairchild or any of its subsidiaries or can be imputed or attributed by law to Fairchild or any of its subsidiaries, the effect of any of which would, individually or in the aggregate, have a Fairchild Material Adverse Effect; (iii) there are no past or present actions, activities, circumstances, conditions, events or incidents arising out of, based upon, resulting from or relating to the ownership, operation or use of any property or assets currently or formerly owned, operated or used by Fairchild or any of its subsidiaries (or any predecessor in interest of any of them), including, without limitation, the generation, storage, treatment or transportation of any Hazardous Materials, or the emission, discharge, disposal or other Release or threatened Release of any Hazardous Materials into the Environment which is presently expected to result in an Environmental Claim; (iv) no lien has been recorded under any Environmental Law with respect to any material property, facility or asset owned by Fairchild or any of its subsidiaries, and to the actual knowledge of Fairchild, no lien has been recorded under any Environmental Law with respect to any material property, facility or asset, operated, leased or managed or used by Fairchild or its subsidiaries and relating to or resulting from Fairchild or its subsidiaries operations, lease, management or use for which Fairchild or its subsidiaries may be legally responsible; (v) neither Fairchild nor any of its subsidiaries has received notice that it has been identified as a potentially responsible party or any request for information under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the Resource Conservation and Recovery Act, as amended ("RCRA"), or any comparable state law nor has Fairchild or any of its subsidiaries received any notification that any Hazardous Materials that it or any of their respective predecessors in interest has used, generated, stored, treated, handled, transported or disposed of, or arranged for transport for treatment or disposal of, or arranged for disposal or treatment of, has been found at any site at which any person is conducting or plans to conduct an investigation or other action pursuant to any Environmental Law; (vi) to the actual knowledge of Fairchild, there has been no Release of Hazardous Materials at, on, upon, under, from or into any real property in the vicinity of any property currently or formerly owned by Fairchild or any of its subsidiaries that, through soil, air, surface water or groundwater migration or contamination, has become located on, in or under such properties and, to the actual knowledge of Fairchild, there has been no release of Hazardous Materials at, on, upon, under or from any property currently or formerly operated, leased, managed or used by Fairchild or any of its subsidiaries that through soil, air, surface water or groundwater migration or contamination has become located on, in or under such properties as resulting from or relating to Fairchild or any of its subsidiaries operations, lease, management or use thereof of for which Fairchild and any of its subsidiaries may be legally responsible; (vii) no asbestos or asbestos containing material or any polychlorinated biphenyls are contained within products presently manufactured and, to the best knowledge of Fairchild manufactured at any time by Fairchild or any of its subsidiaries and, to the actual knowledge of Fairchild there is no asbestos or asbestos containing material or any polychlorinated biphenyl in, on or at any property or any facility or equipment owned, operated, leased, managed or used by Fairchild or any of its subsidiaries; (viii) no property owned by Fairchild or any of its subsidiaries and to the actual knowledge of Fairchild, no property operated, leased, managed or used by Fairchild and any of its subsidiaries is (i) listed or proposed for listing on the National Priorities List under CERCLA or (ii) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant to CERCLA, or on any comparable list published by any governmental authority; (ix) no underground storage tank or related piping is located at, under or on any property owned by Fairchild or any of its subsidiaries or, to the actual knowledge of Fairchild, any property operated, leased, managed or used by Fairchild and any of its subsidiaries, nor, to the actual knowledge of Fairchild, has any such tank or piping been removed or decommissioned from or at such property; (x) all environmental investigations, studies, audits, assessments or reviews conducted of which Fairchild has actual knowledge in relation to the current or prior business or assets owned, operated, leased managed or used by Fairchild or any of its subsidiaries or any real property, assets or facility now or previously owned operated, managed, leased or used by Fairchild or any of its subsidiaries have been delivered to Shared Technologies; and (xi) each of Fairchild and its subsidiaries has obtained all permits, licenses and other authorizations ("Authorizations") required under any Environmental Law with respect to the operation of its assets and business and its use, ownership and operation of any real property, and each such Authorization is in full force and effect. (b) For purposes of Section 6.21(a): (i) "Actual Knowledge of Fairchild" means the actual knowledge of individuals at the corporate management level of Fairchild and its subsidiaries. (ii) "Environment" means any surface water, ground water, drinking water supply, land surface or subsurface strata, ambient air and including, without limitation, any indoor location; (iii) "Environmental Claim" means any notice or claim by any person alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental costs, or harm, injuries or damages to any person, property or natural resources, and any fines or penalties) arising out of, based upon, resulting from or relating to (1) the emission, discharge, disposal or other release or threatened release in or into the Environment of any Hazardous Materials or (2) circumstances forming the basis of any violation, or alleged violation, of any applicable Environmental Law; (iv) "Environmental Laws" means all federal, state and local laws, codes and regulations relating to pollution, the protection of human health, the protection of the Environment or the emission, discharge, disposal or other release or threatened release of Hazardous Materials in or into the Environment; (v) "Hazardous Materials" means pollutants, contaminants or chemical, industrial, hazardous or toxic materials or wastes, and includes, without limitation, asbestos or asbestos-containing materials, PCBs and petroleum, oil or petroleum or oil products, derivatives or constituents; and (vi) "Release" means any past or present spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of Hazardous Materials into the Environment or within structures (including the abandonment or discarding of barrels, containers or other closed receptacles containing any Hazardous Materials). 6.22 Disclosure. No representation or warranty by Fairchild herein, or in any certificate furnished by or on behalf of Fairchild to Shared Technologies in connection herewith, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. 6.23 Absence of Undisclosed Liabilities. Except as set forth in Section 6.9 of the Disclosure Statement, neither Fairchild nor any of its subsidiaries has any liabilities or obligations of any nature, whether absolute, accrued, unmatured, contingent or otherwise, or any unsatisfied judgments or any leases of personalty or realty or unusual or extraordinary commitments, except the liabilities recorded on the Balance Sheet and the notes thereto, and except for liabilities or obligations incurred in the ordinary course of business and consistent with past practice since June 30, 1995 that would not individually or in the aggregate have a Fairchild Material Adverse Effect. 6.24 Finders or Brokers. Except as set forth in Section 6.24 of the Disclosure Statement, none of Fairchild, the subsidiaries of Fairchild, the Board of Directors or any member of the Board of Directors has employed any investment banker, broker, finder or intermediary in connection with the transactions contemplated hereby who might be entitled to a fee or any commission in connection with of the Merger, and Section 6.24 of the Disclosure Statement sets forth the maximum consideration (present and future) agreed to be paid to each such party. ARTICLE VII CONDUCT OF BUSINESS OF FAIRCHILD AND SHARED TECHNOLOGIES PENDING THE MERGER 7.1 Conduct of Business of Fairchild and Shared Technologies Pending the Merger. Except as contemplated by this Agreement or as expressly agreed to in writing by Fairchild and Shared Technologies, during the period from the date of this Agreement to the Effective Time, each of Fairchild and its subsidiaries and Shared Technologies and its subsidiaries will conduct their respective operations according to its ordinary course of business consistent with past practice, and will use all commercially reasonable efforts to preserve intact its business organization, to keep available the services of its officers and employees and to maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with it and will take no action which would materially adversely affect the ability of the parties to consummate the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, prior to the Effective Time, neither Fairchild nor Shared Technologies will nor will they permit any of their respective subsidiaries to, without the prior written consent of the other party: (a) amend its certificate of incorporation or by-laws, except Shared Technologies may amend its certificate of incorporation and bylaws as required by the terms of this Agreement; (b) authorize for issuance, issue, sell, deliver, grant any options for, or otherwise agree or commit to issue, sell or deliver any shares of any class of its capital stock or any securities convertible into shares of any class of its capital stock, except (i) pursuant to and in accordance with the terms of currently outstanding convertible securities, warrants and options, and (ii) options granted under the Stock Option Plans of Shared Technologies, in the ordinary course of business consistent with past practice; (c) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock or purchase, redeem or otherwise acquire any shares of its own capital stock or of any of its subsidiaries, except as otherwise expressly provided in this Agreement (including, without limitation, Section 6.7(b)) and except for the distribution of the shares of Shared Technologies Cellular Inc. to the shareholders of Shared Technologies; (d) except in the ordinary course of business, consistent with past practice (i) create, incur, assume, maintain or permit to exist any long-term debt or any short-term debt for borrowed money other than under existing lines of credit; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person except its wholly owned subsidiaries in the ordinary course of business and consistent with past practices; or (iii) make any loans, advances or capital contributions to, or investments in, any other person; (e) except as otherwise expressly contemplated by this Agreement (including without limitation as set forth in Schedule 6.17 to the Disclosure Statement) or in the ordinary course of business, consistent with past practice, (i) increase in any manner the compensation of any of its directors, officers or other employees; (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required, or enter into or agree to enter into any agreement or arrangement with such director, officer or employee, whether past or present, relating to any such pension, retirement allowance or other employee benefit, except as required under currently existing agreements, plans or arrangements; (iii) grant any severance or termination pay to, or enter into any employment or severance agreement with, any of its directors, officers or other employees; or (iv) except as may be required to comply with applicable law, become obligated (other than pursuant to any new or renewed collective bargaining agreement) under any new pension plan, welfare plan, multiemployer plan, employee benefit plan, benefit arrangement, or similar plan or arrangement, which was not in existence on the date hereof, including any bonus, incentive, deferred compensation, stock purchase, stock option, stock appreciation right, group insurance, severance pay, retirement or other benefit plan, agreement or arrangement, or employment or consulting agreement with or for the benefit of any person, or amend any of such plans or any of such agreements in existence on the date hereof; (f) except as otherwise expressly contemplated by this Agreement, enter into any other agreements, commitments or contracts, except agreements, commitments or contracts for the purchase, sale or lease of goods or services in the ordinary course of business, consistent with past practice; (g) except in the ordinary course of business, consistent with past practice, or as contemplated by this Agreement, authorize, recommend, propose or announce an intention to authorize, recommend or propose, or enter into any agreement in principle or an agreement with respect to, any plan of liquidation or dissolution, any acquisition of a material amount of assets or securities, any sale, transfer, lease, license, pledge, mortgage, or other disposition or encumbrance of a material amount of assets or securities or any material change in its capitalization, or any entry into a material contract or any amendment or modification of any material contract or any release or relinquishment of any material contract rights; or (h) agree to do any of the foregoing. ARTICLE VIII COVENANTS AND AGREEMENTS 8.1 Approval of Stockholders; SEC and Other Filings. (a) Shared Technologies shall cause a special meeting of its stockholders (the "Special Meeting") to be duly called and held as soon as reasonably practicable for the purpose of (i) voting on this Agreement, (ii) authorizing Shared Technologies' Board of Directors, to the extent permitted by law, to make modifications of or amendments to this Agreement as Shared Technologies' Board of Directors deems proper without further stockholder approval and (iii) voting on all other actions contemplated hereby which require the approval of Shared Technologies' stockholders, including without limitation any such approval needed to amend Shared Technologies' Certificate of Incorporation and Bylaws as required by this Agreement. Shared Technologies shall comply with all applicable legal requirements in connection with the Special Meeting. (b) Shared Technologies and Fairchild shall cooperate with each other and use their best efforts to file with the SEC or other applicable regulatory or governmental agency or authority, as the case may be, as promptly as practicable the Proxy Statement and the Other Documents. The parties shall use their best efforts to have the Proxy Statement cleared by the SEC as promptly as practicable after filing and, as promptly as practicable after the Proxy Statement has been so cleared, shall mail the Proxy Statement to the stockholders of Shared Technologies as of the record date for the Special Meeting. Subject to the fiduciary obligations of Shared Technologies' Board of Directors under applicable law as advised by Gadsby & Hannah or other nationally recognized counsel, the Proxy Statement shall contain the recommendation of the Board in favor of the Merger and for approval and adoption of this Agreement. In addition to the irrevocable proxy received from a stockholder of Shared Technologies prior to the date hereof, Shared Technologies shall use its best efforts to solicit from stockholders of Shared Technologies proxies or consents in favor of such approval and to take all other action necessary or, in the reasonable judgment of Fairchild, helpful to secure the vote of stockholders required by law to effect the Merger. Shared Technologies and Fairchild each shall use its best efforts to obtain and furnish the information required to be included in the Proxy Statement and any Other Document, and Shared Technologies, after consultation with Fairchild, shall use its best efforts to respond as promptly as is reasonably practicable to any comments made by the SEC or any other applicable regulatory or governmental agency or authority with respect to any of the foregoing (or any preliminary version thereof). Shared Technologies will promptly notify Fairchild of the receipt of the comments of the SEC or any other applicable regulatory or governmental agency or authority, as the case may be, and of any request by any of the foregoing for amendments or supplements to the Proxy Statement or any Other Document, as the case may be, or for additional information, and will supply Fairchild with copies of all correspondence between Shared Technologies and its representatives, on the one hand, and the SEC, any other applicable regulatory or governmental agency or authority or the members of the staff of any of the foregoing, on the other hand, with respect to the Proxy Statement or any Other Document, as the case may be. If at any time prior to the Special Meeting any event should occur relating to Shared Technologies or any of its subsidiaries or Fairchild or any of its affiliates or associates, or relating to the Financing (as hereinafter defined) which should be set forth in an amendment of or a supplement to, the Proxy Statement or any Other Document, Shared Technologies will promptly inform Fairchild or Fairchild will promptly inform Shared Technologies, as the case may be. Whenever any event occurs which should be set forth in an amendment of, or a supplement to, the Proxy Statement or any Other Document, as the case may be, Fairchild and Shared Technologies will upon learning of such event, cooperate and promptly prepare, file and mail such amendment or supplement. (c) Fairchild shall use its best efforts to file with and obtain from the Internal Revenue Service a favorable ruling to the effect set forth in Schedule 9.2(d) hereto. Fairchild and Shared Technologies shall cooperate with each other and use their best efforts to effect a tender offer and consent solicitation for the outstanding 12 1/4% Senior Notes due 1999 of Fairchild and, if the Merger is consummated, to retire all such Notes tendered in such offer. 8.2 Additional Agreements; Cooperation. (a) Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, and to cooperate with each other in connection with the foregoing, including using its best efforts (i) to obtain all necessary waivers, consents and approvals from other parties to loan agreements, leases and other contracts that are specified on Schedule 8.2 to the Disclosure Statement, (ii) to obtain all necessary consents, approvals and authorizations as are required to be obtained under any federal, state or foreign law or regulations, (iii) to defend all lawsuits or other legal proceedings challenging this Agreement or the consummation of the transactions contemplated hereby, (iv) to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby, (v) to effect all necessary registrations and filings, including, but not limited to, filings under the HSR Act and any pre-merger notifications required in any other country, if any, and submissions of information requested by governmental authorities, (vi) provide all necessary information for the Proxy Statement and (vii) to fulfill all conditions to this Agreement. In addition, Fairchild agrees to use its best efforts (subject to compliance with all applicable securities laws) to solicit and receive the irrevocable proxies from shareholders of Shared Technologies contemplated by Section 10.1(b). Shared Technologies agrees to use its best efforts to cause the distribution to its shareholders of all shares of capital stock of Shared Technologies Cellular, Inc. ("STCI") owned by Shared Technologies and its subsidiaries to be completed prior to the Effective Time and, prior to such distribution to cause STCI, to enter into an agreement preventing STCI from competing in the telecommunications systems and service business. (b) Shared Technologies will supply Fairchild with copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between Shared Technologies or its representatives, on the one hand, and the Federal Trade Commission, the Antitrust Division of the United States Department of Justice, the SEC and any other regulatory or governmental agency or authority or members of their respective staffs, on the other hand, with respect to this Agreement, the Merger and the other transactions contemplated hereby. Each of the parties hereto agrees to furnish to the other party hereto such necessary information and reasonable assistance as such other party may request in connection with its preparation of necessary filings or submissions to any regulatory or governmental agency or authority, including, without limitation, any filing necessary under the provisions of the HSR Act or any other applicable Federal or state statute. (c) Fairchild will supply Shared Technologies with copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between Fairchild or its representatives, on the one hand, and the Federal Trade Commission, the Antitrust Division of the United States Department of Justice, the SEC or any other regulatory or governmental agency or authority or members of their respective staffs, on the other hand, with respect to this Agreement, the Merger and the other transactions contemplated hereby. 8.3 Publicity. Shared Technologies and Fairchild agree to consult with each other in issuing any press release and with respect to the general content of other public statements with respect to the transactions contemplated hereby, and shall not issue any such press release prior to such consultation, except as may be required by law. 8.4 No Solicitation. (a) Each of Shared Technologies and Fairchild agrees that, prior to the Effective Time, it shall not, and shall not authorize or permit any of its subsidiaries or any of its or its subsidiaries' directors, officers, employees, agents or representatives to, directly or indirectly, solicit, initiate, facilitate or encourage (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving Shared Technologies or its subsidiaries or Fairchild or its subsidiaries or acquisition of any kind of all or substantially all of the assets or capital stock of Shared Technologies and its subsidiaries taken as a whole or Fairchild and its subsidiaries taken as a whole (an "Acquisition Transaction") or negotiate, explore or otherwise communicate in any way with any third party (other than Shared Technologies or Fairchild, as the case may be) with respect to any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by this Agreement; provided that Shared Technologies or Fairchild may, in response to an unsolicited written proposal with respect to an Acquisition Transaction from a financially capable third party that contains no financing condition, (i) furnish or disclose non-public information to such third party and (ii) negotiate, explore or otherwise communicate with such third party, in each case only if the Board of Directors of such party determines in good faith by a majority vote, after consultation with its legal and financial advisors, and after receipt of the written opinion of outside legal counsel of such party that failing to take such action would constitute a breach of the fiduciary duties of such Board of Directors, that taking such action is reasonably likely to lead to an Acquisition Transaction that is more favorable to the stockholders of such party than the Merger and that failing to take such action would constitute a breach of the Board's fiduciary duties. (b) Each of Shared Technologies and Fairchild shall immediately advise the other in writing of the receipt of any inquiries or proposals relating to an Acquisition Transaction and any actions taken pursuant to Section 8.4(a). 8.5 Access to Information. (a) From the date of this Agreement until the Effective Time, each of Shared Technologies and Fairchild will give the other party and its authorized representatives (including counsel, environmental and other consultants, accountants and auditors) full access during normal business hours to all facilities, personnel and operations and to all books and records of it and its subsidiaries, will permit the other party to make such inspections as it may reasonably require and will cause its officers and those of its subsidiaries to furnish the other party with such financial and operating data and other information with respect to its business and properties as such party may from time to time reasonably request. (b) Each of the parties hereto will hold and will cause its consultants and advisors to hold in strict confidence pursuant to the Confidentiality Agreement dated October 1995 between the parties (the "Confidentiality Agreement") all documents and information furnished to the other in connection with the transactions contemplated by this Agreement as if each such consultant or advisor was a party thereto, and the provisions of the Confidentiality Agreement shall survive any termination of this Agreement but will be extinguished at the Effective Time if the Merger occurs. 8.6 Financing. Fairchild will cooperate with Shared Technologies to assist Shared Technologies in obtaining the financing required for Shared Technologies to effect the Merger (including the funds necessary to repay the indebtedness referred to on Exhibit 9.1 and to pay the amounts owing to the holders of the Series A and Series C Preferred Stock) (the "Financing"). Immediately prior to the Effective Time, Fairchild will certify the aggregate amount of accrued and unpaid dividends on the Series A Preferred Stock and Series C Preferred Stock to be paid by Shared Technologies pursuant to the Merger. 8.7 Notification of Certain Matters. Shared Technologies or Fairchild, as the case may be, shall promptly notify the other of (i) its obtaining of actual knowledge as to the matters set forth in clauses (x) and (y) below, or (ii) the occurrence, or failure to occur, of any event which occurrence or failure to occur would be likely to cause (x) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Effective Time, or (y) any material failure of Shared Technologies or Fairchild, as the case may be, or of any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations or warranties of the parties or the conditions to the obligations of the parties hereunder. 8.8 Board of Directors of Shared Technologies. The Shared Technologies Board of Directors shall take such corporate action as may be necessary to cause the directors comprising its full board to be changed at the Effective Time to include, subject to the requisite vote of the shareholders of Shared Technologies, immediately after the Effective Time on the Surviving Corporation Board of Directors the persons specified pursuant to the Shareholders Agreement. 8.9 Indemnification. (a) The Surviving Corporation shall indemnify, defend and hold harmless the present and former officers, directors, employees and agents of Fairchild and its subsidiaries against all losses, claims, damages, expenses or liabilities arising out of actions or omissions or alleged actions or omissions occurring at or prior to the Effective Time to the same extent and on the same terms and conditions (including with respect to advancement of expenses) provided for in Fairchild's Certificate of Incorporation and By-Laws and agreements in effect at the date hereof (to the extent consistent with applicable law); provided that such actions or omissions or alleged actions or omissions are exclusively related to the business of the Fairchild Communications Services Company; and, provided, further, that in no event will this indemnity extend to the transactions effected pursuant to this Agreement, including but not limited to the Fairchild Reorganization. (b) The provisions of this Section 8.9 are intended to be for the benefit of and shall be enforceable by each indemnified party hereunder, his or her heirs and his or her representatives. 8.10 Fees and Expenses. (a) Except as set forth in Section 8.10(b), in the event this Agreement is terminated, Shared Technologies and Fairchild shall bear their respective expenses incurred in connection with the Merger, including, without limitation, the preparation, execution and performance of this Agreement and the transactions contemplated hereby, and all fees and expenses of investment bankers, finders, brokers, agents, representatives, counsel and accountants, except that the fees and expenses of CS First Boston shall be shared equally by Shared Technologies and Fairchild. If the Merger occurs, then the Surviving Corporation shall be responsible, and reimburse Fairchild, for all of such expenses incurred by Shared Technologies and Fairchild in connection with the Merger (but Fairchild's expenses shall only be borne by the Surviving Corporation to the extent set forth in Schedule 8.10). (b) If this Agreement is terminated pursuant to Section 10.1(d), (e) or (h), then Shared Technologies shall promptly, but in no event later than the next business day after the date of such termination, pay Fairchild, in immediately available funds, the amount of any and all fees and expenses incurred by Fairchild (including, but not limited to, fees and expenses of Fairchild's counsel, investment banking fees and expenses and printing expenses) in connection with this Agreement, the Merger and the other transactions contemplated hereby and, in addition, if such termination is pursuant to Section 10.1(h), a fee of $5,000,000. If this Agreement is terminated pursuant to Section 10.1(f) or (i) or pursuant to Section 10.1(c) solely due to the failure of Fairchild to satisfy the condition in Section 9.2(d) or to obtain tenders and consents from at least 51% of the outstanding principal amount of Fairchild's 12 1/4% Senior Notes due 1999 as contemplated by Schedule 9.1, then Fairchild shall promptly, but in no event later than the next business day after the date of such termination, pay Shared Technologies, in immediately available funds, the amount of any and all fees and expenses incurred by Shared Technologies (including, but not limited to, fees and expenses of Shared Technologies' counsel, investment banking fees and expenses and printing expenses) in connection with this Agreement, the Merger and the other transactions contemplated hereby and in addition, if such termination is pursuant to Section 10.1(i), a fee of $5,000,000. 8.11 Post-Merger Cooperation. After the Effective Time, the Surviving Corporation shall cooperate with RHI and permit RHI to take all actions (including without limitation the right to endorse checks and enter into agreements) reasonably required by RHI to allow RHI to assert title (and prosecute claims against and defend claims brought by third parties), whether in its own name or in the name of Fairchild, with respect to all assets, claims and privileges of Fairchild that were owned by it, and defend against all liabilities and claims attributable to it, in each case, immediately prior to the Fairchild Reorganization and that did not relate to the telecommunications systems and service business. After the Effective Time, RHI will cooperate with the Surviving Corporation and permit the Surviving Corporation to take all actions (including without limitation the right to endorse checks and enter into agreements) reasonably required by the Surviving Corporation to allow the Surviving Corporation to assert title (and prosecute claims against third parties) whether in its own name or in the name of Fairchild, with respect to all assets, claims and privileges of Fairchild's telecommunications systems and service business. ARTICLE IX CONDITIONS TO CLOSING 9.1 Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver by the Board of Directors of the waiving party (subject to applicable law) at or prior to the Effective Date of each of the following conditions: (a) Shared Technologies' shareholders shall have duly approved and adopted the Merger, this Agreement and any other transactions contemplated hereby which require the approval of such shareholders by law as required by applicable law; (b) any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated; (c) no order, statute, rule, regulation, executive order, injunction, stay, decree or restraining order shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or governmental or regulatory authority or instrumentality that prohibits the consummation of the Merger or the transactions contemplated hereby; (d) all necessary consents and approvals of any United States or any other governmental authority or any other third party required for the consummation of the transactions contemplated by this Agreement shall have been obtained except for such consents and approvals the failure to obtain which individually or in the aggregate would not have a material adverse effect on the Surviving Corporation and any waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated; (e) each of the transactions set forth on the attached Schedule 9.1 shall have been consummated; (f) the parties shall have received the written opinion of Donaldson, Lufkin & Jenrette Securities Corporation or another investment banking firm of nationally recognized standing selected by Fairchild that the fair market value of the Preferred Stock is at least equal to the positive difference between $47.5 million and the value of the Shared Technologies Common Stock to be received as Merger Consideration (based upon the closing price thereof on the date preceding the Effective Time); and (g) Mel D. Borer shall have been offered an employment agreement on terms satisfactory to both Fairchild and Shared Technologies. 9.2 Additional Conditions to Obligations of Fairchild. The obligations of Fairchild to effect the Merger shall be subject to the fulfillment or waiver (subject to applicable law), at or prior to the Effective Date, of each of the following conditions: (a) Shared Technologies shall have furnished Fairchild with certified copies of resolutions duly adopted by its Board of Directors approving the execution and delivery of this Agreement and the Merger and all other necessary corporate action to enable Shared Technologies to comply with the terms of this Agreement; (b) Shared Technologies shall have performed or complied in all material respects with all its agreements, obligations and covenants required by this Agreement to be performed by it on or prior to the Effective Date, and Shared Technologies shall have delivered to Fairchild a certificate, dated the Effective Date, of its President and its Secretary to such effect; (c) the representations and warranties of Shared Technologies contained herein shall be true and correct in all material respects on the date of this Agreement and the Effective Date as though such representations and warranties were made at and on such date, and Shared Technologies shall have delivered to Fairchild a certificate, dated the Effective Date, of its President and its Secretary to such effect; (d) Fairchild shall have received a favorable ruling of the Internal Revenue Service to the effect set forth in Schedule 9.2(d) hereto; (e) Shared Technologies shall have amended its Certificate of Incorporation and Bylaws to the extent set forth in Schedule 9.2(e); (f) there shall not have occurred since December 31, 1994 any material adverse change in the business, operations, assets, financial condition or results of operations of Shared Technologies and its subsidiaries taken as a whole; (g) Shared Technologies shall have executed and delivered a registration rights agreement in the form of Exhibit D hereto; (h) Shared Technologies shall have entered into a Tax Sharing Agreement with RHI in the form of Exhibit E hereto; and (i) Shared Technologies shall have, prior to the Effective Time, completed the distribution to its shareholders of all of the capital stock of Shared Technologies Cellular, Inc. owned by Shared Technologies and Shared Technologies Cellular, Inc. shall have executed a non-competition agreement with Shared Technologies, in form and substance satisfactory to Fairchild. 9.3 Additional Conditions to Obligations of Shared Technologies. The obligations of Shared Technologies to effect the Merger shall be subject to the fulfillment or waiver (subject to applicable law), at or prior to the Effective Date, of each of the following conditions: (a) Each of TFC, RHI and Fairchild shall have furnished Shared Technologies with certified copies of resolutions duly adopted by its Board of Directors approving the execution and delivery of this Agreement and the Merger and all other necessary corporate action to enable Fairchild to comply with the terms of this Agreement; (b) Fairchild shall have performed or complied in all material respects with all its agreements, obligations and covenants required by this Agreement to be performed by it on or prior to the Effective Date and Fairchild shall have delivered to Shared Technologies a certificate, dated the Effective Date, of its President and its Secretary to such effect; (c) the representations and warranties of TFC, RHI and Fairchild contained herein shall be true and correct in all material respects on the date of this Agreement and the Effective Date as though such representations and warranties were made at and on such date and Fairchild shall have delivered to Shared Technologies a certificate, dated the Effective Date, of its President and its Secretary to such effect; (d) there shall not have occurred since June 30, 1995 any material adverse change in the business, operations, assets, financial condition or results of operations of Fairchild and its wholly owned subsidiary, VSI, taken as a whole (it being understood that no such material adverse change shall be deemed to have occurred with respect to Fairchild and VSI, taken as a whole, if the pro forma consolidated net worth of Fairchild, as evidenced by a pro forma closing date balance sheet to be delivered to Shared Technologies on the Effective Date, is at least $80,000,000); and (e) RHI, The Fairchild Corporation, D-M-E Inc. and Fairchild Fasteners Inc. shall have entered into Indemnification Agreements with Shared Technologies in the forms of Exhibits B1-3 hereto; and RHI shall have delivered to Shared Technologies an executed Pledge Agreement in the form of Exhibit C hereto, as well as the Preferred Stock required to be pledged thereby. ARTICLE X TERMINATION 10.1 Termination. This Agreement may be terminated at any time prior to the Effective Time whether before or after approval by the stockholders of Shared Technologies: (a) by mutual written consent of Fairchild and Shared Technologies; (b) by Fairchild if RHI has not received within 10 business days after the date of this Agreement irrevocable proxies from holders of more than 50% of Shared Technologies common stock (on a fully diluted basis) agreeing to vote for the Merger; provided, that such right of termination must be exercised, if at all, within 13 business days after the date of this Agreement; (c) by either Fairchild or Shared Technologies if the Effective Time has not occurred on or prior to January 31, 1996 unless the Merger has not occurred at such time solely by reason of the condition set forth in Section 9.2(d) having not yet been satisfied or because of the failure of the Securities and Exchange Commission to give timely approval to the proxy materials for Shared Technologies shareholders, in which case February 28, 1996 or such other date, if any, as Fairchild and Shared Technologies shall agree upon, unless the absence of such occurrence shall be due to the failure of the party seeking to terminate this Agreement (or its subsidiaries or affiliates) to perform in all material respects each of its obligations under this Agreement required to be performed by it at or prior to the Effective Time; (d) by either Fairchild or Shared Technologies if, at the Special Meeting (including any adjournment thereof), the stockholders of Shared Technologies fail to adopt and approve this Agreement, the Merger and any of the other transactions contemplated hereby in accordance with Delaware law; (e) by Fairchild if Shared Technologies fails to perform in any material respect any of its obligations under this Agreement; (f) by Shared Technologies if Fairchild fails to perform in any material respect any of its obligations under this Agreement; (g) by Fairchild or Shared Technologies if a court of competent jurisdiction or a governmental, regulatory or administrative agency or commission shall have issued an order, decree, or ruling or taken any other action, in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; (h) by Shared Technologies if its Board of Directors shall have withdrawn, modified or amended in an adverse manner its recommendation of the Merger as a result of its exercise of its fiduciary duties; or (i) by Fairchild if its Board of Directors shall have withdrawn, modified or amended in an adverse manner its recommendation of the Merger as a result of its exercise of its fiduciary duties; or (j) by either Shared Technologies or Fairchild if either of their respective Board of Directors reasonably determine that market conditions will not permit the completion of the Financing contemplated by Section 8.6 in a timely manner or on acceptable terms or it becomes obvious that the necessary marketing activities or filings necessary for such Financing have not been completed in a timely manner necessary to complete the Merger. 10.2 Effect of Termination. In the event of the termination of this Agreement pursuant to the foregoing provisions of this Article X, this Agreement shall become void and have no effect, with no liability on the part of any party or its stockholders or directors or officers in respect thereof except for agreements which survive the termination of this Agreement and except for liability that TFC, RHI, Fairchild or Shared Technologies might have arising from a breach of this Agreement. ARTICLE XI SURVIVAL AND INDEMNIFICATION 11.1 Survival of Representations and Warranties. All representations and warranties made in this Agreement shall survive from the Effective Time until March 31, 1997 and shall not be extinguished by the Merger or any investigation made by or on behalf of any party hereto. 11.2 Indemnification by TFC and RHI. Each of TFC and RHI hereby agrees, jointly and severally, to indemnify and hold harmless Shared Technologies against any and all losses, liabilities and damages or actions (or actions or proceedings, whether commenced or threatened) or claims (including, without limitation, counsel fees and expenses of Shared Technologies in the event that TFC or RHI fail to assume the defense thereof) in respect thereof (hereinafter referred to collectively as "Losses") resulting from any breach of the representations and warranties made by TFC, RHI or Fairchild in this Agreement; provided, however, that TFC's and RHI's obligations under this Section 11.2 is to the extent that the Losses exceed $4,000,000. Notwithstanding the foregoing, in no event shall Shared Technologies be entitled to indemnification for, and the term "Losses" shall not include any consequential damages or damages which are speculative, remote or conjectural (except to the extent represented by a successful claim by a third party). If any action, proceeding or claim shall be brought or asserted against Shared Technologies by any third party, which action, proceeding or claim, if determined adversely to the interests of Shared Technologies would entitle Shared Technologies to indemnity pursuant to this Agreement, Shared Technologies shall promptly but in no event later than 10 days from the date Shared Technologies receives written notice of such action, proceeding or claim, notify TFC and RHI of the same in writing specifying in detail the basis of such claim and the facts pertaining thereto (but the failure to give such notice in a timely fashion shall not affect TFC's and RHI's obligations under this Section 11.2 except to the extent it prejudiced or damaged their ability to defend, settle or compromise such claim or to pay any Losses resulting therefrom), and TFC and RHI shall be entitled (but not obligated) to assume the defense thereof by giving written notice thereof within 10 days after TFC and RHI received notice of the claim from Shared Technologies to Shared Technologies and have the sole control of defense and settlement thereof (but only, with respect to any settlement, if such settlement involves an unconditional release of Shared Technologies and its subsidiaries in respect of such claim), including the employment of counsel and the payment of all expenses. 11.3 Indemnification by Shared Technologies. Shared Technologies hereby agrees to indemnify and hold harmless TFC and RHI against any and all losses, liabilities and damages or actions (or actions or proceedings, whether commenced or threatened) or claims (including, without limitation, counsel fees and expenses of TFC and RHI in the event that Shared Technologies fails to assume the defense thereof) in respect thereof hereinafter referred to as the "Shared Technologies' Losses") resulting from the breach of the representations and warranties made by Shared Technologies in this Agreement; provided, however, that Shared Technologies' obligation under this Section 11.3 is to the extent that the Shared Technologies' Losses exceed $4,000,000. Notwithstanding the foregoing, in no event shall TFC or RHI be entitled to indemnification for, and the term "Shared Technologies' Losses" shall not include any consequential damages or damages which are speculative, remote or conjectural (except to the extent represented by a successful claim by a third party). Shared Technologies at its option may make any indemnification pursuant to this Section 11.3 in cash or in shares of Common Stock of Shared Technologies having a fair market value at the time of issuance in an amount equal to the amount of such loss. In the event that Shared Technologies makes a payment in cash in fulfillment of its obligation under this Section 11.3, the term "Shared Technologies' Losses" shall also include the diminution as a result of such payment in the value of the shares of Common Stock and Preferred Stock as a result of such payment. In the event that Shared Technologies issues Common Stock in fulfillment of its obligation under this Section 11.3, the term "Shared Technologies' Losses" shall also include the diminution as a result of such issuance in the value of the shares of Common Stock and Preferred Stock of Shared Technologies owned by RHI prior to such issuance. If any action, proceeding or claim shall be brought or asserted against TFC or RHI by any third party, which action, proceeding or claim, if determined adversely to the interests of TFC or RHI would entitle TFC or RHI to indemnity pursuant to this Agreement, TFC or RHI shall, promptly but in no event later than 10 days from the date TFC or RHI receives written notice of such action, proceeding or claim, notify Shared Technologies of the same in writing specifying in detail the basis of such claim and the facts pertaining thereto (but the failure to give such notice in a timely fashion shall not affect Shared Technologies' obligations under this Section 11.3 except to the extent it prejudiced or damaged Shared Technologies' ability to defend, settle or compromise such claim or to pay any Losses resulting therefrom), and Shared Technologies shall be entitled (but not obligated) to assume the defense thereof by giving written notice thereof within 10 days after Shared Technologies received notice of the claim from TFC or RHI to TFC or RHI and have the sole control of defense and settlement thereof (but only, with respect to any settlement, if such settlement involves an unconditional release of TFC and RHI and their respective subsidiaries in respect of such claim), including the employment of counsel and the payment of all expenses. 11.4 Set-Off. In the event that either TFC, RHI or Shared Technologies fails to make any payment required by Section 11.2 or 11.3 hereof, the party entitled to receive such payment may set off the amount thereof against any other payments owed by it to the party failing to make such payment. ARTICLE XII MISCELLANEOUS 12.1 Closing and Waiver. (a) Unless this Agreement shall have been terminated in accordance with the provisions of Section 10.1 hereof, a closing (the "Closing" and the date and time thereof being the "Closing Date") will be held as soon as practicable after the conditions set forth in Sections 9.1, 9.2 and 9.3 shall have been satisfied or waived. The Closing will be held at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York or at such other places as the parties may agree. Immediately thereafter, the Certificate of Merger will be filed. (b) At any time prior to the Effective Date, any party hereto may (i) extend the time for the performance of any of the obligations or other acts of any other party hereto, (ii) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements of any other party or with any conditions to its own obligations contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing duly authorized by and signed on behalf of such party. 12.2 Notices. (a) Any notice or communication to any party hereto shall be duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), facsimile or overnight air courier guaranteeing next day delivery, to such other party's address. If to The Fairchild Corporation, RHI Holdings, Inc. or Fairchild Industries, Inc.: 300 West Service Road P.O. Box 10803 Chantilly, VA 22001 Facsimile No.: (703) 888-5674 Attention: Donald Miller, Esq. with a copy to: James J. Clark, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Facsimile No.: (212) 269-5420 If to Shared Technologies Inc.: 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Facsimile No.: (203) 258-2401 Attention: Legal Department with a copy to: Walter D. Wekstein, Esq. Harold J. Carroll, Esq. Gadsby & Hannah 125 Summer Street Boston, MA 02110 Facsimile No.: (617) 345-7050 (b) All notices and communications will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, if mailed; when sent, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. 12.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 12.4 Interpretation. The headings of articles and sections herein are for convenience of reference, do not constitute a part of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof. As used in this Agreement, "person" means any individual, corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof; "subsidiary" of any person means (i) a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by such person or by one or more other subsidiaries of such person or by such person and one or more subsidiaries thereof or (ii) any other person (other than a corporation) in which such person, or one or more other subsidiaries of such person or such person and one or more other subsidiaries thereof, directly or indirectly, have at least a majority ownership and voting power relating to the policies, management and affairs thereof; and "voting stock" of any person means capital stock of such person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. 12.5 Variations and Amendment. This Agreement may be varied or amended only by written action of Shared Technologies and Fairchild, before or after the Special Meeting at any time prior to the Effective Time. 12.6 No Third Party Beneficiaries. Except for the provisions of Sections 8.9 (which are intended to be for the benefit of the persons referred to therein, and may be enforced by such persons) and 8.11, nothing in this Agreement shall confer any rights upon any person or entity which is not a party or permitted assignee of a party to this Agreement. 12.7 Use of Fairchild Name. RHI hereby grants a royalty free license in perpetuity to Shared Technologies for the use of the Fairchild name to Shared Technologies for exclusive use by Shared Technologies as a trade name in the telecommunications system and services business but not for any other use. In no event may Shared Technologies assign the right to use the Fairchild name to any other person. 12.8 Governing Law. Except as the laws of the State of Delaware are by their terms applicable, this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. 12.9 Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 12.10 No Recourse Against Others. No director, officer or employee, as such, of Shared Technologies, TFC, RHI or any of their respective subsidiaries shall have any liability for any obligations of Shared Technologies, TFC or RHI, respectively, under this Agreement for any claim based on, in respect of or by reason of such obligations or their creation. 12.11 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to be executed by their duly authorized officers all as of the day and year first above written. SHARED TECHNOLOGIES INC. By: /s/ Anthony D. Autorino Title: Chairman of the Board, Chief Executive Officer and President FAIRCHILD INDUSTRIES, INC. By: /s/ Jeffrey J. Steiner Title: Chairman of the Board, Chief Executive Officer and President THE FAIRCHILD CORPORATION By: /s/ Jeffrey J. Steiner Title: Chairman of the Board, Chief Executive Officer and President RHI HOLDINGS, INC. By: /s/ Jeffrey J. Steiner Title: Chairman of the Board, Chief Executive Officer and President Schedule 9.1 The steps comprising the Fairchild Recapitalization are as follows: 1. Fairchild Industries, Inc., as it exists on the date of the Merger Agreement ("FII"), will cause Fairchild Communications Services Company, a Delaware partnership ("FCSC") to merge into FII's wholly owned subsidiary, VSI Corporation ("VSI"). 2. FII will then cause VSI to transfer all of VSI's assets and liabilities (other than those of the former FCSC, but excluding from those real estate owned by FCSC, and other than the Assumed Indebtedness described below) to one or more wholly owned subsidiaries. 3. FII (or Shared Technologies) will make a cash tender offer to purchase all of the outstanding 12 1/4% Senior Notes due 1999 (the "12 1/4% Notes") of FII and, in connection therewith, will obtain such Noteholders' consent (representing at least 51% of the outstanding principal amount of the 12 1/4% Notes) to the transfer by FII of all of the assets of FII (other than the stock of VSI) to RHI and to amend the indenture under which the 12 1/4% Notes were issued to remove all covenants which can be amended or deleted by majority vote. The aggregate amount needed to be paid to consummate such tender offer and consent solicitation is herein called the "Note Purchase Amount". 4. Prior to the Effective Time, FII will transfer (in one or more transactions) all of its assets to RHI, and RHI will assume all liabilities, except for (i) the stock of VSI (which will only have in it the assets and liabilities of the former FCSC), (ii) the 12 1/4% Senior Notes, (iii) the Series A and C Preferred Stock and (iv) an amount of bank and other indebtedness (the "Assumed Indebtedness") equal to $223,500,000 minus (x) the Note Purchase Amount and (y) $44,237,745 (the aggregate redemption price of the Series A and C Preferred Stock) plus accrued dividends thereon through the Effective Time, and RHI will contribute all of the outstanding Series B Preferred Stock to FII. 5. Concurrently with the consummation of the Merger, the Surviving Corporation will (i) purchase the 12 1/4% Notes tendered for the Note Purchase Amount, (ii) repay the Assumed Indebtedness in full and (iii) deposit in escrow the funds necessary to pay the holders of the Series A and Series C Preferred Stock the amounts owed to them under the Merger Agreement. Schedule 9.2(d) TAX RULINGS REQUESTED BY FAIRCHILD Fairchild requests the following rulings be issued regarding the mergers of the three corporate subsidiaries of VSI into VSI: 1. The mergers will qualify as a complete liquidation of each of the three corporate subsidiaries (FCSII, FCSI, and FCNMC, which are the partners in FCSC) underss. 332(a) of the Internal Revenue Code of 1986, as amended (the "Code"); 2. No gain or loss will be recognized by VSI on its receipt of the assets from each of the three corporate subsidiaries underss. 332(a); 3. No gain or loss will be recognized by the three corporate subsidiaries on the distribution of their respective assets to VSI in complete liquidation underss. 336 andss. 337(a). Fairchild requests the following rulings regarding the formation of Subsidiary 1, the distribution of the stock of Subsidiary 1 by VSI to FII, and the distribution of the stock of Subsidiary 1 by FII to RHI: 4. VSI will recognize no gain or loss on its transfer of assets (except the Telecommunications business) to Subsidiary 1 in exchange for common stock of Subsidiary 1 and assumption of liabilities by Subsidiary 1 (ss.ss. 351 and 357(a) of the Code and Rev. Rul. 77-449, 1977-2 C.B. 110). VSI's basis in the stock of Subsidiary 1 received in the transaction will equal the basis of the property transferred in exchange therefor, reduced by the sum of the liabilities assumed by Subsidiary 1, or to which assets transferred are taken subject (ss. 358(a) and (d)). 5. Subsidiary 1 will recognize no gain or loss on its transfer of assets to Subsidiaries 2, 3, 4, 5, 6 and 7 in exchange for the common stock of Subsidiaries 2, 3, 4, 5, 6 and 7 and the assumption of liabilities by Subsidiaries 2 to 7 (ss.ss. 351 and 357(a) and Rev. Rul. 77-449). Subsidiary 1's basis in the stock of Subsidiaries 2 to 7 received in the transaction will equal the basis of the property transferred to Subsidiaries 2 to 7, respectively, in exchange therefor, reduced by the sum of the liabilities assumed by Subsidiaries 2 to 7 or to which assets transferred are taken subject (ss. 358(a) and (d)). 6. No income, gain or loss will be recognized by Subsidiary 1 upon the receipt of the assets of Fastener and D-M-E businesses, stock of FDC, plus real estate held for sale in exchange for stock of Subsidiary 1 and Subsidiary 1's assumption of liabilities (ss. 1032(a)). 7. The basis of the assets received by Subsidiary 1 will be the same as the basis of such assets in the hands of VSI immediately prior to the Distribution (ss. 362(b)). 8. No income, gain or loss will be recognized by FII as the Shareholder of VSI on its receipt of the Subsidiary 1 common stock pursuant to the Distribution (ss. 355(a)). 9. No income, gain or loss will be recognized by RHI as the Shareholder of FII on its receipt of Subsidiary 1 common stock pursuant to the Distribution (ss. 355(a)). 10. No income, gain or loss will be recognized by VSI and FII upon the distributions to their respective Shareholders of all of the Subsidiary 1's common stock pursuant to the Distribution (ss. 355(c)). Schedule 9.2(e) The Restated Certificate of Incorporation of Shared Technologies (the "Certificate") shall be amended in the following manner: (a) Article Four of the Certificate shall be amended to (i) increase the authorized common shares of the Corporation, $.004 par value, to 50,000,000 and (ii) to increase the authorized shares of preferred stock of the Corporation, $.01 par value, to 25,000,000; and (b) The Certificate shall be amended or a certificate of designation shall be filed to reflect the terms of the Convertible Preferred Stock and the [Special] Preferred Stock in form and substance satisfactory to RHI and consistent with Schedules 3.1 (c) and (b) hereof; and The Amended and Restated Bylaws of the Corporation (the "Bylaws") shall be amended in the following manner: (a) Article II, Section 11 of the Bylaws is deleted in its entirety and is replaced by the following paragraph: "No action requiring shareholder approval may be taken without a meeting of the shareholders entitled to vote thereon." (b) Article III, Section 1 of the Bylaws shall be amended to include the following sentences at the end of such section: "So long as The Fairchild Corporation and its affiliates (collectively, "TFC") owns 25% or more of the common stock of the Corporation that TFC owned on the [Date of Merger] TFC shall have the irrevocable right to appoint four (4) members of the Board of Directors; provided, that so long as Mel D. Borer is President and a Director of the Corporation, TFC shall only be entitled to appoint three (3) directors." "The Board of Directors may not grant any options for, or any other rights to acquire, common stock of the Corporation, except for options issued pursuant to a plan approved by the shareholders or in a transaction with non-affiliates where such party pays cash for such option or right, unless such transaction is approved by a majority of the shareholders." (c) Article III, Section 10 of the Bylaws shall be deleted in its entirety and replaced with the following paragraph: "Executive Committee. The Board of Directors of the Corporation shall have an executive committee consisting of the President, a director appointed by TFC as long as TFC owns at least 25% of the common stock of the Corporation that TFC owned on the [Date of Merger], and a third director appointed by the Board of Directors of the Corporation. All actions taken by the Executive Committee may only be taken pursuant to a unanimous vote by the members thereof." (d) Article III, Sections 11, 12 and 13 shall be amended to include the following sentence as the second sentence of each such section: "As long as TFC owns at least 25% of the common stock of the Corporation, TFC will be entitled to appoint one director to such committee." (e) Article IV, Section 5 shall be amended to include the following sentence at the end of such section: "The Corporation shall have a Vice Chairman of the Board of Directors who shall have such duties as are designated by the Board of Directors." (f) Article IV, Section 6 shall be deleted in its entirety and replaced with the following paragraph: "Executive Officers. The Chairman of the Board of the Corporation shall also be the Chief Executive Officer of the Corporation and shall be the senior executive of the Corporation and shall have overall supervision of the affairs of the Corporation. The President of the Corporation shall also be the Chief Operating Officer of the Company and he shall be responsible for the day-to-day business operations of the Corporation under the direction of the Chief Executive Officer. Each of the Chief Executive Officer and the President shall see that all orders and resolutions of the Board of Directors of the Corporation are carried into effect, subject, however, to the right of the Board of Directors to delegate any specific powers, except as may be exclusively conferred on the President by law, to the Chairman or any other officer of the Corporation. Each of the Chief Executive Officer and the President may execute bonds, mortgages, and other contracts requiring a signature under the seal of the Corporation. (g) Article VIII, Section 1 shall be deleted in its entirety and replaced with the following paragraph: "By Directors or Shareholders. The bylaws of the Corporation may be altered, amended or repealed at any validly called and convened meeting of the shareholders by the affirmative vote of the holders of a majority of the voting power of shares entitled to vote thereon represented at such meeting in person or by proxy and at any validly called and convened meeting of the board of directors by the affirmative vote of at least a majority of the directors (unless such alteration, amendment or repeal in any way adversely affects the rights granted to TFC hereunder or in Article II, Section 11, Article III, Section 10 or Article IV, Section 6 of these bylaws, in which event a vote of 80% of the directors shall be required); provided, however, that the notice of such meeting shall state that such alteration, amendment or repeal will be proposed." EX-2.2 4 FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER dated as of February 2, 1996 ("First Amendment") is made by and among Fairchild Industries, Inc., a Delaware corporation ("Fairchild"), RHI Holdings, Inc., a Delaware corporation ("RHI"), The Fairchild Corporation, a Delaware corporation ("TFC"), and Shared Technologies Inc., a Delaware corporation ("Shared Technologies"), amending certain provisions of the Agreement and Plan of Merger dated as of November 9, 1995, including the exhibits and schedules thereto (the "Merger Agreement") by and among Fairchild, RHI, TFC and Shared Technologies. Terms not otherwise defined herein which are defined in the Merger Agreement shall have the same respective meanings herein as therein. WHEREAS, Fairchild, RHI, TFC and Shared Technologies have agreed to modify certain terms and conditions of the Merger Agreement as specifically set forth in this First Amendment. NOW THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I AMENDMENTS TO MERGER AGREEMENT 1.1 References to the distribution of shares of Shared Technologies Cellular Inc. shall be deleted from sections 5.7(b) and 7.1(c) and in Section 5.5 of the Disclosure Statement. 1.2 Section 6.19 of the Merger Agreement is hereby amended by deleting the provisions of clause (ii) thereof and by inserting therefor the following: "(ii) all material Taxes of Fairchild and its subsidiaries in respect of the pre-Merger period (including but not limited to Taxes attributable to the Fairchild Reorganization) have been paid in full to the proper authorities, other than such Taxes as are being contested in good faith by appropriate proceedings and/or are adequately reserved for in accordance with generally accepted accounting principles;" 1.3 The first sentence of ss.8.1(c) of the Merger Agreement is hereby deleted in its entirety. 1.4 The last sentence of ss.8.2(a) of the Merger Agreement is hereby deleted in its entirety and replaced with the following: "Shared Technologies shall cause Shared Technologies Cellular, Inc. ("STCI") to enter into an agreement preventing STCI from competing in the telecommunications systems and service business." 1.5 Section 9.1(f) shall be amended to state "43.5" in place of "47.5". 1.6 Section 9.1 shall be amended to replace the references to "Recapitalization" with "Reorganization." 1.7 Section 9.2(d) of the Merger Agreement and Schedule 9.2(d) of the Merger Agreement shall be deleted in their entirety. 1.8 Schedule 9.2(e) shall be amended by adding to the end thereof the following: "(h) Article III, Section 20 shall be amended to include the following language at the end of such section: '; provided that in no event shall the board authorize or permit to be issued any preferred or special class of shares which are entitled to more than one vote per share or authorize or permit to be issued any additional shares of the Corporation's Series C Preferred Stock, in each case without the affirmative vote of 80% of the directors.' " 1.9 Section 9.2(i) is hereby deleted in its entirety and replaced with the following: "STCI shall have executed a non-competition agreement with Shared Technologies in form and substance satisfactory to Fairchild." 1.10 The "and" at the end of ss.9.3(d) of the Merger Agreement shall be deleted. 1.11 The following is added as new ss.9.3(e) of the Merger Agreement and existing Section 9.3(e) of the Merger Agreement is renumbered as ss.9.3(f): "(e) TFC and RHI shall have entered into a Tax Sharing Agreement with Shared Technologies in the form of Exhibit E hereto; and 1.12 The reference to the entities "D-M-E, Inc." and B-3 and "Fairchild Fasteners, Inc." in ss.9.3(f) (formerly ss.9.3(e)) of the Merger Agreement shall be deleted and replaced with the entity "Fairchild Holding Corp." and the reference to "B-1, B-2 and B-3" shall be replaced by "B-1 and B-2." 1.13 Section 10.1(c) shall be deleted in its entirety and replaced with the following: "by either Fairchild or Shared Technologies if the Effective Time has not occurred on or prior to March 8, 1996 or such other date, if any, as Fairchild or Shared Technologies shall agree upon, unless the absence of such occurrence shall be due to the failure of the party seeking to terminate this Agreement (or its subsidiaries or affiliates) to perform in all material respects each of its obligations under this Agreement required to be performed by it at or prior to the Effective Time." -2- ARTICLE II AMENDMENTS TO INDEMNIFICATION AGREEMENTS (EXHIBITS B-1 through B-3) 2.1 The first sentence of Section 1 of the Indemnification Agreement set forth as Exhibit B-1 to the Merger Agreement is hereby amended by adding the clause "and including all Taxes (including but not limited to Taxes related to the Fairchild Reorganization)" after the first reference to "Merger Agreement" therein. 2.2 The first sentence of Section 1 of the Indemnification Agreement set forth as Exhibit B-2 to the Merger Agreement is hereby amended by adding the clause "and including all Taxes (including but not limited to Taxes related to the Fairchild Reorganization)" after the reference to "Merger Agreement" therein. 2.3 All references to "Fairchild Recapitalization" in the Indemnification Agreements set forth as Exhibits B-1 and B-2 to the Merger Agreement are hereby deleted and replaced with the defined term "Fairchild Reorganization." 2.4 All references to the entity "Fairchild Fasteners, Inc." in the Indemnification Agreement set forth as Exhibit B-2 to the Merger Agreement are hereby deleted and replaced with the entity "Fairchild Holding Corp." and all references to the defined term "Fasteners" in the Indemnification Agreement set forth as Exhibit B-2 to the Merger Agreement are hereby deleted and replaced with the defined term "FHC". 2.5 All references to "Shared Technologies" in ss.1 of the Indemnification Agreements set forth as Exhibits B-1 and B-2 shall include, and shall be deemed to include for all purposes set forth in ss.1, all subsidiaries of Shared Techologies Inc. 2.6 Exhibit B-3 shall be deleted in its entirety. ARTICLE III AMENDMENTS TO PLEDGE AGREEMENT (EXHIBIT C) 3.1 The Pledge Agreement as set forth as Exhibit C to the Merger Agreement is amended by deleting all references to "D-M-E Inc." and "Fairchild Fasteners, Inc." and substituting therefor "Fairchild Holding Corp." ARTICLE IV AMENDMENTS TO TAX SHARING AGREEMENT (EXHIBIT E) 4.1 The Tax Sharing Agreement as set forth as Exhibit E to the Merger Agreement is hereby deleted and the Tax Sharing Agreement as attached hereto as Exhibit E (Restated) is substituted therefor. ARTICLE V PROVISIONS OF GENERAL APPLICATION 5.1 Except as otherwise expressly provided by this First Amendment, all of the terms, conditions and provisions to the Merger Agreement remain unaltered. The Merger Agreement and this First Amendment shall be read and construed as one agreement. -3- 5.2 If any of the terms of this First Amendment shall conflict in any respect with any of the terms of the Merger Agreement, the terms of this First Amendment shall be controlling. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed by their duly authorized officers all as of the day and year first above written. SHARED TECHNOLOGIES INC. THE FAIRCHILD CORPORATION By:/s/ Vincent DiVincenzo By:/s/ Donald E. Miller ---------------------- -------------------- Vincent DiVincenzo Donald E. Miller Senior Vice President- Senior Vice President Finance and Administration, Treasurer and Chief Financial Officer FAIRCHILD INDUSTRIES, INC. RHI HOLDINGS, INC. By:/s/ Donald E. Miller By:/s/ Donald E. Miller -------------------- -------------------- Donald E. Miller Donald E. Miller Vice President Vice President ACCEPTED AND AGREED TO BY: FAIRCHILD HOLDING CORP. By:/s/ Donald E. Miller -------------------- Donald E. Miller Vice President -4- EX-2.3 5 SECOND AMEND. AGREEMENT/PLAN OF MERGER EXHIBIT 2.3 SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER This SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER dated as of February 23, 1996 ("Second Amendment"), is made by and among Fairchild Industries, Inc., a Delaware corporation ("Fairchild"), RHI Holdings, Inc., a Delaware corporation ("RHI"), The Fairchild Corporation, a Delaware corporation ("TFC"), and Shared Technologies Inc., a Delaware corporation ("Shared Technologies"), amending certain provisions of the Agreement and Plan of Merger dated as of November 9, 1995, as amended by the First Amendment to the Agreement and Plan of Merger dated as of February 2, 1996, including the exhibits and schedules thereto (the "Merger Agreement") by and among Fairchild, RHI, TFC and Shared Technologies. Terms not otherwise defined herein which are defined in the Merger Agreement shall have the same respective meanings herein as therein. WHEREAS, Fairchild, RHI, TFC and Shared Technologies have agreed to modify certain terms and conditions of the Merger Agreement as specifically set forth in this Second Amendment. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I AMENDMENTS TO MERGER AGREEMENT 1.1 The following shall be added as a new final paragraph to Schedule 3.1(b) to the Merger Agreement, "Summary of Terms of Special Preferred Stock": "The terms of the Special Preferred Stock will provide, or Fairchild, RHI and Shared Technologies shall enter into an agreement giving, Shared Technologies the option to extend the final maturity of the Special Preferred Stock from March 31, 2007, to March 31, 2008. If such option is exercised, Shared Technologies will pay a dividend to the holders of the Special Preferred Stock at the same rate payable on the Senior Discount Notes due 2006 to be issued by a subsidiary of the Surviving Corporation in connection with the Merger, calculated on the outstanding liquidation preference of the Special Preferred Stock. Such dividend shall accrue from March 31, 2007, and be payable quarterly beginning June 30, 2007." 1.2 Section 6.7(a) of the Merger Agreement is amended by adding "(the 'Closing Date Balance Sheet')," after the words "Effective Date" on the last line of such section, such that such line reads as follows: "......gies on the Effective Date (the "Closing Date Balance Sheet"), is at least $80,000,000);........ ." 1.3 Section 6.7(b) of the Merger Agreement is amended in its entirety to read as follows: "(b) except as contemplated by Schedule 9.1 and except for the assignment to RHI by Fairchild of Fairchild's receivables (the "Permitted Receivables Assignment"), in an amount of $9,000,000, there has not been any direct or indirect redemption, purchase or other acquisition of any shares of capital stock of Fairchild or any of its subsidiaries, or any declaration, setting aside or payment of any dividend or other distribution by Fairchild or any of its subsidiaries in respect of their capital stock; provided that the Permitted Receivables Assignment shall not reduce the net worth of Fairchild to less than $80,000,000. Notwithstanding the foregoing, if the Effective Time shall not have occurred on or prior to March 15, 1996, the amount of the Permitted Receivables Assignment shall be increased to the maximum amount which would not cause the net worth of Fairchild, as evidenced by the Closing Date Balance Sheet, to be less than $80,000,000. Within 90 days of the Closing Date, Arthur Andersen, L.L.P. will prepare and deliver to the parties an audited balance sheet of Fairchild as of the Closing Date (the "Audited Balance Sheet"). In the event that the net worth of Fairchild, as shown on the Audited Balance Sheet, (x) is less than $80,000,000, Fairchild shall pay to Shared Technologies an amount in cash equal to such difference or (y) is more than $80,000,000, Shared Technologies shall pay to Fairchild an amount in cash equal to such difference; provided that no such cash payment, when taken together with the amount of receivables assigned to RHI by Fairchild pursuant to this paragraph, shall be required in an amount greater than the amount of the Permitted Receivables Assignment." 1.4 The following shall be added as a new Section 8.12 of the Merger Agreement: 2 "8.12 Post-Merger Sale of Shared Technologies Cellular, Inc. RHI agrees that if, within 150 days of the Effective Time, the Surviving Corporation shall receive cash proceeds from the sale of its interest, as of this date, in STCI, then RHI shall contribute to the Surviving Corporation, a sum equal to 40% of such cash proceeds received by the Surviving Corporation, up to a maximum contribution of $1,600,000." 1.5 Section 10.1(c) of the Merger Agreement is hereby amended by deleting the date "March 8, 1996," and inserting the date "March 15, 1996," in lieu thereof. 1.6 Section 10.1(d) shall be amended by deleting the words "..., at the Special Meeting of (including any adjournment thereof)," and adding at the end of such section the words "on or before March 4, 1996". ARTICLE II AMENDMENTS TO THE TAX SHARING AGREEMENT (EXHIBIT E) 2.1 The parties hereto agree to amend The Tax Sharing Agreement as set forth as Exhibit E to the Merger Agreement to provide for the following language: (i) Notwithstanding any other representation in the Merger Agreement or in the Tax Sharing Agreement, TFC and RHI make no representation or warranty as to (i) the amount of any net operating loss and tax credits of the TFC Group allocable to FII or VSI at the Effective Date as a result of the operations of FII and VSI prior to the Effective Date; and (ii) the amount of any reduction in tax payable by Shared Technologies due to utilization of any net operating loss or tax credit of the TFC Group allocable to FII and VSI as a result of the operations of FII and VSI prior to the Effective Date. (ii) Notwithstanding any other provision of the Tax Sharing Agreement, Shared Technologies shall not share with TFC and RHI any reduction in the tax payment of Shared Technologies as a result of Shared Technologies utilizing any net operating losses or tax credits of the TFC Group allocable to FII or VSI at the Effective Date or as a result of operations of FII and VSI prior to the Effective Date. ARTICLE III PROVISIONS OF GENERAL APPLICATION 3.1 Except as otherwise expressly provided by this Second Amendment, all of the terms, conditions and provisions to the Merger Agreement remain unaltered. 3 The Merger Agreement and this Second Amendment shall be read and construed as one agreement. 3.2 If any of the terms of this Second Amendment shall conflict in any respect with any of the terms of the Merger Agreement, the terms of this Second Amendment shall be controlling. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed by their duly authorized officers, all as of the day and year first above written. SHARED TECHNOLOGIES INC. THE FAIRCHILD CORPORATION By:/s/Anthony D. Autorino By:/s/Donald E. Miller Anthony D. Autorino Donald E. Miller Chief Executive Officer Senior Vice President FAIRCHILD INDUSTRIES, INC. RHI HOLDINGS, INC. By:/s/Donald E. Miller By:/s/Donald E. Miller Donald E. Miller Donald E. Miller Vice President Vice President ACCEPTED AND AGREED TO BY: FAIRCHILD HOLDING CORP. By:/s/Donald E. Miller Donald E. Miller Vice President 4 EX-2.4 6 THIRD AMEND.AGREEMENT/PLAN OF MERGER EXHIBIT 2.4 THIRD AMENDMENT TO AGREEMENT AND PLAN OF MERGER This THIRD AMENDMENT TO AGREEMENT AND PLAN OF MERGER dated as of March 1, 1996 ("Third Amendment"), is made by and among Fairchild Industries, Inc., a Delaware corporation ("Fairchild"), RHI Holdings, Inc., a a Delaware corporation ("RHI"), The Fairchild Corporation, a Delaware corporation ("TFC"), and Shared Technologies Inc., a Delaware corporation ("Shared Technologies"), amending certain provisions of the Agreement and Plan of Merger dated as of November 9, 1995, as amended by the First Amendment to Agreement and Plan of Merger dated as of February 2, 1996 (the "First Amendment"), as further amended by the Second Amendment to Agreement and Plan of Merger dated as of February 23, 1996 (the "Second Amendment"), including the exhibits and schedules thereto (the Agreement and Plan of Merger, as amended by the First Amendment and the Second Amendment, are referred to collectively herein as the "Merger Agreement") by and among Fairchild, RHI, TFC and Shared Technologies. Terms not otherwise defined herein which are defined in the Merger Agreement shall have the same respective meanings herein as therein. WHEREAS, Fairchild, RHI, TFC and Shared Technologies have agreed to modify certain terms and conditions of the Merger Agreement as specifically set forth in this Third Amendment. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I AMENDMENTS TO MERGER AGREEMENT 1.1 The Merger Agreement hereby is amended by deleting therefrom in its entirety Section 1.1 of the Second Amendment. 1.2 Section 10.1(d) of the Merger Agreement (as amended by Section 1.6 of the Second Amendment) hereby is amended by deleting the words "on or before March 4, 1996", and adding the words "on or before March 13, 1996" at the end of such section. 1.3 Section 6.7(b) of the Merger Agreement (as amended by Section 1.3 of the Second Amendment) hereby is amended by deleting clauses (x) and (y) therefrom in their entirety (but not deleting the proviso following such clauses), and substituting therefor the following: "(x) is less than $80,000,000, TFC shall pay to Shared Technologies an amount in cash equal to such difference or (y) is more than $80,000,000 Shared Technologies shall pay to TFC an amount in cash equal to such difference;". ARTICLE II PROVISIONS OF GENERAL APPLICATION 2.1 Except as otherwise expressly provided by this Third Amendment, all of the terms, conditions and provisions to the Merger Agreement remain unaltered. The Merger Agreement and this Third Amendment shall be read and construed as one agreement. 2.2 If any of the terms of this Third Amendment shall conflict in any respect with any of the terms of the Merger Agreement, the terms of this Third Amendment shall be controlling. IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed by their duly authorized officers, all as of the day and year first above written. SHARED TECHNOLOGIES INC. THE FAIRCHILD CORPORATION By: /s/ Anthony D. Autorino By: /s/ Donald E. Miller ----------------------- -------------------- Chief Executive Officer Senior Vice President 2 FAIRCHILD INDUSTRIES, INC. RHI HOLDINGS, INC. By: /s/ Donald E. Miller By: /s/ Donald E. Miller -------------------- -------------------- Vice President Vice President ACCEPTED AND AGREED TO BY: FAIRCHILD HOLDING CORP. By: /s/ Donald E. Miller -------------------- Vice President 3 EX-3.(I).1 7 RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3(i).1 RESTATED CERTIFICATE OF INCORPORATION OF SHARED TECHNOLOGIES INC. INTRODUCTION. SHARED TECHNOLOGIES INC. was originally incorporated under the name of Balcon, Inc. by Certificate of Incorporation filed on September 23, 1987. By a Plan and Agreement of Merger dated March 8, 1988, Balcon, Inc. merged with Shared Technologies Inc., survived the merger, and changed its name to Shared Technologies Inc. This restatement only restates and integrates, and does not further amend, the provisions of the Corporation's Restated Certificate of Incorporation as heretofore amended or supplemented, and there is no discrepancy between the provisions thereof and of this Restated Certificate of Incorporation. This Restated Certificate of Incorporation was duly adopted pursuant to Section 245 of the Delaware General Corporation Law by the Board of Directors. FIRST. The name of this corporation shall be: SHARED TECHNOLOGIES INC. SECOND. Its registered office in the State of Delaware is to be located at 1013 Centre Road, in the City of Wilmington, County of New Castle 19805, and its registered agent at such address is CORPORATION SERVICE COMPANY. THIRD. The purpose of the corporation shall be: To engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 20,000,000 shares of Common Stock, $.004 par value per share ("Common Stock"), and (ii) 10,000,000 shares of Preferred Stock, $.01 par value per share. A. Common Stock. Shares of Common Stock shall have the following voting powers, rights and preferences: 1. Voting Rights. Except as otherwise required by Statute or as otherwise provided in this Restated Certificate of Incorporation, the holders of shares of Common Stock shall be entitled to vote on all matters at all meetings of the stockholders of the Corporation, and shall be entitled to one vote for each share of Common Stock entitled to vote at such meeting, voting together, as one class, with the holders of any shares of Preferred Stock who are entitled to vote, except to the extent that a class vote for any class or series of stock is required by statute. 2. Dividends. Subject to any preferential dividend rights applicable to shares of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive such dividends as may be declared by the Board of Directors. 3. Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after distribution in full of the preferential amounts to be distributed to the holders of shares of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive all of the remaining assets of the Corporation available for distribution to the holders of Common Stock, ratably in proportion to the number of shares of Common Stock held by them. B. Preferred Stock. Shares of Preferred Stock shall have the following voting powers, rights and preferences. Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of any series of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued as shares of the same series or as shares of one or more other series of Preferred Stock except as otherwise provided by law. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purpose of voting by classes unless expressly provided. Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the Delaware General Corporation Law. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other series to the extent permitted by law. 2 DESIGNATION OF SERIES C PREFERRED STOCK 1. Designation; Rank. The series of Preferred Stock designated and known as "Series C Preferred Stock" shall consist of 5,000,000 shares, par value $.01 per share. Shares of the Series C Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior and prior to the Common Stock, par value $.004 per share (the "Common Stock") of the Corporation and to any other class or series of capital stock of the Corporation hereafter issued (all of such equity securities of the Corporation to which the Series C Preferred Stock ranks prior, including all classes of Common Stock, are at times collectively referred to herein as the "Junior Securities"). 2. Dividends. (a) The holders of the Series C Preferred Stock shall be entitled to receive, out of any funds legally available therefor, dividends in cash at the annual rate of $.32 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations or other similar recapitalizations affecting such shares), and no more, in equal quarterly payments in arrears on March 31, June 30, September 30 and December 31 in each year (each such date is referred to as a "Dividend Payment Date") commencing on September 30, 1992, payable in preference and priority to any payment of any cash dividend on Common Stock or any other shares of capital stock of this Corporation. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time such dividend is declared. If the Dividend Payment Date is not a business day, the Dividend Payment Date shall be the next succeeding business day. (b) Each of such quarterly dividends shall be fully cumulative and shall accrue, whether or not earned or declared, without interest, from the first day of the quarter in which such dividend may be payable as herein provided, except that with respect to the first quarterly dividend, such dividend shall accrue from September 15, 1992. (c) No dividends shall be declared or paid or set apart for payment on the Junior Securities, or on the Preferred Stock of any series ranking, as to dividends, junior to the Series C Preferred Stock, for any period unless full cumulative dividends have been or contemporaneously are declared and paid (or declared and a sum sufficient for the payment thereof set apart for such payment) on the Series C Preferred Stock for all dividend payment periods ending on or prior to the date of payment of 3 such full cumulative dividends. Unless full cumulative dividends on the Series C Preferred Stock have been paid, no other distribution shall be made upon the Junior Securities or upon any other such series of Preferred Stock. (d) In the event that the Corporation shall have cumulative, accrued and unpaid dividends outstanding immediately prior to, and in the event of a conversion of any shares of Series C Preferred Stock as provided in Section 5 hereof, the Corporation shall, at the option of the holder of such shares, pay in cash to such holder the full amount of any such dividends or allow such dividends to be converted into Common Stock in accordance with, and pursuant to the terms specified in, Section 5 hereof, except that the Conversion Price (as that term is defined in Section 5(a)) for such purpose shall be the then fair market value of the Common Stock as determined by the Board of Directors of the Corporation. 3. Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any other class or series of stock of the Corporation ranking on liquidation prior and in preference to the Series C Preferred Stock (collectively referred to as "Senior Preferred Stock"), but before any payment shall be made to the holders of any Junior Securities by reason of their ownership thereof, an amount equal to $4 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series C Preferred Stock the full amount to which they shall be entitled, the holders of Series C Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Preferred Stock and Series C Preferred Stock upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Junior Securities then outstanding shall be 4 entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders. (c) Written notice of such liquidation, dissolution or winding up, stating a payment date and the place where said payments shall be made, shall be given by mail, postage prepaid, or by telex to non-U.S. residents, not less than 20 days prior to the payment date stated therein, to the holders of record of the Series C Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. (d) Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. (e) For the purposes of this Section 3, neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the business of the Corporation. 4. Voting (a) Except as may be otherwise provided in these terms of the Series C Preferred Stock or by law, the Series C Preferred Stock shall not be entitled to vote. (b) The Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Series C Preferred Stock so as to affect adversely the Series C Preferred Stock, without the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series C Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any series of Series Preferred Stock with preference or priority over the Series C Preferred Stock as to the right to receive either dividends or amounts distributable 5 upon liquidation, dissolution or winding up of the Corporation shall be deemed to affect adversely the Series C Preferred Stock, and the authorization or issuance of any series of Series Preferred Stock on a parity with Series C Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall not be deemed to affect adversely the Series C Preferred Stock. The number of authorized shares of Series C Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of the Common Stock, Series C Preferred Stock and all other classes or series of stock of the Corporation entitled to vote thereon, voting as a single class. 5. Optional Conversion. The holders of the Series C Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $4.00 by the Conversion Price (as defined below) in effect at the time of conversion. The conversion price at which shares of Common Stock shall be deliverable upon conversion of Series C Preferred Stock without the payment of additional consideration by the holder thereof (the "Conversion Price") shall initially be $8.00. Such initial Conversion Price, and the rate at which shares of Series C Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. In the event of a notice of redemption of any shares of Series C Preferred Stock pursuant to Section 6 hereof, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the fifth full day preceding the date fixed for redemption, unless the redemption price is not paid when due, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation of the Corporation, the Conversion Rights shall terminate at the close of business on the first full day preceding the date fixed for the payment of any amounts distributable on liquidation to the holders of Series C Preferred Stock. (b) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series C Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price. (c) Mechanics of Conversion. (i) In order for a holder of Series C Preferred Stock to convert shares of Series C Preferred Stock 6 into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series C Preferred Stock at the office of the transfer agent for the Series C Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Series C Preferred Stock represented by such certificate or certificates. Such notice shall state such holder's name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in a form satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date ("Conversion Date"). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of Series C Preferred Stock, or to his or its nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share. (ii) The Corporation shall at all times when the Series C Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series C Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series C Preferred Stock. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series C Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price. (iii) Upon any such conversion, no adjustment to the Conversion Price shall be made for any accrued and unpaid dividends on the Series C Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion. 7 (iv) All shares of Series C Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and payment of any accrued and unpaid dividends thereon. Any shares of Series C Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series C Preferred Stock accordingly. (d) Adjustments to Conversion Price for Diluting Issues: (i) Special Definitions. For purposes of this Subsection 5(d), the following definitions shall apply: (A) "Option" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities, excluding options granted to employees or consultants of the Corporation pursuant to an option plan adopted by the Board of Directors (subject to appropriate adjustment for any stock dividend, stock split, combination or other similar recapitalization affecting such shares). (B) "Original Issue Date" shall mean the date on which a share of Series C Preferred Stock was first issued. (C) "Convertible Securities" shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock. (D) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued (or, pursuant to Subsection 5(d)(iii) below, deemed to be issued) by the Corporation after the Original Issue Date, other than shares of Common Stock issued or issuable: (I) upon conversion of shares of Series C Preferred Stock outstanding on the Original Issue Date; (II) as a dividend or distribution on Series C Preferred Stock; 8 (III) by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock excluded from the definition of Additional Shares of Common Stock by the foregoing clauses (I) and (II) or this clause (III); or (IV) upon the exercise of options excluded from the definition of "Option" in Subsection 5(d)(i)(A). (ii) No Adjustment of Conversion Price. No adjustment in the number of shares of Common Stock into which the Series C Preferred Stock is convertible shall be made by adjustment in the applicable Conversion Price thereof: (a) unless the consideration per share (determined pursuant to Subsection 5(d)(v)) for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the applicable Conversion Price in effect on the date of, and immediately prior to, the issue of such Additional Shares, or (b) if prior to such issuance, the Corporation receives written notice from the holders of at least a majority of the then outstanding shares of Series C Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance of Additional Shares of Common Stock. (iii) Issue of Securities Deemed Issue of Additional Shares of Common Stock. If the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Subsection 5(d)(v) hereof) of such Additional Shares of Common Stock would be less than the applicable Conversion Price in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and provided further that in any 9 such case in which Additional Shares of Common Stock are deemed to be issued: (A) no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Corporation, or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; (C) no readjustment pursuant to clause (B) above shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price on the original adjustment date, or (ii) the Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date; (D) upon the expiration or termination of any unexercised Option, the Conversion Price shall not be readjusted, but the Additional Shares of Common Stock deemed issued as the result of the original issue of such Option shall not be deemed issued for the purposes of any subsequent adjustment of the Conversion Price; and (E) in the event of any change in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any Option or Convertible Security, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price then in effect shall forthwith be readjusted to such Conversion Price as would have been obtained had the adjustment which was made upon the issuance of such Option or Convertible Security not exercised or converted prior to such change been made upon the basis of such change, but no further adjustment shall be made for the actual issuance of 10 Common Stock upon the exercise or conversion of any such Option or Convertible Security. (iv) Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 5(d)(iii), but excluding shares issued as a dividend or distribution as provided in Subsection 5(f) or upon a stock split or combination as provided in Subsection 5(e)), without consideration or for a consideration per share less than the applicable Conversion Price in effect on the date of and immediately prior to such issue, then, and in such event, such Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, (A) the numerator of which shall be (1) the number of shares of Common Stock outstanding immediately prior to such issue plus (2) the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at such Conversion Price; and (B) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common Stock so issued; provided that, for the purpose of this Subsection 5(d)(iv), all shares of Common Stock issuable upon conversion of shares of Series C Preferred Stock outstanding immediately prior to such issue shall be deemed to be outstanding, and immediately after any Additional Shares of Common Stock are deemed issued pursuant to Subsection 5(d)(iii) (other than shares excluded from the definition of "Additional Shares of Common Stock" by virtue of clause (IV) of Subsection 5(d)(i)(D)), such Additional Shares of Common Stock shall be deemed to be outstanding. Notwithstanding the foregoing, the applicable Conversion Price shall not be so reduced at such time if the amount of such reduction would be an amount less than $.05, but any such amount shall be carried forward and reduction with respect thereto made at the time of and together with any subsequent reduction which, together with such amount and any other amount or amounts so carried forward, shall aggregate $.05 or more. (v) Determination of Consideration. For purposes of this Subsection 5(d), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows: 11 (A) Cash and Property: Such consideration shall: (I) insofar as it consists of cash, be computed at the aggregate of cash received by the Corporation, excluding amounts paid or payable for accrued interest or accrued dividends; (II) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors; and (III) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (I) and (II) above, as determined in good faith by the Board of Directors. (B) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 5(d)(iii) relating to Options and Convertible Securities shall be determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by (y) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (e) Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date for a series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that 12 subdivision shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Original Issue Date for a series of the Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (f) Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time, or from time to time after the Original Issue Date for a series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for such series of Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for such series of Preferred Stock then in effect by a fraction: (i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for such series of Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for such series of Preferred Stock shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions. (g) Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date for a series of Preferred Stock shall 13 make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of such series of Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period, under this paragraph with respect to the rights of the holders of the Preferred Stock. (h) Adjustment for Reclassification, Exchange or Substitution. If the Common Stock issuable upon the conversion of the Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein. (i) Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation (other than a consolidation, merger or sale which is treated as a liquidation pursuant to Subsection 3(a)), each share of Series C Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series C Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 5 set forth with respect to the rights and interest thereafter of the holders of the Series C Preferred Stock, to the end that the provisions set forth in this Section 5 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property 14 thereafter deliverable upon the conversion of the Series C Preferred Stock. (j) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series C Preferred Stock against impairment. (k) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 5, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series C Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series C Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price then in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Series C Preferred Stock. (1) Notice of Record Date. In the event: (i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation; (ii) that the Corporation subdivides or combines its outstanding shares of Common Stock; (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation, or of the sale of all or substantially all of the assets of the Corporation; or (iv) of the involuntary or voluntary dissolution, liquidation or winding up of the Corporation; 15 then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series C Preferred Stock, and shall cause to be mailed to the holders of the Series C Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten days prior to the record date specified in (A) below or twenty days before the date specified in (B) below, a notice stating (A) the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or (B) the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up. 6. Optional Redemption. (a) At any time and from time to time after June 30, 1993, the Corporation may, at the option of its Board of Directors, redeem the Series C Preferred Stock, in whole or in part, by paying $6 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations or other similar recapitalization affecting such shares) in cash for each share of Series C Preferred Stock then redeemed (hereinafter referred to as the "Redemption Price"). (b) In the event of any redemption of only a part of the then outstanding Series C Preferred Stock, the Corporation shall effect such redemption pro rata among the holders thereof based on the number of shares of Series C Preferred Stock held by such holders on the date of the Redemption Notice (as defined below). (c) `At least 30 days prior to the date fixed for any redemption of Series C Preferred Stock (hereinafter referred to as the "Redemption Date"), written notice shall be mailed, by first class or registered mail, postage prepaid, to each holder of record of Series C Preferred Stock to be redeemed, at his or its address last shown on the records of the transfer agent of the Series C Preferred Stock (or the records of the Corporation, if it serves as its own transfer agent), notifying such holder of the election of the Corporation to redeem such shares, specifying the Redemption 16 Date and the date on which such holder's Conversion Rights (pursuant to Section 5 hereof) as to such shares terminate and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares to be redeemed (such notice is hereinafter referred to as the "Redemption Notice"). On or prior to the Redemption Date, each holder of Series C Preferred Stock to be redeemed shall surrender his, her or its certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the Redemption Date, unless there shall has been a default in payment of the Redemption Price, all rights of the holders of the Series C Preferred Stock designated for redemption in the Redemption Notice as holders of Series C Preferred Stock of the Corporation (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. (d) Subject to the provisions hereof, the Board of Directors of the Corporation shall have authority to prescribe the manner in which Series C Preferred Stock shall be redeemed from time to time. Any shares of Series C Preferred Stock so redeemed shall permanently be retired, shall no longer be deemed outstanding and shall not under any circumstances be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series C Preferred Stock accordingly. Nothing herein contained shall prevent or restrict the purchase by the Corporation, from time to time either at public or private sale, of the whole or any part of the Series C Preferred Stock at such price or prices as the Corporation may determine, subject to the provisions of applicable law. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 17 DESIGNATION OF SERIES D PREFERRED STOCK 1. Designation; Rank. The series of Preferred Stock designated and known as "Series D Preferred Stock" shall consist of 1,000,000 shares, par value $.01 per share. Shares of the Series D Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior and prior to the Common Stock, par value $.004 per share (the "Common Stock") of the Corporation and junior to the Series C Preferred Stock. 2. Dividends. (a) The holders of the Series D Preferred Stock shall be entitled to receive, when declared by the Directors out of any funds legally available therefor, dividends in cash at the annual rate of $0.2375 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations or other similar recapitalizations affecting such shares), and no more, in equal quarterly payments in arrears on March 31, June 30, September 30 and December 31 in each year (each such date is referred to as a "Dividend Payment Date") commencing on March 31, 1994, payable in preference and priority to any payment of any cash dividend on Common Stock and junior in preference and priority to any payment of any cash dividend to the holders of Series C Preferred Stock. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time such dividend is declared; provided, however, that the amount payable to shareholders for the first such dividend due on March 31, 1994, shall be pro-rated on a daily basis from the date of issue. If the Dividend Payment Date is not a business day, the Dividend Payment Date shall be the next succeeding business day. (b) Each of such quarterly dividends shall be fully cumulative and shall accrue, whether or not earned or declared, without interest, from the date of issue of the Series D Preferred Stock. (c) No dividends shall be declared or paid or set apart for payment on the Common Stock, or on the Preferred Stock of any series ranking, as to dividends, junior to the Series D Preferred Stock, for any period unless full cumulative dividends have been or contemporaneously are declared and paid (or declared and a sum sufficient for the payment thereof set apart for such payment) on the Series D Preferred Stock for all dividend payment periods ending on or prior to the date of payment of such full cumulative dividends. (The Common Stock and any such series of Preferred Stock are referred to hereinafter as "Junior Securities".) Unless full cumulative dividends on the Series D Preferred Stock have been paid, no other 18 distribution shall be made upon or in respect of the Junior Securities. (d) In the event that the Corporation shall have cumulative, accrued and unpaid dividends outstanding immediately prior to, and in the event of a conversion of any shares of Series D Preferred Stock as provided in Section 5 hereof, the Corporation shall, at its option, pay in cash to such holder the full amount of any such dividends or allow such dividends to be converted into Common Stock and the conversion price for such purpose shall be the then fair market value of the Common Stock as determined by the Board of Directors of the Corporation. 3. Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series D Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any other class or series of stock of the Corporation ranking on liquidation prior and in preference to the Series D Preferred Stock, (collectively referred to as "Senior Preferred Stock") but before any payment shall be made to the holders of any Junior Securities by reason of their ownership thereof, an amount equal to $4.75 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series D Preferred Stock the full amount to which they shall be entitled, the holders of Series D Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Preferred Stock and Series D Preferred Stock upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Junior Securities then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders. (c) Written notice of such liquidation, dissolution or winding up, stating a payment date and the place where said 19 payments shall be made, shall be given by mail, postage prepaid, or by telecopier to non-U.S. residents, not less than 20 days prior to the payment date stated therein, to the holders of record of the Series D Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. (d) Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. (e) For the purposes of this Section 3, neither the voluntary sale, conveyance, exchange or transfer (for case, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the business of the Corporation. 4. Voting. (a) Except as may be otherwise provided in these terms of the Series D Preferred Stock or by law, the Series D Preferred Stock shall not be entitled to vote. (b) The Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Series D Preferred Stock so as to affect adversely the Series D Preferred Stock, without the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series D Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any series of Preferred Stock with preference or priority over the Series D Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed to affect adversely the Series D Preferred Stock, and the authorization or issuance of any series of Preferred Stock on a parity with Series D Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed not to affect adversely the Series D Preferred Stock. The number of authorized shares of Series D Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of 20 a majority of the then outstanding shares of the Common Stock, Series D Preferred Stock and all other classes or series of stock of the Corporation entitled to vote thereon, voting as a single class. 5. Optional Conversion. The holders of the Series D Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Series D Preferred Stock shall be convertible, at the option of the holder thereof, at any time, into one share of fully paid and nonassessable Common Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). In the event of a notice of redemption of any shares of Series D Preferred Stock pursuant to Section 6 hereof, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the fifth full day preceding the date fixed for redemption, unless the redemption price is not paid when due, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation of the Corporation, the Conversion Rights shall terminate at the close of business on the first full day preceding the date fixed for the payment of any amounts distributable on liquidation to the holders of Series D Preferred Stock. (b) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series D Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price. (c) Mechanics of Conversion. (i) In order for a holder of Series D Preferred Stock to convert shares of Series D Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series D Preferred Stock at the office of the transfer agent for the Series D Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Series D Preferred Stock represented by such certificate or certificates for shares of Common stock to be issued, provided however, that the holder shall pay any transfer taxes arising from the issuance of the Common Stock to any person or entity other than the holder. 21 If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in a form satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date ("Conversion Date"). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of Series D Preferred Stock, or to his or its nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share. (ii) The Corporation shall at all times when the Series D Preferred Stock shall be outstanding, reserve and keep available out of is authorized but unissued stock, for the purpose of effecting the conversion of the Series D Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series D Preferred Stock. (iii) All shares of Series D Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and payment of any accrued and unpaid dividends thereon. Any shares of Series D Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series D Preferred Stock accordingly. (d) Adjustment for Reclassification, Exchange, or Substitution. If the Common Stock issuable upon the conversion of the Series D Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for above in section 5(a) hereof, or a reorganization, merger, consolidation, or sale of assets provided for below in Section 5(e) hereof), then and in each event the holder of each such share of Series D Preferred Stock shall have the 22 right thereafter to convert such share of Series D Preferred Stock into the kind and amount of shares of stock and other securities receivable upon such reorganization, reclassification, or other change by a holder of the number of shares of Common Stock into which such shares of Series D Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein. (e) Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation (other than a consolidation, merger or sale which is treated as a liquidation pursuant to Subsection 3(a)), each share of Series D Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series D Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 5 with respect to the rights and interest thereafter of the holders of the Series D Preferred Stock, to the end that the provisions set forth in this Section 5 shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series D Preferred Stock. (f) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series D Preferred Stock against impairment. (g) Notice of Record Date. In the event: (i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation; (ii) that the Corporation subdivides or combines its outstanding shares of Common Stock; 23 (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation, or of the sale of all or substantially all of the assets of the Corporation; or (iv) of the involuntary or voluntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series D Preferred Stock, and shall cause to be mailed to the holders of the Series D Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten days prior to the record date specified in (A) below or twenty days before the date specified in (B) below, a notice stating (A) the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or (B) the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up. 6. Optional Redemption. (a) At any time and from time to time, the Corporation may, at the option of its Board of Directors, redeem the Series D Preferred Stock, in whole or in part, by paying $7 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations or other similar recapitalizations affecting such shares) in cash for each share of Series D Preferred Stock then redeemed (hereinafter referred to as the "Redemption Price"). (b) In the event of any redemption of only a part of the then outstanding Series D Preferred Stock, the Corporation shall effect such redemption pro rata among the holders thereof based on the number of shares of Series D Preferred Stock held of record by such holders on the date of the Redemption Notice (as defined below). 24 (c) At least 30 days prior to the date fixed for any redemption of Series D Preferred Stock (hereinafter referred to as the "Redemption Date"), written notice shall be mailed, by first class mail, postage prepaid, to each holder of record of Series D Preferred Stock to be redeemed, at his or its address last shown on the records of the transfer agent of the Series D Preferred Stock (or the records of the Corporation, if it serves as its own transfer agent), notifying such holder of the election of the Corporation to redeem such shares specifying the Redemption Date and the date on which such holder's Conversion Rights (pursuant to Section 5 hereof) as to such shares terminate and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares to be redeemed (such notice is hereinafter referred to as the "Redemption Notice"). On or prior to the Redemption Date, each holder of Series D Preferred Stock to be redeemed shall surrender his, her or its certificate or certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of the Series D Preferred Stock designated for redemption in the Redemption Notice as holders of Series D Preferred Stock of the Corporation (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. (d) Subject to the provisions hereof, the Board of Directors of the Corporation shall have authority to prescribe the manner in which Series D Preferred Stock shall be redeemed from time to time. Any shares of Series D Preferred Stock so redeemed shall permanently be retired, shall no longer be deemed outstanding and shall not under any circumstances be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series D Preferred Stock accordingly. Nothing herein contained shall prevent or restrict the purchase by the Corporation, from time to time either at public or private sale, of the whole or any part of the Series D Preferred Stock at such price or prices as the Corporation may determine, subject to the provisions of applicable law. 25 DESIGNATION OF SERIES E PREFERRED STOCK 1. Designation; Rank. The series of Preferred Stock designated and known as "Series E Preferred Stock" shall consist of 400,000 shares, par value $.01 per share. Shares of the Series E Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior and prior to the Common Stock, par value $.004 per share (the "Common Stock") of the Corporation, junior to the Series C Preferred Stock and on a parity with the Series D Preferred Stock and Series F Preferred Stock. 2. Dividends. (a) The holders of the Series E Preferred Stock shall be entitled to receive, when declared by the Directors out of any funds legally available therefor, dividends in cash or, at the Corporation's option, in Common Stock, at the annual rate of $0.30 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations or other similar recapitalizations affecting such shares), and no more, on the earlier to occur of (i) the Conversion Date (as hereinafter defined) and (ii) the Redemption Date (as hereinafter defined) (the "Dividend Payment Date"), payable in preference and priority to any payment of any cash dividend on Common Stock, junior in preference and priority to any dividend payment to the holders of Series C Preferred Stock and on a parity with any dividend payment to the holders of Series D Preferred Stock and Series F Preferred Stock. Such dividends shall be paid to the holders of record at the close of business on the Dividend Payment Date. If the Dividend Payment Date is not a business day, the Dividend Payment Date shall be the next succeeding business day. If the Corporation elects to pay such dividends in Common Stock, the conversion price per share (the "Conversion Price") shall be the lesser of (i) $3.75 and (ii) the closing price per share of the Common Stock on the principal national securities exchange on which the Common Stock is then listed or admitted to trading or, if not then listed or admitted to trading on any such exchange, on the NASDAQ National Market System, or if not then listed or traded on any such exchange or system, the bid price per share on the NASDAQ Small-Cap Market, averaged over the 30 trading days immediately preceding the Conversion Date (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). (b) Dividends shall be fully cumulative and shall accrue, whether or not earned or declared, without interest, from the date of issue of the Series E Preferred Stock. 26 (c) No dividends shall be declared or paid or set apart for payment on the Common Stock, or on the Preferred Stock of any series ranking, as to dividends, junior to or on a parity with the Series E Preferred Stock, for any period unless full cumulative dividends have been or contemporaneously are declared and paid (or declared and a sum sufficient for the payment thereof set apart for such payment) on the Series E Preferred Stock for all dividend payment periods ending on or prior to the date of payment of such full cumulative dividends. (The Common Stock and any such series of Preferred Stock are referred to hereinafter as "Junior Securities".) Unless full cumulative dividends on the Series E Preferred Stock have been paid, no other distribution shall be made upon or in respect of the Junior Securities. 3. Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series E Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any other class or series of stock of the Corporation ranking on liquidation prior and in preference to the Series E Preferred Stock, (collectively referred to as "Senior Preferred Stock") but before any payment shall be made to the holders of any Junior Securities by reason of their ownership thereof, and on a parity with any dividend payment to the holders of Series D Preferred Stock and Series F Preferred Stock, an amount equal to $3.75 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series E Preferred Stock the full amount to which they shall be entitled, the holders of Series E Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Preferred Stock and Series E Preferred Stock upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Junior Securities then outstanding shall be 27 entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders. (c) Written notice of such liquidation, dissolution or winding up, stating a payment date and the place where said payments shall be made, shall be given by mail, postage prepaid, or by telecopier to non-U.S. residents, not less than 20 days prior to the payment date stated therein, to the holders of record of the Series E Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. (d) Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. (e) For the purposes of this Section 3, neither the voluntary sale, conveyance, exchange or transfer (for case, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the business of the Corporation. 4. Voting. (a) Except as may be otherwise provided in these terms of the Series E Preferred Stock or by law, the Series E Preferred Stock shall not be entitled to vote. (b) The Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Series E Preferred Stock so as to affect adversely the Series E Preferred Stock, without the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series E Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any series of Preferred Stock with preference or priority over the Series E Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed to affect adversely the Series E Preferred Stock, and the authorization or issuance of any series of Preferred Stock on a parity with Series E Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or 28 winding up of the Corporation shall be deemed not to affect adversely the Series E Preferred Stock. The number of authorized shares of Series E Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of the Common Stock, Series E Preferred Stock and all other classes or series of stock of the Corporation entitled to vote thereon, voting as a single class. 5. Conversion. (a) Mandatory Conversion. On January 1, 1995 (the "Conversion Date"), each share of Series E Preferred Stock shall automatically and without further action on the part of any holder of Series E Preferred Stock be converted into the number of shares of fully paid and nonassessable Common Stock derived by dividing $3.75 by the Conversion Price. Upon such conversion, each share of Series E Preferred Stock shall be cancelled and not subject to reissuance. On or before September 30, 1994, the Corporation shall provide written notice (the "Conversion Notice") to the holders hereof of the Corporation's intention not to exercise the redemption option provided for in Section 6 hereof and to allow the Series E Preferred Stock to automatically convert pursuant to this Section 5(a). The immediately preceding sentence notwithstanding, the Corporation shall not be deemed to have waived its right to redeem the Series E Preferred Stock pursuant to Section 6 hereof by virtue of the issuance of the Conversion Notice." (b) Delivery of Stock Certificates. The holder of any shares of Series E Preferred Stock converted pursuant to Section 5(a) hereof, shall deliver to the Corporation during regular business hours at the office of the transfer agent of the Corporation for the Series E Preferred Stock, or at such other place as may be designated by the Corporation, the certificate or certificates for the shares so converted, duly endorsed or assigned in blank to the Corporation. As promptly as practicable thereafter, the Corporation shall issue and deliver to such holder, at the place designated by such holder, a certificate or certificates for the number of shares of Common Stock to which such holder is entitled. The person in whose name the certificate for such Common Stock is to be issued shall be deemed to have become a stockholder of record on the Conversion Date unless the transfer books of the Corporation are closed on that date, in which event he shall be deemed to have become a stockholder of record on the next succeeding date on which the transfer books are open. (c) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series E Preferred Stock. In lieu of any fractional shares to which 29 the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the Conversion Price. (d) Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the date on which a share of Series E Preferred Stock was first issued ("Original Issue Date") effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (e) Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time, or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Series E Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for the Series E Preferred Stock then in effect by a fraction: (i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the Series E Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Series E Preferred Stock shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions. 30 (f) Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Series E Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period, under this paragraph with respect to the rights of the holders of the Preferred Stock. (g) Adjustment for Reclassification, Exchange, or Substitution. If the Common Stock issuable upon the conversion of the Series E Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for in Sections 5(d), (e) and (f) hereof, or a reorganization, merger, consolidation, or sale of assets provided for in Section 5(h) hereof), then and in each event the holder of each such share of Series E Preferred Stock shall have the right thereafter to convert such share of Series E Preferred Stock into the kind and amount of shares of stock and other securities receivable upon such reorganization, reclassification, or other change by a holder of the number of shares of Common Stock into which such shares of Series E Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein. (h) Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation (other than a consolidation, merger or sale which is treated as a liquidation pursuant to Subsection 3(a)), each share of Series E Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series E Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the 31 Board of Directors) shall be made in the application of the provisions in this Section 5 with respect to the rights and interest thereafter of the holders of the Series E Preferred Stock, to the end that the provisions set forth in this Section 5 shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series E Preferred Stock. (i) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the holders of the Series E Preferred Stock against impairment of their conversion rights. (j) Notice of Record Date. In the event: (i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation; (ii) that the Corporation subdivides or combines its outstanding shares of Common Stock; (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation, or of the sale of all or substantially all of the assets of the Corporation; or (iv) of the involuntary or voluntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series E Preferred Stock, and shall cause to be mailed to the holders of the Series E Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten (10) days prior to the record date specified in (A) below or twenty (20) days before the date specified in (B) below, a notice stating (A) the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the 32 holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or (B) the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up. (k) Optional Conversion. Except as set forth in Section 5(a) hereof, the holders of the Series E Preferred Stock shall not have the right to convert their shares of Series E Preferred Stock into Common Stock. 6. Optional Redemption. (a) At any time and from time to time on or before December 31, 1994, the Corporation may, at the option of its Board of Directors, redeem the Series E Preferred Stock, in whole or in part, by paying $3.75 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations or other similar recapitalizations affecting such shares) in cash for each share of Series E Preferred Stock then redeemed (hereinafter referred to as the "Redemption Price"). (b) In the event of any redemption of only a part of the then outstanding Series E Preferred Stock, the Corporation shall effect such redemption pro rata among the holders thereof based on the number of shares of Series E Preferred Stock held of record by such holders on the date of the Redemption Notice (as defined below). (c) At least ten (10) days prior to the date fixed for any redemption of Series E Preferred Stock (hereinafter referred to as the "Redemption Date"), written notice shall be mailed, by first class mail, postage prepaid, to each holder of record of Series E Preferred Stock to be redeemed, at his or its address last shown on the records of the transfer agent of the Series E Preferred Stock (or the records of the Corporation, if it serves as its own transfer agent), notifying such holder of the election of the Corporation to redeem such shares specifying the Redemption Date and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares to be redeemed (such notice is hereinafter referred to as the "Redemption Notice"). On or prior to the Redemption Date, each holder of Series E Preferred Stock to be redeemed shall surrender his, her or its certificate or 33 certificates representing such shares to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of the Series E Preferred Stock designated for redemption in the Redemption Notice as holders of Series E Preferred Stock of the Corporation (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. (d) Subject to the provisions hereof, the Board of Directors of the Corporation shall have authority to prescribe the manner in which Series E Preferred Stock shall be redeemed from time to time. Any shares of Series E Preferred Stock so redeemed shall permanently be retired, shall no longer be deemed outstanding and shall not under any circumstances be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series E Preferred Stock accordingly. Nothing herein contained shall prevent or restrict the purchase by the Corporation, from time to time either at public or private sale, of the whole or any part of the Series E Preferred Stock at such price or prices as the Corporation may determine, subject to the provisions of applicable law. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 34 DESIGNATION OF SERIES F PREFERRED STOCK 1. Designation; Rank. The series of Preferred Stock designated and known as "Series F Preferred Stock" shall consist of 700,000 shares, par value $.01 per share. Shares of the Series F Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior and prior to the Common Stock, par value $.004 per share (the "Common Stock") of the Corporation, junior to the Series C Preferred Stock and on a parity with the Series D Preferred Stock and Series E Preferred Stock. 2. Dividends. The holders of the Series F Preferred Stock shall not be entitled to receive dividends. 3. Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series F Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any other class or series of stock of the Corporation ranking on liquidation prior and in preference to the Series F Preferred Stock, (collectively referred to as "Senior Preferred Stock") but before any payment shall be made to the holders of Common Stock and any series of Preferred Stock ranking on liquidation junior to the Series F Preferred Stock ("Junior Securities") by reason of their ownership thereof, and on a parity with any dividend payment to the holders of Series D Preferred Stock and Series E Preferred Stock, an amount equal to $5.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series F Preferred Stock the full amount to which they shall be entitled, the holders of Series F Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Preferred Stock and Series F Preferred Stock upon the dissolution, 35 liquidation or winding up of the Corporation, the holders of shares of Junior Securities then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders. (c) Written notice of such liquidation, dissolution or winding up, stating a payment date and the place where said payments shall be made, shall be given by mail, postage prepaid, or by telecopier to non-U.S. residents, not less than 20 days prior to the payment date stated therein, to the holders of record of the Series F Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. (d) Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. (e) For the purposes of this Section 3, neither the voluntary sale, conveyance, exchange or transfer (for case, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the business of the Corporation. 4. Voting. (a) Except as may be otherwise provided in these terms of the Series F Preferred Stock or by law, the Series F Preferred Stock shall not be entitled to vote. (b) The Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Series F Preferred Stock so as to affect adversely the Series F Preferred Stock, without the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series F Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any series of Preferred Stock with preference or priority over the Series F Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed to affect adversely the Series F Preferred Stock, and the authorization or issuance of any series of Preferred Stock on a parity with Series F 36 Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed not to affect adversely the Series F Preferred Stock. The number of authorized shares of Series F Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of the Common Stock, Series F Preferred Stock and all other classes or series of stock of the Corporation entitled to vote thereon, voting as a single class. 5. Conversion. (a) Mandatory Conversion. On July 1, 1995 (the "Conversion Date"), each share of Series F Preferred Stock shall automatically and without further action on the part of any holder of Series F Preferred Stock be converted into the number of shares of fully paid and nonassessable Common Stock derived by dividing the number 1 by a fraction, the denominator of which is $5.00 and the numerator of which is ninety percent (90%) of the closing price per share of the Common Stock on the principal national securities exchange on which the Common Stock is then listed or admitted to trading or, if not then listed or admitted to trading on any such exchange, on the NASDAQ National Market System, or if not then listed or traded on any such exchange or system, the bid price per share on the NASDAQ Small-Cap Market, averaged over the 30 trading days immediately preceding the Conversion Date. Upon such conversion, each share of Series F Preferred Stock shall be cancelled and not subject to reissuance." (b) Delivery of Stock Certificates. The holder of any shares of Series F Preferred Stock converted pursuant to Section 5(a) hereof, shall deliver to the Corporation during regular business hours at the office of the transfer agent of the Corporation for the Series F Preferred Stock, or at such other place as may be designated by the Corporation, the certificate or certificates for the shares so converted, duly endorsed or assigned in blank to the Corporation. As promptly as practicable thereafter, the Corporation shall issue and deliver to such holder, at the place designated by such holder, a certificate or certificates for the number of shares of Common Stock to which such holder is entitled. The person in whose name the certificate for such Common Stock is to be issued shall be deemed to have become a stockholder of record on the Conversion Date unless the transfer books of the Corporation are closed on that date, in which event he shall be deemed to have become a stockholder of record on the next succeeding date on which the transfer books are open. 37 (c) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series F Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by $5.00. (d) Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the date on which a share of Series F Preferred Stock was first issued ("Original Issue Date") effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (e) Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time, or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Series F Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for the Series F Preferred Stock then in effect by a fraction: (i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for the Series F Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Series F Preferred Stock shall be adjusted pursuant to this 38 paragraph as of the time of actual payment of such dividends or distributions. (f) Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Series F Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period, under this paragraph with respect to the rights of the holders of the Preferred Stock. (g) Adjustment for Reclassification, Exchange, or Substitution. If the Common Stock issuable upon the conversion of the Series F Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for in Sections 5(d), (e) and (f) hereof, or a reorganization, merger, consolidation, or sale of assets provided for in Section 5(h) hereof), then and in each event the holder of each such share of Series F Preferred Stock shall have the right thereafter to convert such share of Series F Preferred Stock into the kind and amount of shares of stock and other securities receivable upon such reorganization, reclassification, or other change by a holder of the number of shares of Common Stock into which such shares of Series F Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein. (h) Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation (other than a consolidation, merger or sale which is treated as a liquidation pursuant to Subsection 3(a)), each share of Series F Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series F 39 Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 5 with respect to the rights and interest thereafter of the holders of the Series F Preferred Stock, to the end that the provisions set forth in this Section 5 shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series F Preferred Stock. (i) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the holders of the Series F Preferred Stock against impairment of their conversion rights. (j) Notice of Record Date. In the event: (i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation; (ii) that the Corporation subdivides or combines its outstanding shares of Common Stock; (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation, or of the sale of all or substantially all of the assets of the Corporation; or (iv) of the involuntary or voluntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series F Preferred Stock, and shall cause to be mailed to the holders of the Series F Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten (10) days prior to the record date specified in (A) below or twenty (20) days before the date specified in (B) below, a notice stating 40 (A) the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or (B) the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up. (k) Optional Conversion. Except as set forth in Section 5(a) hereof, the holders of the Series F Preferred Stock shall not have the right to convert their shares of Series F Preferred Stock into Common Stock. 6. Redemption. The Corporation shall not have any right to redeem the Series F Preferred Stock. FIFTH. The Board of Directors shall have the power to adopt, amend or repeal the by-laws. SIXTH. No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article Sixth shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. SEVENTH. The number of directors constituting the entire Board of Directors shall be as set forth in or pursuant to the by-laws of the Corporation. The Board of Directors shall be divided into three classes, designated Classes I, II and III, which shall be as nearly equal in number as possible. Initially, directors of Class I shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1995, directors of Class II shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1996 and directors of Class III 41 shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1997. At each annual meeting of stockholders following such initial classification and election, the respective successors of each class shall be elected for three-year terms. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this Restated Certificate of Incorporation to be signed by its President and attested by its Secretary this day of June, 1994. SHARED TECHNOLOGIES INC. ATTEST /s/ Kenneth M. Dorros By:/s/ Anthony D. Autorino Kenneth M. Dorros, Secretary Anthony D. Autorino President [Corporate Seal] EX-3.(I).2 8 CERTIFICATE OF MERGER EXHIBIT 3(i).2 CERTIFICATE OF MERGER OF FAIRCHILD INDUSTRIES, INC. INTO SHARED TECHNOLOGIES INC. The undersigned corporation, organized and existing under and by virtue of the General Corporation Law of Delaware, DOES HEREBY CERTIFY: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger is as follows: NAME STATE OF INCORPORATION Fairchild Industries, Inc. Delaware Shared Technologies Inc. Delaware SECOND: That an Agreement of Plan of Merger, as amended, between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of section 251 of the General Corporation Law of Delaware. THIRD: That the name of the surviving corporation of the merger is Shared Technologies Inc., which shall herewith be changed to Shared Technologies Fairchild Inc. FOURTH: That the amendment in the Restated Certificate of Incorporation of Shared Technologies Inc., a Delaware corporation, which is the surviving corporation, that is to be effected by the merger is as follows: To amend Article First of the Corporation's Restated Certificate of Incorporation to read in its entirety as follows: "FIRST. The name of this corporation shall be: SHARED TECHNOLOGIES FAIRCHILD INC." To amend the first paragraph of Article Fourth of the Corporation's Restated Certificate of Incorporation to read in its entirety as follows: "FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 50,000,000 shares of Common Stock, $.004 par value per share (the "Common Stock"), and (ii) 25,000,000 shares of Preferred Stock, $.01 par value per share (the "Preferred Stock"), of which 5,000,000 shares have been designated Series C Preferred Stock (the "Series C Preferred Stock"), 1,000,000 shares have been designated Series D Preferred Stock (the "Series D Preferred Stock"), 250,000 shares have been designated Series G 6% Cumulative Convertible Preferred Stock (the "Series G Preferred Stock"), 200,000 shares have been designated Series H Special Preferred Stock (the "Series H Preferred Stock"), 250,000 shares have been designated Series I 6% Cumulative Convertible Preferred Stock (the "Series I Preferred Stock") and 200,000 shares have been designated Series J Special Preferred Stock (the "Series J Preferred Stock")" As so amended, the Restated Certificate of Incorporation of Shared Technologies Inc. shall be the Restated Certificate of Incorporation of the surviving corporation. FIFTH: That the executed Agreement of Plan of Merger, as amended, is on file at the principal place of business of the surviving corporation, the address of which is 100 Great Meadow Road, Suite 104, Wethersfield, CT 06109. SIXTH: That a copy of the Agreement of Plan of Merger, as amended, will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation. Dated: March 13, 1996 SHARED TECHNOLOGIES INC. By: /s/ Kenneth M. Dorros Kenneth M. Dorros, Senior Vice President 2 EX-3.(I).3 9 CERTIFICATE OF INCORPORATION EXHIBIT 3(i).3 CERTIFICATE OF INCORPORATION OF SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP. FIRST. The name of this corporation shall be: SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP. SECOND. The address of its registered office in the State of Delaware is 1209 Orange Street, Wilmington, DE 19801, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The purpose of the corporation shall be: To engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 3,000 shares of Common Stock, $.004 par value per share (the "Common Stock"). A. Common Stock. Shares of Common Stock shall have the following voting powers, rights and preferences: 1. Voting Rights. Except as otherwise required by Statute or as otherwise provided in this Certificate of Incorporation, the holders of shares of Common Stock shall be entitled to vote on all matters at all meetings of the stockholders of the Corporation, and shall be entitled to one vote for each share of Common Stock entitled to vote at such meeting. 2. Dividends. The holders of shares of Common Stock shall be entitled to receive such dividends as may be declared by the Board of Directors. 3. Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Common Stock shall be entitled to receive all of the remaining assets of the Corporation available for distribution to the holders of Common Stock, ratably in proportion to the number of shares of Common Stock held by them. FIFTH. A. The name and mailing address of the sole incorporator is as follows: NAME MAILING ADDRESS Steven M. Shishko c/o Gadsby & Hannah 125 Summer Street Boston, MA 02110 B. The name and mailing address of each person who is to serve as director until the first annual meeting of the stockholders or until successors are elected and qualified, are as follows: NAME MAILING ADDRESS Anthony D. Autorino c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 Mel D. Borer c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 Vincent DiVencenzo c/o Shared Technologies Fairchild Commuications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 Jeffrey J. Steiner c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 Donald E. Miller c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 2 Thomas H. Decker c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 William A. DiBella c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 Ajit G. Hutheesing c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 Edward J. McCormack, Jr. c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 Jo McKenzie c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 Herbert L. Oakes, Jr. c/o Shared Technologies Fairchild Communications Corp. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 SIXTH. The Board of Directors shall have the power to adopt, amend or repeal the by-laws. SEVENTH. No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article Seventh shall apply to or have any effect on he liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. EIGHTH. The number of directors constituting the entire Board of Directors shall be as set forth in or pursuant to the by-laws of the Corporation. The Board of Directors shall be divided into three classes, designated Classes I, II and III, which shall 3 be as nearly equal in number as possible. Initially, directors of Class I shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1997, directors of Class II shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1998 and directors of Class III shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1999. At each annual meeting of stockholders following such initial classification and election, the respective successors of each class shall be elected for three-year terms. THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, does make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 6th day of March, 1996. /s/ Steven M. Shishko Steven M. Shishko Sole Incorporator EX-3.(II).1 10 AMENDED AND RESTATED BYLAWS EXHIBIT 3(ii).1 AMENDED AND RESTATED BYLAWS OF SHARED TECHNOLOGIES INC. (Effective as of June 15, 1994) ARTICLE I Identification Section 1. Name. The name of the corporation is SHARED TECHNOLOGIES INC. (the "Corporation"). Section 2. Principal Office and Place of Business. The principal office of the Corporation shall be located at such location, within or without the State of Delaware, as the board of directors shall designate from time to time. The board of directors shall have the power and authority to establish and maintain branch or subordinate offices at any other locations within or without the State of Delaware. The registered office of the Corporation shall be 1013 Centre Road in Wilmington, Delaware. The registered agent in Delaware shall be the Corporation Service Company. ARTICLE II Shareholders Section 1. Place of Meetings. Annual and special meetings shall be held at the principal office of the Corporation or at such other place within or without the State of Delaware, as may be determined by the board of directors and designated in the notice of the meeting. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any other place as the place for holding such meeting. Section 2. Annual Meeting. The annual meeting for the election of directors, and for the transaction of such other business of the shareholders as may properly be brought before the meeting, shall be held on the third Tuesday in May at such place and at such time as may be designated by the board of directors. If the annual meeting of the shareholders is not held as herein prescribed, the existing slate of directors shall remain in office and the election of directors may be held at any meeting thereafter called pursuant to these bylaws or otherwise lawfully held. Section 3. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by law, may be called at any time by the Chairman of the board of directors. The Chairman shall call a special meeting of the shareholders upon written request of the shareholders entitled to cast not less than ten percent (10%) of all the issued and outstanding shares of the Corporation entitled to vote for the purposes specified in such request. If the Chairman does not within fifteen (15) days after the receipt of such shareholders request call such meeting, the shareholders may call the same. The general purpose or purposes for which a special meeting is called shall be stated in the notice thereof and no other business shall be transacted at the meeting, unless all shareholders entitled to vote are present and consent thereto. Section 4. Notice of Meeting. Written or printed notice stating the place, day, and hour of any shareholders' meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, unless a greater period of notice is required by law in a particular case, either personally or by mail, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid; provided, however, that in the case of shareholders who are employees of the Corporation delivery at the office address of such employee shall be sufficient. Any matter relating to the affairs of the Corporation may be brought up for action at the annual meeting of shareholders, whether or not stated in the notice of the meeting; provided, however, that unless stated in the notice of the meeting, no bylaw may be brought up for adoption, amendment or repeal and no matter, other than the election of directors, may be brought up which expressly requires the vote of shareholders. Section 5. Waiver of Notice. Notice of any shareholders' meeting may be waived in writing by any shareholder either before or after the time stated therein and, if any person present at a shareholders' meeting does not protest, prior to or at the commencement of the meeting, the lack of proper notice, such person shall be deemed to have waived notice of such meeting. Section 6. Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of such shareholders for any other proper purpose, the directors of the Corporation shall fix in advance a date as the record date for any such determination of shareholders, which date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting of shareholders, nor more than sixty (60) days prior to any other action. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a distribution, the date on which notice of the meeting is mailed or the date on which the resolution of the directors declaring such distribution is adopted, shall be the record date for such determination of shareholders. The record date is effective as of the close of business on such date. When a determination of shareholders entitled to vote at 2 any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof which is thirty (30) days or less. Section 7. Voting Lists and Inspection. The officer of the Corporation having responsibility for the share transfer books shall make, or cause to be made, at least ten (10) days before each meeting of shareholders, a complete list or other equivalent record of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of, and the number and class of shares held by, each. Such list or other equivalent record shall, for a period of ten (10) days prior to such meeting, be kept on file at the principal office of the Corporation and shall be subject to inspection by any shareholders during usual business hours for any proper purpose in the interest of the shareholder or of the Corporation. Such list or equivalent record shall also be produced and kept open to such inspection during the whole time of the meeting. The original share transfer book shall be prima facie evidence as to the shareholders entitled to inspect such list or other equivalent record. Section 8. Quorum and Adjournment of Shareholders' Meetings. At any meeting of shareholders at least one-third of the outstanding shares of the Corporation entitled to vote at such meeting, and represented in person or by proxy, shall constitute a quorum of the shareholders, unless the representation of a larger number shall be required by law, and, in that case, the representation of the number so required shall constitute a quorum. If a larger number shall be required by law and less than said number of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice until a quorum is present or represented, at which time any business may be transacted which might have been transacted at the meeting as originally notified; provided, however, that the adjournment does not exceed thirty (30) days. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of any shareholders, unless the absence of a quorum is specifically noted, by the chairman of the meeting. Section 9. Voting. At each meeting of the shareholders, every shareholder entitled to vote shall have one vote for each share of stock registered in his or her name as of the record date for said meeting. Upon the demand of any shareholder, the vote upon any question before the meeting shall be by written ballot; provided, however, that the election of the board of directors shall not be by written ballot. All questions shall be decided by majority vote except as otherwise provided by these bylaws, the certificate of incorporation, or laws of the State of Delaware. Section 10. Proxies. Each shareholder entitled to vote at a meeting of shareholders may authorize another person or persons to act for him by proxy. All proxies shall be in writing and shall be filed with the Secretary of the Corporation before being voted. A proxy shall not be voted or acted upon after three (3) years from its date of execution unless it specifies a longer length of time for which it is to continue in force or limits its use to a particular meeting not yet held. 3 A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. Section 11. Shareholders' Action Without Meeting. Any action which is required or permitted to be taken at any meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those shareholders who have not consented in writing to such action. The Secretary of the Corporation shall file such consent or consents, or certify the tabulations of such consents and file such certificate with the minutes of the shareholders. Section 12. Irregular Shareholders' Meetings. Actions taken at any meeting of shareholders, however called and with whatever notice, if any, are as valid as though taken at a meeting duly called and held with notice if: (a) all shareholders entitled to vote were present in person or by proxy and no objection to holding the meeting was made by any shareholder; or (b) a quorum was present, either in person or by proxy, and no objection to holding the meeting was made by any shareholder entitled to vote and not present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of the meeting, or an approval of the action taken as shown by the minutes thereof. All such waivers, consents or approval shall be filed with the corporate records or be made a part of the minutes. The absence from the minutes of any indication that a shareholder objected to holding the meeting shall prima facie establish that no such objection was made. Section 13. Order of Business. The order of business at the annual meeting of the shareholders and, insofar as practical, at all other meetings of shareholders, shall be established by the Chairman. 4 ARTICLE III Board of Directors Section 1. General Powers. The business and affairs of the Corporation shall be managed by the board of directors. The board of directors shall be divided into three classes, designated Classes I, II and III, which shall be as nearly equal in number as possible. The initial directors of Class I shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1995, the initial directors of Class II shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1996, and the initial directors of Class III shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1997. At each annual meeting of stockholders following such initial classification and election, the respective successors of each class shall be elected for three-year terms. Section 2. Number, Election and Term of Office. The number of directors shall be fixed from time to time by resolution of the board of directors, but shall not be less than three (3) nor more than eleven (11). In case of any increase in the number of directors in advance of an annual meeting of stockholders, each additional director shall be elected by the directors then in office, although less than a quorum, to hold office until the next election of the class for which such director shall have been chosen, and until his successor shall have been duly elected and qualified (subject to Section 3 of this Article III). No decrease in the number of directors shall shorten the term of any incumbent director. Any newly-created or eliminated directorships resulting from an increase or decrease shall be apportioned by the board of directors among the three classes of directors so as to maintain such classes as nearly equal as possible. It shall not be a qualification of office that the directors be residents of the State of Delaware or stockholders of the Corporation. Section 3. Vacancies. In case of any vacancy in the board of directors through death, resignation, retirement, removal, disqualification or other cause, the remaining directors, by vote of a majority thereof, shall elect a successor to hold office for the unexpired portion of the term of office of the class for which such vacancy occurs, and until the election of his successor. Any director elected by the remaining board of directors to fill a vacancy created by any of the foregoing reasons or by an increase in the number of directors constituting the entire board of directors must subsequently be approved or confirmed by the holders of a majority of the shares of common stock of the Corporation present in person, or represented by proxy, and entitled to vote at the next annual meeting of stockholders. If the director elected to fill such vacancy by the board of directors is not subsequently approved by the stockholders, and if another candidate is not elected at the annual meeting of stockholders in accordance with federal securities laws and these bylaws, then the number of directors constituting the entire board of directors will automatically be reduced and, if necessary, the number of directors serving in each class will be reapportioned so that the number of directors serving in each class will be as nearly equal as possible. 5 Section 4. Meetings. The board of directors shall meet each year following the annual meeting of the shareholders and shall hold regular meetings on the third Tuesday of January, March, May, July, September and November. Meetings of the board of directors, regular or special, may be held either within or without the State of Delaware. Regular meetings may be held with or without notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting need be specified in the notice or waiver of notice, unless otherwise provided by law, the certificate of incorporation or these bylaws. One or more directors, or a member of a committee of the board of directors, may participate in a meeting of the board of directors or such committee by means of a conference telephone or similar communications equipment enabling all directors participating in the meeting to hear one another, and such participation in a meeting shall constitute presence in person at such meeting. Section 5. Special Meetings. Special meetings of the board of directors may be called by or at the request of the Chairman or any three (3) directors. At least two (2) days' written or oral notice of special meetings of the directors shall be given to each director. Section 6. Notice and Waiver. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except when a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Section 7. Quorum and Voting. A majority of the authorized number of directors shall constitute a quorum for the transaction of business. If, at any meeting of the board of directors, less than a quorum is present, a majority of those directors present may adjourn the meeting from time to time without further notice. The act of a majority of the directors present at a duly called meeting at which a quorum is present at the time of the act shall be the act of the board of directors. The affirmative vote of the directors holding a majority of the directorships shall be required for action by the board of directors on any matter whatsoever. Section 8. Action Without Meeting. Any action which is required or permitted to be taken at any meeting of the board of directors, or a committee thereof, may be taken without such a meeting; provided, however, that all of the directors or all of the members of a committee thereof, as the case may be, severally or collectively consent in writing to such action before or after the time such action is taken. The Secretary of the Corporation shall file such consents with the minutes of the meeting of the board of directors. Section 9. Presumption of Assent. A director of the Corporation who is present at a meeting of the directors at which action on any corporate matter is taken shall be 6 presumed to have assented to the action taken unless a dissent shall be entered in the minutes of the meeting or unless he shall file a written dissent to such action with the person acting as the clerk of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation within five days after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 10. Executive Committee. The board of directors shall designate three (3) directors to constitute an executive committee. The executive committee shall have and may exercise all of the authority of the board of directors subject, however, to any limitations the board of directors may place on such authority from time to time by resolution. Section 11. Audit Committee. The board of directors shall designate three (3) directors to constitute an audit committee. The audit committee shall have and may exercise such authority and perform such acts as the board of directors may from time to time direct by resolution and/or as required by applicable law. Section 12. Compensation Committee. The board of directors shall designate four (4) directors to constitute a compensation committee. The compensation committee shall set the compensation of the President and review, from time to time, the compensation policies and procedures of the Corporation. The compensation committee shall have and may exercise such other authority and perform such other acts as the board of directors may, from time to time, direct by resolution. Section 13. Ad Hoc Committees. The board of directors may designate one (1) or more directors to constitute such ad hoc committees as the board of directors shall deem necessary or appropriate. Each such committee shall have and may exercise all such authority of the board of directors as shall be provided in the resolution establishing such committee, subject to the provisions of the certificate of incorporation. Section 14. Committee Minutes. Each committee shall keep minutes of its proceedings, copies of which shall be provided to each and every member of the board of directors. Section 15. Alternate Committee Members. The board of directors may designate one (1) or more directors to serve as alternate members of any committee. An alternate may replace any disqualified or absent member of the committee with respect to which he was designated to serve as an alternate member; provided, however, that in the event of the death or resignation of any permanent committee member the board of directors must designate a replacement and the alternate may not act in such member's place. Section 16. Compensation of Directors. The board of directors shall determine the compensation, if any, to be paid to the directors for their services as directors, including reasonable allowance for expenses actually incurred in connection with their duties. 7 Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation thereof when properly authorized. Section 17. [Intentionally Omitted.] Section 18. Resignation. A director may resign at any time by giving written notice to the board of directors, the Chairman, or the Secretary of the Corporation. Unless otherwise specified in the notice, the resignation shall be effective immediately upon receipt thereof by the Corporation, and the acceptance of the resignation shall not be necessary to make it effective. Section 19. Interested Directors. A contract or other transaction between the Corporation and a director or a member of his immediate family or between the Corporation and any other corporation, firm, association or entity in which a director of the Corporation and members of his immediate family have an interest shall not be either void or voidable and such director shall not incur any liability, merely because such director is a party thereto or because of such family relationship or interest if: (i) such family relationship or such interest, if it is a substantial interest, is fully disclosed and the contract or transaction is not unfair as to the Corporation and is authorized by (a) directors or other persons who have no substantial interest in such contract or transaction in such manner as to be effective without the vote, assent or presence of the director concerned or (b) the written consent of all the directors who have no substantial interest in such contract or transaction, whether or not such directors constitute a quorum of the Board of directors; or (ii) such family relationship or such interest, if it is a substantial interest, is fully disclosed and the contract or transaction is approved by the affirmative vote of the holders of a majority of the voting power of the shares entitled to vote; or (iii) the contract or transaction is not with the director or a member of his immediate family and any such interest is not substantial or (iv) the contract or transaction is fair as to the Corporation. A contract or other transaction between a director or a member of his immediate family with a third party which might otherwise have been entered into by the Corporation and such third party shall be deemed authorized if effected in compliance with this section. In the absence of fraud (without giving effect to the meaning of that term under the applicable Federal or state securities law), no director engaging in a transaction authorized under the provisions hereof shall be liable to the Corporation or to any shareholder or creditor thereof, or to any other person for any loss incurred by it under or by reason of such contract or transaction, nor shall any such director be accountable for any gains or profits realized therefrom. Section 20. Determination of Terms and Conditions of Additional Classes of Stock. The board of directors is authorized to fix and determine terms, limitations and relative rights and preferences of any preferred or special class of shares. 8 ARTICLE IV Officers Section 1. Officers. The Board of Directors shall appoint as officers of the Corporation a President, a Secretary, a Treasurer and any number of Vice Presidents. The board of directors may elect a Chairman of the board of directors and may, in its discretion, appoint such other officers and assistant officers as the business of the Corporation may require. Any individual may hold more than one office; provided, however, that no one individual may hold the offices of President and Secretary. Section 2. Election and Term of Office. The officers of the Corporation shall be appointed or elected by the board of directors in such manner as they may prescribe. Each officer shall hold office for a term of one (1) year and until a successor is elected and qualified, or until the death, resignation or removal of such officer. Section 3. Removal. Any officer or agent may be removed by the board of directors at any time, with or without cause and with or without notice or hearing. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. A vacancy in any office because of death, resignation, removal or otherwise, may be filled by the board of directors for the unexpired portion of the term. Section 5. Chairman. The Chairman shall preside at all meetings of shareholders and directors and shall have such powers as may be conferred from time to time by the board of directors. He shall be a member of all committees of the board of directors. Section 6. President. The President shall be the chief executive officer of the Corporation; he shall have general and active management of the business of the Corporation, shall see that all orders and resolutions of the board of directors are carried into effect, subject, however, to the right of the board of directors to delegate any specific powers, except as may be exclusively conferred on the President by law, to the Chairman or any other officer of the Corporation. He shall execute bonds, mortgages and other contracts requiring a seal under the seal of the Corporation. He shall be an EX-OFFICIO member of all committees of the Board of Directors except when the office of Chairman and President are held by the same individual, and shall have the general power and duties of supervision and management usually vested in the office of President of a corporation. Section 7. Vice Presidents. In the absence of the President or in the event of the inability or refusal to act of the President, the Vice-President, if one is appointed, or if there shall be more than one Vice-President, the Vice Presidents in the order designated by the directors (or if there be no such designation, then in the order of their election) 9 shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 8. Secretary. The Secretary shall attend all meetings of the board of directors and all meetings of the shareholders and act as clerk thereof, and record all votes of the directors and shareholders and the minutes of all proceedings of the directors and shareholders in a book to be kept for that purpose and shall perform like duties for the committees of the board of directors when required. The Secretary shall give, or cause to be given, all notices required by law or these bylaws, and shall perform such other duties as may be prescribed by the board of directors or President, under whose supervision he shall be. The Secretary shall have custody of the corporate seal of the Corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of an Assistant Secretary. The board of directors may give general authority to any other officer to affix the corporate seal of the Corporation and to attest to the affixing by his signature. Section 9. Assistant Secretary. The Assistant Secretary, if one shall be appointed, or if there be more than one, the Assistant Secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 10. Treasurer. The Treasurer shall have charge and custody of and be responsible for all funds and securities of the Corporation, keep full and accurate accounts of receipts and disbursements and other customary financial records of the Corporation, deposit all monies and valuable effects in the name and to the credit of the Corporation in depositories designated by the board of directors, disburse the funds of the Corporation as may be ordered by the board of directors or the President, taking proper vouchers for such disbursements, render to the board of directors or the President whenever they request an accounting of all of his transactions as Treasurer or of the financial condition of the Corporation and, in general, perform such other duties as may from time to time be assigned to him by the board of directors or by the President or as are incident to the office of Treasurer. Section 11. Assistant Treasurer. The Assistant Treasurer, if one shall be appointed, or if there shall be more than one, the Assistant Treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and 10 shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 12. Absence or Disability of Officers. In the case of the absence or disability of any officer of the Corporation and of any person hereby authorized to act in his place during his absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer, or to any director, or to any other person whom it may select. ARTICLE V Issue and Transfer of Stock Section 1. Certificate for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the board of directors. Such certificates shall be signed by the President and by the Secretary or by such other officers authorized by law and by the board of directors. All certificates for shares of each class shall be consecutively numbered or otherwise identified and sealed with the seal of the Corporation. The names and addresses of the shareholders, the number of shares, and dates of issue shall be entered on the stock transfer books of the Corporation. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each shareholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law of Delaware or a statement that the corporation will furnish without charge to each shareholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 11 Any or all of the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall cease to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 2. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the Corporation may proceed to collect the amount due in the same manner as any debt due the Corporation; provided, however, that such subscription is in writing and signed by the subscriber. Section 3. Issuance of Stock. The board of directors is hereby authorized and empowered to issue from time to time all or any part of the shares of its unissued authorized capital stock, as then constituted, for such consideration, in money or other property, as the board of directors may deem advisable; and all shares of the capital stock of this Corporation when issued shall be deemed fully paid and nonassessable and the holders of such shares shall not be liable thereunder to this Corporation or its creditors. Section 4. Transfer of Shares. a. Upon surrender to the Corporation or the transfer agent(s) of the Corporation, if any, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation or the transfer agent(s) of the Corporation, if any, to issue a new certificate to the person entitled thereto, and cancel the old certificate; every such transfer shall be entered on the transfer book of the Corporation which shall be kept at its principal office or the office of its transfer agent. b. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled. c. The Corporation shall be entitled to treat the holder of record of any share as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by law. Section 5. Lost, Destroyed and Stolen Certificates. Unless otherwise restricted by law, the Corporation may refuse to issue a certificate in place of any certificate alleged to 12 have been lost, destroyed, stolen, or mutilated except on production of such terms and indemnification to the Corporation as the directors may prescribe. ARTICLE VI Fiscal Year The fiscal year of the Corporation shall be designated by the board of directors. ARTICLE VII Seal The corporate seal of this Corporation shall be a circular seal and shall have inscribed thereon the Corporation's name and state of incorporation. ARTICLE VIII Amendments Section 1. By Directors or Shareholders. The bylaws of the Corporation may be altered, amended or repealed at any validly called and convened meeting of the shareholders by the affirmative vote of the holders of a majority of the voting power of shares entitled to vote thereon represented at such meeting in person or by proxy and at any validly called and convened meeting of the board of directors by the affirmative vote of a majority of the directors; provided, however, that the notice of such meeting shall state that such alteration, amendment or repeal will be proposed. Section 2. Record of Changes. Whenever a bylaw is amended or repealed or a new bylaw is adopted, such action and the date on which it was taken shall be noted on the original bylaws in the appropriate place or a new set of bylaws shall be prepared incorporating such changes. Section 3. Inconsistencies with Certificate of Incorporation. If any provisions of these bylaws shall be found to be inconsistent with any provisions of the certificate of incorporation, as presently existing, or as from time to time amended, the latter shall constitute the controlling authority. 13 ARTICLE IX Miscellaneous Section 1. Inspection of Corporate Records. The Corporation shall keep correct and complete books and records of account and shall also keep minutes of all meetings of shareholders and directors. Additionally, a record shall be kept at the principal executive office of the Corporation, giving the names and addresses of all shareholders, and the number and class or classes of shares held by each. The original or a copy of the certificate of incorporation and bylaws of the Corporation, as amended, or otherwise altered to date, and certified by the Secretary of the Corporation, shall at all times be kept at the principal office of the Corporation and shall be open to inspection by all shareholders of record or holders of voting trust certificates at all reasonable times during the business hours of the Corporation. At intervals of not more than twelve (12) months, the Corporation shall prepare a balance sheet showing the financial condition of the Corporation as of a date not more than four (4) months prior thereto and a profit and loss statements respecting its operation for the twelve months preceding such date. The balance sheet and a profit and loss statement shall be deposited at the principal office of the Corporation and kept for at least ten years from such date. Any shareholder of record shall, upon written request under oath to the Corporation stating the purpose thereof, have the right to conduct an examination in person, or by agent or attorney, at any reasonable time, for a specified, reasonable and proper purpose, of the Corporation's stock transfer books, a list of its shareholders and the board of directors, these bylaws, its minutes of the meetings of shareholders and the board of directors, and its other books and records, and to make copies and extracts thereof. A specified, reasonable and proper purpose shall mean a purpose reasonably related to such person's interest as a shareholder. In every instance, where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the shareholder. Section 2. Notices. Whenever, under the provisions of applicable law, the certificate of incorporation or these bylaws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail; provided, however, that in the case of shareholders which are employees of the Corporation delivery at the office address of such employee shall be sufficient. Notice to directors may also be given by telegram, and, where specifically provided for herein, orally. 14 Section 3. Waiver of Notice. Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these bylaws or under the provisions of the certificate of incorporation, a waiver thereof in writing, signed by the person or persons entitled to such notice shall be deemed equivalent to the giving of such notice. Attendance in person at any meeting shall constitute waiver of notice unless such attendance is for the purpose of contesting proper notice of the meeting. ARTICLE X Certification These amended and restated bylaws have been prepared pursuant to a resolution duly adopted by the board of directors and the stockholders dated June 8, 1994, and are the true and correct bylaws of the Corporation as of the effective date. In Witness Whereof, the undersigned, Kenneth M. Dorros, Secretary of the Corporation has set his hand and seal of the Corporation as of the 15th day of June, 1994. /s/Kenneth M. Dorros Kenneth M. Dorros Secretary EX-3.(II).2 11 AMENDMENT TO AMENDED AND RESTATED BYLAWS EXHIBIT 3(ii).2 AMENDMENT TO AMENDED AND RESTATED BYLAWS OF SHARED TECHNOLOGIES INC. (Amendment to Amended and Restated Bylaws dated June 15, 1994) Effective Date of Amendment: March 13, 1996 Pursuant to a resolution duly adopted by the Board of Directors of Shared Technologies Inc. (the "Corporation"), the Amended and Restated Bylaws of the Corporation dated as of June 15, 1994 (the "Bylaws") are hereby amended as follows: 1. Article I, Section 1 of the Bylaws is deleted in its entirety and is replaced by the following paragraph: "Section 1. Name. The name of the Corporation is SHARED TECHNOLOGIES FAIRCHILD INC. (the "Corporation")." 2. Article II, Section 11 of the Bylaws is deleted in its entirety and is replaced by the following paragraph: "Section 11. Shareholders' Action Without Meeting. No action requiring shareholder approval may be taken without a meeting of the shareholders entitled to vote thereon." 3. Article III, Section 1 of the Bylaws shall be amended to include the following sentences at the end of such section: "So long as The Fairchild Corporation and its affiliates (collectively, "TFC") owns 25% or more of the common stock of the Corporation that TFC owned on March 13, 1996 TFC shall have the irrevocable right to appoint four (4) members of the Board of Directors; provided, that so long as Mel D. Borer is President and a Director of the Corporation, TFC shall only be entitled to appoint three (3) directors." "The Board of Directors may not grant any options for, or any other rights to acquire, common stock of the Corporation, except for options issued pursuant to a plan approved by the shareholders or in a transaction with non-affiliates where such party pays cash for such option or right, unless such transaction is approved by a majority of the shareholders." 4. Article III, Section 10 of the Bylaws shall be deleted in its entirety and replaced with the following paragraph: "Section 10. Executive Committee. The Board of Directors of the Corporation shall have an executive committee consisting of the President, a director appointed by TFC as long as TFC owns at least 25% of the common stock of the Corporation that TFC owned on March 13, 1996 and a third director appointed by the Board of Directors of the Corporation. All actions taken by the Executive Committee may only be taken pursuant to a unanimous vote by the members thereof." 5. Article III, Sections 11, 12 and 13 shall be amended to include the following sentence as the second sentence of each such section: "As long as TFC owns at least 25% of the common stock of the Corporation, TFC will be entitled to appoint one director to such committee." 6. Article IV, Section 5 shall be amended to include the following sentence at the end of such section: "The Corporation shall have a Vice Chairman of the Board of Directors who shall have such duties as are designated by the Board of Directors." 7. Article IV, Section 6 shall be deleted in its entirety and replaced with the following paragraph: "Section 6. Executive Officers. The Chairman of the Board of the Corporation shall also be the Chief Executive Officer of the Corporation and shall be the senior executive of the Corporation and shall have overall supervision of the affairs of the Corporation. The President of the Corporation shall also be the Chief Operating Officer of the Corporation and he shall be responsible for the day-to-day business operations of the Corporation under the direction of the Chief Executive Officer. Each of the Chief Executive Officer and the President shall see that all orders and resolutions of the Board of Directors of the Corporation are carried into effect, subject, however, to the right of the Board of Directors to delegate any specific powers, except as may be exclusively conferred on the President by law, to the Chairman or any other officer of the Corporation. Each of the Chief Executive Officer and the President may execute bonds, mortgages, and other contracts requiring a signature under the seal of the Corporation. 2 8. Article VIII, Section 1 shall be deleted in its entirety and replaced with the following paragraph: "Section 1. By Directors or Shareholders. The bylaws of the Corporation may be altered, amended or repeated at any validly called and convened meeting of the shareholders by the affirmative vote of the holders of a majority of the voting power of shares entitled to vote thereon represented at such meeting in person or by proxy and at any validly called and convened meeting of the board of directors by the affirmative vote of at least a majority of the directors (unless such alteration, amendment or repeal in any way adversely affects the rights granted to TFC hereunder or in Article II, Section 11, Article III, Section 10 or Article IV, Section 6 of these bylaws, in which event a vote of 80% of the directors shall be required); provided, however, that the notice of such meeting shall state that such alteration, amendment or repeal will be proposed." In all other respects, the Bylaws shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned, Kenneth M. Dorros, Secretary of the Corporation has set his hand and seal of the Corporation to this Amendment as of the 13th day of March, 1996. /s/ Kenneth M. Dorros Kenneth M. Dorros, Secretary 3 EX-3.(II).3 12 BYLAWS EXHIBIT 3(ii).3 BYLAWS OF SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP. ARTICLE I Identification Section 1. Name. The name of the corporation is SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP. (the "Corporation"). Section 2. Principal Office and Place of Business. The principal office of the Corporation shall be located at such location, within or without the State of Delaware, as the board of directors shall designate from time to time. The board of directors shall have the power and authority to establish and maintain branch or subordinate offices at any other locations within or without the State of Delaware. The registered office of the Corporation shall be 1209 Orange Street, Wilmington, Delaware 19801. The registered agent in Delaware shall be the The Corporation Trust Company. ARTICLE II Shareholders Section 1. Place of Meetings. Annual and special meetings shall be held at the principal office of the Corporation or at such other place within or without the State of Delaware, as may be determined by the board of directors and designated in the notice of the meeting. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any other place as the place for holding such meeting. Section 2. Annual Meeting. The annual meeting for the election of directors, and for the transaction of such other business of the shareholders as may properly be brought before the meeting, shall be held on the third Tuesday in May at such place and at such time as may be designated by the board of directors. If the annual meeting of the shareholders is not held as herein prescribed, the existing slate of directors shall remain in office and the election of directors may be held at any meeting thereafter called pursuant to these bylaws or otherwise lawfully held. Section 3. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by law, may be called at any time by the Chairman of the board of directors. The Chairman shall call a special meeting of the shareholders upon written request of the shareholders entitled to cast not less than ten percent (10%) of all the issued and outstanding shares of the Corporation entitled to vote for the purposes specified in such request. If the Chairman does not within fifteen (15) days after the receipt of such shareholders request call such meeting, the shareholders may call the same. The general purpose or purposes for which a special meeting is called shall be stated in the notice thereof and no other business shall be transacted at the meeting, unless all shareholders entitled to vote are present and consent thereto. Section 4. Notice of Meeting. Written or printed notice stating the place, day, and hour of any shareholders' meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, unless a greater period of notice is required by law in a particular case, either personally or by mail, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid; provided, however, that in the case of shareholders who are employees of the Corporation delivery at the office address of such employee shall be sufficient. Any matter relating to the affairs of the Corporation may be brought up for action at the annual meeting of shareholders, whether or not stated in the notice of the meeting; provided, however, that unless stated in the notice of the meeting, no bylaw may be brought up for adoption, amendment or repeal and no matter, other than the election of directors, may be brought up which expressly requires the vote of shareholders. Section 5. Waiver of Notice. Notice of any shareholders' meeting may be waived in writing by any shareholder either before or after the time stated therein and, if any person present at a shareholders' meeting does not protest, prior to or at the commencement of the meeting, the lack of proper notice, such person shall be deemed to have waived notice of such meeting. Section 6. Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of such shareholders for any other proper purpose, the directors of the Corporation shall fix in advance a date as the record date for any such determination of shareholders, which date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting of shareholders, nor more than sixty (60) days prior to any other action. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a distribution, the date on which notice of the meeting is mailed or the date on which the resolution of the directors declaring such distribution is adopted, shall be the record date for such determination of shareholders. The record date is effective as of the close of business on such date. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof which is thirty (30) days or less. 2 Section 7. Voting Lists and Inspection. The officer of the Corporation having responsibility for the share transfer books shall make, or cause to be made, at least ten (10) days before each meeting of shareholders, a complete list or other equivalent record of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of, and the number and class of shares held by, each. Such list or other equivalent record shall, for a period of ten (10) days prior to such meeting, be kept on file at the principal office of the Corporation and shall be subject to inspection by any shareholders during usual business hours for any proper purpose in the interest of the shareholder or of the Corporation. Such list or equivalent record shall also be produced and kept open to such inspection during the whole time of the meeting. The original share transfer book shall be prima facie evidence as to the shareholders entitled to inspect such list or other equivalent record. Section 8. Quorum and Adjournment of Shareholders' Meetings. At any meeting of shareholders at least one-third of the outstanding shares of the Corporation entitled to vote at such meeting, and represented in person or by proxy, shall constitute a quorum of the shareholders, unless the representation of a larger number shall be required by law, and, in that case, the representation of the number so required shall constitute a quorum. If a larger number shall be required by law and less than said number of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice until a quorum is present or represented, at which time any business may be transacted which might have been transacted at the meeting as originally notified; provided, however, that the adjournment does not exceed thirty (30) days. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of any shareholders, unless the absence of a quorum is specifically noted, by the chairman of the meeting. Section 9. Voting. At each meeting of the shareholders, every shareholder entitled to vote shall have one vote for each share of stock registered in his or her name as of the record date for said meeting. Upon the demand of any shareholder, the vote upon any question before the meeting shall be by written ballot; provided, however, that the election of the board of directors shall not be by written ballot. All questions shall be decided by majority vote except as otherwise provided by these bylaws, the certificate of incorporation, or laws of the State of Delaware. Section 10. Proxies. Each shareholder entitled to vote at a meeting of shareholders may authorize another person or persons to act for him by proxy. All proxies shall be in writing and shall be filed with the Secretary of the Corporation before being voted. A proxy shall not be voted or acted upon after three (3) years from its date of execution unless it specifies a longer length of time for which it is to continue in force or limits its use to a particular meeting not yet held. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be irrevocable 3 regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. Section 11. Shareholders' Action Without Meeting. No action requiring shareholder approval may be taken without a meeting of the shareholders entitled to vote thereon. The Secretary of the Corporation shall file such consent or consents, or certify the tabulations of such consents and file such certificate with the minutes of the shareholders. Section 12. Irregular Shareholders' Meetings. Actions taken at any meeting of shareholders, however called and with whatever notice, if any, are as valid as though taken at a meeting duly called and held with notice if: (a) all shareholders entitled to vote were present in person or by proxy and no objection to holding the meeting was made by any shareholder; or (b) a quorum was present, either in person or by proxy, and no objection to holding the meeting was made by any shareholder entitled to vote and not present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of the meeting, or an approval of the action taken as shown by the minutes thereof. All such waivers, consents or approval shall be filed with the corporate records or be made a part of the minutes. The absence from the minutes of any indication that a shareholder objected to holding the meeting shall prima facie establish that no such objection was made. Section 13. Order of Business. The order of business at the annual meeting of the shareholders and, insofar as practical, at all other meetings of shareholders, shall be established by the Chairman. ARTICLE III Board of Directors Section 1. General Powers. The business and affairs of the Corporation shall be managed by the board of directors. The board of directors shall be divided into three classes, designated Classes I, II and III, which shall be as nearly equal in number as possible. The initial directors of Class I shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1997, the initial directors of Class II shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1997, and the initial directors of Class III shall be elected to hold office for a term expiring at the annual meeting of stockholders in 1998. At each annual meeting of stockholders following such initial classification and election, the respective successors of each class shall be elected for three-year terms. 4 So long as The Fairchild Corporation and its affiliates (collectively, "TFC") owns 25% or more of the common stock of Shared Technologies Fairchild Inc. that TFC owned on March 13, 1996, TFC shall have the irrevocable right to appoint four (4) members of the Board of Directors; provided, that so long as Mel D. Borer is President and a Director of the Corporation, TFC shall only be entitled to appoint three (3) directors. The Board of Directors may not grant any options for, or any other rights to acquire, common stock of the Corporation, except for options issued pursuant to a plan approved by the shareholders or in a transaction with non-affiliates where such party pays cash for such option or right, unless such transaction is approved by a majority of the shareholders. Section 2. Number, Election and Term of Office. The number of directors shall be fixed from time to time by resolution of the board of directors, but shall not be less than three (3) nor more than eleven (11). In case of any increase in the number of directors in advance of an annual meeting of stockholders, each additional director shall be elected by the directors then in office, although less than a quorum, to hold office until the next election of the class for which such director shall have been chosen, and until his successor shall have been duly elected and qualified (subject to Section 3 of this Article III). No decrease in the number of directors shall shorten the term of any incumbent director. Any newly-created or eliminated directorships resulting from an increase or decrease shall be apportioned by the board of directors among the three classes of directors so as to maintain such classes as nearly equal as possible. It shall not be a qualification of office that the directors be residents of the State of Delaware or stockholders of the Corporation. Section 3. Vacancies. In case of any vacancy in the board of directors through death, resignation, retirement, removal, disqualification or other cause, the remaining directors, by vote of a majority thereof, shall elect a successor to hold office for the unexpired portion of the term of office of the class for which such vacancy occurs, and until the election of his successor. Any director elected by the remaining board of directors to fill a vacancy created by any of the foregoing reasons or by an increase in the number of directors constituting the entire board of directors must subsequently be approved or confirmed by the holders of a majority of the shares of common stock of the Corporation present in person, or represented by proxy, and entitled to vote at the next annual meeting of stockholders. If the director elected to fill such vacancy by the board of directors is not subsequently approved by the stockholders, and if another candidate is not elected at the annual meeting of stockholders in accordance with federal securities laws and these bylaws, then the number of directors constituting the entire board of directors will automatically be reduced and, if necessary, the number of directors serving in each class will be reapportioned so that the number of directors serving in each class will be as nearly equal as possible. Section 4. Meetings. The board of directors shall meet each year following the annual meeting of the shareholders and shall hold regular meetings on the third Tuesday of January, March, May, July, September and November. Meetings of the board of directors, regular or special, may be held either within or without the State of Delaware. Regular meetings may be held with or without notice. Neither the business to be transacted at, nor 5 the purpose of, any regular or spe]cial meeting need be specified in the notice or waiver of notice, unless otherwise provided by law, the certificate of incorporation or these bylaws. One or more directors, or a member of a committee of the board of directors, may participate in a meeting of the board of directors or such committee by means of a conference telephone or similar communications equipment enabling all directors participating in the meeting to hear one another, and such participation in a meeting shall constitute presence in person at such meeting. Section 5. Special Meetings. Special meetings of the board of directors may be called by or at the request of the Chairman or any three (3) directors. At least two (2) days' written or oral notice of special meetings of the directors shall be given to each director. Section 6. Notice and Waiver. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except when a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Section 7. Quorum and Voting. A majority of the authorized number of directors shall constitute a quorum for the transaction of business. If, at any meeting of the board of directors, less than a quorum is present, a majority of those directors present may adjourn the meeting from time to time without further notice. The act of a majority of the directors present at a duly called meeting at which a quorum is present at the time of the act shall be the act of the board of directors. The affirmative vote of the directors holding a majority of the directorships shall be required for action by the board of directors on any matter whatsoever. Section 8. Action Without Meeting. Any action which is required or permitted to be taken at any meeting of the board of directors, or a committee thereof, may be taken without such a meeting; provided, however, that all of the directors or all of the members of a committee thereof, as the case may be, severally or collectively consent in writing to such action before or after the time such action is taken. The Secretary of the Corporation shall file such consents with the minutes of the meeting of the board of directors. Section 9. Presumption of Assent. A director of the Corporation who is present at a meeting of the directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless a dissent shall be entered in the minutes of the meeting or unless he shall file a written dissent to such action with the person acting as the clerk of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation within five days after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 10. Executive Committee. The Board of Directors of the Corporation shall have an executive committee consisting of the President, a director appointed by TFC as 6 long as TFC owns at least 25% of the common stock of the Corporation that TFC owned on March 13, 1996 and a third director appointed by the Board of Directors of the Corporation. All actions taken by the Executive Committee may only be taken pursuant to a unanimous vote by the members thereof. Section 11. Audit Committee. The board of directors shall designate three (3) directors to constitute an audit committee. As long as TFC owns at least 25% of the common stock of the Corporation, TFC will be entitled to appoint one director to such committee. The audit committee shall have and may exercise such authority and perform such acts as the board of directors may from time to time direct by resolution and/or as required by applicable law. Section 12. Compensation Committee. The board of directors shall designate four (4) directors to constitute a compensation committee. As long as TFC owns at least 25% of the common stock of the Corporation, TFC will be entitled to appoint one director to such committee. The compensation committee shall set the compensation of the President and review, from time to time, the compensation policies and procedures of the Corporation. The compensation committee shall have and may exercise such other authority and perform such other acts as the board of directors may, from time to time, direct by resolution. Section 13. Ad Hoc Committees. The board of directors may designate one (1) or more directors to constitute such ad hoc committees as the board of directors shall deem necessary or appropriate. As long as TFC owns at least 25% of the common stock of the Corporation, TFC will be entitled to appoint one director to such committee. Each such committee shall have and may exercise all such authority of the board of directors as shall be provided in the resolution establishing such committee, subject to the provisions of the certificate of incorporation. Section 14. Committee Minutes. Each committee shall keep minutes of its proceedings, copies of which shall be provided to each and every member of the board of directors. Section 15. Alternate Committee Members. The board of directors may designate one (1) or more directors to serve as alternate members of any committee. An alternate may replace any disqualified or absent member of the committee with respect to which he was designated to serve as an alternate member; provided, however, that in the event of the death or resignation of any permanent committee member the board of directors must designate a replacement and the alternate may not act in such member's place. Section 16. Compensation of Directors. The board of directors shall determine the compensation, if any, to be paid to the directors for their services as directors, including reasonable allowance for expenses actually incurred in connection with their duties. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation thereof when properly authorized. 7 Section 17. [Intentionally Omitted.] Section 18. Resignation. A director may resign at any time by giving written notice to the board of directors, the Chairman, or the Secretary of the Corporation. Unless otherwise specified in the notice, the resignation shall be effective immediately upon receipt thereof by the Corporation, and the acceptance of the resignation shall not be necessary to make it effective. Section 19. Interested Directors. A contract or other transaction between the Corporation and a director or a member of his immediate family or between the Corporation and any other corporation, firm, association or entity in which a director of the Corporation and members of his immediate family have an interest shall not be either void or voidable and such director shall not incur any liability, merely because such director is a party thereto or because of such family relationship or interest if: (i) such family relationship or such interest, if it is a substantial interest, is fully disclosed and the contract or transaction is not unfair as to the Corporation and is authorized by (a) directors or other persons who have no substantial interest in such contract or transaction in such manner as to be effective without the vote, assent or presence of the director concerned or (b) the written consent of all the directors who have no substantial interest in such contract or transaction, whether or not such directors constitute a quorum of the Board of directors; or (ii) such family relationship or such interest, if it is a substantial interest, is fully disclosed and the contract or transaction is approved by the affirmative vote of the holders of a majority of the voting power of the shares entitled to vote; or (iii) the contract or transaction is not with the director or a member of his immediate family and any such interest is not substantial or (iv) the contract or transaction is fair as to the Corporation. A contract or other transaction between a director or a member of his immediate family with a third party which might otherwise have been entered into by the Corporation and such third party shall be deemed authorized if effected in compliance with this section. In the absence of fraud (without giving effect to the meaning of that term under the applicable Federal or state securities law), no director engaging in a transaction authorized under the provisions hereof shall be liable to the Corporation or to any shareholder or creditor thereof, or to any other person for any loss incurred by it under or by reason of such contract or transaction, nor shall any such director be accountable for any gains or profits realized therefrom. Section 20. Determination of Terms and Conditions of Additional Classes of Stock. The board of directors is authorized to fix and determine terms, limitations and relative rights and preferences of any preferred or special class of shares. ARTICLE IV Officers 8 Section 1. Officers. The Board of Directors shall appoint as officers of the Corporation a President, a Secretary, a Treasurer and any number of Vice Presidents. The board of directors may elect a Chairman of the board of directors and may, in its discretion, appoint such other officers and assistant officers as the business of the Corporation may require. Any individual may hold more than one office; provided, however, that no one individual may hold the offices of President and Secretary. Section 2. Election and Term of Office. The officers of the Corporation shall be appointed or elected by the board of directors in such manner as they may prescribe. Each officer shall hold office for a term of one (1) year and until a successor is elected and qualified, or until the death, resignation or removal of such officer. Section 3. Removal. Any officer or agent may be removed by the board of directors at any time, with or without cause and with or without notice or hearing. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. A vacancy in any office because of death, resignation, removal or otherwise, may be filled by the board of directors for the unexpired portion of the term. Section 5. Chairman. The Chairman shall preside at all meetings of shareholders and directors and shall have such powers as may be conferred from time to time by the board of directors. He shall be a member of all committees of the board of directors. The Corporation shall have a Vice Chairman of the Board of Directors who shall have such duties as are designated by the Board of Directors. Section 6. Executive Officers. The Chairman of the Board of the Corporation shall also be the Chief Executive Officer of the Corporation and shall be the senior executive of the Corporation and shall have overall supervision of the affairs of the Corporation. The President of the Corporation shall also be the Chief Operating Officer of the Corporation and he shall be responsible for the day-to-day business operations of the Corporation under the direction of the Chief Executive Officer. Each of the Chief Executive Officer and the President shall see that all orders and resolutions of the Board of Directors of the Corporation are carried into effect, subject, however, to the right of the Board of Directors to delegate any specific powers, except as may be exclusively conferred on the President by law, to the Chairman or any other officer of the Corporation. Each of the Chief Executive Officer and the President may execute bonds, mortgages, and other contracts requiring a signature under the seal of the Corporation. Section 7. Vice Presidents. In the absence of the President or in the event of the inability or refusal to act of the President, the Vice-President, if one is appointed, or if there shall be more than one Vice-President, the Vice Presidents in the order designated by the directors (or if there be no such designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to 9 all the restrictions upon the President. The Vice Presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 8. Secretary. The Secretary shall attend all meetings of the board of directors and all meetings of the shareholders and act as clerk thereof, and record all votes of the directors and shareholders and the minutes of all proceedings of the directors and shareholders in a book to be kept for that purpose and shall perform like duties for the committees of the board of directors when required. The Secretary shall give, or cause to be given, all notices required by law or these bylaws, and shall perform such other duties as may be prescribed by the board of directors or President, under whose supervision he shall be. The Secretary shall have custody of the corporate seal of the Corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of an Assistant Secretary. The board of directors may give general authority to any other officer to affix the corporate seal of the Corporation and to attest to the affixing by his signature. Section 9. Assistant Secretary. The Assistant Secretary, if one shall be appointed, or if there be more than one, the Assistant Secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 10. Treasurer. The Treasurer shall have charge and custody of and be responsible for all funds and securities of the Corporation, keep full and accurate accounts of receipts and disbursements and other customary financial records of the Corporation, deposit all monies and valuable effects in the name and to the credit of the Corporation in depositories designated by the board of directors, disburse the funds of the Corporation as may be ordered by the board of directors or the President, taking proper vouchers for such disbursements, render to the board of directors or the President whenever they request an accounting of all of his transactions as Treasurer or of the financial condition of the Corporation and, in general, perform such other duties as may from time to time be assigned to him by the board of directors or by the President or as are incident to the office of Treasurer. Section 11. Assistant Treasurer. The Assistant Treasurer, if one shall be appointed, or if there shall be more than one, the Assistant Treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 12. Absence or Disability of Officers. In the case of the absence or disability of any officer of the Corporation and of any person hereby authorized to act in his place during his absence or disability, the board of directors may by resolution delegate the 10 powers and duties of such officer to any other officer, or to any director, or to any other person whom it may select. ARTICLE V Issue and Transfer of Stock Section 1. Certificate for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the board of directors. Such certificates shall be signed by the President and by the Secretary or by such other officers authorized by law and by the board of directors. All certificates for shares of each class shall be consecutively numbered or otherwise identified and sealed with the seal of the Corporation. The names and addresses of the shareholders, the number of shares, and dates of issue shall be entered on the stock transfer books of the Corporation. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each shareholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law of Delaware or a statement that the corporation will furnish without charge to each shareholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Any or all of the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall cease to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. 11 Section 2. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the Corporation may proceed to collect the amount due in the same manner as any debt due the Corporation; provided, however, that such subscription is in writing and signed by the subscriber. Section 3. Issuance of Stock. The board of directors is hereby authorized and empowered to issue from time to time all or any part of the shares of its unissued authorized capital stock, as then constituted, for such consideration, in money or other property, as the board of directors may deem advisable; and all shares of the capital stock of this Corporation when issued shall be deemed fully paid and nonassessable and the holders of such shares shall not be liable thereunder to this Corporation or its creditors. Section 4. Transfer of Shares. a. Upon surrender to the Corporation or the transfer agent(s) of the Corporation, if any, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation or the transfer agent(s) of the Corporation, if any, to issue a new certificate to the person entitled thereto, and cancel the old certificate; every such transfer shall be entered on the transfer book of the Corporation which shall be kept at its principal office or the office of its transfer agent. b. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled. c. The Corporation shall be entitled to treat the holder of record of any share as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by law. Section 5. Lost, Destroyed and Stolen Certificates. Unless otherwise restricted by law, the Corporation may refuse to issue a certificate in place of any certificate alleged to have been lost, destroyed, stolen, or mutilated except on production of such terms and indemnification to the Corporation as the directors may prescribe. ARTICLE VI Fiscal Year 12 The fiscal year of the Corporation shall be designated by the board of directors. ARTICLE VII Seal The corporate seal of this Corporation shall be a circular seal and shall have inscribed thereon the Corporation's name and state of incorporation. ARTICLE VIII Amendments Section 1. By Directors or Shareholders. The bylaws of the Corporation may be altered, amended or repealed at any validly called and convened meeting of the shareholders by the affirmative vote of the holders of a majority of the voting power of shares entitled to vote thereon represented at such meeting in person or by proxy and at any validly called and convened meeting of the board of directors by the affirmative vote of a majority of the directors; provided, however, that the notice of such meeting shall state that such alteration, amendment or repeal will be proposed. Section 1. By Directors or Shareholders. The bylaws of the Corporation may be altered, amended or repealed at any validly called and convened meeting of the shareholders by the affirmative vote of the holders of a majority of the voting power of shares entitled to vote thereon represented at such meeting in person or by proxy and at any validly called and convened meeting of the board of directors by the affirmative vote of at least a majority of the directors (unless such alteration, amendment or repeal in any way adversely affects the rights granted to TFC hereunder or in Article II, Section 11, Article III, Section 10 or Article IV, Section 6 of these bylaws, in which event a vote of 80% of the directors shall be required); provided, however, that the notice of such meeting shall state that such alteration, amendment or repeal will be proposed. Section 2. Record of Changes. Whenever a bylaw is amended or repealed or a new bylaw is adopted, such action and the date on which it was taken shall be noted on the original bylaws in the appropriate place or a new set of bylaws shall be prepared incorporating such changes. Section 3. Inconsistencies with Certificate of Incorporation. If any provisions of these bylaws shall be found to be inconsistent with any provisions of the certificate of incorporation, as presently existing, or as from time to time amended, the latter shall constitute the controlling authority. 13 ARTICLE IX Miscellaneous Section 1. Inspection of Corporate Records. The Corporation shall keep correct and complete books and records of account and shall also keep minutes of all meetings of shareholders and directors. Additionally, a record shall be kept at the principal executive office of the Corporation, giving the names and addresses of all shareholders, and the number and class or classes of shares held by each. The original or a copy of the certificate of incorporation and bylaws of the Corporation, as amended, or otherwise altered to date, and certified by the Secretary of the Corporation, shall at all times be kept at the principal office of the Corporation and shall be open to inspection by all shareholders of record or holders of voting trust certificates at all reasonable times during the business hours of the Corporation. At intervals of not more than twelve (12) months, the Corporation shall prepare a balance sheet showing the financial condition of the Corporation as of a date not more than four (4) months prior thereto and a profit and loss statements respecting its operation for the twelve months preceding such date. The balance sheet and a profit and loss statement shall be deposited at the principal office of the Corporation and kept for at least ten years from such date. Any shareholder of record shall, upon written request under oath to the Corporation stating the purpose thereof, have the right to conduct an examination in person, or by agent or attorney, at any reasonable time, for a specified, reasonable and proper purpose, of the Corporation's stock transfer books, a list of its shareholders and the board of directors, these bylaws, its minutes of the meetings of shareholders and the board of directors, and its other books and records, and to make copies and extracts thereof. A specified, reasonable and proper purpose shall mean a purpose reasonably related to such person's interest as a shareholder. In every instance, where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the shareholder. Section 2. Notices. Whenever, under the provisions of applicable law, the certificate of incorporation or these bylaws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail; provided, however, that in the case of shareholders which are employees of the Corporation delivery at the office address of such employee shall be sufficient. Notice to directors may also be given by telegram, and, where specifically provided for herein, orally. 14 Section 3. Waiver of Notice. Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these bylaws or under the provisions of the certificate of incorporation, a waiver thereof in writing, signed by the person or persons entitled to such notice shall be deemed equivalent to the giving of such notice. Attendance in person at any meeting shall constitute waiver of notice unless such attendance is for the purpose of contesting proper notice of the meeting. 15 EX-4.1 13 DESIGNATION OF SERIES G STOCK EXHIBIT 4.1 CERTIFICATE OF DESIGNATIONS SERIES G 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK SERIES H SPECIAL PREFERRED STOCK SERIES I 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK SERIES J SPECIAL PREFERRED STOCK OF SHARED TECHNOLOGIES INC. SHARED TECHNOLOGIES INC., a Delaware corporation, certifies that pursuant to the authority expressly granted to the Board of Directors in Article FOURTH of the Corporation's Restated Certificate of Incorporation, the Board of Directors of the Corporation duly adopted the following resolution creating four series of Preferred Stock designated as Series G 6% Cumulative Convertible Preferred Stock, Series H Special Preferred Stock, Series I 6% Cumulative Convertible Preferred Stock and Series J Special Preferred Stock: RESOLVED: That this Corporation create and authorize 250,000 shares of Series G 6% Cumulative Convertible Preferred Stock and 200,000 shares of Series H Special Preferred Stock, each with the terms, rights and preferences as set forth in the Designation of Rights and Preferences, attached hereto as Exhibit A and Exhibit B, respectively, and made a part of these resolutions, and to be issued in accordance with the provisions of the Merger Agreement; RESOLVED: That this Corporation create and authorize up to 250,000 shares of Series I 6% Cumulative Convertible Preferred Stock and 200,000 shares of Series J Special Preferred Stock, each with the terms, rights and preferences as set forth in the Designation of Rights and Preferences, attached hereto as Exhibit C and Exhibit D, respectively, and made a part of these resolutions, and to be issued in accordance with the provisions of the Exchange Agreement; RESOLVED: That in connection with the foregoing resolutions, each of the Chief Executive Officer and President, the Chief Financial Officer, Treasurer, any Vice President and Secretary of this Corporation be, and each hereby is, authorized and directed, for and on behalf of this Corporation, to file such documents, including, but not limited to, the Designation of Rights and Preferences annexed hereto as Exhibits A, B, C and D as are necessary with the Secretary of State of Delaware. IN WITNESS WHEREOF, said SHARED TECHNOLOGIES INC. has caused this Certificate of Designations of its Series G 6% Cumulative Convertible Preferred Stock, Series H Special Preferred Stock, Series I 6% Cumulative Convertible Preferred Stock and Series J Special Preferred Stock to be duly executed by its Senior Vice President and attested to by its Secretary and has caused its corporation seal to be affixed hereto as of the 8th day of March, 1996. SHARED TECHNOLOGIES INC. By:/s/ Vincent DiVincenzo Vincent DiVincenzo, Senior Vice President (Corporation Seal) ATTEST: /s/ Kenneth M. Dorros Kenneth M. Dorros, Secretary 2 Designation of Series G 6% Cumulative Convertible Preferred Stock - ------------------------------------------------- 1. Designation; Rank. The series of Preferred Stock designated and known as "Series G 6% Cumulative Convertible Preferred Stock" shall consist of 250,000 shares, par value $.01 per share. Shares of the Cumulative Convertible Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to all classes of common stock of the Corporation (including, without limitation, the Common Stock, par value $.004 per share (the "Common Stock")), and each other class of capital stock or series of preferred stock hereafter created which does not expressly provide that it ranks on a parity with the Cumulative Convertible Preferred Stock as to dividend rights and rights on liquidation, winding up and dissolution ("Junior Stock"), on a parity with the Series D Preferred Stock, Special Preferred Stock and each other class of capital stock or series of preferred stock hereafter created which expressly provides that it ranks on a parity with the Cumulative Convertible Preferred Stock as to dividend rights and rights on liquidation, winding up and dissolution ("Parity Stock"), and, junior to the Series C Preferred Stock and each other class of capital stock or series of preferred stock hereafter created which has been approved by the holders of the Cumulative Convertible Preferred Stock in accordance with Section 4 and which expressly provides that it ranks senior to the Cumulative Convertible Preferred Stock as to dividend rights and rights on liquidation, winding up and dissolution ("Senior Stock"). 2. Dividends. (a) The holders of the Cumulative Convertible Preferred Stock shall be entitled to receive, out of any funds legally available therefor, dividends in cash at the annual rate of 6% of the Liquidation Preference (as hereinafter defined) thereof, in equal quarterly payments in arrears on March 31, June 30, September 30 and December 31 in each year (each such date is referred to as a "Dividend Payment Date") commencing on March 31, 1996, payable in preference and priority to any payment of any cash dividend on any Junior Stock, junior in preference and priority to any payment of any cash dividend on any Senior Stock and on a parity with any payment of any cash dividend on any Parity Stock. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time such dividend is declared. If the Dividend Payment Date is not a business day, the Dividend Payment Date shall be the next succeeding business day. -2- (b) Each of such quarterly dividends shall be fully cumulative, whether or not earned or declared, and shall accrue without interest, from the first day of the quarter in which such dividend may be payable as herein provided until the applicable Dividend Payment Date with respect thereto (except that with respect to the first quarterly dividend, such dividend shall accrue from March 13, 1996). In addition, if not fully paid in cash on such Dividend Payment Date, each such dividend shall accrue interest at an annual rate of 12% thereof from such Dividend Payment Date until the date fully paid in cash. (c) In the event that the Corporation shall have cumulative, accrued and unpaid dividends outstanding (including any interest accruing thereon as herein provided) immediately prior to and in the event of a conversion of any shares of Cumulative Convertible Preferred Stock as provided in Section 5 hereof, the Corporation shall, at the option of the holder of such shares, pay in cash to such holder the full amount of any such dividends (including any interest accruing thereon as herein provided) or allow such dividends (including any interest accruing thereon as herein provided) to be converted into Common Stock in accordance with, and pursuant to the terms specified in, Section 5 hereof. 3. Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Cumulative Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock but before any payment shall be made to the holders of any Junior Stock, and on a parity with any payment to the holders of Parity Stock, an amount equal to $100 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) (the "Liquidation Preference") plus with respect to any date, an additional amount (the "Additional Amount") equal to the total amount of dividends a holder of such share of Cumulative Convertible Preferred Stock would have received from the original issue date of such share of Cumulative Convertible Preferred Stock until such date, if dividends were paid quarterly in cash as herein provided at the rate of 10% per annum minus the total amount of cash dividends actually paid on such share of Cumulative Convertible Preferred Stock without giving effect to any accrued and paid interest on such dividends as herein provided. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets -3- of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Cumulative Convertible Preferred Stock the full amount to which they shall be entitled, the holders of Cumulative Convertible Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Stock, Parity Stock and Cumulative Convertible Preferred Stock upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Junior Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders. (c) Written notice of such liquidation, dissolution or winding up, stating a payment date and the place where said payment shall be made, shall be given by mail, postage prepaid, or by telecopier, not less than 20 days prior to the payment date stated therein, to the holders of record of the Cumulative Convertible Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. (d) Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. (e) For the purposes of this Section 3, neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the business of the Corporation. 4. Voting. (a) Except as may be otherwise provided in these terms of the Cumulative Convertible Preferred Stock or by law, the -4- Cumulative Convertible Preferred Stock shall not be entitled to vote. (b) The Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Cumulative Convertible Preferred Stock so as to affect adversely the Cumulative Convertible Preferred Stock, without the written consent or affirmative vote of the holders of at least two-thirds of the then outstanding shares of Cumulative Convertible Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any series of Preferred Stock with preference or priority over the Cumulative Convertible Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed to affect adversely the Cumulative Convertible Preferred Stock, and the authorization or issuance of any series of Preferred Stock on a parity with the Cumulative Convertible Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed not to affect adversely the Cumulative Convertible Preferred Stock. (c) In the event that the Corporation shall fail to declare and pay in full dividends on the Cumulative Convertible Preferred Stock as set forth in Section 2(a) hereof on four consecutive Dividend Payment Dates then the number of directors constituting the Board of Directors shall be increased by one director and the holders of shares of the Cumulative Convertible Preferred Stock, in addition to any other rights that they may otherwise have, shall have the exclusive right, voting separately as a class, to elect such one director of the Corporation. (d) In addition to the rights specified in the foregoing Section 4(c), in the event that the Corporation shall fail to declare and pay in full dividends on the Cumulative Convertible Preferred Stock as set forth in Section 2(a) hereof on eight consecutive Dividend Payment Dates, then the number of directors constituting the Board of Directors shall be increased by an additional one director and the holders of shares of the Cumulative Convertible Preferred Stock, in addition to any other rights that they may otherwise have, shall have the exclusive right, voting separately as a class, to elect such additional one director of the Corporation (in addition to the additional director elected pursuant to Section 4(c)). -5- (e) Any voting right pursuant to Section 4(c) or (d) may be exercised initially either by written consent or at a special meeting of the holders of the Cumulative Convertible Preferred Stock, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting until such time as all dividends accumulated on the shares of the Cumulative Convertible Preferred Stock shall have been paid in full, at which time such voting right and the term of any director elected pursuant to this Section 4 shall terminate and the number of directors constituting the full Board of Directors shall be reduced accordingly. (f) At any time when the voting right specified in either Section 4(c) or (d) shall have vested in holders of shares of the Cumulative Convertible Preferred Stock as described in such Section 4(c) or (d), as the case may be, and if such right shall not already have been exercised by written consent, a proper officer of the Corporation may call, and, upon the written request, addressed to the Secretary of the Corporation, of the record holders of shares representing twenty-five percent (25%) or more of the then outstanding shares of Cumulative Convertible Preferred Stock, shall call, a special meeting of the holders of the Cumulative Convertible Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation, or, if none, at a place in New York City designated by the Board of Directors. (g) At any meeting held for the purpose of electing directors at which the holders of shares of Cumulative Convertible Preferred Stock shall have the right to elect a director as provided herein, the presence in person or by proxy of the holders of shares representing more than fifty percent (50%) of the then outstanding shares of Cumulative Convertible Preferred Stock shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. (h) Any director elected by holders of Cumulative Convertible Preferred Stock pursuant to the voting right created under this Section 4 shall hold office until the next annual meeting of stockholders (unless such term has previously terminated pursuant to Section 4(e)) and any vacancy in respect of any such director shall be filled only by vote of the holders of such Cumulative Convertible Preferred Stock entitled to elect such director by written consent or at a special meeting called in accordance with the procedures set forth in Section 4(f), or, if no such special meeting is called or written consent executed, at the next annual meeting of stockholders. Upon any termination of such -6- voting right, subject to applicable law, the term of office of the director elected by holders of Cumulative Convertible Preferred Stock voting separately as a class pursuant to this Section 4 shall terminate. (i) In exercising the voting rights set forth in this Section 4, each share of Cumulative Convertible Preferred Stock shall have one vote. 5. Optional Conversion. The holders of the Cumulative Convertible Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Cumulative Convertible Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing (A) the sum of (x) the Liquidation Preference thereof and (y) the Additional Amount thereof by (B) the Conversion Price (as defined below) in effect at the time of conversion; provided, that the Company may, at its option, elect to pay the Additional Amount in cash in lieu of shares of Common Stock at the time of conversion. The conversion price at which shares of Common Stock shall be deliverable upon conversion of Cumulative Convertible Preferred Stock without the payment of additional consideration by the holder thereof (the "Conversion Price") shall initially be $6.3750. Such initial Conversion Price, and the rate at which shares of Cumulative Convertible Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. In the event of a notice of redemption of any shares of Cumulative Convertible Preferred Stock pursuant to Section 6 hereof, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the fifth full day preceding the date fixed for redemption, unless the redemption price is not paid when due, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation of the Corporation, the Conversion Rights shall terminate at the close of business on the first full day preceding the date fixed for the payment of any amounts distributable on liquidation to the holders of Cumulative Convertible Preferred Stock. (b) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Cumulative Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash -7- equal to such fraction multiplied by the then effective Conversion Price. (c) Mechanics of Conversion. (i) In order for a holder of Cumulative Convertible Preferred Stock to convert shares of Cumulative Convertible Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Cumulative Convertible Preferred Stock at the office of the transfer agent for the Cumulative Convertible Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Cumulative Convertible Preferred Stock represented by such certificate or certificates. Such notice shall state such holder's name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in a form satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date ("Conversion Date"). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of Cumulative Convertible Preferred Stock, or to his or its nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share, and in the case of the conversion of less than all of the shares of the Cumulative Convertible Preferred Stock represented by a certificate, a new certificate for the number of shares of Cumulative Convertible Preferred Stock not so converted. (ii) The Corporation shall at all times when the Cumulative Convertible Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Cumulative Convertible Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Cumulative Convertible Preferred Stock. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock -8- issuable upon conversion of the Cumulative Convertible Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price. (iii) All shares of Cumulative Convertible Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and payment of any accrued and unpaid dividends thereon. Any shares of Cumulative Convertible Preferred Stock so converted shall be retired and cancelled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Cumulative Convertible Preferred Stock accordingly. (d) Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (e) Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time, or from time to time, after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Cumulative Convertible Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction: (i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately -9- prior to the time of such issuance or the close of business on such record date; and (ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions. (f) Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in property of the Corporation or securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Cumulative Convertible Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount and type of such property and securities of the Corporation that they would have received had their Cumulative Convertible Preferred Stock been converted into Common Stock on the date of such event and, with respect to any such securities receivable by them as aforesaid, had thereafter, during the period from the date of such event to and including the conversion date, retained such securities during such period giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the Cumulative Convertible Preferred Stock. (g) Adjustment for Reclassification, Exchange or Substitution. If the Common Stock issuable upon the conversion of the Cumulative Convertible Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of Cumulative Convertible Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and -10- other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Cumulative Convertible Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein. (h) Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation (other than a consolidation, merger or sale which is treated as as a liquidation pursuant to Section 3(a)), each share of Cumulative Convertible Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Cumulative Convertible Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 5 set forth with respect to the rights and interests thereafter of the holders of the Cumulative Convertible Preferred Stock, to the end that the provisions set forth in this Section 5 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Cumulative Convertible Preferred Stock. (i) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Cumulative Convertible Preferred Stock against impairment. (j) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 5, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Cumulative Convertible Preferred Stock a certificate setting forth such adjustment or -11- readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Cumulative Convertible Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price then in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Cumulative Convertible Preferred Stock. (k) Notice of Record Date. In the event: (i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation; (ii) that the Corporation subdivides or combines its outstanding shares of Common Stock; (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation, or of the sale of all or substantially all of the assets of the Corporation; or (iv) of the involuntary or voluntary dissolution, liquidation or winding up of the Corporation, then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Cumulative Convertible Preferred Stock, and shall cause to be mailed to the holders of the Cumulative Convertible Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten days prior to the record date specified in (A) below or twenty days before the date specified in (B) below, a notice stating (A) the record date of such dividend, distribution, subdivision or combination or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or (B) the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation or winding up is expected to become effective, and the date -12- as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up. 6. Redemption. (a) At any time and from time to time after March 31, 1999, the Corporation may, at the option of its Board of Directors, redeem the Cumulative Convertible Preferred Stock in the manner provided below, in whole or in part, at a redemption price (the "Optional Redemption Price") equal to 100% of the Liquidation Preference thereof plus the Additional Amount on the Redemption Date (as defined below); provided that the Corporation shall not redeem any shares of Cumulative Convertible Preferred Stock unless and until all accrued and unpaid dividends (including any interest accruing thereon as herein provided) on the Cumulative Convertible Preferred Stock through the Redemption Date have been paid in full in cash. (b) The Corporation shall redeem all outstanding shares of Cumulative Convertible Preferred Stock on March 31, 2008 in the manner provided below at a redemption price equal to the Liquidation Preference thereof plus the Additional Amount on the Redemption Date (the "Mandatory Redemption Price"). (c) At least 30 days prior to the date fixed for any redemption of Cumulative Convertible Preferred Stock (hereinafter referred to as the "Redemption Date"), written notice (the "Redemption Notice") shall be mailed, by first class or registered mail, postage prepaid, to each holder of record of Cumulative Convertible Preferred Stock to be redeemed, at its address last shown on the records of the transfer agent of the Cumulative Convertible Preferred Stock (or the records of the Corporation, if it serves as its own transfer agent). The Redemption Notice shall state: (1) whether the redemption is pursuant to Section (6)(a) or (6)(b) hereof; (2) the Optional Redemption Price or Mandatory Redemption Price, as the case may be; (3) whether all or less than all the outstanding shares of the Cumulative Convertible Preferred Stock redeemable thereunder are to be redeemed and the total number of shares of such Cumulative Convertible Preferred Stock being redeemed; -13- (4) the number of shares of Cumulative Convertible Preferred Stock held, as of the appropriate record date, by the holder that the Corporation intends to redeem; (5) the date fixed for redemption (the "Redemption Date"); (6) that the holder is to surrender to the Corporation, at the place or places where certificates for shares of Cumulative Convertible Preferred Stock are to be surrendered for redemption, in the manner and at the price designated, his certificate or certificates representing the shares of Cumulative Convertible Preferred Stock to be redeemed; and (7) that dividends on the shares of the Cumulative Convertible Preferred Stock to be redeemed shall cease to accumulate on such Redemption Date unless the Corporation defaults in the payment of the Optional Redemption Price or the Mandatory Redemption Price, as the case may be. (d) Each Holder of Cumulative Convertible Preferred Stock shall surrender the certificate or certificates representing such shares of Cumulative Convertible Preferred Stock to the Corporation, duly endorsed, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full Optional Redemption Price or Mandatory Redemption Price, as the case may be, for such shares shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired and shall not under any circumstances be reissued. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (e) Unless the Corporation defaults in the payment in full of the redemption price, dividends on the Cumulative Convertible Preferred Stock called for redemption shall cease to accumulate on the Redemption Date, and the holders of such redeemed shares shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the Optional Redemption Price or Mandatory Redemption Price, as the case may be, without interest. (f) In the event of any redemption of only a part of the then outstanding Cumulative Convertible Preferred Stock, the Corporation shall effect such redemption pro rata among the holders thereof based on the number of shares of Cumulative Convertible -14- Preferred Stock held by such holders on the date of the Redemption Notice. 7. Certain Restrictions. (a) No dividends or other distributions shall be declared or paid, set apart for payment or otherwise made on any Junior Stock or Parity Stock for any period and no shares of any Junior Stock or Parity Stock shall be redeemed or otherwise repurchased unless (i) full cumulative dividends (including any interest accruing thereon as herein provided) have been or contemporaneously are declared and paid (or declared and a sum sufficient for the payment thereof set apart for such payment) on the Cumulative Convertible Preferred Stock for all dividend payment periods ending on or prior to the date such dividend or other distribution shall be declared or paid, set apart for payment or otherwise made or the date of such redemption or repurchase, as the case may be, (ii) on the date such dividend shall be declared, paid, set apart for payment or otherwise made or the date of such redemption or repurchase, as the case may be, the Corporation shall have made all payments required to be made by it pursuant to Section 6 and otherwise be in compliance with all of its obligations hereunder. (b) The Corporation shall not create or permit to exist any contractual restriction which would restrict in any way the Corporation's ability to make required payments on the Cumulative Convertible Preferred Stock or the Series C Preferred Stock. EX-4.2 14 DESIGNATION OF SERIES H STOCK EXHIBIT 4.2 CERTIFICATE OF DESIGNATIONS SERIES G 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK SERIES H SPECIAL PREFERRED STOCK SERIES I 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK SERIES J SPECIAL PREFERRED STOCK OF SHARED TECHNOLOGIES INC. SHARED TECHNOLOGIES INC., a Delaware corporation, certifies that pursuant to the authority expressly granted to the Board of Directors in Article FOURTH of the Corporation's Restated Certificate of Incorporation, the Board of Directors of the Corporation duly adopted the following resolution creating four series of Preferred Stock designated as Series G 6% Cumulative Convertible Preferred Stock, Series H Special Preferred Stock, Series I 6% Cumulative Convertible Preferred Stock and Series J Special Preferred Stock: RESOLVED: That this Corporation create and authorize 250,000 shares of Series G 6% Cumulative Convertible Preferred Stock and 200,000 shares of Series H Special Preferred Stock, each with the terms, rights and preferences as set forth in the Designation of Rights and Preferences, attached hereto as Exhibit A and Exhibit B, respectively, and made a part of these resolutions, and to be issued in accordance with the provisions of the Merger Agreement; RESOLVED: That this Corporation create and authorize up to 250,000 shares of Series I 6% Cumulative Convertible Preferred Stock and 200,000 shares of Series J Special Preferred Stock, each with the terms, rights and preferences as set forth in the Designation of Rights and Preferences, attached hereto as Exhibit C and Exhibit D, respectively, and made a part of these resolutions, and to be issued in accordance with the provisions of the Exchange Agreement; RESOLVED: That in connection with the foregoing resolutions, each of the Chief Executive Officer and President, the Chief Financial Officer, Treasurer, any Vice President and Secretary of this Corporation be, and each hereby is, authorized and directed, for and on behalf of this Corporation, to file such documents, including, but not limited to, the Designation of Rights and Preferences annexed hereto as Exhibits A, B, C and D as are necessary with the Secretary of State of Delaware. IN WITNESS WHEREOF, said SHARED TECHNOLOGIES INC. has caused this Certificate of Designations of its Series G 6% Cumulative Convertible Preferred Stock, Series H Special Preferred Stock, Series I 6% Cumulative Convertible Preferred Stock and Series J Special Preferred Stock to be duly executed by its Senior Vice President and attested to by its Secretary and has caused its corporation seal to be affixed hereto as of the 8th day of March, 1996. SHARED TECHNOLOGIES INC. By:/s/ Vincent DiVincenzo Vincent DiVincenzo, Senior Vice President (Corporation Seal) ATTEST: /s/ Kenneth M. Dorros Kenneth M. Dorros, Secretary 2 Designation of Series H Special Preferred Stock 1. Designation; Rank. The series of Preferred Stock designated and known as "Series H Special Preferred Stock" shall consist of 200,000 shares, par value $.01 per share. Shares of the Special Preferred Stock shall, with respect to rights on liquidation, winding up and dissolution, rank senior to all classes of common stock of the Corporation (including, without limitation, the Common Stock, par value $.004 per share (the "Common Stock")), and each other class of capital stock or series of preferred stock hereafter created which does not expressly provide that it ranks on a parity with the Special Preferred Stock as to rights on liquidation, winding up and dissolution ("Junior Stock"), on a parity with the Series D Preferred Stock, Cumulative Convertible Preferred Stock and each other class of capital stock or series of preferred stock hereafter created which expressly provides that it ranks on a parity with the Special Preferred Stock as to rights on liquidation, winding up and dissolution ("Parity Stock"), and, junior to the Series C Preferred Stock and each other class of capital stock or series of preferred stock hereafter created which has been approved by the holders of the Special Preferred Stock in accordance with Section 4 and which expressly provides that it ranks senior to the Special Preferred Stock as to rights on liquidation, winding up and dissolution ("Senior Stock"). 2. Dividends. (a) The holders of the Special Preferred Stock shall not be entitled to receive any dividends. 3. Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Special Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock but before any payment shall be made to the holders of any Junior Stock, and on a parity with any payment to the holders of Parity Stock, an amount equal to $100 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) (the "Original Liquidation Preference") plus with respect to any date after December 31, 1996, an amount (which amount, collectively with the Original Liquidation Preference, is hereinafter referred to as -2- the "Liquidation Preference") equal to 5% per annum of the Original Liquidation Preference thereof calculated on a daily basis from January 1, 1996 to such date; provided that the maximum Liquidation Preference shall not exceed $30,000,000. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Special Preferred Stock the full amount to which they shall be entitled, the holders of Special Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Stock, Parity Stock and Special Preferred Stock upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Junior Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders. (c) Written notice of such liquidation, dissolution or winding up, stating a payment date and the place where said payment shall be made, shall be given by mail, postage prepaid, or by telecopier, not less than 20 days prior to the payment date stated therein, to the holders of record of the Special Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. (d) Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. (e) For the purposes of this Section 3, neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the business of the Corporation. -3- 4. Voting. (a) Except as may be otherwise provided in these terms of the Special Preferred Stock or by law, the Special Preferred Stock shall not be entitled to vote. (b) The Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Special Preferred Stock so as to affect adversely the Special Preferred Stock, without the written consent or affirmative vote of the holders of at least two-thirds of the then outstanding shares of Special Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any series of Preferred Stock with preference or priority over the Special Preferred Stock as to the right to receive amounts distribut-able upon liquidation, dissolution or winding up of the Corporation shall be deemed to affect adversely the Special Preferred Stock, and the authorization or issuance of any series of Preferred Stock on a parity with the Special Preferred Stock as to the right to receive amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed not to affect adversely the Special Preferred Stock. 5. Redemption. (a) At any time and from time to time the Corporation may, at the option of its Board of Directors, redeem the Special Preferred Stock in the manner provided below, in whole or in part, at a redemption price equal to 100% of the Liquidation Preference thereof on the Redemption Date (as defined below). (b) The Corporation shall redeem all outstanding shares of Special Preferred Stock on (x) the date which is 35 days after the occurrence of a Change of Control (as defined below) and, in any event, on (z) March 31, 2007 in each such case in the manner provided below at a redemption price equal to 100% of the Liquidation Preference thereof on the Redemption Date. (c) On March 31 of each year, commencing with March 31, 1997, the Corporation shall redeem at a redemption price equal to 100% of the Liquidation Preference thereof on such Redemption Date an amount (the "Required Redemption Amount") of Special Preferred Stock equal to 50% of the amount, if any, by which the consolidated EBITDA (as defined below) of the Corporation and its subsidiaries exceeds the Threshold Amount set forth below for the immediately preceding year ended on -4- December 31. To the extent the Required Redemption Amount exceeds 50% of the sum (the "Income Limitation") of (i) the consolidated net income of the Corporation and its subsidiaries for the immediately preceding year ended on December 31 (without deducting therefrom any amounts on account of dividends paid or payable on any preferred stock or redemptions of any preferred stock of the Corporation, including, without limitation, the Convertible Preferred Stock, Special Preferred Stock and Series C and D classes of Preferred Stock of the Corporation) plus (ii) amounts attributable to the amortization of goodwill of the Corporation and its subsidiaries for such immediately preceding year, such excess amount shall be carried forward and be considered a Required Redemption Amount for the next succeeding year and for each year thereafter until paid. The Threshold Amount for each year shall be as follows:
Year Ended Threshold December 31, Amount 1996......................................... $47.0 million 1997......................................... 53.0 million 1998......................................... 57.5 million 1999......................................... 60.5 million 2000......................................... 63.5 million 2001......................................... 66.5 million 2002......................................... 69.5 million 2003......................................... 72.5 million 2004......................................... 75.5 million 2005......................................... 78.5 million 2006 and thereafter.......................... 81.5 million
"EBITDA" means net income plus income taxes, interest expense, depreciation and amoritization. In the event that the Corporation or any subsidiary sells or disposes of any material asset or business ("material" meaning having a value of $250,000 or more), the Threshold Amount for each year thereafter as set forth above shall be reduced by the amount of EBITDA attributable to such asset or business for the four fiscal quarters immediately preceding such sale or disposition. All accounting terms used in this paragraph (c) shall be determined in accordance with generally accepted accounting principles consistently applied as in effect in the United States from time to time. (d) At least 30 days prior to the date fixed for any redemption of Special Preferred Stock (hereinafter referred to as the "Redemption Date"), written notice (the "Redemption Notice") -5- shall be mailed, by first class or registered mail, postage prepaid, to each holder of record of Special Preferred Stock to be redeemed, at its address last shown on the records of the transfer agent of the Special Preferred Stock (or the records of the Corporation, if it serves as its own transfer agent). The Redemption Notice shall state: (1) whether the redemption is pursuant to Section (5)(a), (5)(b)(x), (5)(b)(z) or 5(c) hereof; (2) the redemption price thereof; (3) whether all or less than all the outstanding shares of the Special Preferred Stock redeemable thereunder are to be redeemed and the total number of shares of such Special Preferred Stock being redeemed; (4) the number of shares of Special Preferred Stock held, as of the appropriate record date, by the holder that the Corporation intends to redeem; (5) the date fixed for redemption (the "Redemption Date"); and (6) that the holder is to surrender to the Corporation, at the place or places where certificates for shares of Special Preferred Stock are to be surrendered for redemption, in the manner and at the price designated, his certificate or certificates representing the shares of Special Preferred Stock to be redeemed. (e) Each Holder of Special Preferred Stock shall surrender the certificate or certificates representing such shares of Special Preferred Stock to the Corporation, duly endorsed, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full redemption price for such shares shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired and shall not under any circumstances be reissued. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (f) Unless the Corporation defaults in the payment in full of the redemption price the holders of such redeemed shares shall cease to have any further rights with respect thereto on -6- the Redemption Date, other than the right to receive the redemption price with respect thereto, without interest. (g) In the event of any redemption of only a part of the then outstanding Special Preferred Stock, the Corporation shall effect such redemption pro rata among the holders thereof based on the number of shares of Special Preferred Stock held by such holders on the date of the Redemption Notice. (h) The occurrence of any of the following events will constitute a "Change of Control" for purposes of this Section 5: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than one or more Permitted Holders (as defined below), is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act except that for purposes of this clause (i) such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 30% of the total voting power of the Voting Stock (as defined below) of the Corporation; provided, however, that the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Corporation than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Corporation (for the purposes of this clause (i), a person shall be deemed to beneficially own any Voting Stock of a specified corporation held by another corporation (the "parent corporation"), if such other person is the beneficial owner (as defined in this clause (i) above), directly or indirectly, of more than 30% of the voting power of the Voting Stock of such parent corporation and the Permitted Holders beneficially own (as defined in this clause (i) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent corporation and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent corporation); (ii) during any two consecutive 365-day periods, individuals who at the beginning of such period constituted -7- the Board of Directors of the Corporation (together with any new directors whose election by the Board of Directors of the Corporation or whose nomination for election by the shareholders of the Corporation was approved by a vote of 66-2/3% of the directors of the Corporation then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Corporation then in office; or (iii) the merger or consolidation of the Corporation with or into another Person or the merger of another Person with or into the Corporation, or the sale of all or substantially all the assets of the Corporation to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Corporation that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Corporation are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation and have the immediate right to appoint a majority of the Board of Directors of the surviving corporation. "Permitted Holders" means Jeffrey J. Steiner and his respective "associates" (as defined in Rule 12b-2 under the Exchange Act as in effect on March 13, 1996, except that a person shall not be an "associate" for purposes of this definition solely because such person comes within the definition of such term in clause (a) of such Rule) or their respective Affiliates. "Affiliate" of any specified person or entity means any other person or entity, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person or entity. For the purposes of this definition, "control" when used with respect to any person or entity means the power to direct the management and policies of such person or entity, 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. -8- "Voting Stock" means, with respect to any person, securities of any class or classes of capital stock in such person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of any contingency) to vote in the election of members of the Board of Directors or other governing body of such person. 6. Certain Restrictions. (a) No dividends or other distributions shall be declared or paid, set apart for payment or otherwise made on any Junior Stock or Parity Stock for any period and no shares of any Junior Stock or Parity Stock shall be redeemed or otherwise repurchased unless on the date such dividend shall be declared, paid, set apart for payment or otherwise made or the date of such redemption or repurchase, as the case may be, the Corporation shall have made all payments required to be made by it pursuant to Section 5 and otherwise be in compliance with all of its obligations hereunder. (b) The Corporation shall not create or permit to exist any contractual restriction which would restrict in any way the Corporation's ability to make required payments on the Special Preferred Stock or the Series C Preferred Stock. EX-4.3 15 DESIGNATION OF SERIES I STOCK EXHIBIT 4.3 CERTIFICATE OF DESIGNATIONS SERIES G 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK SERIES H SPECIAL PREFERRED STOCK SERIES I 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK SERIES J SPECIAL PREFERRED STOCK OF SHARED TECHNOLOGIES INC. SHARED TECHNOLOGIES INC., a Delaware corporation, certifies that pursuant to the authority expressly granted to the Board of Directors in Article FOURTH of the Corporation's Restated Certificate of Incorporation, the Board of Directors of the Corporation duly adopted the following resolution creating four series of Preferred Stock designated as Series G 6% Cumulative Convertible Preferred Stock, Series H Special Preferred Stock, Series I 6% Cumulative Convertible Preferred Stock and Series J Special Preferred Stock: RESOLVED: That this Corporation create and authorize 250,000 shares of Series G 6% Cumulative Convertible Preferred Stock and 200,000 shares of Series H Special Preferred Stock, each with the terms, rights and preferences as set forth in the Designation of Rights and Preferences, attached hereto as Exhibit A and Exhibit B, respectively, and made a part of these resolutions, and to be issued in accordance with the provisions of the Merger Agreement; RESOLVED: That this Corporation create and authorize up to 250,000 shares of Series I 6% Cumulative Convertible Preferred Stock and 200,000 shares of Series J Special Preferred Stock, each with the terms, rights and preferences as set forth in the Designation of Rights and Preferences, attached hereto as Exhibit C and Exhibit D, respectively, and made a part of these resolutions, and to be issued in accordance with the provisions of the Exchange Agreement; RESOLVED: That in connection with the foregoing resolutions, each of the Chief Executive Officer and President, the Chief Financial Officer, Treasurer, any Vice President and Secretary of this Corporation be, and each hereby is, authorized and directed, for and on behalf of this Corporation, to file such documents, including, but not limited to, the Designation of Rights and Preferences annexed hereto as Exhibits A, B, C and D as are necessary with the Secretary of State of Delaware. IN WITNESS WHEREOF, said SHARED TECHNOLOGIES INC. has caused this Certificate of Designations of its Series G 6% Cumulative Convertible Preferred Stock, Series H Special Preferred Stock, Series I 6% Cumulative Convertible Preferred Stock and Series J Special Preferred Stock to be duly executed by its Senior Vice President and attested to by its Secretary and has caused its corporation seal to be affixed hereto as of the 8th day of March, 1996. SHARED TECHNOLOGIES INC. By:/s/ Vincent DiVincenzo Vincent DiVincenzo, Senior Vice President (Corporation Seal) ATTEST: /s/ Kenneth M. Dorros Kenneth M. Dorros, Secretary 2 New Preferred Designation of Series I 6% Cumulative Convertible Preferred Stock 1. Designation; Rank. The series of Preferred Stock designated and known as "Cumulative Series I 6% Convertible Preferred Stock" shall consist of 250,000 shares, par value $.01 per share and shall herein be referred to as the "Cumulative Convertible Preferred Stock". Shares of the Cumulative Convertible Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to all classes of common stock of the Corporation (including, without limitation, the Common Stock, par value $.004 per share (the "Common Stock")), and each other class of capital stock or series of preferred stock hereafter created which does not expressly provide that it ranks on a parity with the Cumulative Convertible Preferred Stock as to dividend rights and rights on liquidation, winding up and dissolution ("Junior Stock"), on a parity with the Series D Preferred Stock, Special Preferred Stock and each other class of capital stock or series of preferred stock hereafter created which expressly provides that it ranks on a parity with the Cumulative Convertible Preferred Stock as to dividend rights and rights on liquidation, winding up and dissolution ("Parity Stock"), and, junior to the Series C Preferred Stock and each other class of capital stock or series of preferred stock hereafter created which has been approved by the holders of the Cumulative Convertible Preferred Stock in accordance with Section 4 and which expressly provides that it ranks senior to the Cumulative Convertible Preferred Stock as to dividend rights and rights on liquidation, winding up and dissolution ("Senior Stock"). 2. Dividends. (a) The holders of the Cumulative Convertible Preferred Stock shall be entitled to receive, out of any funds legally available therefor, dividends in cash at the annual rate of 6% of the Liquidation Preference (as hereinafter defined) thereof, in equal quarterly payments in arrears on March 31, June 30, September 30 and December 31 in each year (each such date is referred to as a "Dividend Payment Date") commencing on March 31, 1996, payable in preference and priority to any payment of any cash dividend on any Junior Stock, junior in preference and priority to any payment of any cash dividend on any Senior Stock and on a parity with any payment of any cash dividend on any Parity Stock. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time such dividend is declared. If the Dividend Payment -2- Date is not a business day, the Dividend Payment Date shall be the next succeeding business day. (b) Each of such quarterly dividends shall be fully cumulative, whether or not earned or declared, and shall accrue without interest, from the first day of the quarter in which such dividend may be payable as herein provided until the applicable Dividend Payment Date with respect thereto (except that with respect to the first quarterly dividend, such dividend shall accrue from March 13, 1996). In addition, if not fully paid in cash on such Dividend Payment Date, each such dividend shall accrue interest at an annual rate of 12% thereof from such Dividend Payment Date until the date fully paid in cash. (c) In the event that the Corporation shall have cumulative, accrued and unpaid dividends outstanding (including any interest accruing thereon as herein provided) immediately prior to and in the event of a conversion of any shares of Cumulative Convertible Preferred Stock as provided in Section 5 hereof, the Corporation shall, at the option of the holder of such shares, pay in cash to such holder the full amount of any such dividends (including any interest accruing thereon as herein provided) or allow such dividends (including any interest accruing thereon as herein provided) to be converted into Common Stock in accordance with, and pursuant to the terms specified in, Section 5 hereof. 3. Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Cumulative Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock but before any payment shall be made to the holders of any Junior Stock, and on a parity with any payment to the holders of Parity Stock, an amount equal to $100 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) (the "Liquidation Preference") plus with respect to any date, an additional amount (the "Additional Amount") equal to the total amount of dividends a holder of such share of Cumulative Convertible Preferred Stock would have received from the original issue date of such share of Cumulative Convertible Preferred Stock until such date, if dividends were paid quarterly in cash as herein provided at the rate of 10% per annum minus the total amount of cash dividends actually paid on such share of Cumulative Convertible Preferred -3- Stock without giving effect to any accrued and paid interest on such dividends as herein provided. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Cumulative Convertible Preferred Stock the full amount to which they shall be entitled, the holders of Cumulative Convertible Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Stock, Parity Stock and Cumulative Convertible Preferred Stock upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Junior Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders. (c) Written notice of such liquidation, dissolution or winding up, stating a payment date and the place where said payment shall be made, shall be given by mail, postage prepaid, or by telecopier, not less than 20 days prior to the payment date stated therein, to the holders of record of the Cumulative Convertible Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. (d) Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. (e) For the purposes of this Section 3, neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the business of the Corporation. -4- 4. Voting. (a) Except as may be otherwise provided in these terms of the Cumulative Convertible Preferred Stock or by law, the Cumulative Convertible Preferred Stock shall not be entitled to vote. (b) The Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Cumulative Convertible Preferred Stock so as to affect adversely the Cumulative Convertible Preferred Stock, without the written consent or affirmative vote of the holders of at least two-thirds of the then outstanding shares of Cumulative Convertible Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any series of Preferred Stock with preference or priority over the Cumulative Convertible Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed to affect adversely the Cumulative Convertible Preferred Stock, and the authorization or issuance of any series of Preferred Stock on a parity with the Cumulative Convertible Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed not to affect adversely the Cumulative Convertible Preferred Stock. (c) In the event that the Corporation shall fail to declare and pay in full dividends on the Cumulative Convertible Preferred Stock as set forth in Section 2(a) hereof on four consecutive Dividend Payment Dates then the number of directors constituting the Board of Directors shall be increased by one director and the holders of shares of the Cumulative Convertible Preferred Stock, in addition to any other rights that they may otherwise have, shall have the exclusive right, voting separately as a class, to elect such one director of the Corporation. (d) In addition to the rights specified in the foregoing Section 4(c), in the event that the Corporation shall fail to declare and pay in full dividends on the Cumulative Convertible Preferred Stock as set forth in Section 2(a) hereof on eight consecutive Dividend Payment Dates, then the number of directors constituting the Board of Directors shall be increased by an additional one director and the holders of shares of the Cumulative Convertible Preferred Stock, in addition to any other rights that they may otherwise have, shall have the exclusive right, voting separately as a class, to elect such additional one director of -5- the Corporation (in addition to the additional director elected pursuant to Section 4(c)). (e) Any voting right pursuant to Section 4(c) or (d) may be exercised initially either by written consent or at a special meeting of the holders of the Cumulative Convertible Preferred Stock, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting until such time as all dividends accumulated on the shares of the Cumulative Convertible Preferred Stock shall have been paid in full, at which time such voting right and the term of any director elected pursuant to this Section 4 shall terminate and the number of directors constituting the full Board of Directors shall be reduced accordingly. (f) At any time when the voting right specified in either Section 4(c) or (d) shall have vested in holders of shares of the Cumulative Convertible Preferred Stock as described in such Section 4(c) or (d), as the case may be, and if such right shall not already have been exercised by written consent, a proper officer of the Corporation may call, and, upon the written request, addressed to the Secretary of the Corporation, of the record holders of shares representing twenty-five percent (25%) or more of the then outstanding shares of Cumulative Convertible Preferred Stock, shall call, a special meeting of the holders of the Cumulative Convertible Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation, or, if none, at a place in New York City designated by the Board of Directors. (g) At any meeting held for the purpose of electing directors at which the holders of shares of Cumulative Convertible Preferred Stock shall have the right to elect a director as provided herein, the presence in person or by proxy of the holders of shares representing more than fifty percent (50%) of the then outstanding shares of Cumulative Convertible Preferred Stock shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. (h) Any director elected by holders of Cumulative Convertible Preferred Stock pursuant to the voting right created under this Section 4 shall hold office until the next annual meeting of stockholders (unless such term has previously terminated pursuant to Section 4(e)) and any vacancy in respect of any such director shall be filled only by vote of the holders of such Cumulative Convertible Preferred Stock entitled to elect such director by written consent or at a special meeting called in -6- accordance with the procedures set forth in Section 4(f), or, if no such special meeting is called or written consent executed, at the next annual meeting of stockholders. Upon any termination of such voting right, subject to applicable law, the term of office of the director elected by holders of Cumulative Convertible Preferred Stock voting separately as a class pursuant to this Section 4 shall terminate. (i) In exercising the voting rights set forth in this Section 4, each share of Cumulative Convertible Preferred Stock shall have one vote. 5. Optional Conversion. The holders of the Cumulative Convertible Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Cumulative Convertible Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing (A) the sum of (x) the Liquidation Preference thereof and (y) the Additional Amount thereof by (B) the Conversion Price (as defined below) in effect at the time of conversion; provided, that the Company may, at its option, elect to pay the Additional Amount in cash in lieu of shares of Common Stock at the time of conversion. The conversion price at which shares of Common Stock shall be deliverable upon conversion of Cumulative Convertible Preferred Stock without the payment of additional consideration by the holder thereof (the "Conversion Price") shall initially be $6.3750. Such initial Conversion Price, and the rate at which shares of Cumulative Convertible Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. In the event of a notice of redemption of any shares of Cumulative Convertible Preferred Stock pursuant to Section 6 hereof, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the fifth full day preceding the date fixed for redemption, unless the redemption price is not paid when due, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation of the Corporation, the Conversion Rights shall terminate at the close of business on the first full day preceding the date fixed for the payment of any amounts distributable on liquidation to the holders of Cumulative Convertible Preferred Stock. -7- (b) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Cumulative Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price. (c) Mechanics of Conversion. (i) In order for a holder of Cumulative Convertible Preferred Stock to convert shares of Cumulative Convertible Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Cumulative Convertible Preferred Stock at the office of the transfer agent for the Cumulative Convertible Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Cumulative Convertible Preferred Stock represented by such certificate or certificates. Such notice shall state such holder's name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in a form satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date ("Conversion Date"). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of Cumulative Convertible Preferred Stock, or to his or its nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share, and in the case of the conversion of less than all of the shares of the Cumulative Convertible Preferred Stock represented by a certificate, a new certificate for the number of shares of Cumulative Convertible Preferred Stock not so converted. (ii) The Corporation shall at all times when the Cumulative Convertible Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Cumulative Convertible Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to -8- time be sufficient to effect the conversion of all outstanding Cumulative Convertible Preferred Stock. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Cumulative Convertible Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price. (iii) All shares of Cumulative Convertible Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and payment of any accrued and unpaid dividends thereon. Any shares of Cumulative Convertible Preferred Stock so converted shall be retired and cancelled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Cumulative Convertible Preferred Stock accordingly. (d) Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (e) Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time, or from time to time, after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Cumulative Convertible Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of -9- business on such record date, by multiplying the Conversion Price then in effect by a fraction: (i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and (ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions. (f) Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in property of the Corporation or securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of the Cumulative Convertible Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount and type of such property and securities of the Corporation that they would have received had their Cumulative Convertible Preferred Stock been converted into Common Stock on the date of such event and, with respect to any such securities receivable by them as aforesaid, had thereafter, during the period from the date of such event to and including the conversion date, retained such securities during such period giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the Cumulative Convertible Preferred Stock. (g) Adjustment for Reclassification, Exchange or Substitution. If the Common Stock issuable upon the conversion of the Cumulative Convertible Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or -10- stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of Cumulative Convertible Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Cumulative Convertible Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein. (h) Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation (other than a consolidation, merger or sale which is treated as as a liquidation pursuant to Section 3(a)), each share of Cumulative Convertible Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Cumulative Convertible Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 5 set forth with respect to the rights and interests thereafter of the holders of the Cumulative Convertible Preferred Stock, to the end that the provisions set forth in this Section 5 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Cumulative Convertible Preferred Stock. (i) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Cumulative Convertible Preferred Stock against impairment. -11- (j) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 5, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Cumulative Convertible Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Cumulative Convertible Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price then in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Cumulative Convertible Preferred Stock. (k) Notice of Record Date. In the event: (i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation; (ii) that the Corporation subdivides or combines its outstanding shares of Common Stock; (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation, or of the sale of all or substantially all of the assets of the Corporation; or (iv) of the involuntary or voluntary dissolution, liquidation or winding up of the Corporation, then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Cumulative Convertible Preferred Stock, and shall cause to be mailed to the holders of the Cumulative Convertible Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten days prior to the record date specified in (A) below or twenty days before the date specified in (B) below, a notice stating (A) the record date of such dividend, distribution, subdivision or combination or, if a record is not to be taken, the date as of which the holders of Common Stock -12- of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or (B) the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up. 6. Redemption. (a) At any time and from time to time after March 31, 1999, the Corporation may, at the option of its Board of Directors, redeem the Cumulative Convertible Preferred Stock in the manner provided below, in whole or in part, at a redemption price (the "Optional Redemption Price") equal to 100% of the Liquidation Preference thereof plus the Additional Amount on the Redemption Date (as defined below); provided that the Corporation shall not redeem any shares of Cumulative Convertible Preferred Stock unless and until all accrued and unpaid dividends (including any interest accruing thereon as herein provided) on the Cumulative Convertible Preferred Stock through the Redemption Date have been paid in full in cash. (b) The Corporation shall redeem all outstanding shares of Cumulative Convertible Preferred Stock on March 31, 2008 in the manner provided below at a redemption price equal to the Liquidation Preference thereof plus the Additional Amount on the Redemption Date (the "Mandatory Redemption Price"). (c) At least 30 days prior to the date fixed for any redemption of Cumulative Convertible Preferred Stock (hereinafter referred to as the "Redemption Date"), written notice (the "Redemption Notice") shall be mailed, by first class or registered mail, postage prepaid, to each holder of record of Cumulative Convertible Preferred Stock to be redeemed, at its address last shown on the records of the transfer agent of the Cumulative Convertible Preferred Stock (or the records of the Corporation, if it serves as its own transfer agent). The Redemption Notice shall state: (1) whether the redemption is pursuant to Section (6)(a) or (6)(b) hereof; -13- (2) the Optional Redemption Price or Mandatory Redemption Price, as the case may be; (3) whether all or less than all the outstanding shares of the Cumulative Convertible Preferred Stock redeemable thereunder are to be redeemed and the total number of shares of such Cumulative Convertible Preferred Stock being redeemed; (4) the number of shares of Cumulative Convertible Preferred Stock held, as of the appropriate record date, by the holder that the Corporation intends to redeem; (5) the date fixed for redemption (the "Redemption Date"); (6) that the holder is to surrender to the Corporation, at the place or places where certificates for shares of Cumulative Convertible Preferred Stock are to be surrendered for redemption, in the manner and at the price designated, his certificate or certificates representing the shares of Cumulative Convertible Preferred Stock to be redeemed; and (7) that dividends on the shares of the Cumulative Convertible Preferred Stock to be redeemed shall cease to accumulate on such Redemption Date unless the Corporation defaults in the payment of the Optional Redemption Price or the Mandatory Redemption Price, as the case may be. (d) Each Holder of Cumulative Convertible Preferred Stock shall surrender the certificate or certificates representing such shares of Cumulative Convertible Preferred Stock to the Corporation, duly endorsed, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full Optional Redemption Price or Mandatory Redemption Price, as the case may be, for such shares shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired and shall not under any circumstances be reissued. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (e) Unless the Corporation defaults in the payment in full of the redemption price, dividends on the Cumulative Convertible Preferred Stock called for redemption shall cease to accumulate on the Redemption Date, and the holders of such redeemed shares shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the -14- Optional Redemption Price or Mandatory Redemption Price, as the case may be, without interest. (f) In the event of any redemption of only a part of the then outstanding Cumulative Convertible Preferred Stock, the Corporation shall effect such redemption pro rata among the holders thereof based on the number of shares of Cumulative Convertible Preferred Stock held by such holders on the date of the Redemption Notice. 7. Certain Restrictions. (a) No dividends or other distributions shall be declared or paid, set apart for payment or otherwise made on any Junior Stock or Parity Stock for any period and no shares of any Junior Stock or Parity Stock shall be redeemed or otherwise repurchased unless (i) full cumulative dividends (including any interest accruing thereon as herein provided) have been or contemporaneously are declared and paid (or declared and a sum sufficient for the payment thereof set apart for such payment) on the Cumulative Convertible Preferred Stock for all dividend payment periods ending on or prior to the date such dividend or other distribution shall be declared or paid, set apart for payment or otherwise made or the date of such redemption or repurchase, as the case may be, (ii) on the date such dividend shall be declared, paid, set apart for payment or otherwise made or the date of such redemption or repurchase, as the case may be, the Corporation shall have made all payments required to be made by it pursuant to Section 6 and otherwise be in compliance with all of its obligations hereunder. (b) The Corporation shall not create or permit to exist any contractual restriction which would restrict in any way the Corporation's ability to make required payments on the Cumulative Convertible Preferred Stock or the Series C Preferred Stock, except: (1) for such contractual restrictions consented to in writing by a majority of the holders of the Cumulative Convertible Preferred Stock before or after the Corporation enters into such contractual restrictions (the "Approved Contracts"), and (2) any subsequent amendments, modifications, supplements, or restatements of the Approved Contracts (including such contractual restrictions entered into in connection with any refinancings of any debt instruments issued by or borrowings of the Corporation) (the "Subsequent Contracts"); provided that, any such Subsequent Contracts will not be permitted to contain restrictions on the Corporation's payment obligations with respect to the Cumulative Convertible Preferred Stock or Series C Preferred Stock of the Corporation which are more restrictive than, or more adverse to the -15- holders of the Cumulative Convertible Preferred Stock or Series C Preferred Stock of the Corporation, in each such case, in any material respect as set forth in any such Approved Contracts. EX-4.4 16 DESIGNATION OF SERIES J STOCK EXHIBIT 4.4 CERTIFICATE OF DESIGNATIONS SERIES G 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK SERIES H SPECIAL PREFERRED STOCK SERIES I 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK SERIES J SPECIAL PREFERRED STOCK OF SHARED TECHNOLOGIES INC. SHARED TECHNOLOGIES INC., a Delaware corporation, certifies that pursuant to the authority expressly granted to the Board of Directors in Article FOURTH of the Corporation's Restated Certificate of Incorporation, the Board of Directors of the Corporation duly adopted the following resolution creating four series of Preferred Stock designated as Series G 6% Cumulative Convertible Preferred Stock, Series H Special Preferred Stock, Series I 6% Cumulative Convertible Preferred Stock and Series J Special Preferred Stock: RESOLVED: That this Corporation create and authorize 250,000 shares of Series G 6% Cumulative Convertible Preferred Stock and 200,000 shares of Series H Special Preferred Stock, each with the terms, rights and preferences as set forth in the Designation of Rights and Preferences, attached hereto as Exhibit A and Exhibit B, respectively, and made a part of these resolutions, and to be issued in accordance with the provisions of the Merger Agreement; RESOLVED: That this Corporation create and authorize up to 250,000 shares of Series I 6% Cumulative Convertible Preferred Stock and 200,000 shares of Series J Special Preferred Stock, each with the terms, rights and preferences as set forth in the Designation of Rights and Preferences, attached hereto as Exhibit C and Exhibit D, respectively, and made a part of these resolutions, and to be issued in accordance with the provisions of the Exchange Agreement; RESOLVED: That in connection with the foregoing resolutions, each of the Chief Executive Officer and President, the Chief Financial Officer, Treasurer, any Vice President and Secretary of this Corporation be, and each hereby is, authorized and directed, for and on behalf of this Corporation, to file such documents, including, but not limited to, the Designation of Rights and Preferences annexed hereto as Exhibits A, B, C and D as are necessary with the Secretary of State of Delaware. IN WITNESS WHEREOF, said SHARED TECHNOLOGIES INC. has caused this Certificate of Designations of its Series G 6% Cumulative Convertible Preferred Stock, Series H Special Preferred Stock, Series I 6% Cumulative Convertible Preferred Stock and Series J Special Preferred Stock to be duly executed by its Senior Vice President and attested to by its Secretary and has caused its corporation seal to be affixed hereto as of the 8th day of March, 1996. SHARED TECHNOLOGIES INC. By:/s/ Vincent DiVincenzo Vincent DiVincenzo, Senior Vice President (Corporation Seal) ATTEST: /s/ Kenneth M. Dorros Kenneth M. Dorros, Secretary 2 New Preferred Designation of Series J Special Preferred Stock 1. Designation; Rank. The series of Preferred Stock designated and known as "Series J Special Preferred Stock" shall consist of 200,000 shares, par value $.01 per share, and shall herein be referred to as the "Special Preferred Stock". Shares of the Special Preferred Stock shall, with respect to rights on liquidation, winding up and dissolution, rank senior to all classes of common stock of the Corporation (including, without limitation, the Common Stock, par value $.004 per share (the "Common Stock")), and each other class of capital stock or series of preferred stock hereafter created which does not expressly provide that it ranks on a parity with the Special Preferred Stock as to rights on liquidation, winding up and dissolution ("Junior Stock"), on a parity with the Series D Preferred Stock, Cumulative Convertible Preferred Stock and each other class of capital stock or series of preferred stock hereafter created which expressly provides that it ranks on a parity with the Special Preferred Stock as to rights on liquidation, winding up and dissolution ("Parity Stock"), and, junior to the Series C Preferred Stock and each other class of capital stock or series of preferred stock hereafter created which has been approved by the holders of the Special Preferred Stock in accordance with Section 4 and which expressly provides that it ranks senior to the Special Preferred Stock as to rights on liquidation, winding up and dissolution ("Senior Stock"). 2. Dividends. (a) Prior to March 31, 2007, the holders of the Special Preferred Stock shall not be entitled to receive any dividends. On and after March 31, 2007, the holders of the Special Preferred Stock shall be entitled to receive, out of any funds legally available therefor, dividends in cash at the annual rate of 12 1/4% of the Liquidation Preference (as hereinafter defined) thereof, in equal quarterly payments in arrears on March 31, June 30, September 30 and December 31 in each year (each such date is referred to as a "Dividend Payment Date") commencing on June 30, 2007, payable in preference and priority to any payment of any cash dividend on any Junior Stock, junior in preference and priority to any payment of any cash dividend on any Senior Stock and on a parity with any payment of any cash dividend on any Parity Stock. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time such dividend is declared. If the Dividend Payment Date is not a business day, the Dividend Payment Date shall be the next succeeding business day. -2- (b) Each of such quarterly dividends shall be fully cumulative, whether or not earned or declared, and shall accrue without interest, from the first day of the quarter in which such dividend may be payable as herein provided until the applicable Dividend Payment Date with respect thereto (except that with respect to the first quarterly dividend, such dividend shall accrue from April 1, 2007). In addition, if not fully paid in cash on such Dividend Payment Date, each such dividend shall accrue interest at an annual rate of 12 1/4% thereof from such Dividend Payment Date until the date fully paid in cash. 3. Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Special Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock but before any payment shall be made to the holders of any Junior Stock, and on a parity with any payment to the holders of Parity Stock, an amount equal to $100 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) (the "Original Liquidation Preference") plus with respect to any date after December 31, 1996, an amount (which amount, collectively with the Original Liquidation Preference, is hereinafter referred to as the "Liquidation Preference") equal to 5% per annum of the Original Liquidation Preference thereof calculated on a daily basis from January 1, 1996 to such date; provided that the maximum Liquidation Preference shall not exceed $30,000,000. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Special Preferred Stock the full amount to which they shall be entitled, the holders of Special Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. (b) After the payment of all preferential amounts required to be paid to the holders of Senior Stock, Parity Stock and Special Preferred Stock upon the dissolution, liquidation or winding up of the Corporation, the holders of shares of Junior Stock then outstanding shall be entitled to receive the remaining -3- assets and funds of the Corporation available for distribution to its stockholders. (c) Written notice of such liquidation, dissolution or winding up, stating a payment date and the place where said payment shall be made, shall be given by mail, postage prepaid, or by telecopier, not less than 20 days prior to the payment date stated therein, to the holders of record of the Special Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. (d) Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation. (e) For the purposes of this Section 3, neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the business of the Corporation. 4. Voting. (a) Except as may be otherwise provided in these terms of the Special Preferred Stock or by law, the Special Preferred Stock shall not be entitled to vote. (b) The Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Special Preferred Stock so as to affect adversely the Special Preferred Stock, without the written consent or affirmative vote of the holders of at least two-thirds of the then outstanding shares of Special Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any series of Preferred Stock with preference or priority over the Special Preferred Stock as to the right to receive amounts distribut-able upon liquidation, dissolution or winding up of the Corporation shall be deemed to affect adversely the Special Preferred Stock, and the authorization or issuance of any series of Preferred Stock on a parity with the -4- Special Preferred Stock as to the right to receive amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed not to affect adversely the Special Preferred Stock. 5. Redemption. (a) At any time and from time to time the Corporation may, at the option of its Board of Directors, redeem the Special Preferred Stock in the manner provided below, in whole or in part, at a redemption price equal to 100% of the Liquidation Preference thereof on the Redemption Date (as defined below). (b) The Corporation shall redeem all outstanding shares of Special Preferred Stock on (x) the date which is 35 days after the occurrence of a Change of Control (as defined below) and, in any event, on (z) March 31, 2008 in each such case in the manner provided below at a redemption price equal to 100% of the Liquidation Preference thereof on the Redemption Date. (c) On March 31 of each year, commencing with March 31, 1997, the Corporation shall redeem at a redemption price equal to 100% of the Liquidation Preference thereof on such Redemption Date an amount (the "Required Redemption Amount") of Special Preferred Stock equal to 50% of the amount, if any, by which the consolidated EBITDA (as defined below) of the Corporation and its subsidiaries exceeds the Threshold Amount set forth below for the immediately preceding year ended on December 31. To the extent the Required Redemption Amount exceeds 50% of the sum (the "Income Limitation") of (i) the consolidated net income of the Corporation and its subsidiaries for the immediately preceding year ended on December 31 (without deducting therefrom any amounts on account of dividends paid or payable on any preferred stock or redemptions of any preferred stock of the Corporation, including, without limitation, the Convertible Preferred Stock, Special Preferred Stock and Series C and D classes of Preferred Stock of the Corporation) plus (ii) amounts attributable to the amortization of goodwill of the Corporation and its subsidiaries for such immediately preceding year, such excess amount shall be carried forward and be considered a Required Redemption Amount for the next succeeding year and for each year thereafter until paid. -5- The Threshold Amount for each year shall be as follows:
Year Ended Threshold December 31, Amount 1996........................................... $47.0 million 1997........................................... 53.0 million 1998........................................... 57.5 million 1999........................................... 60.5 million 2000........................................... 63.5 million 2001........................................... 66.5 million 2002........................................... 69.5 million 2003........................................... 72.5 million 2004........................................... 75.5 million 2005........................................... 78.5 million 2006 and thereafter............................ 81.5 million
"EBITDA" means net income plus income taxes, interest expense, depreciation and amoritization. In the event that the Corporation or any subsidiary sells or disposes of any material asset or business ("material" meaning having a value of $250,000 or more), the Threshold Amount for each year thereafter as set forth above shall be reduced by the amount of EBITDA attributable to such asset or business for the four fiscal quarters immediately preceding such sale or disposition. All accounting terms used in this paragraph (c) shall be determined in accordance with generally accepted accounting principles consistently applied as in effect in the United States from time to time. (d) At least 30 days prior to the date fixed for any redemption of Special Preferred Stock (hereinafter referred to as the "Redemption Date"), written notice (the "Redemption Notice") shall be mailed, by first class or registered mail, postage prepaid, to each holder of record of Special Preferred Stock to be redeemed, at its address last shown on the records of the transfer agent of the Special Preferred Stock (or the records of the Corporation, if it serves as its own transfer agent). The Redemption Notice shall state: (1) whether the redemption is pursuant to Section (5)(a), (5)(b)(x), (5)(b)(z) or 5(c) hereof; (2) the redemption price thereof; (3) whether all or less than all the outstanding shares of the Special Preferred Stock redeemable thereunder are to be redeemed and the total number of shares of such Special Preferred Stock being redeemed; -6- (4) the number of shares of Special Preferred Stock held, as of the appropriate record date, by the holder that the Corporation intends to redeem; (5) the date fixed for redemption (the "Redemption Date"); and (6) that the holder is to surrender to the Corporation, at the place or places where certificates for shares of Special Preferred Stock are to be surrendered for redemption, in the manner and at the price designated, his certificate or certificates representing the shares of Special Preferred Stock to be redeemed. (e) Each Holder of Special Preferred Stock shall surrender the certificate or certificates representing such shares of Special Preferred Stock to the Corporation, duly endorsed, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full redemption price for such shares shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled and retired and shall not under any circumstances be reissued. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (f) Unless the Corporation defaults in the payment in full of the redemption price the holders of such redeemed shares shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the redemption price with respect thereto, without interest. (g) In the event of any redemption of only a part of the then outstanding Special Preferred Stock, the Corporation shall effect such redemption pro rata among the holders thereof based on the number of shares of Special Preferred Stock held by such holders on the date of the Redemption Notice. (h) The occurrence of any of the following events will constitute a "Change of Control" for purposes of this Section 5: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than one or more Permitted Holders (as defined below), is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act except that for purposes of this clause (i) such person shall be -7- deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 30% of the total voting power of the Voting Stock (as defined below) of the Corporation; provided, however, that the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Corporation than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Corporation (for the purposes of this clause (i), a person shall be deemed to beneficially own any Voting Stock of a specified corporation held by another corporation (the "parent corporation"), if such other person is the beneficial owner (as defined in this clause (i) above), directly or indirectly, of more than 30% of the voting power of the Voting Stock of such parent corporation and the Permitted Holders beneficially own (as defined in this clause (i) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent corporation and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent corporation); (ii) during any two consecutive 365-day periods, individuals who at the beginning of such period constituted the Board of Directors of the Corporation (together with any new directors whose election by the Board of Directors of the Corporation or whose nomination for election by the shareholders of the Corporation was approved by a vote of 66- 2/3% of the directors of the Corporation then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Corporation then in office; or (iii) the merger or consolidation of the Corporation with or into another Person or the merger of another Person with or into the Corporation, or the sale of all or substantially all the assets of the Corporation to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Corporation that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Corporation are -8- changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation and have the immediate right to appoint a majority of the Board of Directors of the surviving corporation. "Permitted Holders" means Jeffrey J. Steiner and his respective "associates" (as defined in Rule 12b-2 under the Exchange Act as in effect on March 13, 1996, except that a person shall not be an "associate" for purposes of this definition solely because such person comes within the definition of such term in clause (a) of such Rule) or their respective Affiliates. "Affiliate" of any specified person or entity means any other person or entity, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person or entity. For the purposes of this definition, "control" when used with respect to any person or entity means the power to direct the management and policies of such person or entity, 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. "Voting Stock" means, with respect to any person, securities of any class or classes of capital stock in such person entitling the holders thereof (whether at all times or only so long as no senior class of stock has voting power by reason of any contingency) to vote in the election of members of the Board of Directors or other governing body of such person. 6. Certain Restrictions. (a) No dividends or other distributions shall be declared or paid, set apart for payment or otherwise made on any Junior Stock or Parity Stock for any period and no shares of any Junior Stock or Parity Stock shall be redeemed or otherwise repurchased unless on the date such dividend shall be declared, paid, set apart for payment or otherwise made or the date of such redemption or repurchase, as the case may be, the Corporation shall have made all payments required to be made by it pursuant to Section 5 and otherwise be in compliance with all of its obligations hereunder. -9- (b) The Corporation shall not create or permit to exist any contractual restriction which would restrict in any way the Corporation's ability to make required payments on the Special Preferred Stock or the Series C Preferred Stock, except: (1) for such contractual restrictions consented to in writing by a majority of the holders of the Special Preferred Stock before or after the Corporation enters into such contractual restrictions (the "Approved Contracts"), and (2) any subsequent amendments, modifications, supplements, or restatements of the Approved Contracts (including such contractual restrictions entered into in connection with any refinancings of any debt instruments issued by or borrowings of the Corporation) (the "Subsequent Contracts"); provided that, any such Subsequent Contracts will not be permitted to contain restrictions on the Corporation's payment obligations with respect to the Special Preferred Stock or Series C Preferred Stock of the Corporation which are more restrictive than, or more adverse to the holders of the Special Preferred Stock or Series C Preferred Stock of the Corporation, in each such case, in any material respect as set forth in any such Approved Contracts. EX-4.5 17 INDENTURE EXHIBIT 4.5 INDENTURE dated as of March 1, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Company"), SHARED TECHNOLOGIES INC., to be renamed SHARED TECHNOLOGIES FAIRCHILD INC. ("STFI"), various subsidiaries of the Company listed on the signature page hereto (the "Subsidiary Guarantors" and, with STFI, the "STFC Guarantors") and UNITED STATES TRUST COMPANY OF NEW YORK, a New York corporation (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 12-1/4% Senior Subordinated Discount Notes Due 2006 (the "Initial Notes") and, if and when issued pursuant to a registered exchange for Initial Notes, the Company's 12-1/4% Senior Subordinated Discount Notes Due 2006 (the "Exchange Notes") and, if and when issued pursuant to a private exchange for Initial Notes, the Company's 12-1/4% Senior Subordinated Discount Notes Due 2006 (the "Private Exchange Notes" and, together with the Exchange Notes and the Initial Notes, the "Notes"): ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01. Definitions. "Accreted Value" as of any date (the "Specified Date") means, with respect to each $1,000 principal amount at maturity of Notes: (i) if the Specified Date is one of the following dates (each a "Semi-Annual Accrual Date"), the amount set forth opposite such date below:
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE March 13, 1996 $ 702.77 September 1, 1996 742.87 March 1, 1997 788.37 September 1, 1997 836.66 March 1, 1998 887.90 September 1, 1988 942.29 March 1, 1999 1,000.00
(ii) if the Specified Date occurs between two Semi-Annual Accrual Dates, the sum of (A) the Accreted Value for the Semi-Annual Accrual Date immediately preceding the Specified Date and (B) an amount equal to the product of (i) the Accreted Value for the immediately following Semi-Annual Accrual Date less the Accreted Value for the immediately preceding Semi-Annual Accrual Date and (ii) a fraction, the numerator of which is the number of days from the immediately preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day year of twelve 30-day months, and the denominator of which is 180 (or, if the Semi-Annual Accrual Date immediately preceding the Specified Date is March 13, 1996, the denominator of which is 169); and (iii) if the Specified Date occurs after the last Semi-Annual Accrual Date, $1,000. "Acquisition" means the merger of Fairchild Industries Inc. with and into Shared Technologies Inc. "Additional Assets" means (i) any property or assets (other than Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such Restricted Subsidiary described in clause (ii) or (iii) above is primarily engaged in a Related Business. "Adjusted Consolidated Net Income" means, for any period, the Consolidated Net Income for such period plus, to the extent deducted therefrom, the consolidated amortization of goodwill of the Company and its consolidated Subsidiaries for such period related to the Acquisition. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the 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. For purposes of SectionsE4.05, 4.07 and 4.08 only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, 2 consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (i) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary), (ii) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary or (iii) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary (other than, in the case of (i), (ii) and (iii) above, (y) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary and (z) for purposes of Section 4.07 only, a disposition that constitutes a Restricted Payment permitted by Section 4.05). "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at an interest rate which would be applicable to Capital Lease Obligations with a like term in accordance with GAAP) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable by the Company or any STFC Guarantor under or in respect of the Credit Facility, or any facility that refinances or replaces the Credit Facility, in each case as amended, refinanced or replaced from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, Guarantees and all other amounts payable thereunder or in respect thereof. "Banks" has the meaning specified in the Credit Facility. 3 "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligations" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Change of Control" means the occurrence of any of the following events: (i) any "person" (as such term is used in SectionsE13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders or STFI, is or becomes the beneficial owner (as defined in RulesE13d-3 and 13d-5 under the Exchange Act except that for purposes of this clauseE(i) such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 30% of the total voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in RulesE13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clauseE(i), a person shall be deemed beneficially to own any Voting Stock of a specific corporation held by a another corporation (the "parent corporation"), if such other person is the beneficial owner (as defined in this clauseE(i)), directly or indirectly, of more than 30% of the voting power of the Voting Stock of such parent corporation and the Permitted Holders beneficially own (as defined in this clauseE(i) above), directly or indirectly, in the aggregate a 4 lesser percentage of the voting power of the Voting Stock of such parent corporation and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent corporation); (ii) one or more Permitted Holders collectively own beneficially, directly or indirectly, shares representing more than 49% of the total voting power of the outstanding Voting Stock of the Company or STFI; provided, however, a Person shall be deemed to beneficially own any Voting Stock of a specified corporation or other entity held by another corporation or other entity (the "parent entity") if such person owns beneficially more than 49% of the total voting power of the Voting Stock of such parent entity; (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholder of the Company was approved by a vote of 60% of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; or (iv) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than a Person that is controlled by the Permitted Holders) and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. 5 "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days prior to the date of such determination to (ii) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness has been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period and (4) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning or such period) shall have made any Asset Disposition, any Investment or 6 acquisition of assets that would have required an adjustment pursuant to clauseE(2) or (3) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto, and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12Emonths). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries, (i) interest expense attributable to capital leases and one-third of the rental expense attributable to operating leases, (ii) amortization of debt discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection with Investments in discontinued operations, (ix) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary and (x) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "Consolidated Net Income" means, for any period, the net income of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income of any Person if such Person is not a Restricted Subsidiary, except that (A) subject to the 7 exclusion contained in clauseE(iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clauseE(iii) below) and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; (ii) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transactions for any period prior to the date of such acquisition; (iii) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the exclusion contained in clauseE(iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (iv) any gain (but not loss) realized upon the sale or other disposition of any assets of the Company or its consolidated Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition of any Capital Stock of any Person; (v) extraordinary gains or losses; and (vi) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purposes of Section 4.05 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiary to the Company or a Restricted Subsidiary to the extent such 8 dividends, repayments or transfers increase the amount of Restricted Payments permitted under Section 4.05 pursuant to clauseE(a)(3)(D) thereof. "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the most recent fiscal quarter of the Company ending at least 45Edays prior to the taking of any action for the purpose of which the determination is being made, as (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. "Currency Agreement" means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement to which such Person is a party or a beneficiary. "Credit Facility" means the Credit Agreement dated as of March 12, 1996, as amended from time to time, among the Company, STFI, the Lenders referred to therein and the Banks referred to therein, Credit Suisse, as Administrative Agent and Collateral Agent, Citicorp USA, Inc. and NationsBank, N.A., as Documentation Agent. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Preferred Stock" means the 6% Cumulative Convertible Preferred Stock issued by STFI in connection with the Acquisition. "Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness of the Company which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $10 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or 9 (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the first anniversary of the Stated Maturity of the Notes; provided, however, that any Capital Stock that would not constitute Disqualified Stock but for the provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the first anniversary of the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the provisions in Section 4.07 and Section 4.12. "EBITDA" for any period means the sum of Consolidated Net Income plus the following to the extent deducted in calculating such Consolidated Net Income: (a) all income tax expense of the Company, (b) Consolidated Interest Expense, (c) depreciation expense, (d) amortization expense and (e) all other non-cash items reducing such Consolidated Net Income (excluding any non-cash item to the extent it represents an accrual of, or reserve for, cash disbursement for any subsequent period) less all non-cash items increasing such Consolidated Net Income (such amount calculated pursuant to this clauseE(e) not to be less than zero), in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, and other non-cash items with respect to, a Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statuses, rules and governmental regulations applicable to such Subsidiary or its stockholders. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth (i) in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) in such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements (including pro 10 forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Guaranty" means the Guarantee of the Notes by STFI and the Subsidiary Guarantors pursuant to this Indenture. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or 11 other similar instruments for the payment of which such Person is responsible or liable; (ii) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person; (iii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than the obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (v) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (vi) all obligations of the type referred to in clausesE(i) through (v) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, Guarantor or otherwise, including by means of any Guarantee; (vii) all obligations of the type referred to in clausesE(i) through (vi) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and (viii) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum 12 liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Indenture" means this Indenture as amended or supplemented from time to time. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary", the definition of "Restricted Payment" and Section 4.05, (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means the date on which the Notes are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Net Available Cash" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and 13 when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form) in each case net of all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition, and in each case net of all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be, repaid out of the proceeds from such Asset Disposition, and net of all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition. "Net Cash Proceeds," with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means JeffreyEJ. Steiner and his "associates" (as defined in Rule 12b-2 under the Exchange Act as in effect on the Issue Date, except that a person shall not be an "associate" for purposes of this Indenture solely because such person comes within the definition of such term in clauseE(a) of such Rule) and his Affiliates. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (ii) another Person if as a result of such 14 Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (iii) Temporary Cash Investments; (iv) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such consessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (v) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vi) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; and (vii) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "principal" of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. "Public Equity Offering" means an underwritten primary public offering of common stock of STFI pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after (x) a Public Equity Offering has been consummated and (y) at least 15% of the total issued and outstanding common stock of STFI has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, 15 defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with the Indenture including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that (i) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (ii) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not includeE(x) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company orE(y) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. "Related Business" means any business related, ancillary or complementary to the business of the Company and the Restricted Subsidiaries on the Issue Date. "Representative" means any trustee, agent or representative (if any) for an issue of Senior Indebtedness of the Company. "Restricted Payment" with respect to any Person means (i) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Restricted Subsidiary, and other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option 16 to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) the making of any Investment in any Person (other than a Permitted Investment). "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "Revolving Credit Provisions" means the provisions in the Credit Facility pursuant to which the lenders have committed to make available to the Company a revolving credit facility in a maximum principal amount of $25.0 million. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Senior Indebtedness" with respect to any Person means (i) the Bank Indebtedness, (ii) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred and (iii) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person whether or not post-filing interest is allowed in such proceeding) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Notes or the applicable Guaranty, as the case may be; provided, however, that Senior Indebtedness shall not include (1) any obligation of such Person to any Subsidiary of such Person, (2) any liability for Federal, state, local or other taxes owed or owing by such Person, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or 17 instruments evidencing such liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which by its terms is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person or (5) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of this Indenture, it being understood that, for purposes of this clauseE(5), all Bank Indebtedness shall at all times constitute Senior Indebtedness. "Senior Subordinated Indebtedness" with respect to any Person means the Notes (in the case of the Company) or the Guaranty of such Person (in the case of an STFC Guarantor) and, in each case, any other Indebtedness of such Person that specifically provides that such Indebtedness is to rank pari passu with the Notes or such Guaranty, as the case may be, in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company or such STFC Guarantor, respectively, which is not Senior Indebtedness of such Person. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "STFC Guarantors" means each of STFI and the Subsidiary Guarantors. "STFI" means Shared Technologies Fairchild Inc., a Delaware corporation. "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes pursuant to a written agreement to the effect. "Subsidiary" means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, 18 or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. "Subsidiary Guarantor" means each Subsidiary of the Company that Guarantees any Indebtedness of the Company. "Subsidiary Guaranty" means the Guaranty by a Subsidiary Guarantor of the Company's obligations with respect to the Notes. "Temporary Cash Investments" means any of the following: (i) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof, (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50,000,000 (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by any registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc., or "A-1" (or higher) according to Standard and Poor's Ratings Group and (v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc. "Term Loan Provisions" means the provisions in the Credit Facility pursuant to which the lenders commit to make available to the Company $120.0 million of credit facilities 19 in the form of either amortizing term loans or letters of credit. "TIA" means the Trust Indenture Act of 1939 (15EU.S.C. ss.ss.E77aaa-77bbbb) as in effect on the date of this Indenture. "Trust Officer" means any officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.05. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be by the Company to the Trustee by promptly filing with the Trustee a copy of the Board resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. 20 "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares and shares held by other Persons to the extent such shares are required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary) is owned by the Company or one of more Wholly Owned Subsidiaries. SECTION 1.02. Other Definitions. Defined in Term Section "Affiliate Transaction" ................ 4.08 "Bankruptcy Law" ....................... 6.01 "Blockage Notice" ...................... 10.03 "covenant defeasance option" ........... 8.01(b) "Custodian" ............................ 6.01 "Default Amount"........................ 6.02 "Event of Default" ..................... 6.01 "legal defeasance option" .............. 8.01(b) "Legal Holiday" ........................ 12.08 "Offer" ................................ 4.07 "Offer Amount" ......................... 4.07 "Offer Period" ......................... 4.07 "pay the Notes" ........................ 10.03 "Paying Agent" ......................... 2.03 "Payment Blockage Period" .............. 10.03 "Purchase Date" ........................ 4.07 "Registrar"............................. 2.03 "Restricted Payment" ................... 4.05 "Successor Company" .................... 5.01 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Notes and the Guaranties. "indenture security holder" means a Noteholder. 21 "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company, STFI, the Subsidiary Guarantors and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and (9) all references to the date the Notes were originally issued shall refer to the date the Initial Notes were originally issued. 22 ARTICLE 2 The Notes SECTION 2.01. Form and Dating. Provisions relating to the Initial Notes, the Private Exchange Notes and the Exchange Notes are set forth in Appendix 1, which is hereby incorporated in and expressly made part of this Indenture. The Initial Notes and the Trustee's certificate of authentication shall be substantially in the form of ExhibitEA which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Notes, the Private Exchange Notes and the Trustee's certificate of authentication shall be substantially in the form of ExhibitEB, which is hereby incorporated in and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit A and ExhibitEB are part of the terms of this Indenture. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless. A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the 23 "Registrar") and an office or agency where Notes may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Notes. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Note, the Company shall deposit with the Paying Agent a sum in immediately available funds sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Notes and shall notify the Trustee in writing of any default by the Company in making any such payment. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Noteholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders. 24 SECTION 2.06. Replacement Notes. If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Note is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Note. Every replacement Note is an additional obligation of the Company. SECTION 2.07. Outstanding Notes. Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.06, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Noteholders on that date pursuant to the terms of this Indenture, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.08. Temporary Notes. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes and deliver them in exchange for temporary Notes. SECTION 2.09. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee 25 any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Notes surrendered for registration of transfer, exchange, payment or cancellation and deliver a certificate of such destruction to the Company unless the Company directs the Trustee to deliver canceled Notes to the Company. The Company may not issue new Notes to replace Notes it has redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.10. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company shall pay the defaulted interest to the persons who are Noteholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date which special record date shall be 10 days before such payment date and shall promptly mail to each Noteholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.11.EECUSIP Numbers.EEThe Company in issuing the Notes may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to paragraphE5 of the Notes, it shall notify the Trustee in writing of the redemption date, the principal amount of Notes to be redeemed and the paragraph of the Notes pursuant to which the redemption will occur. The Company shall give each notice to the Trustee provided for in this Section at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the 26 effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Notes To Be Redeemed. If fewer than all the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Notes not previously called for redemption. The Trustee may select for redemption portions of the principal of Notes that have denominations larger than $1,000. Notes and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company promptly of the Notes or portions of Notes to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Notes, the Company shall mail a notice of redemption by first-class mail to each Holder of Notes to be redeemed. The notice shall identify the Notes to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Notes are to be redeemed, the identification and principal amounts of the particular Notes to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date and the Accreted Value of the Notes (or portions) thereof called for redemption cease to increase on or after the redemption date; and 27 (7) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Notes called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. On the redemption date, such Notes shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary of the Company is the Paying Agent, shall segregate and hold in trust) money, in immediately available funds, sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date other than Notes or portions of Notes called for redemption which have been delivered by the Company to the Trustee for cancellation. SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Note equal in principal amount to the unredeemed portion of the Note surrendered. ARTICLE 4 Covenants SECTION 4.01. Payment of Notes. The Company shall promptly pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. Principal and interest (including any redemption price in connection with any redemption pursuant to ArticleE3) shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest (or in the case of any such redemption, such redemption price) then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the 28 Noteholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal (including any redemption price) at the rate specified therefor in the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02.EESEC Reports. Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC and provide the Trustee and Noteholders with such annual reports and such information, documents and other reports as are specified in SectionsE13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such information, documents and other reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such Sections. SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not Incur, directly or indirectly, any Indebtedness unless, on the date of such Incurrence, the Consolidated Coverage Ratio would be equal to or greater than 2.0 to 1.0 if such Indebtedness is Incurred prior to March 1, 1998 or 2.25 to 1.0 if such Indebtedness is Incurred thereafter. (b) Notwithstanding Section 4.03(a), the Company may Incur any or all of the following Indebtedness: (1) Indebtedness Incurred pursuant to the Revolving Credit Provisions of the Credit Facility or any other revolving credit facility in a principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this Section 4.03(b)(1) and then outstanding, does not exceed $25.0 million; (2) Indebtedness Incurred pursuant to the Term Loan Provisions of the Credit Facility or any other credit or loan agreement or indenture in an aggregate principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this Section 4.03(b)(2) and then outstanding, does not exceed (A) $120.0 million less (B) the aggregate amount of all principal repayments of any such Indebtedness made after the Issue Date (other than any such principal repayments made as a result of the Refinancing of any such Indebtedness); (3) Indebtedness owed to and held by a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock which results in any such Wholly 29 Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other than to another Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the Company; (4) the Notes; (5) Indebtedness outstanding on the Issue Date (other than Indebtedness described in SectionsE4.03(b)(1), (2), (3) or (4)); (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to Section 4.03(a) or pursuant to SectionsE4.03(b)(4) or (5) or this Section 4.03(b)(6); (7) Hedging Obligations consisting of Interest Rate Agreements directly related to Indebtedness permitted to be Incurred by the Company pursuant to this Indenture; and (8) Indebtedness in an aggregate principal amount which, together with all other Indebtedness of the Company outstanding on the date of such Incurrence (other than Indebtedness permitted by SectionsE4.03(b)(1) through (7) above or Section 4.03(a)), when aggregated with all Indebtedness then outstanding pursuant to Section 4.04(a)(v), does not exceed $5.0 million. (c) Notwithstanding the foregoing, the Company shall not Incur any Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations unless such Indebtedness shall be subordinated to the Notes to at least the same extent as such Subordinated Obligations. (d) Notwithstanding Section 4.03(a) and Section 4.03(b) above, (i) the Company shall not Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness and (ii) the Company shall not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. (e) For purposes of determining compliance with this Section 4.03, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness and only 30 be required to include the amount and type of such Indebtedness in one of the above clauses and (ii) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. SECTION 4.04. Limitation on Indebtedness and Preferred Stock of Restricted Subsidiaries. (a) The Company shall not permit any Restricted Subsidiary to Incur, directly or indirectly, any Indebtedness or Preferred Stock except: (i) Indebtedness or Preferred Stock issued to and held by the Company or a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness or Preferred Stock (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness or Preferred Stock by the issuer thereof; (ii) Indebtedness or Preferred Stock of a Subsidiary Incurred and outstanding on or prior to the date on which such Subsidiary was acquired by the Company (other than Indebtedness or Preferred Stock Incurred in connection with, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company) and Refinancing Indebtedness Incurred in respect thereof; provided, however, that such Refinancing Indebtedness shall only be permitted under this Section 4.04(a)(ii) to the extent Incurred by the Subsidiary that originally Incurred such Indebtedness; (iii) in the case of a Subsidiary Guarantor, (A) any Guarantee of Indebtedness of the Company and (B) any Indebtedness consisting of Liens securing any Guarantee permitted pursuant to this clauseE(iii); (iv) Indebtedness or Preferred Stock outstanding on the Issue Date (other than Indebtedness described in Section 4.04(a)(i) orESection 4.04(a)(ii)); (v) Indebtedness represented by Capital Lease Obligations Incurred for the purpose of financing all or any part of the purchase price of equipment used in a Related Business or Incurred to Refinance any such purchase price; provided, however, that the amount of Indebtedness outstanding at any time pursuant to this Section 4.04(a)(v), when aggregated with all Indebtedness then outstanding pursuant to Section 4.03(b)(8), shall not exceed $5.0 million; and 31 (vi) Refinancing Indebtedness Incurred in respect of Indebtedness or Preferred Stock referred to in Section 4.04(a)(iv) or this Section 4.04(a)(vi). (b) Notwithstanding the foregoing, the Company shall not permit any Subsidiary Guarantor to Incur any Indebtedness pursuant to Section 4.04(a) if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations of such Subsidiary Guarantor unless such Indebtedness shall be subordinated to the Subsidiary Guaranty of such Subsidiary Guarantor to at least the same extent as such Subordinated Obligations. (c) For purposes of determining compliance with this Section 4.04, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the above clauses and (ii) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. (d) Notwithstanding Section 4.04(a) and Section 4.04(b), the Company shall not permit any Subsidiary Guarantor to Incur (i) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of such Subsidiary Guarantor, unless such Indebtedness is Senior Subordinated Indebtedness of such Subsidiary Guarantor or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Subsidiary Guarantor or (ii) any Secured Indebtedness that is not Senior Indebtedness of such Subsidiary Guarantor unless contemporaneously therewith effective provision is made to secure such Subsidiary Guarantor's Guarantee of the Notes equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. SECTION 4.05. Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); or (2) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a); or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of: (A) 50% of the Adjusted Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the Issue Date to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case 32 such Adjusted Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees) plus the aggregate cash capital contributions received by the Company subsequent to the Issue Date; (C) the amount by which Indebtedness of the Company is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent of the Issue Date, of any Indebtedness of the Company convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange); and (D) an amount equal to the sum of (i) the net reduction in Investments in Unrestricted Subsidiaries resulting from dividends, repayments of loans or advances or other transfers of assets, in each case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary. (b) The provisions of Section 4.05(a) shall not prohibit: (i) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of or cash capital contribution in respect of Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees); provided, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale and any such cash capital contribution shall be excluded from the calculation of amounts under Section 4.05(a)(3)(B) above; (ii) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to Section 4.03; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or 33 retirement for value shall be excluded in the calculation of the amount of Restricted Payments; (iii) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; provided, however, that, at the time of payment of such dividend, no other Default shall have occurred and be continuing (or result therefrom), provided further, however, that such dividend shall be included in the calculation of the amount of Restricted Payments; (iv) the declaration and payment of a dividend or other distribution by the Company to STFI the proceeds of which are to be used promptly by STFI for (A) the payment of cash dividends on the Designated Preferred Stock at a rate not in excess of 6% per annum of the liquidation preference of the Designated Preferred Stock or (B) the payment of cash dividends on the STFI's SeriesEC Preferred Stock and SeriesED Preferred Stock; provided, however, that the maximum amount of cash dividends on such SeriesEC Preferred Stock and SeriesED Preferred Stock in any calendar year shall not exceed $0.5Emillion; provided further, however, that the payments of all such dividends and distributions made pursuant to this clauseE(iv) shall be included in the calculation of the amount of Restricted Payments; or (v) the declaration and payment of a dividend or other distribution by the Company to STFI the proceeds of which are to be used for (A) legal, accounting and other professional fees incurred by STFI and any fees and expenses payable by STFI that are associated with registration statements and periodic reports filed with the SEC or (B) the dividends, redemptions and other payments to be made by STFI on the Issue Date in connection with the Acquisition; provided, however, that the payments of all such dividends and distributions made pursuant to this clauseE(v) shall be excluded in the calculation of the amount of Restricted Payments. SECTION 4.06. Limitation on Restrictions on Distributions from Restricted Subsidiaries.EEThe Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary (a) to pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) to make any loans or advances to the Company or (c) to transfer any of its property or assets to the Company, except: (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date; (ii) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the 34 funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (iii) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or (ii) of this Section 4.06 or this clause (iii) or contained in any amendment to an agreement referred to in clause (i) or (ii) of this Section 4.06 or this clause (iii); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are no less favorable to the Noteholders than encumbrances and restrictions with respect to such Restricted Subsidiary contained in such agreements; (iv) any such encumbrance or restriction consisting of customary nonassignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder; (v) in the case of clause (c) of this Section 4.06, restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; and (vi) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition. SECTION 4.07. Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all noncash consideration), as determined in good faith by the Board of Directors, of the shares and assets subject to such Asset Disposition and at least 85% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents and (ii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) first, to the extent the Company elects (or is required by the terms of any Senior Indebtedness of the Company), to prepay, repay, redeem or repurchase Senior Indebtedness of the Company or Indebtedness (other than any Disqualified Stock or, in the case of a Subsidiary Guarantor, any Subordinated Obligations) of a Wholly Owned Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), to the extent the Company elects, to invest in Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net 35 Available Cash; (C) third, to the extent of the balance of such Net Available Cash in excess of $250,000 in any fiscal year after application in accordance with clausesE(A) and (B), to make an offer to the holders of the Notes (and to holders of other Senior Subordinated Indebtedness of the Company designated by the Company) to purchase Notes (and such other Senior Subordinated Indebtedness) pursuant to and subject to Section 4.07(b); and (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C) to (x) the acquisition by the Company or any Wholly Owned Subsidiary of Additional Assets or (y) the prepayment, repayment or purchase of Indebtedness (other than any Disqualified Stock) of the Company (other than Indebtedness owned to an Affiliate of the Company) or Indebtedness of any Subsidiary (other than Indebtedness owed to the Company or an Affiliate of the Company), in each case within one year from the later of the receipt of such Net Available Cash and the date the offer described in Section 4.07(b) is consummated, provided, however, that, in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A), (C) or (D) above, the Company or such Restricted Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this paragraph, the Company and the Restricted Subsidiaries shall not be required to apply any Net Available Cash in accordance with this paragraph except to the extent that the aggregate Net Available Cash from all Asset Dispositions which is not applied in accordance with this paragraph exceeds $5.0 million. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Permitted Investments. For the purposes of this Section 4.07, the following are deemed to be cash or cash equivalents: (x) the assumption of Indebtedness of the Company or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition and (y) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. (b) In the event of an Asset Disposition that requires the purchase of the Notes (and other Senior Subordinated Indebtedness) pursuant to clause (ii)(C) of 36 Section 4.07(a), the Company will be required to purchase Notes tendered pursuant to an offer by the Company for the Notes (and other Senior Subordinated Indebtedness) (the "Offer") at a purchase price of 100% of their Accreted Value plus accrued but unpaid interest (or, in respect of such other Senior Subordinated Indebtedness, such lesser price, if any, as may be provided for by the terms of such Senior Subordinated Indebtedness) in accordance with the procedures (including prorating in the event of oversubscription) set forth in Section 4.07(c). If the aggregate purchase price of Notes (and any other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase thereof, the Company will be required to apply the remaining Net Available Cash in accordance with Section 4.07(a)(ii)(D). The Company shall not be required to make such an offer to purchase Notes (and other Senior Subordinated Indebtedness) pursuant to this Section 4.07 if the Net Available Cash available therefor (after application of the proceeds as provided in clauses (A) and (B) of Section 4.07(a)(ii)) is less than $5.0 million (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to any subsequent Asset Disposition). (c) (1) Promptly, and in any event within 10 days after the Company becomes obligated to make an Offer, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Notes purchased by the Company either in whole or in part (subject to prorationing as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and shall contain such information concerning the business of the Company which the Company in good faith believes will enable such Holders to make an informed decision (which at a minimum will include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Dispositions otherwise described in the offering materials (or corresponding successor reports), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such Reports, and (iii) if material, appropriate pro forma financial information and all instructions and materials necessary to tender Notes pursuant to the Offer, together with the information contained in clause (3). 37 (2) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided below, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.07(a). On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments, maturing on the day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancellation the Notes or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Notes delivered by the Company to the Trustee is less than the Offer Amount, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section. (3) Holders electing to have a Note purchased will be required to surrender the Note, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the Accreted Value of the Note which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Note purchased. If at the expiration of the Offer Period the aggregate Accreted Value of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Notes are purchased only in part will be issued new Notes equal in Accreted Value to the unpurchased portion of the Notes surrendered. (4) At the time the Company delivers Notes to the Trustee which are to be accepted for purchase, the Company will also deliver an Officers' Certificate stating that such Notes are to be accepted by the Company pursuant to and in 38 accordance with the terms of this Section. A Note shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (d) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTIONE4.08.EELimitation on Affiliate Transactions. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof (1) are no less favorable to the Company or such restricted Subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate, (2) if such Affiliate Transaction involves an amount in excess of $1.0 million, (i) are set forth in writing and (ii) have been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction and (3) if such Affiliate Transaction involves an amount in excess of $5.0 million, have been determined by nationally recognized investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of Section 4.08(a) shall not prohibit (i) any Restricted Payment permitted to be paid pursuant to Section 4.05; (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors; (iii) the grant of stock options or similar rights to employees and directors of the Company pursuant to plans approved by the Board of Directors; (iv) loans or advances to employees in the ordinary course of business in accordance with the past practices of the Company or its Restricted Subsidiaries, but in any event not to exceed $1.0 million in the aggregate outstanding at any one time; (v) the payment of reasonable fees to directors of the Company and its Restricted Subsidiaries who are not employees of the Company or its Restricted Subsidiaries; and (vi) any Affiliate Transaction between the Company and a Wholly Subsidiary or between Wholly Owned Subsidiaries. 39 SECTION 4.09. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. The Company shall not sell or otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any shares of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary or (ii) if, immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary. SECTION 4.10. Unrestricted Subsidiaries. The Company shall not permit any Unrestricted Subsidiary to engage in the business of shared telecommunications services in commercial office buildings. SECTION 4.11. Future Guarantors. The Company shall cause each Person that Guarantees any Indebtedness of the Company to become an STFC Guarantor under this Indenture and thereby Guarantee the Notes on the terms and conditions set forth in this Indenture. SECTION 4.12. Change of Control. (a) Upon a Change of Control, each Holder shall have the right to require that the Company repurchase such Holder's Notes at a purchase price in cash equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on a record date to receive interest on the relevant interest payment date), in accordance with the terms contemplated in Section 4.12(b). In the event that at the time of such Change of Control the terms of the Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this Section, then prior to the mailing of the notice to Holders provided for in Section 4.12(b) but in any event within 30 days following any Change of Control, the Company shall (i) repay in full all Bank Indebtedness or to offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness of each lender who has accepted such offer or (ii) obtain the requisite consent under the agreements governing the Bank Indebtedness to permit the repurchase of the Notes as provided for in Section 4.12(b). (b) Within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's Notes at a purchase price in cash equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the 40 right of Holders of record on a record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this Section, that a Holder must follow in order to have its Notes purchased. (c) Holders electing to have a Note purchased will be required to surrender the Note, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than three Business Days prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Note purchased. (d) On the purchase date, all Notes purchased by the Company under this Section shall be delivered by the Trustee for cancellation, and the Company shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto. (e) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.13. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with 41 respect thereto. The Company also shall comply with TIA ss.E314(a)(4). SECTION 4.14. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE 5 Successor Company SECTION 5.01. When Company May Merge or Transfer Assets. (a) The Company shall not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to, any Person, unless:E (i) the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental thereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a); (iv) immediately after giving effect to such transaction, the Successor Company shall have Consolidated Net Worth in an amount that is not less than the Consolidated Net Worth of the Company prior to such transaction; and (v) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. 42 The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, but the predecessor Company in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of and interest on the Notes. Notwithstanding the foregoing clausesE(ii), (iii) and (iv), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company. (b) STFI shall not, and the Company will not permit any Subsidiary Guarantor to, consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless:E(i) in the case of STFI, such Person is not the Company or any Restricted Subsidiary; (ii) the resulting, surviving or transferee Person (if not STFI or such Subsidiary, as the case may be) shall be a Person organized and existing under the laws of the jurisdiction under which STFI or such Subsidiary, as applicable, was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume, by an amendment to the Indenture, in a form satisfactory to the Trustee, all the obligations of STFI or such Subsidiary (as applicable) under its Guaranty; and (iii) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing. ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default. An "Event of Default" occurs if: (1) the Company defaults in any payment of interest on any Note when the same becomes due and payable, whether or not such payment shall be prohibited by Article 10, and such default continues for a period of 30 days; (2) the Company (i) defaults in the payment of the principal (or Accreted Value) of any Note when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration or otherwise, whether or not such 43 payment shall be prohibited by Article 10 or (ii) fails to redeem or purchase Notes when required pursuant to this Indenture or the Notes, whether or not such redemption or purchase shall be prohibited by ArticleE10; (3) the Company or STFI fails to comply with Section 5.01; (4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 or 4.12 (other than a failure to purchase Notes when required under Section 4.07 or 4.12) and such failure continues for 30 days after the notice specified below; (5) the Company or any STFC Guarantor fails to comply with any of its agreements in the Notes or this Indenture (other than those referred to in (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified below; (6) Indebtedness of the Company, STFI or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $5.0 million or its foreign currency equivalent at the time; (7) the Company, STFI or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company, STFI or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company, STFI or any Significant Subsidiary or for any substantial part of its property; or 44 (C) orders the winding up or liquidation of the Company, STFI or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money in excess of $5.0 million or its foreign currency equivalent at the time is entered against the Company, STFI or any Significant Subsidiary, remains outstanding for a period of 60 days following the entry of such judgment or decree and is not discharged, waived or the execution thereof stayed within 10 days after the notice specified below; or (10) a Guaranty ceases to be in full force and effect (other than in accordance with the terms of such Guaranty) or an STFC Guarantor denies or disaffirms its obligations under its Guaranty. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means TitleE11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4), (5) or (9) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the Notes notify the Company of the Default and the Company does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clauseE(6) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clauseE(4), (5) or (9), its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(7) or (8) with respect to the Company) occurs and is continuing, 45 the Trustee by written notice to the Company, or the Holders of at least 25% in principal amount of the Notes by written notice to the Company and the Trustee, may declare the Accreted Value of and accrued but unpaid interest on all the Notes to be due and payable (collectively, the "Default Amount"). Upon such a declaration, the Default Amount shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or (8) with respect to the Company occurs, the Default Amount on all the Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Noteholders. The Holders of a majority in principal amount of the Notes by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the Notes by written notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Note or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Noteholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee 46 determines is unduly prejudicial to the rights of other Noteholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Noteholder may not pursue any remedy with respect to this Indenture or the Notes unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in principal amount of the Notes make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Notes do not give the Trustee a direction inconsistent with the request during such 60-day period. A Noteholder may not use this Indenture to prejudice the rights of another Noteholder or to obtain a preference or priority over another Noteholder. SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Notes held by such Holder, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. 47 SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Noteholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness to the extent required by ArticleE10; THIRD: to Noteholders for amounts due and unpaid on the Notes for principal (or Accreted Value) and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal (or Accreted Value) and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section. At least 15Edays before such record date, the Company shall mail or cause to be mailed to each Noteholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to 48 Section 6.07 or a suit by Holders of more than 10% in principal amount of the Notes. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraphE(b) of this Section; 49 (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphsE(a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. Notwithstanding anything to the contrary contained herein, the Trustee shall not be charged with knowledge of any default or Event of Default (other than those under SectionsE6.01 and 6.02) unless and until a Trust Officer receives written notice of or has actual knowledge of any such default or Event of Default. SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. 50 (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in the Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Noteholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal (or Accreted Value) of or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Noteholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each MayE15 beginning with the MayE15 following the date of this Indenture, and in any event prior to JulyE15 in each year, the Trustee shall mail to each Noteholder a brief report dated as of MayE15 that complies with TIA ss.E313(a). The Trustee also shall comply with TIA ss.E313(b). 51 A copy of each report at the time of its mailing to Noteholders shall be filed with the SEC and each stock exchange (if any) on which the Notes are listed. The Company agrees to notify promptly the Trustee whenever the Notes become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company or the STFC Guarantors if the Company fails to do so shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company or the STFC Guarantors if the Company fails to do so shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company and each STFC Guarantors shall, jointly and severally, indemnify the Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company and the STF Guarantors promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company and the STFC Guarantors shall defend the claim and the Trustee may retain separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company and the STFC Guarantors need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. To secure the Company's and the STFC Guarantors' payment obligations in this Section, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee other than money or property held in trust to pay principal (or Accreted Value) of and interest on particular Notes. The Company's and the STFC Guarantors' payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Company or any STFC Guarantor, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The 52 Holders of a majority in principal amount of the Notes may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Notes and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture and the retiring Trustee shall have no further rights powers or duties under the Indenture. The successor Trustee shall mail a notice of its succession to Noteholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Noteholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust 53 business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA ss.E310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA ss.E310(b); provided, however, that there shall be excluded from the operation of TIAEss.E310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIAEss.E310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims AgainstECompany. The Trustee shall comply with TIA ss.E311(a), excluding any creditor relationship listed in TIA ss.E311(b). A Trustee who has resigned or been removed shall be subject to TIA ss.E311(a) to the extent indicated. ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Notes; Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding Notes (other than Notes replaced pursuant to Section 2.06) for cancellation or (ii) all outstanding Notes have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to ArticleE3 hereof and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Notes, including interest thereon to maturity or such redemption date (other than Notes replaced pursuant to 54 Section 2.06), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Sections 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all its obligations under the Notes and this Indenture ("legal defeasance option") or (ii) its obligations under SectionsE4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.12 and the operation of Sections 6.01(4), 6.01(6), 6.01(7) (but only with respect to Significant Subsidiaries) and 6.01(9) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in SectionsE6.01(4), 6.01(6), 6.01(7) (but only with respect to Significant Subsidiaries) or 6.01(9) or because of the failure of the Company to comply with SectionsE5.01(a)(iii) and (iv) or Section 5.01(b)(iii). If the Company exercises its legal defeasance option or its covenant defeasance option, each STFC Guarantor will be released from all of its obligations under its Guaranty. Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clausesE(a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money orEU.S. Government Obligations for the payment of principal of and interest on the Notes to maturity or redemption, as the case may be; 55 (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the depositedEU.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Notes to maturity or redemption, as the case may be; (3) 123Edays pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(7) or (8) with respect to the Company occurs which is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article 10; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Noteholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Noteholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Notes as contemplated by this Article 8 have been complied with. 56 Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Notes at a future date in accordance with Article 3. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money orEU.S. Government Obligations deposited with it pursuant to this ArticleE8. It shall apply the deposited money and the money fromEU.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Notes. Money and securities so held in trust are not subject to Article 10. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Noteholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against depositedEU.S. Government Obligations or the principal and interest received on suchEU.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money orEU.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money orEU.S. Government Obligations in accordance with this ArticleE8; provided, however, that, if the Company has made any payment of interest on or principal of any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. 57 ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders. The Company, the STFC Guarantors and the Trustee may amend this Indenture or the Notes without notice to or consent of any Noteholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article 5; (3) to provide for uncertificated Notes in addition to or in place of certificated Notes; provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code; (4) to make any change in ArticleE10 that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under ArticleE10; (5) to add guarantees with respect to the Notes, including any new Subsidiary Guaranties, or to secure the Notes; (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (7) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of this Indenture under the TIA; or (8) to make any change that does not adversely affect the rights of any Noteholder. An amendment under this Section may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Noteholders a notice briefly describing such amendment. The failure to give such notice to all Noteholders, or any defect therein, shall not 58 impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company, the STFC Guarantors and the Trustee may amend this Indenture or the Notes without notice to any Noteholder but with the written consent of the Holders of at least a majority in principal amount of the Notes. However, without the consent of each Noteholder affected, an amendment may not: (1) reduce the amount of Notes whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Note; (3) reduce the principal or Accreted Value of or extend the Stated Maturity of any Note; (4) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed in accordance with ArticleE3; (5) make any Note payable in money other than that stated in the Note; (6) make any change in Article 10 or ArticleE12 that adversely affects the rights of any Noteholder under ArticleE10 or ArticleE12; (7) make any change in Section 6.04 or 6.07 or the second sentence of this Section; or (8) make any change in any Guaranty that would adversely affect the Noteholders. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Noteholders a notice briefly describing such amendment. The failure to give such notice to all Noteholders, or any defect therein, shall not 59 impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Notes shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent or waiver is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Note or portion of the Note if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Noteholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Noteholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Noteholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Notes. If an amendment changes the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive 60 indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and that such amendment constitutes the legal, valid and binding obligation of the Company and each STFC Guarantor subject to the customary exceptions. SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE 10 Subordination of the Notes SECTION 10.01. Agreement To Subordinate. The Company agrees, and each Noteholder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment of all Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Notes shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company and only Indebtedness of the Company which is Senior Indebtedness shall rank senior to the Notes in accordance with the provisions set forth herein. All provisions of this ArticleE10 shall be subject to Section 10.12. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of such Senior Indebtedness in cash or cash equivalents before Noteholders shall be entitled to receive any payment of principal of or interest on the Notes; and 61 (2) until such Senior Indebtedness is paid in full in cash or cash equivalents, any distribution to which Noteholders would be entitled but for this Article 10 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Noteholders may receive shares of stock and any debt securities that are subordinated to such Senior Indebtedness, and to any debt securities received by holders of such Senior Indebtedness, to at least the same extent as the Notes are subordinated to Senior Indebtedness of the Company. SECTION 10.03. Default on Senior Indebtedness of the Company. The Company may not pay the principal of or premium, if any, or interest on the Notes or make any deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise retire or defease any Notes (collectively, "pay the Notes") if (i) any Designated Senior Indebtedness is not paid when due or (ii) any other default on Designated Senior Indebtedness occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Designated Senior Indebtedness has been paid in full; provided, however, that the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representatives of the Designated Senior Indebtedness. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179Edays thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) by repayment in full of such Designated Senior Indebtedness or (iii) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day 62 period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period; provided, however, that if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness (other than the Bank Indebtedness), the Representative of the Bank Indebtedness may give another Blockage Notice within such period; provided further, however, that in no event may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179Edays in the aggregate during any 360 consecutive day period. For purposes of this Section, no default or event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. SECTION 10.04. Acceleration of Payment of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the Representative for the holders of the Designated Senior Indebtedness by written notice to the address set forth in Section 13.02 hereof or at any other address specified in writing to the Trustee from time to time. SECTION 10.05. When Distribution Must Be Paid Over. If a distribution is made to Noteholders that because of this Article 10 should not have been made to them, the Noteholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the Company and pay it over to them or their Representatives as their interests may appear. SECTION 10.06. Subrogation. After all Senior Indebtedness of the Company is paid in full and until the Notes are paid in full, Noteholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article 10 to holders of such Senior Indebtedness which otherwise would have been made to Noteholders is not, as between the Company and Noteholders, a payment by the Company on such Senior Indebtedness. SECTION 10.07. Relative Rights. This Article 10 defines the relative rights of Noteholders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: 63 (1) impair, as between the Company and Noteholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; or (2) prevent the Trustee or any Noteholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Noteholders. SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Notes and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Company may give the notice; provided, however, that, if an issue of Senior Indebtedness of the Company has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any such Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. ArticleE10 Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Notes by reason of any provision in 64 this Article 10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10 shall have any effect on the right of the Noteholders or the Trustee to accelerate the maturity of the Notes. SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds ofEU.S. Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest on the Notes shall not be subordinated to the prior payment of any Senior Indebtedness of the Company or subject to the restrictions set forth in this Article 10, and none of the Noteholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 10, the Trustee and the Noteholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Noteholders or (iii) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this ArticleE10, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10. SECTION 10.14. Trustee To Effectuate Subordination. Each Noteholder by accepting a Note authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination 65 between the Noteholders and the holders of Senior Indebtedness of the Company as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Noteholders or the Company or any other Person, money or assets to which any holders of such Senior Indebtedness shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Noteholder by accepting a Note acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 11 Guaranties SECTION 11.01. Guaranties. Each STFC Guarantor hereby unconditionally and irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal or Accreted Value of and interest on the Notes when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture and the Notes and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under this Indenture and the Notes (all the foregoing being hereinafter collectively called the "Obligations"). Each STFC Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from such STFC Guarantor and that such STFC Guarantor will remain bound under this ArticleE11 notwithstanding any extension or renewal of any Obligation. Each STFC Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each STFC Guarantor waives notice of any default under the 66 Notes or the Obligations. The obligations of each STFC Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Notes or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Notes or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of such STFC Guarantor. Each STFC Guarantor further agrees that its Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. Each Guaranty is, to the extent and in the manner set forth in ArticleE12, subordinated and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Indebtedness of the STFC Guarantor giving such Guaranty and each Guaranty is made subject to such provisions of this Indenture. Except as expressly set forth in SectionsE8.01(b), 11.02 and 11.06, the obligations of each STFC Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each STFC Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Notes or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful 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 which may or might in any manner or to any extent vary the risk of such STFC Guarantor or would otherwise operate as a discharge of such STFC Guarantor as a matter of law or equity. Each STFC Guarantor further agrees that its Guarantee herein shall continue to be effective or be 67 reinstated, as the case may be, if at any time payment, or any part thereof, of principal or Accreted Value of or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any STFC Guarantor by virtue hereof, upon the failure of the Company to pay the principal or Accreted Value of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each STFC Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. Each STFC Guarantor agrees that it shall not be entitled to any right of subrogation in respect of any Obligations guaranteed hereby until payment in full of all Obligations and all obligations to which the Obligations are subordinated as provided in ArticleE12. Each STFC Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations Guaranteed hereby may be accelerated as provided in Article 6 for the purposes of such STFC Guarantor's Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in ArticleE6, such Obligations (whether or not due and payable) shall forthwith become due and payable by such STFC Guarantor for the purposes of this Section. Each STFC Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section. SECTION 11.02. Limitation on Liability. Any term or provision of this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or 68 similar laws affecting the rights of creditors generally (taking into account, for purposes of such determination, the full amount, without any reduction, of such STFC Guarantor's liability under its guarantee of Bank Indebtedness or any other guarantee of Senior Indebtedness). SECTION 11.03. Successors and Assigns. This ArticleE11 shall be binding upon each STFC Guarantor and its successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 11 at law, in equity, by statute or otherwise. SECTION 11.05. Modification. No modification, amendment or waiver of any provision of this ArticleE11, nor the consent to any departure by any STFC Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any STFC Guarantor in any case shall entitle such STFC Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 11.06. Release of Subsidiary Guarantor. Upon the sale (including any sale pursuant to any exercise of remedies by a holder of Senior Indebtedness) or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor, or the sale or disposition of all or substantially all the assets of such Subsidiary Guarantor (in each case other than to the Company or an Affiliate of the Company), such Subsidiary Guarantor shall be deemed released from all obligations under this ArticleE11 without any further action required on the part of the Trustee or any Holder. At the request of the Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release. 69 ARTICLE 12 Subordination of STFC Guaranties SECTION 12.01. Agreement To Subordinate. Each STFC Guarantor agrees, and each Noteholder by accepting a Note agrees, that the Obligations of such STFC Guarantor are subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment of all Senior Indebtedness of such STFC Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Obligations of an STFC Guarantor shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of such STFC Guarantor and only Senior Indebtedness of such STFC Guarantor (including such STFC Guarantor's Guarantee of Senior Indebtedness of the Company) shall rank senior to the Obligations of such STFC Guarantor in accordance with the provisions set forth herein. SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of any STFC Guarantor to creditors upon a total or partial liquidation or a total or partial dissolution of such STFC Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such STFC Guarantor or its property: (1) holders of Senior Indebtedness of such STFC Guarantor shall be entitled to receive payment in full of such Senior Indebtedness in cash or cash equivalents before Noteholders shall be entitled to receive any payment pursuant to any Obligations of such STFC Guarantor; and (2) until the Senior Indebtedness of any STFC Guarantor is paid in full in cash or cash equivalents, any distribution to which Noteholders would be entitled but for this Article 12 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Noteholders may receive shares of stock and any debt securities of such STFC Guarantor that are subordinated to Senior Indebtedness, and to any debt securities received by holders of Senior Indebtedness, of such STFC Guarantor to at least the same extent as the Obligations of such STFC Guarantor are subordinated to Senior Indebtedness of such STFC Guarantor. SECTION 12.03. Default on Senior Indebtedness of STFC Guarantor. No STFC Guarantor may make any payment pursuant to any of its Obligations or repurchase, redeem or otherwise retire or defease any Notes or other Obligations (collectively, "pay its Guaranty") if (i) any Designated Senior Indebtedness of the Company is not paid when due or (ii) any other default on Designated Senior Indebtedness of 70 the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Designated Senior Indebtedness has been paid in full; provided, however, that any STFC Guarantor may pay its Guaranty without regard to the foregoing if such STFC Guarantor and the Trustee receive written notice approving such payment from the Representatives of the Designated Senior Indebtedness. No STFC Guarantor may pay its Guaranty during the continuance of any Payment Blockage Period after receipt by the Company and the Trustee of a Payment Notice under Section 10.03. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of Designated Senior Indebtedness giving such Payment Notice or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, any STFC Guarantor may resume payments pursuant to its Obligations after such Payment Blockage Period. SECTION 12.04. Demand for Payment. If a demand for payment is made on an STFC Guarantor pursuant to ArticleE11, the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of such demand. SECTION 12.05. When Distribution Must Be Paid Over. If a distribution is made to Noteholders that because of this Article 12 should not have been made to them, the Noteholders who receive the distribution shall hold it in trust for holders of the relevant Senior Indebtedness and pay it over to them or their Representatives as their interests may appear. SECTION 12.06. Subrogation. After all Senior Indebtedness of an STFC Guarantor is paid in full and until the Notes are paid in full, Noteholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 12 to holders of such Senior Indebtedness which otherwise would have been made to Noteholders is not, as between the relevant STFC Guarantor and Noteholders, a payment by such STFC Guarantor on such Senior Indebtedness. SECTION 12.07. Relative Rights. This Article 12 defines the relative rights of Noteholders and holders of Senior Indebtedness of an STFC Guarantor. Nothing in this Indenture shall: (1) impair, as between an STFC Guarantor and Noteholders, the obligation of such STFC Guarantor, which is 71 absolute and unconditional, to pay its Obligations to the extent set forth in ArticleE11 or the relevant Guaranty; or (2) prevent the Trustee or any Noteholder from exercising its available remedies upon a default by such STFC Guarantor under its Obligations, subject to the rights of holders of Senior Indebtedness of such STFC Guarantor to receive distributions otherwise payable to Noteholders. SECTION 12.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of any STFC Guarantor to enforce the subordination of the Obligations of such STFC Guarantor shall be impaired by any act or failure to act by such STFC Guarantor or by its failure to comply with this Indenture. SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding Section 12.03, the Trustee or Paying Agent may continue to make payments on any Guaranty and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article 12. The Company, the relevant STFC Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of any STFC Guarantor may give the notice; provided, however, that, if an issue of Senior Indebtedness of any STFC Guarantor has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any Senior Indebtedness of any STFC Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 12 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 12.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of any STFC Guarantor, the distribution may be made and the notice given to their Representative (if any). SECTION 12.11. ArticleE12 Not To Prevent Defaults Under a Guaranty or Limit Right To Demand Payment. The failure to make a payment pursuant to a Guaranty by reason of 72 any provision in this Article 12 shall not be construed as preventing the occurrence of a default under such Guaranty. Nothing in this Article 12 shall have any effect on the right of the Noteholders or the Trustee to make a demand for payment on any STFC Guarantor pursuant to ArticleE11 or the relevant Guaranty. SECTION 12.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 12, the Trustee and the Noteholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Noteholders or (iii) upon the Representatives for the holders of Senior Indebtedness of any STFC Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other indebtedness of such STFC Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of any STFC Guarantor to participate in any payment or distribution pursuant to this Article 12, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such STFC Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this ArticleE12, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 12. SECTION 12.13. Trustee To Effectuate Subordination. Each Noteholder by accepting a Note authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Noteholders and the holders of Senior Indebtedness of any STFC Guarantor as provided in this Article 12 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of STFC Guarantor. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of any STFC Guarantor and shall not be liable to 73 any such holders if it shall mistakenly pay over or distribute to Noteholders or the Company or any other Person, money or assets to which any holders of such Senior Indebtedness shall be entitled by virtue of this Article 12 or otherwise. SECTION 12.15. Reliance by Holders of Senior Guarantor Debt on Subordination Provisions. Each Noteholder by accepting a Note acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of any STFC Guarantor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 13 Miscellaneous SECTION 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 13.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company or any STFC Guarantor: Shared Technologies Fairchild Corp. 100 Great Meadow Road Wethersfield, Connecticut 06109 Attention: KennethEM. Dorros Senior Vice President, General Counsel and Secretary if to the Trustee: United States Trust Company of New York 114 West 47th Street New York, New York 10036 Attention: RobertEF. Lee Corporate Trust Administration 74 if to the Representative of the Designated Senior Indebtedness: Credit Suisse Tower 49 12EEast 49th Street New York, New York 10017 Attention: Lisa Perrotto Agency Group The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Noteholder shall be mailed to the Noteholder at the Noteholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.03. Communication by Holders with Other Holders. Noteholders may communicate pursuant to TIA ss. 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. 75 SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 13.06. When Notes Disregarded. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee receives an Officer's Certificate certifying that such Notes are so owned shall be so disregarded. Also, subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination. SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Noteholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.09. Governing Law. This Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York but without giving 76 effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 13.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company or any STFC Guarantor shall not have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Noteholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes. SECTION 13.11. Successors. All agreements of the Company and the STFC Guarantors in this Indenture and the Notes and Guaranties shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 13.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONSECORP., by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer SHARED TECHNOLOGIES INC., as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer 77 MULTI-TENANT SERVICES, INC., as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer BOSTON TELECOMMUNICATIONS GROUP, INC., as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer OFFICE TELEPHONE MANAGEMENT, as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer STI INTERNATIONAL, INC., as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer UNITED STATES TRUST COMPANY OF NEW YORK, by: /s/ Gerard V. Ganey ------------------------ Name: Gerard V. Ganey Title: Senior Vice President EX-4.6 18 FIRST SUPPLEMENTAL INDENTURE EXHIBIT 4.6 EXECUTION COPY SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., Company SHARED TECHNOLOGIES FAIRCHILD, INC. VARIOUS SUBSIDIARIES FINANCIAL PLACE COMMUNICATIONS COMPANY VSI CORPORATION Guarantors 12-1/4% Senior Subordinated Discount Notes Due 2006 First Supplemental Indenture Dated as of March 13, 1996 to Indenture Dated as of March 1, 1996 UNITED STATES TRUST COMPANY OF NEW YORK, Trustee FIRST SUPPLEMENTAL INDENTURE dated as of March 13, 1996 by and among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Company"), SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI"), various subsidiaries of the Company listed on the signature page hereto (the "Subsidiary Guarantors" and, with STFI, the "STFC Guarantors"), VSI CORPORATION, a Delaware Corporation ("VSI"), FINANCIAL PLACE COMMUNICATIONS COMPANY, an Illinois general partnership ("FPCC") and UNITED STATES TRUST COMPANY (the "Trustee"). Capitalized terms used herein but not defined herein shall have the meaning ascribed thereto in the Indenture. WHEREAS, the Company, the Subsidiary Guarantors, STFI and the Trustee entered into an Indenture (the "Original Indenture") dated as of March 1, 1996 for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 12-1/4% Senior Subordinated Discount Notes Due 2006 (the "Initial Notes") and, if and when issued pursuant to a registered exchange for Initial Notes, the Company's 12-1/4% Senior Subordinated Discount Notes Due 2006 (the "Exchange Notes") and, if and when issued pursuant to a private exchange for Initial Notes, the Company's 12-1/4% Senior Subordinated Discount Notes Due 2006 (the "Private Exchange Notes" and, together with the Exchange Notes and the Initial Notes, the "Notes"). The Original Indenture as supplemented by this First Supplemental Indenture is hereinafter referred to as the "Indenture". WHEREAS, Section 9.01 of the Original Indenture provides that the Company, the STFC Guarantors and the Trustee may amend the Original Indenture without notice to or consent of any Noteholder (as defined in Section 1.01 of the Indenture). WHEREAS, VSI, FPCC, the Company, STFI and the Subsidiary Guarantors have agreed that VSI will become a Subsidiary Guarantor and FPCC will become an STFC Guarantor under the Indenture. WHEREAS, all things necessary to make this First Supplemental Indenture a valid indenture supplemental to the Original Indenture have been done. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I SECTION 1.1 Agreement to be Bound. VSI hereby agrees to be bound as a Subsidiary Guarantor, and FPCC agrees to be bound as an STFC Guarantor, by the terms and provisions of the Original Indenture, including without limitation the terms and provisions contained in Article 11 thereof. SECTION 1.2 STFC Guarantors. VSI shall for all purposes be a Subsidiary Guarantor under the Indenture and shall exercise every right and power of the other Subsidiary Guarantors with the same effect as if it had been named as a Subsidiary Guarantor under the Original Indenture and FPCC shall for all purposed be an STFC Guarantor under the Indenture and shall exercise every right and power of the other STFC Guarantors with the same effect as if it had been named as an STFC Guarantor under the Original Indenture. Except as specifically modified herein, the Original Indenture is in all respect ratified and confirmed and shall remain in full force and effect in accordance with its terms. SECTION 1.3 Execution of Supplemental Indenture. This First Supplemental Indenture is executed and shall be construed as an indenture supplemental to the Original Indenture and, as provided in the Original Indenture, this First Supplemental Indenture forms a part thereof. The Original Indenture, as supplemented and amended by this First Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed. Except as herein expressly otherwise defined, the use of the terms and expressions herein is in accordance with the definitions, uses and constructions contained in the Indenture. ARTICLE II Miscellaneous SECTION 2.1 Governing Law. This First Supplemental Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 2.2 Successors. All agreements of the Company and the STFC Guarantors in the Indenture and the Notes and Guaranties shall bind their respective successors. All agreements of the Trustee in the Indenture shall bind its successors. SECTION 2.3 Multiple Originals. The parties may sign any number of copies of this First Supplemental Indenture. Each signed copy shall be an original, but all of 2 them together represent the same agreement. One signed copy is enough to prove this First Supplemental Indenture. SECTION 2.4 Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this First Supplemental Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. SECTION 2.5. Responsibility for Recitals, etc. The recitals herein shall be taken as the statements of VSI, the Company, STFI and the Subsidiary Guarantors, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representations as to the validity or sufficiency of this First Supplemental Indenture. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, all as of the date first written above. SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONSECORP., by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer SHARED TECHNOLOGIES FAIRCHILD INC., as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer MULTI-TENANT SERVICES, INC., as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer VSI CORPORATION, as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer 3 BOSTON TELECOMMUNICATIONS GROUP, INC., as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer OFFICE TELEPHONE MANAGEMENT, as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer STI INTERNATIONAL, INC., as Guarantor, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer FINANCIAL PLACE COMMUNICATIONS COMPANY, as Guarantor, by SHARED TECHNOLOGIES FAIRCHILD INC., General Partner, by: /s/ Vincent DiVincenzo ------------------------ Name: Vincent DiVincenzo Title: Treasurer UNITED STATES TRUST COMPANY OF NEW YORK, by: /s/ Gerard V. Ganey ------------------------ Name: Gerard V. Ganey Title: Senior Vice President 4 EX-10.1 19 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.1 SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP. $163,637,000 12 1/4% Senior Subordinated Discount Notes Due 2006 REGISTRATION RIGHTS AGREEMENT March 8, 1996 CS First Boston Corporation Citicorp Securities, Inc. c/o CS First Boston Corporation Park Avenue Plaza New York, New York 10055 Ladies and Gentlemen: Shared Technologies Fairchild Communications Corp., a Delaware corporation (the "Issuer"), proposes to issue and sell to CSEFirst Boston Corporation and Citicorp Securities Inc. (collectively, the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), $163,637,000 aggregate principal amount of its 12 1/4% Senior Subordinated Discount Notes Due 2006 (the "Notes") to be unconditionally guaranteed on a senior subordinated basis (the "Guaranties") by Shared Technologies Inc. to be renamed Shared Technologies Fairchild Inc. ("STFI") and by each subsidiary of the Issuer listed on the signature page hereto (with STFI, the "Guarantors" and together with the Issuer, the "Company"). The Notes will be issued pursuant to an Indenture, dated as of March 1, 1996, (the "Indenture") among the Issuer, the Guarantors named therein and the United States Trust Company of New York (the "Trustee"). As an inducement to the Initial Purchasers, the Company agrees with the Initial Purchasers, for the benefit of the holders of the Notes (including, without limitation, the Initial Purchasers), the Exchange Notes (as defined below) and the Private Exchange Notes (as defined below) (collectively the "Holders"), as follows: 1. Registered Exchange Offer. The Company shall, at its cost, prepare and, not later than 45Edays after (or if the 45thEday is not a business day, the first business day thereafter) the issue date of the Notes (the "Issue Date"), file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of Transfer Restricted Notes (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Notes, a like aggregate principal amount of debt securities (the "Exchange Notes") of the Company issued under the Indenture and identical in all material respects to the Notes (except for the transfer restrictions relating to the Notes) that would be registered under the Securities Act. The Company shall use its best efforts to cause such Exchange Offer Registration Statement to become effective under the Securities Act within 120 days (or if the 120thEday is not a business day, the first business day thereafter) after the Issue Date of the Notes and shall keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). If the Company effects the Registered Exchange Offer, the Company will be entitled to close the Registered Exchange Offer 30 days after the commencement thereof provided that the Company has accepted all the Notes theretofore validly tendered in accordance with the terms of the Registered Exchange Offer. Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Notes electing to exchange the Notes for Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Notes and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Notes, acquired for its own account as a result of market making activities or other trading activities, for Exchange Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in Annex A hereto on the cover, in Annex B hereto in the 2 "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Exchange Notes acquired in exchange for Notes constituting any portion of an unsold allotment is required to deliver a prospectus containing the information required by ItemsE507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale. The Company shall use its best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Notes; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Notes held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto, available to any broker-dealer for use in connection with any resale of any Exchange Notes for a period not less than 90 days after the consummation of the Registered Exchange Offer. If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Notes acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the Exchange Notes pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the "Private Exchange") for the Notes held by such Initial Purchaser, a like principal amount of debt securities of the Company issued under the Indenture and identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities laws of the several states of the United States) to the Notes (the "Private Exchange Notes"). The Notes, the Exchange Notes and the Private Exchange Notes are herein collectively called the "Securities". In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, 3 together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; (d) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all material respects with all applicable laws. As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall: (i) accept for exchange all the Notes validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (ii) deliver to the Trustee for cancellation all the Notes so accepted for exchange; and (iii) cause the Trustee to authenticate and deliver promptly to each Holder of the Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. The Indenture will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter. Interest on each Exchange Note and Private Exchange Note issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the date of original issue of the Notes. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer 4 (i) any Exchange Notes received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Notes or the Exchange Notes within the meaning of the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes and (v) if such Holder is a broker-dealer, that it will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that in no such case shall the Company be responsible for information concerning or supplied in writing by any Initial Purchaser of the Securities included in the Exchange Offer Registration Statement, the prospectus contained therein, or any amendment or supplement thereto, as the case may be. 2. Shelf Registration. If, (i) because of any change in law or in applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within 150 days of the Issue Date, (iii) any Initial Purchaser so requests with respect to the Notes (or the Private Exchange Notes) not eligible to be exchanged for Exchange Notes in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer or, 5 in the case of any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive freely tradeable Exchange Notes on the date of the exchange, the Company shall take the following actions: (a) The Company shall, at its cost, as promptly as practicable (but in no event more than the later of (i) 45Edays after the Issue Date and (ii) 30 days after so required or requested pursuant to this Section 2) file with the Commission and thereafter shall use its best efforts to cause to be declared effective a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Notes by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. (b) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of three years (or for such longer period if extended pursuant to Section 3(j) below) from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement have been sold pursuant thereto. The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law; provided, however, that the Company shall not be deemed to have voluntarily taken any such action if it enters, in good faith, into negotiations concerning, or executes and delivers any agreement or other document relating to, any business combination, acquisition or disposition. (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any 6 untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3. Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by ItemsE507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Notes received by such broker-dealer in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders, who propose to sell Securities pursuant to the Shelf Registration Statement, as selling securityholders. 7 (b) The Company shall give written notice to the Initial Purchasers, the Holders of the Securities and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clausesE(ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading. (c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Registration Statement. (d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company shall deliver to each Exchanging Dealer and each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange 8 Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (g) The Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Notes covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement. (h) Prior to any public offering of the Securities, pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. 9 (i) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by paragraphsE(ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Notes or purchasers of Securities, the 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, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with paragraphsE(ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j). (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, and provide the applicable trustee with printed certificates for the Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities 10 Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45Edays after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (m) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (n) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (o) The Company shall enter into such customary agreements (including if requested an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. (p) In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof. 11 (q) In the case of any Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall be subject to customary qualifications and exceptions and shall include, without limitation, the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of material legal or governmental proceedings involving the Company; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act); (ii) its officers to execute and deliver all documents and certificates and updates thereof in customary form reasonably requested by any underwriters of the applicable Securities and (iii) its independent public accountants to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No.E72. (r) In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to such Initial Purchaser or such Participating Broker-Dealer a signed opinion in the form set 12 forth in Section 6(f)-(g) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 6(a) of the Purchase Agreement, with appropriate date changes. (s) If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or caused to be marked, on the Notes so exchanged that such Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall the Notes be marked as paid or otherwise satisfied. (t) The Company will use its best efforts to cause the Securities covered by a Registration Statement to be rated (or to have any existing rating confirmed) with the appropriate rating agencies, if so requested by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement, or by the managing underwriters, if any. (u) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such broker-dealer in complying with the requirements of such Rules and By-Laws, including, without limitation, by (A) if such Rules or By-Laws, including Schedule E thereto, shall so require, engaging a "qualified independent underwriter" (as defined in such Schedule) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules of Fair Practice of the NASD. 13 (v) The Company shall use its best efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby. 4. Registration Expenses. The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 1 through 3 hereof (including the reasonable fees and expenses, if any, of Cravath, Swaine & Moore, counsel for the Initial Purchasers, incurred in connection with the Registered Exchange Offer), whether or not the Registered Exchange Offer or a Shelf Registration is filed or becomes effective, and, in the event of a Shelf Registration, shall bear or reimburse the Holders of the Securities covered thereby for the reasonable fees and disbursements of one firm of counsel designated by the Holders of a majority in principal amount of the Securities covered thereby to act as counsel for the Holders of the Securities in connection therewith. 5. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder 14 specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsectionE(a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders. (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition 15 to any liability which such Holder may otherwise have to the Company or any of its controlling persons. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above, except to the extent that the indemnifying party is prejudiced by failure to give such notice. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, which consent shall not be unreasonably withheld, be counsel to the indemnifying party if such representation of both the indemnifying and the indemnified party would be inappropriate due to an actual or potential conflict of interest between them), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. No indemnifying party shall be liable for any amounts paid in Settlement of any action or claim without its written consent. (d) If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of 16 the Notes, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall 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 the Company on the one hand or such Holder or such other indemnified person, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have 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 Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. (e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 6. Additional Interest Under Certain Circumstances. (a) Additional interest (the "Additional Interest") with respect to the Securities shall be assessed as follows if any 17 of the following events occur (each such event in clausesE(i) through (iii) below a "Registration Default": (i) If by AprilE27, 1996, neither the Exchange Offer Registration Statement nor a Shelf Registration Statement has been filed with the Commission; (ii) If by AugustE10, 1996, neither the Registered Exchange Offer is consummated nor, if required in lieu thereof, the Shelf Registration Statement is declared effective by the Commission; or (iii) If after either the Exchange Offer Registration Statement or the Shelf Registration Statement is declared effective (A) such Registration Statement thereafter ceases to be effective; or (B) such Registration Statement or the related prospectus ceases to be usable (except as permitted in paragraphE(b)) in connection with resales of Transfer Restricted Notes during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder. Additional Interest shall accrue on the Notes over and above the interest set forth in the title of the Notes from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of 0.50% per annum. (b) A Registration Default referred to in Section 6(a)(iii)(B) shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clauseE(y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 45Edays, Additional Interest shall be payable in accordance 18 with the above paragraph from the day following such 45Eday period until the date on which such Registration Default is cured. (c) Any amounts of Additional Interest due pursuant to clause (a)(i), (a)(ii) or (a)(iii) of Section 6 above will be payable in cash on the regular interest payment dates with respect to the Notes. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Notes, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. (d) "Transfer Restricted Notes" means each Security until (i) the date on which such Transfer Restricted Note has been exchanged by a person other than a broker-dealer for a freely transferrable Exchange Note in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of a Transfer Restricted Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Transfer Restricted Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Transfer Restricted Note is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 7. Rules 144 and 144A. The Company shall use its best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Transfer Restricted Notes, make publicly available other information so long as necessary to permit sales of their securities pursuant to RulesE144 and 144A. The Company covenants that it will take such further action as any Holder of Transfer Restricted Notes may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Notes without registration under the Securities Act within the limitation of the exemptions provided by RulesE144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Notes identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Transfer Restricted Notes, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall 19 be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 8. Underwritten Registrations.If any of the Transfer Restricted Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("Managing Underwriters") will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Notes to be included in such offering. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Notes on the basis reasonably provided in any underwriting arrangements approved by the persons 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. 9. Miscellaneous. (a) 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, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 9(b), which address initially is, with respect to each Holder, the address of such Holder to which confirmation of the sale of the Notes to such Holder was first sent by the Initial Purchasers, with a copy in like manner to you as follows: CS First Boston Corporation Park Avenue Plaza New York, NY 10055 Fax No.: (212) 318-0532 Attention: Transactions Advisory Group 20 with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Fax No.: (212) 474-3700 Attention: Kris F. Heinzelman (2) if to the Initial Purchasers, at the addresses specified in Section 9(b)(1); (3) if to the Company, at its address as follows: Shared Technologies Fairchild Corp. 100 Great Meadow Road Wethersfield, Connecticut Fax No: Attention: All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (c) Agent for Service; Submission to Jurisdiction; Waiver of Immunities. By the execution and delivery of this Agreement, the Company (i) acknowledges that it has, by separate written instrument, irrevocably designated and appointed CT Corporation System (and any successor entity), as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Agreement that may be instituted in any federal or state court in the State of New York or brought under federal or state securities laws, and acknowledges that CT Corporation System has accepted such designation, (ii) submits to the nonexclusive jurisdiction of any such court in any such suit or proceeding, and (iii) agrees that service of process upon CTECorporation System and written notice of said service to the Company shall be deemed in every respect effective service of process upon it in any such suit or proceeding. The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment of CT Corporation System in full force and effect so long as any of the Notes shall be outstanding. To the extent that the Company may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, 21 attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of this Agreement, to the fullest extent permitted by law. (d) No Inconsistent Agreements.EEThe Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (e) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (i) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (j) Securities Held by the Company.EEWhenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 22 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuer a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers, the Issuer and the Guarantors in accordance with its terms. Very truly yours, SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP. by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer SHARED TECHNOLOGIES INC. as Guarantor by: /s/ Vincent DiVincnezo ----------------------- Name: Vincent DiVincenzo Title: Treasurer MULTI-TENANT SERVICES, INC., as Guarantor by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer BOSTON TELECOMMUNICATIONS GROUP, INC., as Guarantor by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer OFFICE TELEPHONE MANAGEMENT, as Guarantor by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer STI INTERNATIONAL, INC., as Guarantor by: /s/ Vincent DiVincenzo ----------------------- Name: Vincent DiVincenzo Title: Treasurer 23 The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. CS FIRST BOSTON CORPORATION CITICORP SECURITIES, INC. by: CS FIRST BOSTON CORPORATION By: /s/ Richard H. Ivers --------------------------- Name: Richard H. Ivers Title: Managing Director 24 ANNEX A Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 25 ANNEX B Each broker-dealer that receives Exchange Notes for its own account in exchange for Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." 26 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Existing Notes where such Existing Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until March 13, 1999, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus.* The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. - -------- *In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus. 27 For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 28 ANNEX D / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ____________________________________________ Address: _________________________________________ ----------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 29 EX-10.2 20 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.2 ================================================================================ REGISTRATION RIGHTS AGREEMENT between RHI HOLDINGS, INC. THE FAIRCHILD CORPORATION and SHARED TECHNOLOGIES INC. Dated March 13, 1996 ================================================================================ REGISTRATION RIGHTS AGREEMENT dated as of March 13, 1996, between SHARED TECHNOLOGIES INC., a Delaware corporation (the "Company"), RHI HOLDINGS, INC., a Delaware corporation ("RHI") and THE FAIRCHILD CORPORATION, a Delaware corporation ("TFC"). WITNESSETH: WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of November 9, 1995, as amended (the "Merger Agreement"), among the Company, TFC, RHI and Fairchild Industries, Inc. ("Fairchild"), RHI has obtained 6,000,000 shares of Common Stock shares of the Company, par value $.004 (the "Common Stock"). WHEREAS, pursuant to the Agreement to Exchange 6% Cumulative Convertible Preferred Stock and Special Preferred Stock dated as of March 1, 1996 (the "Exchange Agreement") among the Company, TFC, RHI, Fairchild and Fairchild Holding Company, RHI has obtained (i) 250,000 shares of Series I 6% Cumulative Convertible Preferred Stock par value $.01 (the "Convertible Preferred Stock"), of the Company and (ii) 200,000 shares of Series J Special Preferred Stock, par value $.01 (the "Special Preferred Stock" and, together with the Convertible Preferred Stock, the "Preferred Stock"). WHEREAS, the Company desires to provide RHI and its successors and assigns with certain rights regarding the registration of the Common Stock and the Preferred Stock (including Common Stock issuable upon conversion of the Convertible Preferred Stock and Common Stock issuable by the Company to RHI to satisfy indemnification obligations of the Company under the Merger Agreement). NOW, THEREFORE, in consideration of the mutual covenants and agreements made herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereto agree as follows: 1. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: "Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange Act (as in effect on the date of this Agreement), it being understood that any limited partner of a partnership shall not be an Affiliate of such partnership solely by virtue of its status as such a limited partner. -2- "Commission" means the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Common Stock" means the common stock of Shared Technologies Inc., par value $.004. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934, as amended, shall include reference to the comparable section, if any, of any such subsequent similar federal statute. "Exchange Agreement" is defined in the Recitals. "Merger Agreement" is defined in the Recitals. "Person" means any individual, partnership, joint venture, corporation, trust, unincorporated organization, government or department or agency of a government. "Preferred Stock" means, collectively, (i) the 6% Cumulative Convertible Preferred Stock of the Company, par value $.01, issued pursuant to the Exchange Agreement and (ii) the Special Preferred Stock of the Company, par value $.01, issued pursuant to the Exchange Agreement. "Registrable Common Securities" means the shares of Common Stock (i) issued to RHI pursuant to the Merger Agreement, (ii) issued to RHI in the future to satisfy indemnification obligations of the Company under the Merger Agreement and (iii) issuable and issued upon conversion of any shares of Convertible Preferred Stock. As to any particular Registrable Common Securities, once issued such securities shall cease to be Registrable Common Securities when (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) they shall have been sold as permitted by, and in compliance with, Rule 144 (or successor provision) promulgated under the Securities Act or (c) they shall have ceased to be outstanding. "Registrable Preferred Securities" means the shares of Preferred Stock issued to RHI pursuant to the Exchange Agreement. As to any particular Registrable Preferred Securities, once issued such securities shall cease to be Registrable Preferred Securities -3- when (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) they shall have been sold as permitted by, and in compliance with, Rule 144 (or successor provision) promulgated under the Securities Act or (c) they shall have ceased to be outstanding. "Registrable Securities" means collectively the Registrable Common Securities and Registrable Preferred Securities and any other securities issuable in connection therewith or in replacement thereof by way of a dividend, distribution, recapitalization, exchange, merger, consolidation or other reorganization. "Registration Expenses" means all expenses incident to the Company's performance of or compliance with Section 2, including, without limitation, all registration, filing and National Association of Securities Dealers, Inc. fees, all listing fees, all fees and expenses of complying with securities or blue sky laws (including, without limitation, reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities), all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of "comfort" letters required by or incident to such performance and compliance, and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities; provided, however, that Registration Expenses shall exclude, and RHI shall pay, underwriters' fees and underwriting discounts and commissions and transfer taxes in respect of the Registrable Securities being registered. "Securities Act" means the Securities Act of 1933, as amended, or any subsequent similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. References to a particular section of the Securities Act of 1933, as amended, shall include a reference to the comparable section, if any, of any such subsequent similar federal statute. "Special Securities" is defined in the definition of "Trigger Date" below. "Trigger Date" means (i) with respect to shares of Common Stock issued to satisfy indemnification obligations of the Company under the Merger Agreement (collectively "Special Securities"), on -4- the date of their issuance, (ii) with respect to the shares of Special Preferred Stock, on their date of issuance and (iii) with respect to all other Registrable Securities, on the date which is two years after the date of this Agreement. 2. REGISTRATION RIGHTS. 2.1 Registration on Demand. 2.1.1 Demand. At any time following a Trigger Date, upon the written request (the "Demand") of RHI that the Company effect the registration under the Securities Act of all or part of RHI's Registrable Securities, the Company shall: use its best efforts to effect, as soon as practicable and in any event within 90 days after the Demand is received from RHI, the registration under the Securities Act (but not including by means of a shelf registration pursuant to Rule 415 under the Securities Act), of the Registrable Securities which the Company has been so requested to register by RHI. 2.1.2 Registration of Other Securities. Whenever the Company shall effect a registration pursuant to this Section 2.1 in connection with an underwritten offering by RHI of Registrable Securities, holders of securities of the Company who have "piggyback" registration rights may include all or a portion of such securities in such registration, offering or sale; provided that, if the amount of Registrable Securities to be sold by RHI is to be reduced because of the views of the managing underwriter or underwriters, then the securities (other than the Registrable Securities) to be sold by such other holders participating in such offering shall be reduced by allocating the securities to be sold by such other holders in proportion to the number of securities proposed to be sold in such offering by such holders. 2.1.3 Registration Statement Form. Registrations under this Section 2.1 shall be on such appropriate registration form of the Commission as shall be selected by the Company. The Company shall include in any such registration statement all information which, in the opinion of counsel to the Company, is required to be included. 2.1.4 Expenses. The Company shall pay the Registration Expenses in connection with any registration requested pursuant to this Section 2.1. 2.1.5 Effective Registration Statement. A registration requested pursuant to this Section 2.1 shall not be deemed to have been effected (i) unless a registration statement -5- 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 RHI and has not thereafter become effective, 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 RHI. 2.1.6 Selection of Underwriters. In connection with each underwritten offering, RHI shall promptly select an underwriter subject to the approval of the Company (which approval shall not be unreasonably withheld by the Company). 2.1.7 Limitations on Registration on Demand. The Company shall not be required to prepare and file a registration statement pursuant to this Section 2.1 which would become effective within 90 days following the effective date of a registration statement (other than a registration statement filed on Form S-8) filed by the Company with the Commission pertaining to an underwritten public offering of convertible debt securities or equity securities for cash for the account of the Company or another holder of securities of the Company or if the Company gives written notice to RHI within 10 days of receipt of a Demand that the Company will initiate within 30 days the preparation of such registration statement, and in each such case RHI was afforded the opportunity to include Registrable Securities in such registration pursuant to Section 2.2 (unless the managing underwriter for such registration is of the opinion that such inclusion would adversely affect the Company's ability to complete its underwritten offering). Notwithstanding anything in this Section 2.1 to the contrary, in no event shall the Company be required to effect (i) in the aggregate, more than three registrations pursuant to this Section 2.1 (other than registrations pertaining to Special Securities, which shall be unlimited in number and not otherwise reduce the number of registrations available to the Company pursuant to this Section 2.1) and (ii) more than one registration pursuant to this Section 2.1 in any 180-day period (other than registrations pertaining to Special Securities, which shall not affect or be affected by this clause (ii)). 2.1.8 Right to Purchase in Lieu of Registration. If the Company receives a request for a Demand registration and the Company desires not to comply with such request, then the Company may purchase all but not less than all of the Registrable Securities proposed to be disposed of in such request (the "Redeemable Shares") by delivering to RHI a notice of the -6- Company's election to purchase such Registrable Securities (the "Redemption Notice") within seven (7) days of receipt by the Company of the request for the Demand registration pursuant to Section 2.1.1. Upon issuance of the Redemption Notice, the Company shall be irrevocably committed to purchase the Registrable Securities on the terms set forth herein. The purchase price to be paid for the Registrable Securities shall be the Closing Price on the Trading Day immediately prior to the date the Company receives the notice for the Demand registration; provided, that in the event the Registrable Securities are not listed and traded on any national securities exchange or on NASDAQ (as defined below), the purchase price shall be established by the written opinion of a nationally recognized investment banking firm selected by RHI delivered to the Company at time of the request for a Demand registration. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Registrable Securities in question shall be listed or admitted to trading shall be open for the transaction of business or, if the Registrable Securities shall not be listed or admitted to trading on any national securities exchange, any day on which trading takes place in the over-the-counter market. The Company shall purchase the Registrable Securities within thirty (30) business days of the issuance of the Redemption Notice by delivering the purchase price in cash to RHI against delivery of the Registrable Securities. "Closing Price" means the last sale price, regular way, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the principal national securities exchange on which the Registrable Securities shall be listed or admitted to trading or, if the Registrable Securities shall not be listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers Automated Quotations System ("NASDAQ") or such other system then in use. 2.2 Piggyback Registration. 2.2.1 Right to Include Registrable Securities. If the Company at any time proposes to register any of its securities under the Securities Act by registration on Forms S-1, S-2, S-3 or any successor or similar form(s) (except registrations on such Forms or similar form(s) solely for registration of securities in connection with (i) an employee benefit plan or dividend reinvestment plan or a merger or consolidation or (ii) debt securities which are not convertible into Common Stock), whether or not for sale for its own account, it shall, subject to Section 2.8, each such time give written notice to RHI of its intention to do -7- so and of RHI's rights under this Section 2.2 at least 15 days prior to the filing of a registration statement with respect to such registration with the Commission. Upon the written request of RHI made as promptly as practicable and in any event within 5 business days after the receipt of any such notice, which request shall specify the Registrable Securities intended to be disposed of by RHI, the Company shall, subject to Section 2.7, use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by RHI; provided, that with respect to registrations effected for the account of another holder of securities of the Company, RHI's rights to include Registrable Securities will be subject to the consent of such other holder under agreements existing as of the date of this Agreement; provided, further, that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to RHI and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from any obligation of the Company to pay the Registration Expenses in connection therewith), without prejudice; provided, however, that RHI may request that such registration be effected as a registration under Section 2.1 hereof and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities. No registration effected under this Section 2.2 shall relieve the Company of its obligation to effect any registration upon demand under Section 2.1. The Company shall pay all Registration Expenses in connection with registration of Registrable Securities requested pursuant to this Section 2.2. 2.2.2 Priority in Piggyback Registrations. Notwithstanding anything in paragraph 2.2.1 above to the contrary, if the managing underwriter of any underwritten offering shall inform the Company by letter of its belief that the number or type of Registrable Securities requested to be included in such registration would materially and adversely affect such offering, then the Company shall include in such registration, to the extent of the number and type which the Company is so advised can be sold in (or during the time of) such offering, first, all securities proposed by the Company to be sold for its own account or by the holder of securities who initiated a demand registration, and second, by reducing the other securities (including Registrable Securities to be sold by other holders of securities (including -8- RHI)) in proportion to the number of securities proposed to be sold in such offering by such holders. 2.3 Registration Procedures. 2.3.1 In connection with the registration of any Registrable Securities under the Securities Act as provided in Sections 2.1 and 2.2, the Company shall as expeditiously as possible: (i) prepare and file with the Commission the requisite registration statement to effect such registration and thereafter use its best efforts to cause such registration statement to become and remain effective (subject to clause (ii) below); provided, however, that the Company may discontinue any registration of its securities which are not Registrable Securities at any time prior to the effective date of the registration statement relating thereto; (ii) 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 and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement for such period as shall be required for the disposition of all of such Registrable Securities; provided, that such period need not exceed 90 days; (iii) furnish to RHI such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as RHI may reasonably request; (iv) use its best efforts (x) to register or qualify all Registrable Securities and other securities covered by such registration statement under such other securities or Blue Sky laws of such States of the United States of America where an exemption is not available and as RHI shall reasonably request, (y) to keep such registration or qualification in effect for so long as such registration statement remains in effect, and (z) to take any other action which may reasonably be necessary or advisable to enable RHI to consummate the disposition in such jurisdictions of the -9- securities to be sold by RHI, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not, but for the requirements of this paragraph (iv), be obligated to be so qualified or to consent to general service of process in any such jurisdiction; (v) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to RHI to consummate the disposition of such Registrable Securities in accordance with their intended method of disposition; (vi) furnish to RHI and its underwriters, if any, (x) an opinion of counsel for the Company, and (y) a "comfort" letter signed by the independent public accountants who have certified the Company's financial statements included or incorporated by reference in such registration statement, each covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountant's comfort letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountant's comfort letters delivered to the underwriters in underwritten public offerings of securities (and dated the dates such opinions and comfort letters are customarily dated); (vii) notify RHI when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and at the request of RHI promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (viii) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make -10- available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder, and promptly furnish the same to RHI; (ix) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration; and (x) use its best efforts to list all Registrable Securities covered by such registration statement on any national securities exchange or over-the-counter market, if any, on which Registrable Securities of the same class and, if applicable, series, covered by such registration statement are then listed. The Company may require RHI to furnish the Company such information regarding RHI and the distribution of RHI's Registrable Securities as the Company may from time to time reasonably request in writing. RHI agrees that upon receipt of any notice from the Company of the happening of an event of the kind described in Section 2.3.1(vii), RHI will forthwith discontinue its disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until RHI's receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.3.1(vii) and, if so directed by the Company, RHI will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in RHI's possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. 2.4 Underwritten Offerings. 2.4.1 Requested Underwritten Offerings. If requested by the underwriters for any underwritten offering by RHI pursuant to a registration requested under Section 2.1, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company, RHI and the underwriters, and to contain such representations and warranties by the Company and RHI and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnities to the -11- effect and to the extent provided in Section 2.8. RHI will cooperate with the Company in the negotiation of the underwriting agreement and will give consideration to the reasonable suggestions of the Company regarding the form and substance thereof. RHI shall be a party to such underwriting agreement. RHI shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding RHI, RHI's Registrable Securities, RHI's intended method of distribution and any other representations or warranties required by law or customarily given by selling shareholders in an underwritten public offering. 2.4.2 Piggyback Underwritten Offerings. If the Company proposes to register any of its securities under the Securities Act as contemplated by Section 2.2 and such securities are to be distributed by or through one or more underwriters, the Company will, subject to Section 2.2 and Section 2.7 hereof, if requested by RHI, arrange for such underwriters to include all the Registrable Securities to be offered and sold by RHI among the securities of the Company to be distributed by such underwriters (subject to the provisio stated in Section 2.2). RHI shall become a party to the underwriting agreement negotiated between the Company and such underwriters. RHI shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding RHI, RHI's Registrable Securities and RHI's intended method of distribution or any other representations or warranties required by law or customarily given by selling shareholders in an underwritten public offering. 2.4.3 Holdback Agreements. (i) If any registration of Registrable Securities (other than special securities) shall be in connection with an underwritten public offering, RHI agrees not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Registrable Securities, and not to effect any such public sale or distribution of any other equity security of the Company or of any security convertible into or exchangeable or exercisable for any equity security of the Company (in each case, other than as part of such underwritten public offering) during the 15 days prior to, and during the 90-day period beginning on, the effective date of such registration statement, provided that RHI has received written notice of such registration at least 15 days prior to such effective date. (ii) If any registration of Registrable Securities (other than special securities) shall be in connection with an -12- underwritten public offering, the Company agrees (x) not to effect any public sale or distribution of any of its equity securities or of any security convertible into or exchangeable or exercisable for any equity security of the Company (other than in connection with any employee stock option or other benefit plan) during the 15 days prior to, and during the 90-day period beginning on the effective date of such registration statement (except as part of such registration) and (y) that any agreement entered into after the date of this Agreement pursuant to which the Company issues or agrees to issue any privately placed equity securities shall contain a provision under which holders of such securities agree not to effect any public sale or distribution of any such securities during the period referred to in the foregoing clause (x), including any sale pursuant to Rule 144 under the Securities Act (except as part of such registration, if permitted), if such holder is participating in the offering pursuant to such registration. 2.5 Preparation; Reasonable Investigation. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company will give RHI, its underwriters, if any, and their respective counsel and accountants the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and give each of them such access to its books and records, such opportunities to discuss the business of the Company with officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of RHI's and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. Any expenses incurred by RHI in connection with any such investigation shall be borne by RHI. 2.6 Limitations, Conditions and Qualifications to Obligations under Registration Covenants. The obligations of the Company to use its best efforts to cause the Registrable Securities to be registered under the Securities Act are subject to each of the following limitations, conditions and qualifications: In addition to its rights under Section 2.1.8 the Company shall be entitled to postpone for a reasonable period of time (but not exceeding 60 days) the filing of any registration statement otherwise required to be prepared and filed by it pursuant to Section 2.1 if the Company determines, in its reasonable judgment, that such registration and offering would interfere with any financing, acquisition, corporate reorganization or other material transaction involving the Company or any of its Affiliates or would -13- require premature disclosures thereof and promptly give RHI written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the anticipated delay. If the Company shall so postpone the filing of a registration statement, RHI shall have the right to withdraw the request for registration by giving written notice to the Company within 30 days after receipt of the notice of postponement and, in the event of such withdrawal, such request shall not be counted for purposes of the requests for registration to which RHI is entitled pursuant to Section 2.1 hereof. 2.7 Indemnification. 2.7.1 Indemnification by the Company. In the event of any registration of any securities of the Company under the Securities Act, the Company will, and hereby does, indemnify and hold harmless, in the case of any registration statement filed pursuant to Section 2.1 or 2.2, RHI, its directors, officers, partners, agents, and affiliates and each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls RHI or any such underwriter within the meaning of the Securities Act, insofar as losses, claims, damages, or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus, or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company will reimburse RHI and each such director, officer, partner, agent or affiliate, underwriter and controlling Person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of RHI or such underwriter, as the case may be, specifically stating that it is for use in the preparation thereof; and provided, further, -14- that the Company shall not be liable to RHI or any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other person, if any, who controls RHI or such underwriter within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus so long as such final prospectus, and any amendments or supplements thereto, have been furnished to such underwriter or RHI, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of RHI or any such director, officer, partner, agent or affiliate or controlling Person and shall survive the transfer of such securities by RHI. 2.7.2 Indemnification by RHI. If any Registrable Securities are included in any registration statement, each of TFC and RHI will, and each hereby does, jointly and severally indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 2.7.1 above) the Company, and each director of the Company, each officer of the Company and each other Person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by TFC or RHI specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. 2.7.3 Notice of Claims, Etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 2.7, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, immediately give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.7, except to the extent -15- that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs related to the indemnified party's cooperation with the indemnifying party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defense thereof. No indemnifying party shall be liable for any settlement of any action or proceeding effected without its written consent, which consent shall not be unreasonably withheld. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 2.7.4 Contribution. If the indemnification provided for in this Section 2.7 shall for any reason be held by a court to be unavailable to an indemnified party under paragraph 2.7.1 or 2.7.2 hereof in respect of any loss, claim, damage or liability, or any action in respect thereof, then, in lieu of the amount paid or payable under paragraph 2.7.1 or 2.7.2 hereof, the indemnified party and the indemnifying party under paragraph 2.7.1 or 2.7.2 hereof shall contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating the same), (i) in such proportion as is appropriate to reflect the relative fault of the Company on one hand and TFC and RHI on the other which resulted in such loss, claim, damage or liability, or action in respect thereof, with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations or (ii) if the allocation provided by paragraph (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company on one hand and TFC and RHI on the other. No Person guilty of fraudulent misrepresentation (within the -16- meaning of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. In addition, no Person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or claim, effected without such Person's consent, which consent shall not be unreasonably withheld. 2.7.5 Other Indemnification. Indemnification and contribution similar to that specified in the preceding paragraphs of this Section 2.7 (with appropriate modifications) shall be given by the Company and TFC and RHI with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Securities Act. 2.7.6 Indemnification Payments. The indemnification and contribution required by this Section 2.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. 2.7.7 Disclosure of Results of Investigation. Each of TFC and RHI covenants and agrees that if in the course of its investigation of the Company anything comes to its attention that indicates there is or there could become a breach of the Company's representations and warranties, covenants and agreements contained in any underwriting agreement, TFC and RHI shall promptly notify the Company of such matter. Failure to so notify the Company shall cause TFC and RHI to lose its right to indemnification under Section 2.7 with respect to such discovered matter. 3. Rule 144. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Securities to the public without registration, after such time as a public market exists for its Common Stock, the Company agrees to: (a) use its best efforts to facilitate the sale of the Registrable Securities to the public, without registration under the Securities Act, pursuant to Rule 144 promulgated under the Securities Act, provided that this shall not require the Company to file reports under the Securities Act and the Exchange Act at any time prior to the Company's being otherwise required to file such reports; (b) make and keep public information available, as those terms are understood and defined in Rule 144 promulgated under the Securities Act at all times after ninety (90) days after the -17- effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public; (c) use its best efforts to then file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (d) deliver a written statement as to whether it has complied with such requirements of this Section, to RHI upon RHI's request. 4. LEGEND. Any certificate evidencing Registrable Securities shall bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A REGISTRATION RIGHTS AGREEMENT, DATED AS OF BY AND BETWEEN RHI HOLDINGS, INC. AND SHARED TECHNOLOGIES INC. A COPY OF SUCH AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY SHARED TECHNOLOGIES INC. TO THE HOLDER HEREOF UPON SUCH HOLDER'S WRITTEN REQUEST." 5. MODIFICATION; WAIVERS. This Agreement may be modified or amended only with the written consent of each party hereto. No party hereto shall be released from its obligations hereunder without the written consent of the other party. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term, but any such waiver shall be effective only if in a writing signed by the party against which such waiver is to be asserted. Except as otherwise specifically provided herein, no delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. 6. ENTIRE AGREEMENT. This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. -18- 7. SEVERABILITY. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement or the application of such provision to other Persons or circumstances shall not be affected thereby; provided, that the parties shall negotiate in good faith with respect to an equitable modification of the provision or application thereof held to be invalid. 8. NOTICES. (a) Any notice or communication to any party hereto shall be duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), facsimile or overnight air courier guaranteeing next day delivery, to such other party's address. If to RHI Holdings, Inc.: 300 West Service Road P.O. Box 10803 Chantilly, VA 22001 Facsimile No.: (703) 888-5674 Attention: Donald Miller, Esq. If to Shared Technologies Inc.: 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Facsimile No.: (203) 258-2401 Attention: Legal Department (b) All notices and communications will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, if mailed; when receipt acknowledged, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. 9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and shall be binding upon RHI and Shared Technologies and their respective successors and assigns. In the event that RHI assigns its rights to a holder or holders of only a portion of the Registrable Securities, then all references to RHI herein shall also be deemed to refer to such other holder or holders but in such event RHI will have the sole right to make decisions by and give notices for such holder or holders under this Agreement; provided, that if RHI no longer owns any Registrable Securities, then all decisions and notices hereunder must be made by the holders of not less than a majority of the Registrable Securities outstanding. -19- 10. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which for all purposes shall be deemed to be an original and all of which together shall constitute the same agreement. 11. HEADINGS. The Section headings in this Agreement are for convenience of reference only, and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. 12. CONSTRUCTION. This Agreement shall be governed, construed and enforced in accordance with the laws of the state of New York, without regard to its principles of conflict of laws. 13. NO INCONSISTENT AGREEMENTS. The Company has not previously, and will not hereafter, enter into any agreement with respect to its securities which is inconsistent with the rights granted to RHI in this Agreement; except that holders of piggy-back registration rights with respect to 9,458 shares of Common Stock have such registration rights without allowance for cut-back. 14. RECAPITALIZATIONS, ETC. In the event that any capital stock or other securities are issued in respect of, in exchange for, or in substitution of, any Registrable Securities by reason of any reorganization, recapitalization, reclassification, merger, consolidation, spin-off, partial or complete liquidation, stock dividend, split-up, sale of assets, distribution to stockholders or combination of the shares of Registrable Securities or any other change in the Company's capital structure, appropriate adjustments shall be made in this Agreement so as to fairly and equitably preserve, as far as practicable, the original rights and obligations of the parties hereto under this Agreement. 15. ATTORNEYS' FEES. In any action or proceeding brought to enforce any provision of this Agreement by a party hereto, or where any provision hereof is validly asserted as a defense by such party, such party, if successful, shall be entitled to recover reasonably attorneys' fees in addition to any other available remedy. 16. SPECIFIC PERFORMANCE. The parties hereto agree that the Registrable Securities of the Company cannot be purchased or sold in the open market and that, for these reasons, among others, the parties will be irreparably damaged in the event that this Agreement is not specifically enforceable. Accordingly, in the event of any controversy concerning the Registrable Securities which is the subject of this Agreement, or any right or obligation to register such securities, such right or obligation shall be enforceable in a court of equity by specific performance. The -20- rights granted in this Section 16 shall be cumulative and not exclusive, and shall be in addition to any and all other rights which the parties hereto may have hereunder, at law or in equity. -21- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. SHARED TECHNOLOGIES INC. By: /s/ Vincent DiVincenzo --------------------------- Name: Vincent DiVincenzo Title: RHI HOLDINGS, INC. By: /s/ John Flynn --------------------------- Name: John Flynn Title: THE FAIRCHILD CORPORATION By: /s/ John Flynn --------------------------- Name: John Flynn Title: EX-10.3 21 CREDIT AGREEMENT EXHIBIT 10.3 ================================================================================ CREDIT AGREEMENT Dated as of March 12, 1996, Among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., SHARED TECHNOLOGIES INC., THE LENDERS REFERRED TO HEREIN, THE FRONTING BANKS REFERRED TO HEREIN, CREDIT SUISSE, as Arranger, Administrative Agent and Collateral Agent CITICORP USA, INC. as Documentation Agent and NATIONSBANK, N.A. as Documentation Agent ================================================================================ [CS&M Ref. No. 5874-122] TABLE OF CONTENTS
Page ARTICLE I Definitions SECTION 1.01. Defined Terms...............................................................1 SECTION 1.02. Terms Generally.............................................................22 ARTICLE II The Credits SECTION 2.01. Commitments.................................................................22 SECTION 2.02. Loans.......................................................................22 SECTION 2.03. Borrowing Procedure.........................................................24 SECTION 2.04. Evidence of Debt; Repayment of Loans........................................25 SECTION 2.05. Fees........................................................................25 SECTION 2.06. Interest on Loans...........................................................26 SECTION 2.07. Default Interest............................................................27 SECTION 2.08. Alternate Rate of Interest..................................................27 SECTION 2.09. Termination and Reduction of Commitments....................................27 SECTION 2.10. Conversion and Continuation of Term Borrowings..............................28 SECTION 2.11. Repayment of Term Borrowings................................................29 SECTION 2.12. Optional Prepayments........................................................30 SECTION 2.13. Mandatory Prepayments.......................................................30 SECTION 2.14. Reserve Requirements; Change in Circumstances...............................32 SECTION 2.15 Change in Legality..........................................................33 SECTION 2.16. Indemnity...................................................................34 SECTION 2.17. Pro Rata Treatment..........................................................34 SECTION 2.18. Sharing of Setoffs..........................................................34 SECTION 2.19. Payments....................................................................35 SECTION 2.20. Taxes.......................................................................35 SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate....................................................................37 SECTION 2.22. Letters of Credit...........................................................38 ARTICLE III Representations and Warranties SECTION 3.01. Organization; Powers........................................................42 SECTION 3.02. Authorization...............................................................42 SECTION 3.03. Enforceability..............................................................43 SECTION 3.04. Governmental Approvals......................................................43 SECTION 3.05. Financial Statements........................................................43 SECTION 3.06. No Material Adverse Change..................................................44 SECTION 3.07. Title to Properties; Possession Under Leases................................44 SECTION 3.08. Subsidiaries................................................................44 SECTION 3.09. Litigation; Compliance with Laws............................................44 SECTION 3.10. Agreements..................................................................44 SECTION 3.11. Federal Reserve Regulations.................................................45 SECTION 3.12. Investment Company Act; Public Utility Holding Company Act..................45 SECTION 3.13. Use of Proceeds.............................................................45 SECTION 3.14. Tax Returns.................................................................45 SECTION 3.15. No Material Misstatements...................................................45 SECTION 3.16. Employee Benefit Plans......................................................46 SECTION 3.17. Environmental Matters.......................................................46 SECTION 3.18. Insurance...................................................................46 SECTION 3.19. Security Documents..........................................................47 SECTION 3.20. Location of Real Property and Leased Premises...............................47 SECTION 3.21. Labor Matters...............................................................47 SECTION 3.22. Solvency....................................................................48 ARTICLE IV Conditions of Lending SECTION 4.01. All Credit Events...........................................................48 SECTION 4.02. First Credit Event..........................................................49 ARTICLE V Affirmative Covenants SECTION 5.01. Existence; Businesses and Properties........................................52 SECTION 5.02. Insurance...................................................................52 SECTION 5.03. Obligations and Taxes.......................................................53 SECTION 5.04. Financial Statements, Reports, etc..........................................53 SECTION 5.05. Litigation and Other Notices................................................55 SECTION 5.06. Employee Benefits...........................................................55 SECTION 5.07. Maintaining Records; Access to Properties and Inspections...................55 SECTION 5.08. Use of Proceeds.............................................................55 SECTION 5.09. Compliance with Environmental Laws..........................................55 SECTION 5.10. Preparation of Environmental Reports........................................56 SECTION 5.11. Further Assurances..........................................................56 SECTION 5.12. Fiscal Year.................................................................57 SECTION 5.13. Interest Rate Protection Agreements.........................................57 SECTION 5.14. Corporate Identity..........................................................57 ARTICLE VI Negative Covenants SECTION 6.01. Indebtedness................................................................57 SECTION 6.02. Liens.......................................................................58 SECTION 6.03. Sale and Lease-Back Transactions............................................59 SECTION 6.04. Investments, Loans and Advances.............................................59 SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions...................60 SECTION 6.06. Dividends and Distributions; Restrictions on Ability of Subsidiaries to Pay Dividends............................................................61 SECTION 6.07. Transactions with Affiliates................................................62 SECTION 6.08. Business of STFI, the Borrower and the Subsidiaries.........................62 SECTION 6.09. Other Indebtedness and Agreements...........................................62 SECTION 6.10. Capital Expenditures........................................................63 SECTION 6.11. Minimum EBITDA..............................................................64 SECTION 6.12. Fixed Charge Coverage Ratio.................................................64 SECTION 6.13. Leverage Ratio..............................................................64 SECTION 6.14 Interest Expense Coverage Ratio.............................................64 SECTION 6.15 Minimum Net Worth...........................................................64 ARTICLE VII Events of Default Events of Default...........................................................64 ARTICLE VIII The Agents The Agents..................................................................66 ARTICLE IX Miscellaneous SECTION 9.01. Notices.....................................................................68 SECTION 9.02. Survival of Agreement.......................................................69 SECTION 9.03. Binding Effect..............................................................69 SECTION 9.04. Successors and Assigns......................................................69 SECTION 9.05. Expenses; Indemnity.........................................................72 SECTION 9.06. Right of Setoff.............................................................73 SECTION 9.07. Applicable Law..............................................................73 SECTION 9.08. Waivers; Amendment..........................................................73 SECTION 9.09. Interest Rate Limitation....................................................74 SECTION 9.10. Entire Agreement............................................................74 SECTION 9.11. Waiver of Jury Trial........................................................74 SECTION 9.12. Severability................................................................75 SECTION 9.13. Counterparts................................................................75 SECTION 9.14. Headings....................................................................75 SECTION 9.15. Jurisdiction; Consent to Service of Process.................................75 SECTION 9.16. Confidentiality ............................................................76
Exhibits and Schedules Exhibit A Form of Administrative Questionnaire Exhibit B Form of Assignment and Acceptance Exhibit C Form of Borrowing Request Exhibit D Form of Indemnity, Subrogation and Contribution Agreement Exhibit E Form of Parent Guarantee Agreement Exhibit F Form of Pledge Agreement Exhibit G Form of Security Agreement Exhibit H Form of Subsidiary Guarantee Agreement Exhibit I-1 Form of Opinion of Gadsby & Hannah, counsel for STFI and the Borrower Exhibit I-2 Form of Opinions of other counsel Schedule 2.01 Lenders Schedule 2.20 Fronting Banks Schedule 3.08 Subsidiaries Schedule 3.09 Litigation Schedule 3.17 Environmental Matters Schedule 3.18 Insurance Schedule 3.20(b) Leased Premises Schedule 4.02(a) Counsel Schedule 4.02(q) Existing Indebtedness Schedule 6.01(a) Indebtedness Schedule 6.02 Liens Schedule 6.04 Investments Schedule 6.11 Minimum EBITDA Schedule 6.13 Leverage Ratio Schedule 6.14 Interest Expense Coverage Ratio
CONFORMED COPY CREDIT AGREEMENT dated as of March 12, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), SHARED TECHNOLOGIES INC., a Delaware corporation ("STFI", which term shall, after the Merger referred to herein, include the surviving corporation in such Merger), the financial institutions from time to time party hereto, initially consisting of those financial institutions listed on Schedule 2.01 (the "Lenders"), CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of CITICORP USA, INC. and NATIONSBANK, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"). The Borrower has requested the Lenders to extend credit in the form of (a) Tranche A Term Loans (such term and each other capitalized term used but not defined herein having the meaning assigned thereto in Article I) on the Closing Date, in an aggregate principal amount not in excess of $50,000,000, (b) Tranche B Term Loans on the Closing Date, in an aggregate principal amount not in excess of $70,000,000, (c) Revolving Loans at any time and from time to time prior to the Revolving Credit Maturity Date, in an aggregate principal amount at any time outstanding not in excess of the difference between $25,000,000 and the L/C Exposure at such time and (d) Letters of Credit at any time and from time to time prior to the Revolving Credit Maturity Date, in an aggregate stated amount at any time outstanding not in excess of $5,000,000. The proceeds of Term Loans will be used, on the Closing Date, together with a portion of the proceeds of the Discount Notes, to discharge in full the Specified Liabilities. Letters of Credit and the proceeds of Revolving Loans will be used for general corporate purposes. The Lenders are willing to extend such credit to the Borrower and the Fronting Banks are willing to issue Letters of Credit for the account of the Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: ARTICLE I. DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans. "ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan. "ABR Revolving Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "ABR Term Borrowing" shall mean a Borrowing comprised of ABR Term Loans. "ABR Term Loan" shall mean any Term Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "Accreted Value" shall have the meaning assigned to such term in Section 1.01 of the Discount Note Indenture. "Acquired Business" shall mean the telecommunications business of FII. "Acquisition Documents" shall mean all documentation effecting or entered into in connection with (a) the FII Reorganization, including the transfer of assets and the assumption of liabilities not included in the Acquired Business from FII to RHI or other persons, or (b) the Merger, the Section 351 Exchange and the other Acquisition Transactions. "Acquisition Transactions" shall mean the acquisition by STFI of the Acquired Business in the series of transactions described in the Offering Circular, pursuant to which (a) FII and its Affiliates will consummate the FII Reorganization; (b) the Borrower will issue the Discount Notes and will receive gross proceeds of not less than $100,000,000 therefrom; (c) STFI will adopt the Amendments to Charter and Bylaws; (d) the Merger will be consummated; (e) STFI will issue to RHI, the holder of all the issued and outstanding common stock of FII, as consideration in respect of the cancellation of all such common stock in the Merger (i) the Cumulative Convertible Preferred Stock, (ii) the Special Preferred Stock and (iii) 6,000,000 shares of common stock of STFI and, immediately upon the effectiveness of the Merger, the transactions set forth in the Exchange Agreement shall be consummated; (f) RHI will cancel all preferred stock of FII held by it and the holders of all the preferred stock of FII not held by RHI will receive the Preferred Consideration in respect thereof in an aggregate amount equal to approximately $39,600,000; (g) STFI and the Borrower will consummate the Section 351 Exchange; (h) STFI will assume the Existing Indebtedness and the FII Senior Notes in an aggregate principal amount of $125,000,000, all of which will be prepaid upon the consummation of the Merger; and (i) the Borrower will in consideration of the Section 351 Exchange pay an amount to STFI sufficient to enable it to consummate the Acquisition Transactions to be consummated by it. "Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves. "Administrative Agent Fees" shall have the meaning assigned to such term in Section 2.05(b). "Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit A. "Affiliate" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified. "Aggregate Revolving Credit Exposure" shall mean the aggregate amount of the Lenders' Revolving Credit Exposures. 2 "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Amendments to Charter and Bylaws" shall mean the amendments to charter and bylaws of STFI described in the Proxy Statement. "ANSI" shall mean Access Network Services Inc., a wholly owned Subsidiary of ATG. "Applicable Percentage" of any Revolving Credit Lender at any time shall mean the percentage of the Total Revolving Credit Commitment represented by such Lender's Revolving Credit Commitment. In the event the Revolving Credit Commitments shall have expired or been terminated, the Applicable Percentages shall be determined on the basis of the Revolving Credit Commitments most recently in effect, but giving effect to any subsequent assignments pursuant to Section 9.04. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent. "ATG" shall mean Access Telecommunication Group, L.P., a wholly owned Subsidiary of the Borrower. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America. "Borrowing" shall mean a group of Loans of a single Type made by the Lenders on a single date and as to which a single Interest Period is in effect. "Borrowing Request" shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C. "Business Day" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Expenditures" shall mean, for any person in respect of any period, the sum of (a) the aggregate of all expenditures incurred by such person during such period that, in accordance with GAAP, are or should be included in "additions to property, plant or equipment" or similar items 3 reflected in the statement of cash flows of such person and (b) to the extent not covered by clause (a) above, the aggregate of all expenditures by such person to acquire by purchase or otherwise the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any other person; provided, however, that Capital Expenditures shall not include expenditures of proceeds of insurance settlements in respect of lost, destroyed or damaged assets, equipment or other property to the extent such expenditures are made to replace or repair such lost, destroyed or damaged assets, equipment or other property within 12 months of such destruction or damage. "Capital Lease Obligations" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" of any person shall mean any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) equity of such person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest, but excluding any debt securities convertible into such equity. "Certificates of Designation" shall mean the respective certificates of designation establishing the Cumulative Convertible Preferred Stock and the Special Preferred Stock, in each case in substantially the form delivered to the Lenders under cover of a letter dated March 9, 1996, with no changes therefrom adverse to the Borrower or the Lenders, as amended from time to time in accordance with Section 6.09. A "Change in Control" shall be deemed to have occurred if (a) STFI shall fail to own directly, beneficially and of record, free and clear of any and all Liens (other than Liens in favor of the Collateral Agent pursuant to the Pledge Agreement), 100% of the issued and outstanding Capital Stock of the Borrower; (b) RHI and the Management Investors (collectively, the "Designated Persons") or any combination of Designated Persons shall cease to own beneficially, directly or indirectly, in the aggregate shares representing at least 30% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of STFI; (c) any person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date hereof) other than the Designated Persons shall own beneficially, directly or indirectly, shares representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of STFI; (d) a majority of the seats (excluding vacant seats) on the board of directors of STFI shall at any time after the Closing Date have been occupied by persons who were neither (i) nominated by any one or more Designated Persons or by a majority of the board of directors of STFI nor (ii) appointed by directors so nominated; 4 (e) RHI shall fail to own at any time directly, beneficially and of record, free and clear of any and all Liens, all the Special Preferred Stock outstanding at such time; (f) The Fairchild Corporation shall fail to own, directly or indirectly, beneficially and of record, free and clear of any and all Liens, at least 51% of the issued and outstanding Capital Stock of RHI or shall otherwise fail to Control RHI; (g) Jeffrey J. Steiner, The Fairchild Corporation, RHI and their Affiliates collectively shall own beneficially, directly or indirectly, shares representing more than 49% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of STFI; or (h) a change in control with respect to STFI or the Borrower (or similar event, however denominated) shall occur under and as defined in any Certificate of Designation or in any indenture or agreement in respect of Indebtedness in an aggregate outstanding principal amount in excess of $1,000,000 to which STFI, the Borrower or any Subsidiary is party. "Closing Date" shall mean a single date (which shall in no event be later than April 15, 1996) on which the initial Credit Event occurs hereunder. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to ---- time. "Collateral" shall mean all the "Collateral" as defined in any Security Document. "Commitment Fee" shall have the meaning assigned to such term in Section 2.05(a). "Commitments" shall mean, with respect to any Lender, such Lender's Revolving Credit Commitment and Term Loan Commitment. "Confidential Information Memorandum" shall mean the Confidential Information Memorandum of the Borrower dated February, 1996. "Consolidated Cash Interest Expense" shall mean, with respect to STFI, the Borrower and the Subsidiaries on a consolidated basis for any period, Consolidated Interest Expense for such period less the sum of (a) pay-in-kind or accreted Consolidated Interest Expense not involving any payment of cash, (b) to the extent included in Consolidated Interest Expense, the amortization of fees paid by STFI, the Borrower or any Subsidiary on or prior to the Closing Date in connection with the Acquisition Transactions or in connection with the incurrence of any Indebtedness incurred after the Closing Date and (c) the amortization of debt discounts, if any, or fees in respect of Interest Rate Protection Agreements. "Consolidated Current Assets" shall mean, with respect to STFI, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, all assets (other than cash and Permitted Investments or other cash equivalents) that would, in accordance with GAAP, be classified on a consolidated balance sheet of STFI, the Borrower and the Subsidiaries as current assets at such date of determination. 5 "Consolidated Current Liabilities" shall mean, with respect to STFI, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, all liabilities that would, in accordance with GAAP, be classified on a consolidated balance sheet of STFI, the Borrower and the Subsidiaries as current liabilities at such date of determination, other than (a) the current portion of long-term Indebtedness, (b) accruals of Consolidated Interest Expense (excluding Consolidated Interest Expense that is due and unpaid), (c) Revolving Loans classified as current and (d) accruals of transaction costs resulting from the Acquisition Transactions. "Consolidated Interest Expense" shall mean, with respect to STFI, the Borrower and the Subsidiaries on a consolidated basis for any period, interest and fees accrued, accreted or paid by STFI, the Borrower and the Subsidiaries during such period in respect of the Indebtedness of STFI, the Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Consolidated Working Capital" shall mean, with respect to STFI, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, Consolidated Current Assets at such date of determination minus Consolidated Current Liabilities at such date of determination. "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have meanings correlative thereto. "Credit Event" shall have the meaning assigned to such term in Section 4.01. "Cumulative Convertible Preferred Stock" shall mean the cumulative convertible preferred stock of STFI with an initial liquidation preference of $25,000,000 to be issued to RHI on the Closing Date pursuant to the Exchange Agreement. "Debt Service" shall mean, with respect to STFI, the Borrower and the Subsidiaries on a consolidated basis for any period, the sum of (a) Consolidated Cash Interest Expense of STFI, the Borrower and the Subsidiaries for such period plus (b) scheduled principal amortization of Total Debt for such period (whether or not such payments are made). "Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "Discount Exchange Notes" shall mean senior subordinated discount notes of the Borrower issued in exchange for Discount Notes on terms substantially identical to the terms of the Discount Notes. "Discount Note Guarantees" shall mean the senior subordinated Guarantees of the Discount Notes by the Guarantors given on the Closing Date on terms satisfactory to the Lenders and any subsequent senior subordinated Guarantees by the Guarantors on terms no less favorable to the Guarantors and the Lenders of the Indebtedness of the Borrower under the Discount Notes or the Discount Exchange Notes. "Discount Note Indenture" shall mean the indenture pursuant to which the Discount Notes are issued, in substantially the form of the draft of March 8, 1996, thereof, delivered to the 6 Lenders under cover of a letter dated March 9, 1996, with no changes therefrom adverse to the Borrower or the Lenders, as amended from time to time in accordance with Section 6.09. "Discount Note Value" shall mean at any time the Accreted Value at such time of the Discount Notes issued on the Closing Date (assuming such Discount Notes remained outstanding at such time) minus the aggregate amount at such time of the Accreted Value of Discount Notes and Discount Exchange Notes repaid or prepaid on or prior to such time (calculated assuming the applicable original Discount Notes remained outstanding until such time.) "Discount Notes" shall mean the Senior Subordinated Discount Notes of the Borrower issued pursuant to the Discount Note Indenture. "dollars" or "$" shall mean lawful money of the United States of America. "EBITDA" shall mean, with respect to STFI, the Borrower and the Subsidiaries on a consolidated basis for any period, the net income of STFI, the Borrower and the Subsidiaries on a consolidated basis for such period plus, to the extent deducted in computing such consolidated net income, without duplication, the sum of (a) income tax expense, (b) interest expense, (c) depreciation and amortization expense, (d) any extraordinary or non-recurring losses and (e) other noncash items reducing consolidated net income, minus, to the extent added in computing such consolidated net income, without duplication, the sum of (i) interest income, (ii) any extraordinary or non-recurring gains and (iii) other noncash items increasing consolidated net income, determined on a consolidated basis in accordance with GAAP. "ECF Percentage" shall mean 75%, except that if the Leverage Ratio as of the December 31 immediately preceding any date on which a prepayment is to be made pursuant to Section 2.13(c) shall be less than 4.00, the "ECF Percentage" applicable to such prepayment shall be 50%. "environment" shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, the workplace or as otherwise defined in any Environmental Law. "Environmental Claim" shall mean any written accusation, allegation, notice of violation, claim, demand, order, directive, cost recovery action or other cause of action by, or on behalf of, any Governmental Authority or any person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the environment caused by any Hazardous Material, or for fines, penalties or restrictions, resulting from or based upon: (a) the existence, or the continuation of the existence, of a Release (including sudden or non-sudden, accidental or non-accidental Releases); (b) exposure to any Hazardous Material; (c) the presence, use, handling, transportation, storage, treatment or disposal of any Hazardous Material; or (d) the violation or alleged violation of any Environmental Law or Environmental Permit. "Environmental Law" shall mean any and all applicable present and future treaties, laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to 7 the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters. "Environmental Permit" shall mean any permit, approval, authorization, certificate, license, variance, filing or permission required by or from any Governmental Authority pursuant to any Environmental Law. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (f) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the receipt by the Borrower or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the occurrence of a "prohibited transaction" with respect to which the Borrower or any of its Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of the Code) or with respect to which the Borrower or any such Subsidiary could otherwise be liable; and (i) any other event or condition with respect to a Plan or Multiemployer Plan that could reasonably be expected to result in liability of the Borrower. "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans. "Eurodollar Loan" shall mean any Eurodollar Revolving Loan or Eurodollar Term Loan. "Eurodollar Revolving Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "Eurodollar Term Borrowing" shall mean a Borrowing comprised of Eurodollar Term Loans. "Eurodollar Term Loan" shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. 8 "Event of Default" shall have the meaning assigned to such term in Article VII. "Excess Cash Flow" shall mean, with respect to STFI, the Borrower and the Subsidiaries on a consolidated basis for any fiscal year, EBITDA of STFI, the Borrower and the Subsidiaries on a consolidated basis for such fiscal year, minus, without duplication, (a) Debt Service of STFI, the Borrower and the Subsidiaries for such fiscal year, (b) Capital Expenditures by STFI, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year that are paid in cash, (c) all taxes paid in cash by STFI, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year, (d) an amount equal to any increase in Consolidated Working Capital of STFI, the Borrower and the Subsidiaries during such fiscal year, (e) dividends paid by STFI (i) on the Cumulative Convertible Preferred Stock during such fiscal year in an aggregate amount not in excess of $1,500,000 and (ii) on the Series C Preferred Stock of STFI and the Series D Preferred Stock of STFI during such fiscal year in an aggregate amount not in excess of $400,000, (f) cash expenditures made in respect of Interest Rate Protection Agreements during such fiscal year, to the extent not reflected in the computation of EBITDA, (g) amounts paid in cash during such fiscal year on account of items that were accounted for as noncash reductions of consolidated net income of STFI, the Borrower and the Subsidiaries in the current or a prior period, (h) any extraordinary or non-recurring loss paid in cash during such fiscal year and (i) to the extent added in determining EBITDA, all items that did not result from a cash payment to STFI, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year plus, without duplication, (i) an amount equal to any decrease in Consolidated Working Capital during such fiscal year, (ii) all proceeds received during such fiscal year of Capital Lease Obligations, purchase money Indebtedness and any other Indebtedness to the extent used to finance any Capital Expenditure (other than Indebtedness under this Agreement to the extent there is no corresponding deduction to Excess Cash Flow above in respect of the use of such Borrowings for such fiscal year or any prior period), (iii) all amounts referred to in clause (b) above to the extent funded with the proceeds of the issuance of Capital Stock of STFI after the Closing Date or any amount that would have constituted Net Proceeds under clause (a) of the definition of "Net Proceeds" if not so spent, in each case to the extent there is a corresponding deduction to Excess Cash Flow above for such fiscal year or any prior period, (iv) cash payments received in respect of Interest Rate Protection Agreements during such fiscal year to the extent not included in EBITDA, (v) any extraordinary or non-recurring gain realized in cash during such fiscal year (except to the extent such gain is subject to Section 2.13(b)), (vi) to the extent subtracted in the computation of EBITDA, interest income, (vii) to the extent subtracted in determining EBITDA, all items that did not result from a cash payment by STFI, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year and (viii) any cash dividends or any other cash distributions paid or made by, and received from, any Unrestricted Subsidiary or any STFI Unrestricted Subsidiary. "Exchange Agreement" shall mean the Agreement to Exchange 6% Cumulative Convertible Preferred Stock and Special Preferred Stock dated as of March 1, 1996, among FII, RHI, The Fairchild Corporation and STFI. "Existing Indebtedness" shall mean the existing bank and other Indebtedness of FII set forth on Schedule 4.02(q) in an aggregate principal amount not in excess of $58,000,000. "Federal Funds Effective 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 New York, or, if such rate is not so published for any day that is a Business Day, the average of the 9 quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" shall mean the Fee Letter dated February 15, 1996, between STFI and the Administrative Agent. "Fees" shall mean the Commitment Fees, the Administrative Agent Fees, the L/C Participation Fees and the Fronting Bank Fees. "Financial Officer" of any person shall mean the chief financial officer, principal accounting officer, Treasurer or Controller of such person. "FII" shall mean Fairchild Industries, Inc., a Delaware Corporation. "FII Reorganization" shall mean the restructuring of FII pursuant to which FII will divest all its non-telecommunications assets, as contemplated by the Offering Circular. "FII Senior Notes" shall mean the 12 1/4% Senior Secured Notes due 1999 of FII. "Fixed Charge Coverage Ratio" shall mean, as of the last day of any fiscal quarter, the ratio of (a) EBITDA of STFI, the Borrower and the Subsidiaries for the four-quarter period ended on such date, minus the sum for such four-quarter period of (i) Capital Expenditures, (ii) taxes paid in cash and (iii) dividends paid in cash in respect of the Cumulative Convertible Preferred Stock, to (b) Debt Service for such four-quarter period, all determined on a consolidated basis in accordance with GAAP; provided, however, that the Fixed Charge Coverage Ratio as of June 30, 1996, September 30, 1996, and December 30, 1996, shall be determined by multiplying the items referred to in clauses (a) and (b) above for the period commencing April 1, 1996, and ending as of such date by (A) 4, in the case of the quarter ending June 30, 1996, (B) 2, in the case of the two-quarter period ending September 30, 1996, and (C) 4/3, in the case of the three-quarter period ending December 31, 1996. "Fronting Bank Fees" shall have the meaning assigned to such term in Section 2.05(c). "GAAP" shall mean generally accepted accounting principles applied on a consistent basis. "Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantee" of or by any person shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such 10 Indebtedness; provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Guarantee Agreements" shall mean the Parent Guarantee Agreement and the Subsidiary Guarantee Agreement. "Guarantors" shall mean STFI and the Subsidiary Guarantors. "Hazardous Materials" shall mean all explosive or radioactive substances or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or gaseous wastes, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls ("PCBs") or PCB-containing materials or equipment, radon gas, urea formaldelyde, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Indebtedness" of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon which interest charges are customarily paid, (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i) all obligations of such person in respect of interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements and (j) all obligations of such person as an account party in respect of letters of credit and bankers' acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner. "Indemnity, Subrogation and Contribution Agreement" shall mean the Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit D, among STFI, the Borrower, the Subsidiary Guarantors and the Collateral Agent. "Installment Date" shall have the meaning assigned to such term in Section 2.11. "Interest Expense Coverage Ratio" shall mean, as of the last day of any fiscal quarter, the ratio of (a) EBITDA of STFI, the Borrower and the Subsidiaries for the four-quarter period ended on such date to (b) Consolidated Cash Interest Expense for the four-quarter period ended on such date, all determined on a consolidated basis in accordance with GAAP; provided, however, that the Interest Expense Coverage Ratio as of June 30, 1996, September 30, 1996, and December 31, 1996, shall be determined by multiplying the items referred to in clauses (a) and (b) above for the period commencing April 1, 1996, and ending as of such date by (i) 4, in the case of the period ending June 30, 1996, (ii) 2, in the case of the two-quarter period ending September 30, 1996, and (iii) 4/3, in the case of the three-quarter period ending December 31, 1996. "Interest Payment Date" shall mean, with respect to any Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a 11 Eurodollar Borrowing with an Interest Period of more than three months' duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months' duration been applicable to such Borrowing, and, in addition, the date of any prepayment of such Borrowing or refinancing or conversion of such Borrowing with or to a Borrowing of a different Type. "Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period commencing on the date of such Borrowing (or, in the case of a Term Borrowing, the last day of the preceding Interest Period applicable thereto) and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect and (b) as to any ABR Borrowing, the period commencing on the date of such Borrowing (or, in the case of a Term Borrowing, the last day of the preceding Interest Period applicable thereto) and ending on the earliest of (i) the last Business Day of the next succeeding March, June, September or December, (ii) the Revolving Credit Maturity Date, the Tranche A Maturity Date or the Tranche B Maturity Date, as applicable, and (iii) the date such Borrowing is converted to a Borrowing of a different Type in accordance with Section 2.10 or repaid or prepaid in accordance with Section 2.11, 2.12 or 2.13; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "Interest Rate Protection Agreement" shall mean any interest rate cap agreement or other agreement or arrangement satisfactory to the Administrative Agent entered into by the Borrower designed to protect the Borrower against fluctuations in interest rates. "L/C Commitment" shall mean, with respect to any Fronting Bank, the commitment of such Fronting Bank to issue Letters of Credit pursuant to Section 2.22. "L/C Disbursement" shall mean a payment or disbursement made by a Fronting Bank pursuant to a Letter of Credit. "L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time. The L/C Exposure of any Revolving Credit Lender at any time shall mean its Applicable Percentage of the aggregate L/C Exposure at such time. "L/C Participation Fee" shall have the meaning assigned to such term in Section 2.05(c). "Letter of Credit" shall mean any letter of credit issued pursuant to Section 2.22. "Leverage Ratio" shall mean, as of the last day of any fiscal quarter, the ratio of (a) Total Debt as of such date to (b) EBITDA of STFI, the Borrower and the Subsidiaries for the four-quarter period ended on such date, all determined on a consolidated basis in accordance with GAAP; provided however, that the Leverage Ratio as of September 30, 1996, and December 31, 1996, shall be determined by multiplying EBITDA for the period commencing April 1, 1996, and ending as of such 12 date by (i) 2, in the case of the two-quarter period ending September 30, 1996, and (ii) 4/3, in the case of the three-quarter period ending December 31, 1996. "LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which deposits in dollars for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent to first class banks in the London interbank market in immediately available funds at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" shall mean this Agreement, the Letters of Credit, the Guarantee Agreements, the Security Documents and the Indemnity, Subrogation and Contribution Agreement. "Loan Parties" shall mean the Borrower and the Guarantors. "Loans" shall mean the Revolving Loans and the Term Loans. "Management Investors" shall mean members of management of STFI, the Borrower and the Subsidiaries holding directly voting stock of STFI, or options to acquire such stock, on the Closing Date. "Margin Stock" shall have the meaning assigned to such term in Regulation U. "Material Adverse Effect" shall mean (a) a materially adverse effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, or of STFI or, on or prior to the Closing Date, of the Acquired Business, (b) any material impairment of the ability of the Borrower or any other Loan Party to perform any of its obligations under any Loan Document to which it is or will be a party or (c) any material impairment of the rights of or benefits available to the Lenders under any Loan Document. "Merger" shall mean the merger of FII with and into STFI, following which STFI shall be the surviving corporation and shall change its name to Shared Technologies Fairchild Inc. "Merger Agreement" shall mean the Agreement and Plan of Merger among FII, RHI, The Fairchild Corporation and STFI dated as of November 9, 1995, as amended by the First Amendment thereto dated as of February 2, 1996, the Second Amendment thereto dated as of February 23, 1996, and the Third Amendment thereto dated as of March 1, 1996. "Minimum Net Worth" shall mean, as of the last day of any fiscal quarter, $75,000,000 plus (a) 75% of consolidated net income of STFI, the Borrower and the Subsidiaries (to the extent such net income is positive) for such fiscal quarter and 75% of such consolidated net income 13 for each other prior completed fiscal quarter included in the period commencing April 1, 1996 (to the extent net income for such quarter is positive) plus (b) the aggregate amount of proceeds received by STFI in respect of the issuance of Capital Stock of STFI after the Closing Date minus (c) the aggregate amount of payments in respect of the Cumulative Convertible Preferred Stock, the Series C Preferred Stock of STFI and the Series D Preferred Stock of STFI and redemptions of Special Preferred Stock made after the Closing Date in accordance with Section 6.06(a)(ii)(A), (C) and (D), provided that in making the foregoing calculation for any quarter in respect of which the Leverage Ratio as of the last day of such quarter shall be less than 4.00, the percentage used in clause (a) shall be 50% rather than 75%. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds" shall mean (a) 100% of the cash proceeds actually received by STFI, the Borrower or any Subsidiary (including cash proceeds subsequently received in respect of noncash consideration initially received and including all insurance settlements and condemnation awards in any fiscal year of the Borrower but only as and when received), net of selling expenses (including reasonable broker's fees or commissions, transfer and similar taxes and the Borrower's good faith estimate of income taxes incurred in connection with the receipt of such cash proceeds) from any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (other than the sale of inventory in the ordinary course) to any person in any transaction or related series of transactions of any asset or assets of STFI, the Borrower or any Subsidiary, provided that, with respect to proceeds that would otherwise constitute Net Proceeds in an aggregate amount for any fiscal year not in excess of $250,000, such proceeds shall not constitute Net Proceeds, and provided further that proceeds from any sale, transfer or other disposition of any equity interest in STC that would otherwise constitute Net Proceeds shall not constitute Net Proceeds (i) to the extent such proceeds are in excess of $2,000,000 or (ii) in the case of the first $2,000,000 of such proceeds, to the extent such proceeds are applied to reduce outstanding Revolving Loans, (b) 100% of the cash proceeds from the incurrence, issuance or sale by STFI, the Borrower or any Subsidiary of any Indebtedness of STFI, the Borrower or any Subsidiary (other than Indebtedness permitted under Section 6.01), net of all taxes and customary fees, commissions, costs and other expenses incurred in connection with such issuance or sale or (c) 100% (or, if the Leverage Ratio as of the last day of the fiscal quarter most recently preceding the applicable date of determination shall be less than 4.00, 50%) of the cash proceeds from the issuance or sale by STFI, the Borrower or any Subsidiary (other than the issuance or sale to STFI, the Borrower or any Subsidiary) of any equity security of STFI, the Borrower or any Subsidiary (other than sales of Capital Stock of STFI to directors, officers or employees of the Subsidiaries, the Unrestricted Subsidiaries or the STFI Unrestricted Subsidiaries in connection with permitted employee compensation and incentive arrangements), net of all taxes and customary fees, commissions, costs and other expenses incurred in connection with such issuance or sale. "Net Worth" shall mean, as of any date, with respect to STFI, the Borrower and the Subsidiaries, stockholders' equity of STFI, the Borrower and the Subsidiaries as of such date plus the aggregate amount of the liquidation preference of the Cumulative Convertible Preferred Stock and the Special Preferred Stock issued on the Closing Date minus the aggregate amount as of such date of the liquidation preference of all Cumulative Convertible Preferred Stock and Special Preferred Stock redeemed, cancelled or otherwise discharged after the Closing Date, all determined on a consolidated basis in accordance with GAAP. 14 "Obligations" shall mean all obligations defined as "Obligations" in the Guarantee Agreements and the Security Documents. "Offering Circular" shall mean the Confidential Offering Circular dated February 17, 1996, in respect of the Discount Notes, as amended through March [ ], 1996, with no changes therefrom adverse to the Borrower or the Lenders. "Parent Guarantee Agreement" shall mean the Parent Guarantee Agreement, substantially in the form of Exhibit E, made by STFI in favor of the Collateral Agent for the benefit of the Secured Parties. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "Perfection Certificate" shall mean the Perfection Certificate substantially in the form of Annex 2 to the Security Agreement. "Permitted Business Acquisition" shall mean any acquisition of all or substantially all the assets of, or all the shares or other equity interests in, a person or division or line of business of a person (or any subsequent investment made in a previously acquired Permitted Business Acquisition) if immediately after giving effect thereto: (a) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (b) all transactions related thereto shall be consummated in accordance with applicable laws, (c) all the Capital Stock of any acquired or newly formed person shall be owned directly by the Borrower or a wholly owned Subsidiary (or, in the case of a Permitted Business Acquisition funded as contemplated by Section 6.04(j), STFI) and all actions required to be taken, if any, with respect to such acquired or newly formed person under Section 5.11 shall have been taken, (d) any acquired assets shall be located in the United States and any acquired or newly formed person shall be incorporated or organized under the laws of the United States, any State thereof or the District of Columbia and substantially all the activities of such person shall be conducted in the United States, (e) any acquired assets shall be used in, and any acquired or newly formed person shall be engaged in the business currently conducted by STFI and its subsidiaries or by the Acquired Business and business activities reasonably incidental thereto and (f)(i) the Borrower shall be in compliance, on a pro forma basis after giving effect to such acquisition or formation, with the covenants contained in Sections 6.11, 6.12, 6.13, 6.14 and 6.15 (A) recomputed as at the last day of the most recently ended fiscal quarter of the Borrower as if such acquisition had occurred on the first day of each relevant period for testing such compliance and (B) computed for each relevant period during the remaining term of this Agreement (based, in the case of such projected periods, upon reasonable assumptions as to costs to be incurred and revenues to be realized from such acquisition or formation), and the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer to such effect, together with all relevant financial information for such subsidiary or assets and calculations demonstrating such compliance, and (ii) any acquired or newly formed subsidiary shall not be liable for any Indebtedness (except for Indebtedness permitted by Section 6.01). 15 "Permitted Investments" shall mean: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within 90 days from the date of acquisition thereof; (b) investments in commercial paper maturing within 90 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poor's Ratings Group or from Moody's Investors Service, Inc.; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 90 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any Lender or by any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof, in each case which has a combined capital and surplus and undivided profits of not less than $500,000,000 and whose short-term debt has, at such date of acquisition, a rating of A or better from Standard & Poor's Ratings Group or a rating of A or better from Moody's Investors Service, Inc. (or, if either shall change the basis on which it establishes ratings, the equivalent rating after such change); and (d) other investment instruments approved in writing by the Required Lenders and offered by financial institutions which have a combined capital and surplus and undivided profits of not less than $250,000,000. "person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreement" shall mean the Pledge Agreement, substantially in the form of Exhibit F, among STFI, the Borrower, each Subsidiary having any subsidiary and the Collateral Agent for the benefit of the Secured Parties. "Preferred Consideration" shall mean cash consideration in an aggregate amount of approximately $39,600,000 to be paid by STFI to the holders of preferred stock of FII other than RHI, which represents the liquidation value of the respective series of such preferred stock plus dividends accrued to the effective time of the Merger. "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its branch office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective. 16 "Proxy Statement" shall mean the proxy statement of STFI dated February 12, 1996, as amended through March 2, 1996, with no changes therefrom adverse to the Borrower or the Lenders. "Register" shall have the meaning given such term in Section 9.04(d). "Regulation G" shall mean Regulation G of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the environment. "Remedial Action" means any and all actions required by any Governmental Authority or voluntarily undertaken to: (i) investigate, study, cleanup, remove, treat, abate or in any other way address any Hazardous Material in the environment; or (ii) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material in the environment. "Required Lenders" shall mean, at any time, Lenders having Loans, L/C Exposures and, without duplication, unused Commitments representing at least 50.01% of the sum of all Loans outstanding, L/C Exposures and, without duplication, unused Commitments at such time. "Responsible Officer" of any person shall mean any executive officer or Financial Officer of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement. "Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving Loans. "Revolving Credit Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder as set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender assumed its Revolving Credit Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. "Revolving Credit Exposure" shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender, plus the amount at such time of such Lender's L/C Exposure. "Revolving Credit Lender" shall mean a Lender with a Revolving Credit Commitment. 17 "Revolving Credit Maturity Date" shall mean March 30, 2001. "Revolving Loans" shall mean the revolving loans made by the Lenders to the Borrower pursuant to clause (c) of Section 2.01. Each Revolving Loan shall be a Eurodollar Revolving Loan or an ABR Revolving Loan. "RHI" shall mean RHI Holdings, Inc., a Delaware Corporation. "Section 351 Exchange" shall mean the transfer of substantially all the assets of STFI, including the Acquired Business, to the Borrower in exchange for all the Capital Stock of the Borrower. "Secured Parties" shall have the meaning assigned to such term in the Security Agreement. "Security Agreement" shall mean the Security Agreement, substantially in the form of Exhibit G, among STFI, the Borrower, the Subsidiaries and the Collateral Agent for the benefit of the Secured Parties, provided that ATG, ANSI and their subsidiaries shall not be party thereto except as set forth in Section 5.11. "Security Documents" shall mean the Security Agreement, the Pledge Agreement and each of the security agreements, mortgages and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.11. "Special Preferred Stock" shall mean the special preferred stock of STFI with an initial liquidation preference of $20,000,000 to be issued to RHI on the Closing Date pursuant to the Exchange Agreement. "Specified Liabilities" shall mean the Existing Indebtedness and the FII Senior Notes. "Statutory Reserves" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the highest maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate, or other fronting office making or holding a Loan) is subject with respect to Eurocurrency Liabilities (as defined in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "STC" shall mean Shared Technologies Cellular, Inc., a Delaware corporation. "STFI" shall mean Shared Technologies Inc., a Delaware corporation, the name of which will be changed to Shared Technologies Fairchild Inc. after the consummation of the Merger. 18 "STFI Unrestricted Subsidiary" shall mean any subsidiary of STFI (other than STC) or any other direct or indirect investment by STFI in the Capital Stock of any other person (other than STFI) so long as at the time such subsidiary is acquired or created or such investment is made (a) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (b) the Borrower shall have notified the Administrative Agent of the acquisition or creation of such subsidiary or such other investment and STFI's ownership interest therein and its designation thereof as an STFI unrestricted subsidiary concurrently with such acquisition, creation or investment and the intended purposes of such subsidiary or investment, (c) all transactions related thereto shall be consummated in accordance with applicable laws, (d) the Borrower shall be in compliance, on a pro forma basis after giving effect to such acquisition, creation or investment, with covenants contained in Sections 6.11, 6.12, 6.13, 6.14 and 6.15 (i) recomputed as at the last day of the most recently ended fiscal quarter of the Borrower as if such acquisition had occurred on the first day of each relevant period for testing such compliance and (ii) computed for each relevant period during the remaining term of this Agreement (based, in the case of such projected periods, upon reasonable assumptions as to costs to be incurred and revenues to be realized from such investment or subsidiary), and the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer to such effect, together with all relevant financial information for such subsidiary or investment and calculations demonstrating such compliance, (e) none of STFI, the Borrower or any of their subsidiaries shall have any contingent liability in respect thereof (other than any contingent tax liabilities in respect of which there shall exist a tax sharing agreement with the other owners of such STFI Unrestricted Subsidiary providing for an allocation of tax liabilities and benefits customary in similar circumstances), (f) any management or service provided by STFI, the Borrower or any Subsidiary to such investment or subsidiary shall be provided in consideration of cash remuneration in an amount not less than could have been obtained from a third party on an arm's length basis and (g) such investment or subsidiary shall be capitalized solely from the following sources: (i) investments by persons other than STFI, the Borrower or any Subsidiary, (ii) the proceeds of Indebtedness of persons other than STFI, the Borrower, the Subsidiaries, any Unrestricted Subsidiary or any STFI Unrestricted Subsidiary or (iii) in the case of any acquisition, creation or investment in any fiscal year, (A) the portion of the proceeds received in such fiscal year from any issuance or sale of any equity securities of STFI (other than sales of Capital Stock of STFI to directors, officers or employees of the Subsidiaries, the Unrestricted Subsidiaries or the STFI Subsidiaries in connection with permitted employee compensation and incentive arrangements) that does not constitute Net Proceeds, (B) the portion of Excess Cash Flow for the immediately preceding fiscal year not subject to prepayment under Section 2.13(c) and (C) any proceeds received in such year in respect of any sale, transfer or other disposition of any equity interest in STC that would constitute Net Proceeds but for clause (i) of the further proviso contained in clause (c) of the definition of "Net Proceeds" (in each case to the extent not previously used to prepay Indebtedness (other than Revolving Loans), pay any amount in respect of any Capital Stock of STFI, make any investment or Capital Expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any fiscal year). "subsidiary" shall mean, with respect to any person (herein referred to as the "parent"), any corporation, company, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, Controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. 19 "Subsidiary" shall mean each subsidiary of STFI, the Borrower or any of their subsidiaries other than the Unrestricted Subsidiaries and the STFI Unrestricted Subsidiaries, provided that each reference to Subsidiary contained in Article III shall include the STFI Unrestricted Subsidiaries. "Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee Agreement, substantially in the form of Exhibit H, made by the Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the Secured Parties, provided that ATG, ANSI and their subsidiaries shall not be party thereto except as set forth in Section 5.11. "Subsidiary Guarantor" shall mean each Subsidiary that is or becomes a party to a Subsidiary Guarantee Agreement. "Tender Offer" shall mean the tender offer and consent solicitation conducted by FII for the FII Senior Notes, as contemplated by the Offering Circular. "Term Borrowing" shall mean a Borrowing comprised of Tranche A Term Loans or Tranche B Term Loans. "Term Loan Commitments" shall mean the Tranche A Commitments and the Tranche B Commitments. "Term Loans" shall mean the Tranche A Term Loans and the Tranche B Term Loans. "Total Debt" shall mean, with respect to STFI, the Borrower and the Subsidiaries on a consolidated basis at any time, all Indebtedness (other than Indebtedness described in clause (i) of the definition of "Indebtedness") of STFI, the Borrower and the Subsidiaries at such time, determined on a consolidated basis in accordance with GAAP. "Total Revolving Credit Commitment" shall mean, at any time, the aggregate amount of the Revolving Credit Commitments, as in effect at such time. "Tranche A Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Tranche A Term Loans hereunder as set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender assumed its Tranche A Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. "Tranche A Maturity Date" shall mean March 30, 2001. "Tranche A Term Loans" shall mean the term loans made by the Lenders to the Borrower pursuant to clause (a) of Section 2.01. Each Tranche A Term Loan shall be either a Eurodollar Term Loan or an ABR Term Loan. "Tranche B Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Tranche B Term Loans hereunder as set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender assumed its Tranche B Commitment, as 20 applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. "Tranche B Maturity Date" shall mean March 31, 2003. "Tranche B Term Loans" shall mean the term loans made by the Lenders to the Borrower pursuant to clause (b) of Section 2.01. Each Tranche B Term Loan shall be either a Eurodollar Term Loan or an ABR Term Loan. "Transactions" shall have the meaning assigned to such term in Section 3.02. "Type", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term "Rate" shall include the Adjusted LIBO Rate and the Alternate Base Rate. "Unrestricted Subsidiary" shall mean (a) STC and (b) any subsidiary of the Borrower or any Subsidiary or any other direct or indirect investment by the Borrower or any Subsidiary in the Capital Stock of any other person (other than STFI) so long as at the time such subsidiary is acquired or created or such investment is made (i) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (ii) the Borrower shall have notified the Administrative Agent of its acquisition or creation of such subsidiary or such other investment and its ownership interest therein and its designation thereof as an unrestricted subsidiary concurrently with such acquisition, creation or investment and the intended purposes of such subsidiary or investment, (iii) all transactions related thereto shall be consummated in accordance with applicable laws, (iv) the Borrower shall be in compliance, on a pro forma basis after giving effect to such acquisition, creation or investment, with covenants contained in Sections 6.11, 6.12, 6.13, 6.14 and 6.15 (A) recomputed as at the last day of the most recently ended fiscal quarter of the Borrower as if such acquisition had occurred on the first day of each relevant period for testing such compliance and (B) computed for each relevant period during the remaining term of this Agreement (based, in the case of such projected periods, upon reasonable assumptions as to costs to be incurred and revenues to be realized from such investment or subsidiary), and the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer to such effect, together with all relevant financial information for such subsidiary or investment and calculations demonstrating such compliance, (v) none of STFI, the Borrower or any of their subsidiaries shall have any contingent liability in respect thereof (other than any contingent tax liabilities in respect of which there shall exist a tax sharing agreement with the other owners of such Unrestricted Subsidiary providing for an allocation of tax liabilities and benefits customary in similar circumstances), (vi) any management or service provided by STFI, the Borrower or any Subsidiary to such investment or subsidiary shall be provided in consideration of cash remuneration in an amount not less than could have been obtained from a third party on an arm's length basis and (vii) such investment or subsidiary shall be capitalized solely from the following sources: (A) investments by persons other than STFI, the Borrower or any Subsidiary or (B) the proceeds of Indebtedness of persons other than STFI, the Borrower, the Subsidiaries, any Unrestricted Subsidiary or any STFI Unrestricted Subsidiary. "wholly owned Subsidiary" shall mean a Subsidiary 100% of the Capital Stock of which (except for directors' qualifying shares) is, at the time any determination is being made, owned, 21 controlled or held by the Borrower or one or more wholly owned Subsidiaries of or by the Borrower and one or more wholly owned Subsidiaries. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that if within 30 days after delivery of the first financial statements delivered pursuant to Section 5.04 after the effectiveness of any change in GAAP occurring after the date of this Agreement the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VI or any related definition to eliminate the effect of such change on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI or any related definition for such purpose), then (i) the Borrower and the Administrative Agent shall negotiate in good faith to agree upon an appropriate amendment to such covenant and (ii) until such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders, the Borrower's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective. ARTICLE II. THE CREDITS SECTION 2.01. Commitments. On the terms and subject to the conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, (a) to make a Tranche A Term Loan to the Borrower on the Closing Date in a principal amount not to exceed its Tranche A Commitment, (b) to make a Tranche B Term Loan to the Borrower on the Closing Date in a principal amount not to exceed its Tranche B Commitment, and (c) to make Revolving Loans to the Borrower, at any time and from time to time on or after the date hereof, and until the earlier of the Revolving Credit Maturity Date and the termination of the Revolving Credit Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Credit Commitment. Within the limits set forth in clause (c) of the preceding sentence and subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay or prepay and reborrow Revolving Loans. Amounts paid or prepaid in respect of Term Loans may not be reborrowed. SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other 22 Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). The Term Loans must be drawn in a single drawing in their entire amount on the Closing Date. Except for Loans deemed made pursuant to Section 2.02(g), the Revolving Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $1,000,000 and not less than $5,000,000 or (ii) equal to the remaining available balance of the Total Revolving Credit Commitment. (b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than six Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (c) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 11:00 a.m., New York City time, and the Administrative Agent shall promptly upon receipt credit the amounts so received as designated by the Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, for the first day, the Federal Funds Effective Rate and, for each day thereafter, the Alternate Base Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. (e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request any Revolving Credit Borrowing if the Interest Period requested with respect thereto would end after the Revolving Credit Maturity Date. 23 (f) The Borrower may refinance all or any part of a Revolving Credit Borrowing with another Revolving Credit Borrowing, subject to the conditions and limitations set forth in this Agreement. Any Revolving Credit Borrowing or part thereof so refinanced shall be deemed to be repaid or prepaid in accordance with the applicable provisions of this Agreement with the proceeds of the new Revolving Credit Borrowing, and the proceeds of such new Revolving Credit Borrowing, to the extent they do not exceed the principal amount of the Revolving Credit Borrowing being refinanced, shall not be paid by the Lenders to the Administrative Agent or by the Administrative Agent to the Borrower pursuant to paragraph (c) above. (g) If a Fronting Bank shall not have received from the Borrower a payment required to be made by Section 2.22(e) within the time specified in such Section, such Fronting Bank will promptly notify the Administrative Agent of the L/C Disbursement and the Administrative Agent will promptly notify each Revolving Credit Lender of such L/C Disbursement and its Applicable Percentage thereof. Each Revolving Credit Lender shall pay by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York City time, on such date (or, if such Revolving Credit Lender shall have received such notice later than 12:00 noon, New York City time, on any day, not later than 10:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Lender's Applicable Percentage of such L/C Disbursement (it being understood that such amount shall be deemed to constitute an ABR Revolving Loan of such Lender and such payment shall be deemed to have reduced the L/C Exposure), and the Administrative Agent will promptly pay to the applicable Fronting Bank amounts so received by it from the Revolving Credit Lenders. The Administrative Agent will promptly pay to the applicable Fronting Bank any amounts received by it from the Borrower pursuant to Section 2.22(e) prior to the time that any Revolving Credit Lender makes any payment pursuant to this paragraph (g); any such amounts received by the Administrative Agent thereafter will be promptly remitted by the Administrative Agent to the Revolving Credit Lenders that shall have made such payments and to the applicable Fronting Bank, as their interests may appear. If any Revolving Credit Lender shall not have made its Applicable Percentage of such L/C Disbursement available to the Administrative Agent as provided above, such Lender and the Borrower severally agree to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with this paragraph to but excluding the date such amount is paid, to the Administrative Agent at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable to ABR Revolving Loans pursuant to Section 2.06, and (ii) in the case of such Lender, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate. SECTION 2.03. Borrowing Procedure. In order to request a Borrowing (other than a deemed Borrowing pursuant to Section 2.02(g), as to which this Section 2.03 shall not apply), the Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Borrowing Request (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall be signed by or on behalf of the Borrower and shall specify the following information: (i) whether the Borrowing then being requested is to be a Borrowing of Tranche A Term Loans, a Borrowing of Tranche B Term Loans or a Revolving Credit Borrowing, and whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a Business Day), (iii) the number and location of the account to which funds are to be disbursed (which shall be an account that complies with the requirements of Section 2.02(c)); (iv) the amount of such Borrowing; and (v) if such Borrowing is to 24 be a Eurodollar Borrowing, the Interest Period with respect thereto; provided, however, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall promptly advise the applicable Lenders of any notice given pursuant to this Section 2.03 (and the contents thereof), and of each Lender's portion of the requested Borrowing. If the Borrower shall not have delivered a Borrowing Request in accordance with this Section 2.03 prior to the end of the Interest Period then in effect for any Revolving Credit Borrowing and requesting that such Borrowing be refinanced, then the Borrower shall (unless the Borrower has notified the Administrative Agent, not less than three Business Days prior to the end of such Interest Period, that such Borrowing is to be repaid at the end of such Interest Period) be deemed to have delivered a Borrowing Request requesting that such Borrowing be refinanced with a new Borrowing of equivalent amount, and such new Borrowing shall be an ABR Borrowing. SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender (i) the principal amount of each Term Loan of such Lender as provided in Section 2.11 and (ii) the principal amount of each Revolving Loan outstanding on the last day of the Interest Period applicable thereto. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower or any Guarantor and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded absent manifest error; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms. (e) Notwithstanding any other provision of this Agreement, in the event any Lender shall request a promissory note payable to such Lender and its registered assigns, the Borrower shall deliver such a note and the interests represented by such note shall at all times after receipt of such note (including after any assignment of all or part of such interests pursuant to Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns. SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender, through the Administrative Agent, on the Closing Date and on the last Business Day of March, June, September and December in each year and on each date on which any Commitment of such Lender shall expire or 25 be terminated as provided herein, a commitment fee (a "Commitment Fee") of 0.50% per annum on the average daily unused amount of the Commitments of such Lender during the preceding quarter (or other period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which the Commitments of all the Lenders shall expire or be terminated). All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Commitment Fee due to each Lender shall commence to accrue on the date hereof and shall cease to accrue on the date on which all the Commitments of such Lender shall have been terminated as provided herein. (b) The Borrower agrees to pay to the Administrative Agent, for its own account, the fees set forth in the Fee Letter at the times and in the amounts specified therein (the "Administrative Agent Fees"). (c) The Borrower agrees to pay (i) to each Revolving Credit Lender, through the Administrative Agent, on the last Business Day of March, June, September and December of each year and on the date on which the Revolving Credit Commitments of all the Lenders shall be terminated as provided herein, a fee (an "L/C Participation Fee") calculated on such Lender's Applicable Percentage of the average daily aggregate L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which all Letters of Credit shall have been canceled or have expired and the Revolving Credit Commitments of all the Lenders shall have been terminated) at a rate equal to 2.75% per annum and (ii) to each Fronting Bank, the fees separately agreed upon by STFI or the Borrower and such Fronting Bank, plus, with respect to each Letter of Credit, the customary fronting, issuance, amending and drawing fees specified from time to time by such Fronting Bank (the "Fronting Bank Fees"). All L/C Participation Fees and Fronting Bank Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the Fronting Bank Fees shall be paid directly to the applicable Fronting Bank. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section 2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate is determined by reference to the Prime Rate and over a year of 360 days at all other times) at a rate per annum equal to the Alternate Base Rate plus, in the case of (i) Revolving Loans, 1.75%, (ii) Tranche A Term Loans, 1.75%, and (iii) Tranche B Term Loans 2.50%. (b) Subject to the provisions of Section 2.07, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus, in the case of (i) Revolving Loans, 2.75%, (ii) Tranche A Term Loans, 2.75%, and (iii) Tranche B Term Loans, 3.50%. (c) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall 26 be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.07. Default Interest. If the Borrower shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, by acceleration or otherwise, or under any other Loan Document, the Borrower shall on demand from time to time pay interest, to the extent (and only to such extent) permitted by law, on such defaulted amount to but excluding the date of actual payment (after as well as before judgment) (a) in the case of overdue principal, at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus 2.00% per annum and (b) in all other cases, at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times) equal to the sum of the Alternate Base Rate plus 3.75%. SECTION 2.08. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates at which such dollar deposits are being offered will not adequately and fairly reflect the cost to any Lender of making or maintaining its Eurodollar Loan during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or telecopy notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent hereunder shall be conclusive absent manifest error. SECTION 2.09. Termination and Reduction of Commitments. (a) The Term Loan Commitments shall automatically terminate at 5:00 p.m., New York City time, on the Closing Date. The Revolving Credit Commitments and the L/C Commitments shall automatically terminate on the Revolving Credit Maturity Date. Notwithstanding the foregoing, all the Commitments and L/C Commitments shall automatically terminate at 5:00 p.m., New York City time, on April 15, 1996, if the initial Credit Event shall not have occurred by such time. (b) Upon at least three Business Days' prior irrevocable written or telecopy notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Term Loan Commitments or the Revolving Credit Commitments; provided, however, that (i) each partial reduction of the Term Loan Commitments or the Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $5,000,000 (or, if less, the remaining amount of the Revolving Credit Commitments) and (ii) the Total Revolving Credit Commitment shall not be reduced at any time to an amount that is less than the Aggregate Revolving Credit Exposure at such time. (c) The Revolving Credit Commitments shall be automatically and permanently reduced by an amount equal to any amount applied under paragraph (b) or (c) of Section 2.13 to prepay Revolving Credit Borrowings (or that would have been required to be so applied if Revolving Credit Borrowings equal to such amount had been outstanding). 27 (d) Each reduction in the Term Loan Commitments or the Revolving Credit Commitments hereunder shall be made ratably among the Lenders in accordance with their respective applicable Commitments. The Borrower shall pay to the Administrative Agent for the account of the applicable Lenders, on the date of each termination or reduction, the Commitment Fees on the amount of the Commitments so terminated or reduced accrued to but excluding the date of such termination or reduction. SECTION 2.10. Conversion and Continuation of Term Borrowings. The Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent (a) not later than 12:00 noon, New York City time, one Business Day prior to conversion, to convert any Eurodollar Term Borrowing into an ABR Term Borrowing, (b) not later than 12:00 noon, New York City time, three Business Days prior to conversion or continuation, to convert any ABR Term Borrowing into a Eurodollar Term Borrowing or to continue any Eurodollar Term Borrowing as a Eurodollar Term Borrowing for an additional Interest Period, and (c) not later than 12:00 noon, New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Term Borrowing to another permissible Interest Period, subject in each case to the following: (i) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Term Borrowing; (ii) if less than all the outstanding principal amount of any Term Borrowing shall be converted or continued, then each resulting Term Borrowing shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type; (iii) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Term Loan of such Lender resulting from such conversion and reducing the Term Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Term Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion; (iv) if any Eurodollar Term Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.16; (v) any portion of a Term Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Term Borrowing; (vi) any portion of a Term Borrowing that cannot be converted into or continued as a Eurodollar Term Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Term Borrowing; (vii) no Interest Period may be selected for any Eurodollar Term Borrowing that would end later than an Installment Date occurring on or after the first day of such Interest Period and applicable to such Borrowing if, after giving effect to such selection, the aggregate 28 outstanding amount of (A) the Eurodollar Term Borrowings to which such Installment Date applies with Interest Periods ending on or prior to such Installment Date and (B) the ABR Term Borrowings to which such Installment Date applies would not be at least equal to the principal amount of Term Borrowings to be paid on such Installment Date; and (viii) after the occurrence and during the continuance of a Default or Event of Default, no outstanding Loan may be converted into, or continued as, a Eurodollar Loan. Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Term Borrowing that the Borrower requests be converted or continued, (ii) whether such Term Borrowing is to be converted to or continued as a Eurodollar Term Borrowing or an ABR Term Borrowing, (iii) if such notice requests a conversion or continuation, the date of such conversion (which shall be a Business Day) and (iv) if such Term Borrowing is to be converted to or continued as a Eurodollar Term Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Term Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall advise the Lenders of any notice given pursuant to this Section 2.10 and of each Lender's portion of any converted or continued Term Borrowing. If the Borrower shall not have given notice in accordance with this Section 2.10 to continue any Term Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.10 to convert such Term Borrowing), such Term Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued into a new Interest Period as an ABR Term Borrowing. SECTION 2.11. Repayment of Term Borrowings. (a) The Term Borrowings shall be payable as to principal in the aggregate amounts set forth below in consecutive quarterly installments on the last Business Day of each March, June, September and December (each an "Installment Date"), commencing on June 28, 1996, with 25% of the amount set forth below for each applicable four-quarter period being paid on each Installment Date occurring during such four-quarter period:
Four-Quarter Tranche A Tranche B Period Ending Term Loan Amount Term Loan Amount March 31, 1997 $ 7,000,000 $ 2,000,000 March 31, 1998 12,000,000 2,000,000 March 31, 1999 15,000,000 2,000,000 March 31, 2000 8,000,000 2,000,000 March 30, 2001 8,000,000 2,000,000 March 29, 2002 25,000,000 March 31, 2003 35,000,000
(b) Except as set forth in paragraph (c) below, (i) each prepayment of principal of Term Borrowings pursuant to Section 2.12 shall be applied to the Tranche A Term Loans and the Tranche B Term Loans ratably in accordance with the respective outstanding principal amounts thereof and shall reduce scheduled payments required under paragraph (a) above after the date of such prepayments in the scheduled order of maturity, unless and until deemed made under Section 2.13(c) as contemplated thereby (at which time the application of such prepayments (and any subsequent payments under Section 2.11(a) and prepayments under Section 2.13(a) or (b)) shall be retroactively adjusted as if 29 such prepayments had originally been made under Section 2.13(c)), and (ii) each prepayment of principal of the Term Borrowings made or deemed made pursuant to Section 2.13 shall be applied to the Tranche A Term Loans and the Tranche B Term Loans ratably in accordance with the respective outstanding principal amounts thereof and shall reduce the scheduled payments required under paragraph (a) above after the date of such prepayment on a pro rata basis. To the extent not previously paid or reduced, all Tranche A Term Loans shall be due and payable on the Tranche A Maturity Date and all Tranche B Term Loans shall be due and payable on the Tranche B Maturity Date. All repayments pursuant to this Section 2.11 shall be subject to Section 2.16, but shall otherwise be without premium or penalty. Each payment of Borrowings pursuant to this Section 2.11 shall be accompanied by accrued interest on the principal amount paid to but excluding the date of such payment. (c) Any Lender holding Tranche B Term Loans may, to the extent Tranche A Term Loans are outstanding, elect on not less than two Business Days' prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent with respect to any optional prepayment made pursuant to Section 2.12(a) or any mandatory prepayment made pursuant to Section 2.13 not to have such prepayment applied to such Lender's Tranche B Term Loans until all Tranche A Term Loans shall have been paid in full, in which case the amount not so applied shall be applied to prepay (i) Tranche A Term Loans and (ii) Tranche B Term Loans of Lenders holding Tranche B Term Loans which did not elect to reject the initial applicable prepayment on a pro rata basis based upon the aggregate outstanding principal amount of the Tranche A Term Loans and the Tranche B Term Loans of the Lenders referred to in clause (ii). SECTION 2.12. Optional Prepayments. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days' prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent before 11:00 a.m., New York City time; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (or, if less, the remaining amount outstanding under the applicable Tranche). (b) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section 2.12 shall be subject to Section 2.16 but otherwise without premium or penalty and shall be accompanied by accrued interest on the principal amount being prepaid to but excluding the date of payment. SECTION 2.13. Mandatory Prepayments. (a) In the event of the termination of all the Revolving Credit Commitments, the Borrower shall repay or prepay all its outstanding Revolving Credit Borrowings on the date of such termination. In the event of any partial reduction of the Revolving Credit Commitments, then (i) at or prior to the effective date of such reduction, the Administrative Agent shall notify the Borrower and the Revolving Credit Lenders of the Aggregate Revolving Credit Exposure after giving effect thereto and (ii) if the Aggregate Revolving Credit Exposure would exceed the Total Revolving Credit Commitment after giving effect to such reduction or termination, then the Borrower shall, on the date of such reduction or termination, repay or prepay Revolving Credit Borrowings in an amount sufficient to eliminate such excess. 30 (b) Not later than the fifth Business Day following the receipt by STFI, the Borrower or any Subsidiary of any Net Proceeds, all such Net Proceeds shall be applied to prepay Term Loans (and after the Term Loans have been paid in full, to prepay Revolving Loans). (c) Not later than the earlier of (i) 100 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending on December 31, 1996, and (ii) ten days after the date on which the financial statements with respect to such fiscal year are delivered pursuant to Section 5.04(a), the Borrower shall calculate Excess Cash Flow for such fiscal year and prepay outstanding Term Loans (and after the Term Loans have been paid in full, prepay Revolving Loans) in an aggregate principal amount equal to the ECF Percentage of such Excess Cash Flow; provided, however, that, with respect to the period ended on December 31, 1996, Excess Cash Flow shall, notwithstanding anything to the contrary herein, be determined with respect to the period beginning on the Closing Date and ending on December 31, 1996. In the event the Borrower shall have prepaid Term Borrowings under Section 2.12(a) during any fiscal year in an aggregate amount in excess of Debt Service for such fiscal year, the Borrower may in the certificate delivered pursuant to paragraph (e) below in respect of the prepayment to be made pursuant to this paragraph (c) in respect of such fiscal year designate all or any portion of such excess over Debt Service as a payment in respect of the payment required under this paragraph (c) in respect of such fiscal year and such amount shall thereafter be deemed to have been paid under this paragraph (c). (d) The Borrower shall repay or prepay outstanding Revolving Loans and shall refrain from making additional Revolving Credit Borrowings to the extent necessary in order that there shall be a period of at least 30 consecutive days in each fiscal year during which the aggregate principal amount of outstanding Revolving Loans shall not exceed $5,000,000. (e) The Borrower shall deliver to the Administrative Agent not later than three Business Days prior to each prepayment required under this Section 2.13 a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment. Each notice of prepayment shall specify the prepayment date, the Type of each Loan being prepaid and the principal amount of each Loan (or portion thereof) to be prepaid. All pre- payments under this Section 2.13 shall be subject to Section 2.16, but shall otherwise be without premium or penalty and shall be accompanied by accrued interest on the principal amount being prepaid to but excluding the date of payment. (f) Amounts to be applied pursuant to this Section 2.13 to the prepayment of Term Loans and Revolving Loans shall be applied, as applicable, first to reduce outstanding ABR Borrowings. Any amounts remaining after each such application shall, at the option of the Borrower, be applied to prepay Eurodollar Borrowings immediately or shall be deposited in the Prepayment Account (as defined below) for a period of up to 30 days. The Administrative Agent shall apply any cash deposited in the Prepayment Account allocable to Term Loans to prepay Eurodollar Term Loans and allocable to Revolving Loans to prepay Eurodollar Revolving Loans (i) prior to the 30th day following the deposit of such amounts in such account, in each case on the last day of their respective Interest Periods (or, at the direction of the Borrower, on any earlier date) and (ii) on the 30th day following the deposit of such amounts in such account, in each case to prepay Loans in the order of the maturity of the Interest Periods of such Loans, in each case until all outstanding Term Loans or Revolving Loans, as the case may be, have been prepaid or until all the allocable cash on deposit with respect to such Loans has been exhausted. For purposes of this Agreement, the term "Prepayment Account" shall mean an account established by the Borrower with the Administrative Agent and over 31 which the Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal for application in accordance with this paragraph (f). The Administrative Agent will, at the request of the Borrower, invest amounts on deposit in the Prepayment Account in overnight investments that are Permitted Investments; provided, however, that (i) the Administrative Agent shall not be required to make any investment that, in its sole judgment, would require or cause the Administrative Agent to be in, or would result in any, violation of any law, statute, rule or regulation and (ii) the Administrative Agent shall have no obligation to invest amounts on deposit in the Prepayment Account if a Default or Event of Default shall have occurred and be continuing. The Borrower shall indemnify the Administrative Agent for any losses relating to the investments so that the amount available to prepay Eurodollar Borrowings on the last day of the applicable Interest Period is not less than the amount that would have been available had no investments been made pursuant thereto. Other than any interest earned on such investments, the Prepayment Account shall not bear interest. Interest or profits, if any, on such investments shall be deposited in the Prepayment Account and reinvested and disbursed as specified above. If the maturity of the Loans has been accelerated pursuant to Article VII, the Administrative Agent may, in its sole discretion, apply all amounts on deposit in the Prepayment Account to satisfy any of the Obligations in a manner consistent with the terms thereof. The Borrower hereby grants to the Administrative Agent, for its benefit and the benefit of the Fronting Banks and the Lenders, a security interest in the Prepayment Account to secure the Obligations. SECTION 2.14. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision of this Agreement, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any Lender or any Fronting Bank of the principal of or interest on any Eurodollar Loan made by such Lender or any Fees or other amounts payable hereunder (other than changes in respect of taxes imposed on the overall net income of such Lender or Fronting Bank by the jurisdiction in which such Lender or Fronting Bank has its principal office or by any political subdivision or taxing authority therein), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender or such Fronting Bank (except any such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or such Fronting Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender or such Fronting Bank of making or maintaining any Eurodollar Loan or increase the cost to any Lender of issuing or maintaining any Letter of Credit or purchasing or maintaining a participation therein or to reduce the amount of any sum received or receivable by such Lender or such Fronting Bank hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender or such Fronting Bank to be material, then the Borrower will pay to such Lender or such Fronting Bank, as the case may be, upon demand such additional amount or amounts as will compensate such Lender or Fronting Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or Fronting Bank shall have determined that the adoption after the date hereof of any law, rule, regulation, agreement or guideline regarding capital adequacy, or any change after the date hereof in any such law, rule, regulation, agreement or guideline (whether such law, rule, regulation, agreement or guideline has been adopted) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration 32 thereof, or compliance by any Lender (or any lending office of such Lender) or any Fronting Bank or any Lender's or Fronting Bank's holding company (or other person Controlling such Lender or Fronting Bank (a "holding company")) with any request or directive regarding capital adequacy (whether or not having the force of law) of any Governmental Authority has or would have the effect of reducing the rate of return on such Lender's or Fronting Bank's capital or on the capital of such Lender's or Fronting Bank's holding company, if any, as a consequence of this Agreement or the Loans made or participations in Letters of Credit purchased by such Lender pursuant hereto or the Letters of Credit issued by such Fronting Bank pursuant hereto to a level below that which such Lender or Fronting Bank or such Lender's or Fronting Bank's holding company could have achieved but for such applicability, adoption, change or compliance (taking into consideration such Lender's or Fronting Bank's policies and the policies of such Lender's or Fronting Bank's holding company with respect to capital adequacy) by an amount deemed by such Lender or Fronting Bank to be material, then from time to time the Borrower shall pay to such Lender or Fronting Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Fronting Bank or such Lender's or Fronting Bank's holding company for any such reduction suffered. (c) A certificate of a Lender or Fronting Bank setting forth the amount or amounts necessary to compensate such Lender or Fronting Bank or its holding company, as applicable, as specified in paragraph (a) or (b) above shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or Fronting Bank the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same. (d) Failure or delay on the part of any Lender or any Fronting Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Lender's or Fronting Bank's right to demand such compensation. The protection of this Section 2.14 shall be available to each Lender and Fronting Bank regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, agreement, guideline or other change or condition that shall have occurred or been imposed. SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision of this Agreement, if, after the date hereof, any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent: (i) such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans), whereupon any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such for an additional Interest Period or to convert a Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and (ii) such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically con- 33 verted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 2.15, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower. SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender against any loss or expense that such Lender may sustain or incur as a consequence of (a) any event, other than a default by such Lender in the performance of its obligations hereunder, which results in (i) such Lender receiving or being deemed to receive any amount on account of the principal of any Eurodollar Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with respect to any Eurodollar Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar Loan to be made pursuant to a conversion or continuation under Section 2.10) not being made after notice of such Loan shall have been given by the Borrower hereunder (any of the events referred to in this clause (a) being called a "Breakage Event") or (b) any default in the making of any payment or prepayment required to be made hereunder. In the case of any Breakage Event, such loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would have been in effect) for such Loan over (ii) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for such period. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and to the Administrative Agent and shall be conclusive absent manifest error. SECTION 2.17. Pro Rata Treatment. Except as required under Section 2.15, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the Commitment Fees and the L/C Participation Fees, each reduction of the Term Loan Commitments or the Revolving Credit Commitments and each refinancing of any Borrowing with, conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their applicable outstanding Loans). SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain 34 payment (voluntary or involuntary) in respect of any Loan or Loans or L/C Disbursement as a result of which the unpaid principal portion of its Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or participations in L/C Disbursements shall be proportionately less than the unpaid principal portion of the Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or participations in L/C Disbursements, respectively, of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or L/C Exposure, as the case may be of such other Lender, so that the aggregate unpaid principal amount of the Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or L/C Exposure and participations in Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or L/C Exposure held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or L/C Exposure then outstanding as the principal amount of its Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or L/C Exposure prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all Tranche A Term Loans, Tranche B Term Loans, Revolving Loans or L/C Exposure outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.18 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. The Borrower and STFI expressly consent to the foregoing arrangements and agree that any Lender holding a participation in a Term Loan or Revolving Loan or L/C Disbursement deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower and STFI to such Lender by reason thereof as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation. SECTION 2.19. Payments. (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any L/C Disbursement or any Fees or other amounts) hereunder and under any other Loan Document not later than 12:00 noon, New York City time, on the date when due in immediately available dollars, without setoff, defense or counterclaim. Each such payment (other than Fronting Bank Fees, which shall be paid directly to the applicable Fronting Bank) shall be made to the Administrative Agent at its offices at 12 East 49th Street, New York, New York. The Administrative Agent shall distribute such funds promptly after receipt to the Lenders and the Fronting Banks, as applicable. (b) Whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable. SECTION 2.20. Taxes. (a) Any and all payments by or on behalf of the Borrower or any Loan Party hereunder and under any other Loan Document shall be made, in accordance with Section 2.19, free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) income taxes imposed on the net income of the Administrative Agent, any Lender or any Fronting Bank (or any transferee or assignee thereof, including a participation holder (any such entity a "Transferee")) and (ii) franchise taxes imposed on the net income of the Administrative Agent, any 35 Lender or any Fronting Bank (or Transferee), in each case by the jurisdiction under the laws of which the Administrative Agent, such Lender or such Fronting Bank (or Transferee) is organized or any political subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities, collectively or individually, being called "Taxes"). If the Borrower or any Loan Party shall be required to deduct any Taxes from or in respect of any sum payable hereunder or under any other Loan Document to the Administrative Agent, any Lender or any Fronting Bank (or any Transferee), (i) the sum payable shall be increased by the amount (an "additional amount") necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.20) the Administrative Agent, such Lender or such Fronting Bank (or Transferee), as the case may be, shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Loan Party shall make such deductions and (iii) the Borrower or such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including, without limitation, mortgage recording taxes and similar fees) that arise from any payment made hereunder or under any other Loan Document or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document ("Other Taxes"). (c) The Borrower will indemnify the Administrative Agent, each Lender and each Fronting Bank (or Transferee) for the full amount of Taxes and Other Taxes paid by the Administrative Agent, such Lender or such Fronting Bank (or Transferee), as the case may be, and any liability (including penalties, interest and expenses (including reasonable attorney's fees and expenses)) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability prepared by the Administrative Agent, a Lender or a Fronting Bank (or Transferee), or the Administrative Agent on its behalf, absent manifest error, shall be final, conclusive and binding for all purposes. Such indemnification shall be made within 30 days after the date the Administrative Agent, any Lender or any Fronting Bank (or Transferee), as the case may be, makes written demand therefor. (d) As soon as practicable after the date of any payment of Taxes or Other Taxes by the Borrower or any other Loan Party to the relevant Governmental Authority, the Borrower or such other Loan Party will deliver to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt issued by such Governmental Authority evidencing payment thereof. (e) Each Lender and Fronting Bank (or Transferee) that is organized under the laws of a jurisdiction other than the United States, any State thereof or the District of Columbia (a "Non- U.S. Lender") shall deliver to the Borrower and the Administrative Agent two copies of either United States Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender or Fronting Bank claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender or Fronting Bank delivers a Form W-8, a certificate representing that such Non-U.S. Lender or Fronting Bank is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign corporation related to the Borrower 36 (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S. Lender or Fronting Bank claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax on payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender or Fronting Bank on or before the date it becomes a party to this Agreement (or, in the case of a Transferee that is a participation holder, on or before the date such participation holder becomes a Transferee hereunder) and on or before the date, if any, such Non-U.S. Lender or Fronting Bank changes its applicable lending office by designating a different lending office (a "New Lending Office"). In addition, each Non-U.S. Lender or Fronting Bank shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender or Fronting Bank. Notwithstanding any other provision of this Section 2.20(e), a Non-U.S. Lender or Fronting Bank shall not be required to deliver any form pursuant to this Section 2.20(e) that such Non-U.S. Lender or Fronting Bank is not legally able to deliver. (f) The Borrower shall not be required to indemnify any Non-U.S. Lender or Fronting Bank or to pay any additional amounts to any Non-U.S. Lender or Fronting Bank, in respect of United States Federal withholding tax pursuant to paragraph (a) or (c) above to the extent that (i) the obligation to withhold amounts with respect to United States Federal withholding tax existed on the date such Non-U.S. Lender or Fronting Bank became a party to this Agreement (or, in the case of a Transferee that is a participation holder, on the date such participation holder became a Transferee hereunder) or, with respect to payments to a New Lending Office, the date such Non-U.S. Lender or Fronting Bank designated such New Lending Office with respect to a Loan or a Letter of Credit; provided, however, that this paragraph (f) shall not apply (x) to any Transferee or New Lending Office that becomes a Transferee or New Lending Office as a result of an assignment, participation, transfer or designation made at the request of the Borrower and (y) to the extent the indemnity payment or additional amounts any Transferee, or any Lender or Fronting Bank (or Transferee), acting through a New Lending Office, would be entitled to receive (without regard to this paragraph (f)) do not exceed the indemnity payment or additional amounts that the person making the assignment, participation or transfer to such Transferee, or Lender or Fronting Bank (or Transferee) making the designation of such New Lending Office, would have been entitled to receive in the absence of such assignment, participation, transfer or designation or (ii) the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender or Fronting Bank to comply with the provisions of paragraph (e) above. (g) Nothing contained in this Section 2.20 shall require any Lender or Fronting Bank (or any Transferee) or the Administrative Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate. (a) In the event (i) any Lender or Fronting Bank delivers a certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or Fronting Bank delivers a notice described in Section 2.15 or (iii) the Borrower is required to pay any additional amount to any Lender or Fronting Bank or any Governmental Authority on account of any Lender or Fronting Bank pursuant to Section 2.20, the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 9.04(b)), upon notice to such Lender or Fronting Bank and the Administrative Agent, require such Lender or Fronting Bank to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all of its interests, rights and obligations under this Agreement to an assignee that shall assume such assigned 37 obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, of the Fronting Banks), which consents shall not unreasonably be withheld, and (z) the Borrower or such assignee shall have paid to the affected Lender or Fronting Bank in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans or L/C Disbursements of such Lender or Fronting Bank, respectively, plus all Fees and other amounts accrued for the account of such Lender or Fronting Bank hereunder (including any amounts under Section 2.14 and Section 2.16). (b) If (i) any Lender or Fronting Bank shall request compensation under Section 2.14, (ii) any Lender or Fronting Bank delivers a notice described in Section 2.15 or (iii) the Borrower is required to pay any additional amount to any Lender or Fronting Bank or any Governmental Authority on account of any Lender or Fronting Bank, pursuant to Section 2.20, then such Lender or Fronting Bank shall use reasonable efforts (which shall not require such Lender or Fronting Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.14 or enable it to withdraw its notice pursuant to Section 2.15 or would reduce amounts payable pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or Fronting Bank in connection with any such filing or assignment, delegation and transfer. SECTION 2.22. Letters of Credit. (a) General. The Borrower may request the issuance of a Letter of Credit, in a form reasonably acceptable to the Administrative Agent and the applicable Fronting Bank, appropriately completed, for the account of the Borrower, at any time and from time to time while the Revolving Credit Commitments remain in effect. This Section shall not be construed to impose an obligation upon any Fronting Bank to issue any Letter of Credit that is inconsistent with the terms and conditions of this Agreement. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. In order to request the issuance of a Letter of Credit (or to amend, renew or extend an existing Letter of Credit), the Borrower shall give written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the applicable Fronting Bank and the Administrative Agent (not less than 5 Business Days in advance of the requested date of issuance, amendment, renewal or extension) requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) below), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Letter of Credit. Following receipt of such notice and prior to the issuance of the requested Letter of Credit or the applicable amendment, renewal or extension, the Administrative Agent shall, if the conditions set forth in the penultimate sentence of this paragraph would not be satisfied, notify the Borrower and the applicable Fronting Bank of the amount of the Aggregate Revolving Credit Exposure after giving effect to (i) the issuance, amendment, renewal or extension of such Letter of Credit, (ii) the issuance or expiration of any other Letter of Credit that is to be issued or 38 will expire prior to the requested date of issuance of such Letter of Credit and (iii) the borrowing or repayment of any Revolving Credit Loans that (based upon notices delivered to the Administrative Agent by the Borrower) are to be borrowed or repaid prior to the requested date of issuance of such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that, after giving effect to such issuance, amendment, renewal or extension (A) the L/C Exposure shall not exceed $5,000,000 and (B) the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit Commitment. Promptly upon the issuance, amendment, renewal or extension of any Letter of Credit, the applicable Fronting Bank shall notify the Administrative Agent thereof. (c) Expiration Date. Each Letter of Credit shall expire at the close of business on the earlier of the date one year after the date of the issuance of such Letter of Credit and the date that is five Business Days prior to the Revolving Credit Maturity Date, unless such Letter of Credit expires by its terms on an earlier date. (d) Participations. By the issuance of a Letter of Credit and without any further action on the part of the applicable Fronting Bank or the Revolving Credit Lenders, the applicable Fronting Bank hereby grants to each Revolving Credit Lender, and each such Lender hereby acquires from the applicable Fronting Bank, a participation in such Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable Fronting Bank, such Lender's Applicable Percentage of each L/C Disbursement made by such Fronting Bank and not reimbursed by the Borrower (or, if applicable, another party pursuant to its obligations under any other Loan Document) forthwith on the date due as provided in Section 2.02(g). Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If a Fronting Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower shall pay to the applicable Fronting Bank an amount equal to such L/C Disbursement not later than two hours after the Borrower shall have received notice from such Fronting Bank that payment of such draft will be made, or, if the Borrower shall have received such notice later than 10:00 a.m., New York City time, on any Business Day, not later than 10:00 a.m., New York City time, on the immediately following Business Day. (f) Obligations Absolute. The Borrower's obligations to reimburse L/C Disbursements as provided in paragraph (e) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein; 39 (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document; (iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other person may at any time have against the beneficiary under any Letter of Credit, any Fronting Bank, the Administrative Agent or any Lender or any other person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction; (iv) any draft or other document presented under a 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; (v) payment by the applicable Fronting Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and (vi) any other act or omission to act or delay of any kind of any Fronting Bank, any Lender, the Administrative Agent or any other person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower's obligations hereunder. Without limiting the generality of the foregoing, it is expressly understood and agreed that the absolute and unconditional obligation of the Borrower hereunder to reimburse L/C Disbursements will not be excused by the gross negligence or wilful misconduct of any Fronting Bank. However, the foregoing shall not be construed to excuse such Fronting Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Fronting Bank's gross negligence or wilful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof; it is understood that the Fronting Banks may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit (i) any Fronting Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute wilful misconduct or gross negligence of such Fronting Bank. (g) Disbursement Procedures. The applicable Fronting Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Fronting Bank shall as promptly as possible give telephonic notification, 40 confirmed by telecopy, to the Administrative Agent and the Borrower of such demand for payment and whether such Fronting Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Fronting Bank and the Revolving Credit Lenders with respect to any such L/C Disbursement. (h) Interim Interest. If a Fronting Bank shall make any L/C Disbursement in respect of a Letter of Credit, then, unless the Borrower shall reimburse such L/C Disbursement in full on such date, the unpaid amount thereof shall bear interest for the account of such Fronting Bank, for each day from and including the date of such L/C Disbursement, to but excluding the earlier of the date of payment by the Borrower or the date on which interest shall commence to accrue thereon as provided in Section 2.02(g), at the rate per annum that would apply to such amount if such amount were an ABR Loan. (i) Resignation or Removal of a Fronting Bank. A Fronting Bank may resign at any time by giving 180 days' prior written notice to the Administrative Agent, the Lenders and the Borrower, and may be removed at any time by the Borrower by notice to (a) Fronting Bank, the Administrative Agent and the Lenders. Subject to the next succeeding paragraph, upon the acceptance of any appointment as (a) Fronting Bank hereunder by a Lender that shall agree to serve as successor Fronting Bank, such successor shall succeed to and become vested with all the interests, rights and obligations of the retiring Fronting Bank and the retiring Fronting Bank shall be discharged from its obligations to issue additional Letters of Credit hereunder. At the time such removal or resignation shall become effective, the Borrower shall pay all accrued and unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any appointment as a Fronting Bank hereunder by a successor Lender shall be evidenced by an agreement entered into by such successor, in a form satisfactory to the Borrower and the Administrative Agent, and, from and after the effective date of such agreement, (i) such successor Lender shall have all the rights and obligations of the previous Fronting Bank under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term "Fronting Bank" shall be deemed to refer to such successor or to any previous Fronting Bank, or to such successor and all previous Fronting Banks, as the context shall require. After the resignation or removal of a Fronting Bank hereunder, the retiring Fronting Bank shall remain a party hereto and shall continue to have all the rights and obligations of a Fronting Bank under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, the Borrower shall, on the Business Day it receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Credit Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit) thereof and of the amount to be deposited, deposit in an account with the Collateral Agent, for the benefit of the Revolving Credit Lenders, an amount in cash equal to the L/C Exposure as of such date. Such deposit shall be held by the Collateral Agent as collateral for the payment and performance of the Obligations. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits in Permitted Investments, which investments shall be made at the option and sole discretion of the Collateral Agent, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall (i) automatically be applied by the Administrative Agent to reimburse the Fronting 41 Banks for L/C Disbursements for which they have not been reimbursed, (ii) be held for the satisfaction of the reimbursement obligations of the Borrower for the L/C Exposure at such time and (iii) if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Credit Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit), be applied to satisfy the Obligations. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. ARTICLE III. REPRESENTATIONS AND WARRANTIES Each of STFI and the Borrower represents and warrants to the Administrative Agent, the Collateral Agent, the Fronting Banks and each of the Lenders that: SECTION 3.01. Organization; Powers. Each of STFI, the Borrower and each of the Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the corporate or partnership power, as the case may be, and authority to execute, deliver and perform its obligations under each of the Loan Documents, the Acquisition Documents and each other agreement or instrument contemplated hereby to which it is or will be a party and, in the case of the Borrower, to borrow hereunder. SECTION 3.02. Authorization. The execution, delivery and performance by each Loan Party of each of the Loan Documents and the Acquisition Documents, the borrowings hereunder, the Acquisition Transactions and the other transactions contemplated hereby (collectively, the "Transactions") (a) have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of RHI, FII, STFI, the Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C) any provision of any indenture, agreement or other instrument to which RHI, FII, STFI, the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, except for any such violations of agreements not involving borrowed money or other extensions of credit that could not reasonably be expected individually or in the aggregate to have any material effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, or of STFI, or on or prior to the Closing Date, of the Acquired Business, or on the rights or interests of the Lenders, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument, except, in the case of any agreement not involving borrowed money or any other extension of credit, such conflicts as could not reasonably be expected individually or in the aggregate to have any material effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, or of STFI, or on or prior to the Closing Date, of the Acquired Business, or on the rights or interests of the Lenders, or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property or assets now 42 owned by RHI or FII or now owned or hereafter acquired by STFI, the Borrower or any Subsidiary (other than any Lien created under the Security Documents). SECTION 3.03. Enforceability. This Agreement has been duly executed and delivered by STFI and the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against such Loan Party in accordance with its terms. SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (a) the filing of Uniform Commercial Code financing statements and filings with the United States Patent and Trademark Office and the United States Copyright Office and (b) such as have been made or obtained and are in full force and effect and a state regulatory approval in Indiana the failure to obtain which could not result in a Material Adverse Effect. SECTION 3.05. Financial Statements. (a) STFI has heretofore furnished to the Lenders its consolidated balance sheets and statements of operations, stockholders' equity and cash flows (a) as of and for the fiscal years ended December 31, 1994 and December 31, 1993, audited by and accompanied by the opinions of Rothstein, Kass & Company, P.C., and Arthur Andersen LLP, independent public accountants, and (b) as of and for the fiscal quarters and the portion of the fiscal years ended September 30, 1995 and September 30, 1994. The Borrower has heretofore furnished to the Lenders the consolidated balance sheets and statements of earnings, stockholders' equity and cash flows of FII (a) as of and for the fiscal years ended June 30, 1995, and June 30, 1994, audited and accompanied by the opinion of Arthur Andersen LLP, and (b) as of and for the fiscal quarters and the portion of the fiscal years ended October 1, 1995, and October 2, 1994. Such financial statements present fairly the financial condition and results of operations and cash flows of the STFI and FII and their respective consolidated Subsidiaries as of such dates and for such periods. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the STFI and FII and their respective consolidated subsidiaries as of the dates thereof. Such financial statements were prepared in accordance with GAAP applied on a consistent basis. (b) The Borrower has heretofore delivered to the Lenders the unaudited pro forma combined balance sheet of STFI dated as of September 30, 1995, giving effect to the Acquisition Transactions as if they had occurred on such date. Such pro forma balance sheet has been prepared in good faith by the Borrower, based on the assumptions used to prepare the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by STFI and the Borrower on the date hereof and on the Closing Date to be reasonable), is based on the best information available to the Borrower as of the date of delivery thereof, accurately reflects all adjustments required to be made to give effect to the Acquisition Transactions and presents fairly on a pro forma basis the estimated consolidated financial position of STFI, the Borrower and their subsidiaries as of September 30, 1995, assuming that the Acquisition Transactions had actually occurred at September 30, 1995. (c) The Borrower has delivered to the Lenders complete and correct copies of the Offering Circular and all amendments, modifications and supplements thereto. 43 SECTION 3.06. No Material Adverse Change. There has been no material adverse change in the business, assets, operations, prospects, condition, financial or otherwise, or material agreements of STFI, the Borrower and the Subsidiaries, taken as a whole, since June 30, 1995 with respect to the Acquired Business and since December 31, 1994 with respect to STFI, respectively. SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of STFI, the Borrower and the Subsidiaries has good and marketable title to, or valid leasehold interests in, all its material properties and assets, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02. (b) Each of STFI, the Borrower and the Subsidiaries has complied with all obligations under all material leases to which it is a party and all such leases are in full force and effect, except for noncompliance which could not reasonably be expected individually or in the aggregate to have any material effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, or of STFI, or on or prior to the Closing Date, of the Acquired Business, or on the rights or interests of the Lenders. Each of STFI, the Borrower and the Subsidiaries enjoys peaceful and undisturbed possession under all such material leases. SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing Date a list of all Subsidiaries and the percentage ownership interest of the Borrower therein after giving effect to the Acquisition Transactions that shall occur prior to or simultaneously with the initial Credit Event hereunder. The shares of capital stock or other ownership interests so indicated on Schedule 3.08 are fully paid and non-assessable and are owned by the Borrower, directly or indirectly, free and clear of all Liens. SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on Schedule 3.09, there are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of STFI or the Borrower, threatened against or affecting STFI or the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve any Loan Document or the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) None of STFI, the Borrower or any of the Subsidiaries or any of their respective material properties or assets is in violation of, nor will the continued operation of their material properties and assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting any of its real property, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect. SECTION 3.10. Agreements. (a) None of STFI, the Borrower or any of the Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect. No tenant service 44 contract to which STFI, the Borrower or any Subsidiary is party contains any restriction on assignment, and each such contract is under applicable law freely assignable by STFI, the Borrower and the Subsidiaries, as applicable. (b) None of STFI, the Borrower or any of the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect. SECTION 3.11. Federal Reserve Regulations. (a) None of STFI, the Borrower or any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation G, U or X. SECTION 3.12. Investment Company Act; Public Utility Holding Company Act. None of STFI, the Borrower or any Subsidiary is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the Loans and will request the issuance of Letters of Credit only for the purposes specified in the preamble to this Agreement. SECTION 3.14. Tax Returns. Each of STFI, the Borrower and the Subsidiaries has filed or caused to be filed all Federal, state, local and foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all taxes due and payable by it and all assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which STFI, the Borrower or such Subsidiary, as applicable, shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP and such contest operates to suspend collection of the contested obligation, tax, assessment or charge and enforcement of a Lien. SECTION 3.15. No Material Misstatements. None of the Confidential Information Memorandum, the Offering Circular or any other information, report, financial statement, exhibit or schedule furnished by or on behalf of STFI or the Borrower to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, each of STFI and the Borrower represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule. 45 SECTION 3.16. Employee Benefit Plans. Each of the Borrower and its ERISA Affiliates is in compliance in all material respects with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in material liability of the Borrower or any of its ERISA Affiliates. The present value of all benefit liabilities under each Plan (based on those assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed by more than $500,000 the fair market value of the assets of such Plan, and the present value of all benefit liabilities of all underfunded Plans (based on those assumptions used to fund each such Plan) did not, as of the last annual valuation dates applicable thereto, exceed by more than $1,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.17. Environmental Matters. Except as set forth in Schedule 3.17: (a) The properties owned or operated by STFI, the Borrower and the Subsidiaries (the "Properties") do not contain any Hazardous Materials in amounts or concentrations which (i) constitute, or constituted a violation of, or (ii) could give rise to liability under, Environmental Laws, which violations and liabilities, in the aggregate, could result in a Material Adverse Effect. (b) The Properties and all operations of the Borrower and the Subsidiaries are in compliance, and in the last ten years have been in compliance, with all Environmental Laws and all necessary Environmental Permits have been obtained and are in effect, except to the extent that such noncompliance or failure to obtain any necessary permits, in the aggregate, could not result in a Material Adverse Effect. (c) There have been no Releases or threatened Releases at, from, under or proximate to the Properties or otherwise in connection with the operations of the Borrower or the Subsidiaries, which Releases or threatened Releases, in the aggregate, could result in a Material Adverse Effect. (d) None of STFI, the Borrower or any of the Subsidiaries has received any notice of an Environmental Claim in connection with the Properties or the operations of the Borrower or the Subsidiaries or with regard to any person whose liabilities for environmental matters STFI, the Borrower or the Subsidiaries has retained or assumed, in whole or in part, contractually, by operation of law or otherwise, which, in the aggregate, could result in a Material Adverse Effect, nor do STFI, the Borrower or the Subsidiaries have reason to believe that any such notice will be received or is being threatened. (e) None of STFI, the Borrower or the Subsidiaries retained or assumed any liability, contractually, by operation of law or otherwise, with respect to the generation, treatment, storage or disposal (including off-site disposal) of Hazardous Materials, which transportation, generation, treatment, storage or disposal, or retained or assumed liabilities, in the aggregate, could reasonably be expected to result in a Material Adverse Effect. SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and correct description of all insurance maintained by the Borrower, by the Borrower for its Subsidiaries or by the Subsidiaries as of the date hereof and the Closing Date. As of each such date, such insurance is in full force and effect and all premiums have been duly paid. The Borrower and its Subsidiaries have 46 insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice. SECTION 3.19. Security Documents. (a) The Pledge Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Pledge Agreement) and, when the Collateral is delivered to the Collateral Agent, the Pledge Agreement shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the pledgors thereunder in such Collateral, in each case prior and superior in right to any other person. (b) The Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when financing statements in appropriate form are filed in the offices specified on Schedule 6 to the Perfection Certificate, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral to the extent that a Lien may be perfected by filing such financing statements (other than the Intellectual Property, as defined in the Security Agreement), in each case prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.02. (c) When the Security Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in the Intellectual Property (as defined in the Security Agreement), in each case prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks, trademark applications and copyrights acquired by the grantors after the date hereof), other than with respect to Liens expressly permitted by Section 6.02. SECTION 3.20. Location of Real Property and Leased Premises. (a) As of the Closing Date, after giving effect to the Acquisition Transactions, the Borrower and the Subsidiaries do not own any real property. (b) Schedule 3.20(b) lists completely and correctly as of the Closing Date all real property leased by the Borrower and the Subsidiaries under leases having annual rental payments in excess of $35,000 and the locations thereof. The Borrower and the Subsidiaries have valid leases in all the real property set forth on Schedule 3.20(b). SECTION 3.21. Labor Matters. There are no strikes, lockouts or slowdowns against the Acquired Business, STFI, the Borrower or any Subsidiary pending or, to the knowledge of STFI or the Borrower, threatened, other than any strikes which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The hours worked by and payments made to employees of STFI, the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters. All payments due from STFI, the Borrower or any Subsidiary, or for which any claim may be made against STFI, the Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of STFI, the Borrower or such Subsidiary. The consummation of the Acquisition Transactions will not give rise to 47 any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which RHI, FII, STFI, the Borrower or any Subsidiary is bound. SECTION 3.22. Solvency. Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan made on the Closing Date and after giving effect to the application of the proceeds of such Loans, (i) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) each Loan Party will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date. ARTICLE IV. CONDITIONS OF LENDING The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions: SECTION 4.01. All Credit Events. On the date of each Borrowing, including each Borrowing in which Loans are refinanced with new Loans as contemplated by Section 2.02(f) and on the date of each issuance of a Letter of Credit (each such event being called a "Credit Event"): (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 (or such notice shall have been deemed given in accordance with Section 2.03) or, in the case of the issuance of a Letter of Credit, the applicable Fronting Bank and the Administrative Agent shall have received a notice requesting the issuance of such Letter of Credit as required by Section 2.22(b). (b) The representations and warranties set forth in each Loan Document shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) The Borrower and each other Loan Party shall be in compliance with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, and at the time of and immediately after such Credit Event, no Event of Default or Default shall have occurred and be continuing. Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the matters specified in paragraphs (b) and (c) of this Section 4.01. 48 SECTION 4.02. First Credit Event. On the Closing Date: (a) The Administrative Agent shall have received, on behalf of itself, the Lenders and the Fronting Banks, a favorable written opinion of (i) Gadsby & Hannah, counsel for STFI and the Borrower, substantially to the effect set forth in Exhibit I-1 and (ii) each other opinion listed on Schedule 4.02(a), substantially to the effect set forth in Exhibit I-2, in each case (A) dated the Closing Date, (B) addressed to the Administrative Agent, the Lenders and the Fronting Banks, and (C) covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request, and STFI and the Borrower hereby request such counsel to deliver such opinions. (b) All legal matters incident to this Agreement, the Borrowings and extensions of credit hereunder and the other Loan Documents shall be satisfactory to the Lenders, the Fronting Banks and Cravath, Swaine & Moore, counsel for the Administrative Agent. (c) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to (ii) above; and (iv) such other documents as the Lenders, the Fronting Banks or Cravath, Swaine & Moore, counsel for the Administrative Agent, may reasonably request. (d) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Financial Officer of the Borrower, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01. (e) The Administrative Agent shall have received all Fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document. (f) The Pledge Agreement shall have been duly executed by the parties thereto and delivered to the Collateral Agent and shall be in full force and effect, and all the outstanding Capital Stock of the Borrower and the Subsidiaries other than ATG, ANSI and their 49 subsidiaries shall have been duly and validly pledged thereunder to the Collateral Agent for the ratable benefit of the Secured Parties and certificates representing such shares, accompanied by instruments of transfer and stock powers endorsed in blank, shall be in the actual possession of the Collateral Agent. (g) The Security Agreement shall have been duly executed by the Loan Parties party thereto and shall have been delivered to the Collateral Agent and shall be in full force and effect on such date and each document (including each Uniform Commercial Code financing statement) required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Collateral Agent for the benefit of the Secured Parties a valid, legal and perfected first-priority security interest in and lien on the Collateral described in such agreement (subject to any Lien expressly permitted by Section 6.02) shall have been delivered to the Collateral Agent. (h) The Collateral Agent shall have received the results of a search of the Uniform Commercial Code filings (or equivalent filings) made with respect to the Loan Parties in the states (or other jurisdictions) in which the chief executive office of each such person is located and the other jurisdictions in which Uniform Commercial Code filings (or equivalent filings) are to be made pursuant to the preceding paragraph, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence satisfactory to the Collateral Agent that the Liens indicated in any such financing statement (or similar document) would be permitted under Section 6.02 or have been released, except as contemplated by Section 6.09(k). The Administrative Agent shall have received duly executed documentation evidencing the termination of (i) all the security interests granted in the Pledged Stock (as defined in the Pledge Agreement) and in any other Collateral in connection with any of the Specified Liabilities or any existing Indebtedness of STFI and (ii) the credit facility of STFI with State Street Bank and Trust Company. (i) The Collateral Agent shall have received a Perfection Certificate with respect to the Loan Parties dated the Closing Date and duly executed by a Responsible Officer of the Borrower. (j) Each of the Parent Guarantee Agreement and the Subsidiary Guarantee Agreement shall have been duly executed by the parties thereto, respectively, shall have been delivered to the Collateral Agent and shall be in full force and effect. (k) The Indemnity, Subrogation and Contribution Agreement shall have been duly executed by the parties thereto, shall have been delivered to the Collateral Agent and shall be in full force and effect. (l) The Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.02 and the applicable provisions of the Security Documents, each of which policies shall be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable endorsement and to name the Collateral Agent as additional insured, in form and substance satisfactory to the Administrative Agent. 50 (m) All requisite Governmental Authorities and material third parties shall have approved or consented to the Acquisition Transactions and the other Transactions to the extent required other than a state regulatory approval required in Indiana the failure to obtain which could not result in a Material Adverse Effect, all applicable appeal periods shall have expired and there shall be no governmental or judicial action, actual or threatened, that has or could have a reasonable likelihood of restraining, preventing or imposing burdensome conditions on the Acquisition Transactions or the consummation of the other Transactions. (n) The FII Reorganization, the Merger, the Section 351 Exchange and the other Acquisition Transactions shall have been consummated prior to or simultaneously with the initial Credit Event hereunder in accordance with applicable law, the Merger Agreement and the Exchange Agreement (including the cancellation of preferred stock contemplated thereby immediately upon the issuance of the Cumulative Convertible Preferred Stock and the Special Preferred Stock) and as contemplated by the Offering Circular without any changes not approved by the Lenders, and otherwise on terms satisfactory to the Lenders. Each Acquisition Document shall be in form and substance satisfactory to the Lenders and the Lenders shall be satisfied with all arrangements for the transfer of employees and services from, or the provision of services by, STFI to the Subsidiaries. (o) The Amendments to Charter and Bylaws shall have become effective prior to or simultaneously with the initial Credit Event hereunder, and prior to or simultaneously with the initial Credit Event hereunder STFI shall have issued to RHI (i) the Cumulative Convertible Preferred Stock with a liquidation preference not in excess of $25,000,000, (ii) the Special Preferred Stock with an initial liquidation preference not in excess of $20,000,000 and (iii) not more than 6,000,000 shares of common stock of STFI, in each case on terms satisfactory in all respects to the Lenders. (p) The Discount Notes shall have been issued prior to or simultaneously with the initial Credit Event hereunder and shall have an interest rate not in excess of 14% and a maturity not sooner than the tenth anniversary of the Closing Date and otherwise be on the terms set forth in the Discount Note Indenture, and the Borrower shall have received gross proceeds of not less than $115,000,000 therefrom. (q) The proceeds of the Term Loans and, to the extent thereafter required, the net proceeds of Discount Notes shall be applied simultaneously with the initial Credit Event hereunder to discharge in full all the Specified Liabilities and, immediately after giving effect to the Acquisition Transactions (i) STFI, the Borrower and the Subsidiaries shall have outstanding no Indebtedness other than the Loans, the Discount Notes and the Indebtedness of STFI for borrowed money as set forth on Schedule 6.01(a) in an aggregate principal amount not in excess of $4,000,000, (ii) STFI shall not have outstanding any equity interests other than common stock of STFI existing on the date hereof and the Capital Stock of STFI issued to RHI in the Acquisition Transactions, as contemplated by paragraph (o) above, and (iii) the Borrower shall not have outstanding any equity interests other than common stock owned by STFI and pledged to secure the Obligations. (r) The Tender Offer shall have been consummated prior to or simultaneously with the initial Credit Event hereunder and all the FII Senior Notes shall have been tendered and repaid in accordance with the terms thereof. 51 (s) The Lenders shall have received a satisfactory pro forma consolidated balance sheet of STFI as of September 30, 1995, together with a certificate of a Financial Officer of the Borrower to the effect that such pro forma balance sheet fairly presents the pro forma financial position of STFI, the Borrower, the Subsidiaries and the Acquired Business in accordance with GAAP, and the Lenders shall be satisfied that such balance sheet and the Acquisition Transactions and the financing arrangements contemplated hereby are consistent with the sources and uses shown in the Confidential Information Memorandum and are not materially inconsistent with the information or projections and the financial model contained in the Confidential Information Memorandum. (t) The Lenders shall have received a solvency letter from Corporate Valuation Advisors Inc. in form and substance satisfactory to the Lenders, as to the solvency of STFI, the Borrower, the Subsidiaries and the Acquired Business on a consolidated basis after giving effect to the Acquisition Transactions and the consummation of the other Transactions contemplated hereby. ARTICLE V. AFFIRMATIVE COVENANTS Each of STFI and the Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each of STFI and the Borrower will, and will cause each of the Subsidiaries to: SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05. (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; maintain and operate such business in substantially the manner in which it is presently conducted and operated; comply in all material respects with all applicable laws, rules, regulations (including any zoning, building, Environmental and Safety Law, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting any of its real property) and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times. SECTION 5.02. Insurance. Keep its insurable properties adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations, including 52 public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it; and maintain such other insurance as may be required by law. SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other obligations promptly and in accordance with their terms and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP and such contest operates to suspend collection of the contested obligation, tax, assessment or charge and enforcement of a Lien. SECTION 5.04. Financial Statements, Reports, etc. Furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year, consolidated and consolidating balance sheets and related statements of operations, stockholders' equity and cash flows showing the financial condition of STFI, the Borrower and the Subsidiaries as of the close of such fiscal year and the results of operations of STFI, the Borrower and the Subsidiaries during such year, all audited by a big six accounting firm or other independent public accountants of recognized national standing acceptable to the Required Lenders and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of STFI, the Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, consolidated and consolidating balance sheets and related statements of operations, stockholders' equity and cash flows showing the financial condition STFI, the Borrower and the Subsidiaries as of the close of such fiscal quarter and the results of operations of STFI, the Borrower and the Subsidiaries during such fiscal quarter and the then elapsed portion of the fiscal year, all certified by a Financial Officer of STFI or the Borrower as fairly presenting the financial condition and results of operations of STFI, the Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments; (c) (i) concurrently with any delivery of financial statements under paragraph (a) or (b) above (but no later than the date on which such statements are due), a certificate of the accounting firm or Financial Officer opining on or certifying such statements (which certificate, when furnished by an accounting firm, may be limited to accounting matters and disclaim responsibility for legal interpretations) (A) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (B) setting forth computations in reasonable detail satisfactory to the Administrative 53 Agent demonstrating compliance with the covenants contained in Sections 6.11, 6.12, 6.13, 6.14 and 6.15 and (ii) within 45 days after the end of each fiscal year, a certificate of a Financial Officer certifying as to the matters set forth in clauses (A) and (B) above; (d) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by STFI, the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of such Commission, or with any national securities exchange, or distributed to its shareholders, as the case may be; (e) concurrently with the delivery of financial statements under paragraph (a) or (b) above, a balance sheet and related statements of operations, stockholders' equity and cash flows for each Unrestricted Subsidiary and each STFI Unrestricted Subsidiary for the applicable period; (f) within 45 days after the end of each month, a certificate of a Financial Officer of the Borrower reporting revenues and EBITDA for such month and containing statements of operations and cash flows for such month and a comparison of actual results with planned results for such month; (g) upon the earlier of (i) 90 days after the end of each fiscal year of the Borrower and (ii) the date on which the financial statements in respect of such period are delivered pursuant to paragraph (a) above, a certificate of a Financial Officer of the Borrower (A) setting forth, in reasonable detail, an operating and capital expenditure budget for the succeeding fiscal year and (B) setting forth the insurance policies of STFI, the Borrower and the Subsidiaries and evidencing compliance with Section 5.02 and the applicable provisions of the Security Documents; (h) promptly following the creation or acquisition of any Subsidiary, a certificate from a Responsible Officer of STFI or the Borrower, identifying such new Subsidiary and the ownership interest of the Borrower or any Subsidiary therein; (i) promptly, a copy of all reports submitted in connection with any material interim or special audit made by independent accountants of the books of STFI, the Borrower or any Subsidiary; and (j) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of STFI, the Borrower and the Subsidiaries, or compliance with the terms of any Loan Document, or such consolidating financial statements, or such financial statements showing the results of operations of any Unrestricted Subsidiary or any STFI Unrestricted Subsidiary, as in each case the Administrative Agent or any Lender may reasonably request. 54 SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent, the Fronting Banks and each Lender prompt written notice of the following: (a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto; (b) the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect; (c) the loss, suspension or other material impairment of any material FCC license or any other material approval, certification or authorization of any Governmental Authority; and (d) any development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. SECTION 5.06. Employee Benefits. (a) Comply in all material respects with the applicable provisions of ERISA and the Code and (b) furnish to the Administrative Agent (i) as soon as possible after, and in any event within 10 days after any Responsible Officer of the Borrower or any ERISA Affiliate knows or has reason to know that, any ERISA Event has occurred that, alone or together with any other ERISA Event could reasonably be expected to result in liability of the Borrower in an aggregate amount exceeding $1,000,000 or requiring payments exceeding $500,000 in any year, a statement of a Financial Officer of the Borrower setting forth details as to such ERISA Event and the action, if any, that the Borrower proposes to take with respect thereto. SECTION 5.07. Maintaining Records; Access to Properties and Inspections. Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law are made of all dealings and transactions in relation to its business and activities. Each Loan Party will, and will cause each of its subsidiaries (except, other than during the continuance of an Event of Default, in the case of the Borrower, the Unrestricted Subsidiaries and, in the case of STFI, the STFI Unrestricted Subsidiaries) to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of STFI, the Borrower or any Subsidiary at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of STFI, the Borrower or any Subsidiary with the officers thereof and independent accountants therefor. SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and request the issuance of Letters of Credit only for the purposes set forth in the preamble to this Agreement. SECTION 5.09. Compliance with Environmental Laws. Comply, and cause all lessees and other persons occupying its Properties to comply, in all material respects with all Environmental Laws and Environmental Permits applicable to their respective operations and Properties; obtain and renew all material Environmental Permits necessary for their respective operations and Properties; conduct any Remedial Action in accordance with Environmental Laws; and provide the Administrative Agent with prompt written notice of any Environmental Claim that could reasonably be expected to result in material liability. 55 SECTION 5.10. Preparation of Environmental Reports. If a Default caused by reason of a breach of Section 3.17 or 5.09 shall have occurred and be continuing, at the request of the Required Lenders through the Administrative Agent, provide to the Lenders within 45 days after such request, at the expense of the Borrower, an environmental site assessment report for the Properties which are the subject of such default prepared by an environmental consulting firm acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or Remedial Action in connection with such Properties. SECTION 5.11. Further Assurances. Execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements, mortgages and deeds of trust) that may be required under applicable law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority of the security interests created or intended to be created by the Security Documents. In addition, from time to time, STFI, the Borrower and the Subsidiaries will, at their cost and expense, on or promptly (but in any event within 10 Business Days) following the date of acquisition or formation by STFI, the Borrower or any Subsidiary of any new subsidiary (subject to the receipt of required consents from Governmental Authorities and, in the case of Unrestricted Subsidiaries and STFI Unrestricted Subsidiaries, consents of other third parties), promptly secure the Obligations by causing the following to occur: (i) promptly upon creating or acquiring any additional subsidiary, the Capital Stock of such subsidiary will (unless such subsidiary is a subsidiary of an Unrestricted Subsidiary or a subsidiary of an STFI Unrestricted Subsidiary) be pledged pursuant to the Pledge Agreement and (ii) such subsidiary will (unless such subsidiary is an Unrestricted Subsidiary or an STFI Unrestricted Subsidiary) become a party to the Security Agreement, the Pledge Agreement (if such subsidiary owns Capital Stock of any subsidiary), the Subsidiary Guarantee Agreement and the Indemnity, Subrogation and Contribution Agreement as contemplated under each such agreement and will, if such subsidiary owns any material real property, enter into and deliver to the Collateral Agent a first mortgage in respect of such property in form reasonably satisfactory to the Collateral Agent and pay all recording taxes, title insurance costs, survey costs and other costs in connection with such mortgage. STFI and the Borrower further agree that, upon receipt of notice from the Administrative Agent requesting a first mortgage in respect of any real property or leasehold interest of STFI, the Borrower or any Subsidiary, STFI and the Borrower will, and will cause the Subsidiaries to, at their sole cost, promptly deliver to the Collateral Agent each such mortgage in a form reasonably satisfactory to the Collateral Agent and pay all recording taxes, title insurance costs, survey costs and other costs in connection with each such mortgage. All such security interests and Liens will be created under the Security Documents and other instruments and documents in form and substance reasonably satisfactory to the Collateral Agent, and STFI, the Borrower and the Subsidiaries shall deliver or cause to be delivered to the Administrative Agent all such instruments and documents (including legal opinions and lien searches) as the Required Lenders shall reasonably request to evidence compliance with this Section 5.11. STFI and the Borrower agree to provide, and to cause each Subsidiary to provide, such evidence as the Collateral Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. STFI and Borrower will, and will cause their Subsidiaries to, use their best efforts to take all actions and obtain all approvals required to permit the pledge under the Pledge Agreement of all the equity interests in ATG, ANSI and their subsidiaries and to permit ATG, ANSI and their subsidiaries to become Guarantors, Grantors under the Security Agreement and Pledgors under the Pledge Agreement, and immediately upon the taking of all required action and receipt of all required approvals in respect of any of them, cause the equity 56 interests in such person to be pledged under the Pledge Agreement and cause such person to become a Guarantor, a Grantor under the Security Agreement and a Pledgor under the Pledge Agreement. SECTION 5.12. Fiscal Year. Cause its fiscal year to end on December 31. SECTION 5.13. Interest Rate Protection Agreements. In the case of the Borrower, as promptly as practicable and in any event within 90 days after the Closing Date, enter into, and thereafter maintain in effect, one or more Interest Rate Protection Agreements with any of the Lenders or other financial institutions reasonably satisfactory to the Administrative Agent, the effect of which shall be to limit for the 3-year period commencing on the date such Interest Rate Protection Agreements are entered into the interest payable in connection with Indebtedness having an aggregate outstanding principal amount equal to not less than 50% of the aggregate principal amount of the Term Borrowings outstanding at the time such Interest Rate Protection Agreements are entered into to a maximum rate and on terms and conditions otherwise reasonably acceptable, taking into account then current market conditions, to the Administrative Agent, and deliver evidence of the execution and delivery thereof to the Administrative Agent. SECTION 5.14. Corporate Identity. Do or cause to be done (or refrain from doing or causing to be done, as the case may be) all things necessary to ensure that the separate legal identity of the Borrower will at all times be respected and that neither the Borrower nor any of the Subsidiaries will be liable for any obligations, contractual or otherwise, of STFI or any other entity in which STFI owns any equity interest, except as permitted under Section 6.06 or Section 6.07 or pursuant to any Loan Document. Without limiting the foregoing, the Borrower and STFI will (a) observe, and cause the Subsidiaries to observe, all requirements, procedures and formalities necessary or advisable in order that the Borrower will for all purposes be considered a validly existing corporation separate and distinct from STFI and its other subsidiaries, (b) not permit any commingling of the assets of STFI or any of its other subsidiaries with assets of the Borrower or any Subsidiary which would prevent the assets of STFI or any of its subsidiaries from being readily distinguished from the assets of the Borrower and the Subsidiaries and (c) take reasonable and customary actions to ensure that creditors of STFI and its other subsidiaries are aware that each such person is an entity separate and distinct from the Borrower and the Subsidiaries. ARTICLE VI. NEGATIVE COVENANTS Each of STFI and the Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been cancelled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, neither STFI nor the Borrower will, nor will they cause or permit any of the Subsidiaries to: SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except: (a) Indebtedness for borrowed money existing on the date hereof and set forth in Schedule 6.01(a); 57 (b) Indebtedness created hereunder; (c) in the case of the Borrower, Discount Notes and Discount Exchange Notes having an aggregate Accreted Value at any time not in excess of the Discount Note Value at such time; (d) in the case of the Guarantors, the guarantees under the Guarantee Agreements and the Discount Note Guarantees; (e) in the case of the Borrower, Indebtedness under the Interest Rate Protection Agreements entered into in accordance with Section 5.13; (f) Capital Lease Obligations, mortgage financings and purchase money Indebtedness in an aggregate principal amount outstanding at any time not in excess of $2,000,000 incurred by the Borrower or any Subsidiary prior to or within 270 days after a Capital Expenditure in order to finance such Capital Expenditure and secured only by the assets that are the subject of such Capital Expenditure, and extensions, renewals and refinancings thereof if the interest rate with respect thereto and other terms thereof are no less favorable to the Borrower or such Subsidiary than the Indebtedness being refinanced and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced; provided, however, that such refinancing Indebtedness shall not be (i) Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (ii) in a principal amount that exceeds the Indebtedness being renewed, extended or refinanced or (iii) incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom; (g)Indebtedness of the Borrower or any wholly owned Subsidiary to any Subsidiary or the Borrower; and (h) all premium (if any), interest, fees, expenses, indemnities, charges and additional or contingent interest on obligations described in clauses (a) through (g) above. SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any person, including any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, or assign or transfer any income or revenues or rights in respect thereof, except: (a) Liens on property or assets of the Borrower and its Subsidiaries existing on the date hereof and set forth in Schedule 6.02; provided that such Liens shall secure only those obligations which they secure on the date hereof; (b) any Lien created under the Loan Documents; (c) Liens consisting of interests of lessors under capital leases permitted by Section 6.01(f); 58 (d) Liens for taxes not yet due or which are being contested in compliance with Section 5.03; (e) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable or that are being contested in compliance with Section 5.03; (f) pledges and deposits made in the ordinary course of business in compliance with workmen's compensation, unemployment insurance and other social security laws or regulations; (g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (h) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; and (i) other Liens with respect to property or assets not constituting collateral for the Obligations with an aggregate fair market value of not more than $2,000,000 at any time. SECTION 6.03. Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred. SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire any capital stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other person, except: (a) investments (i) by the Borrower existing on the date hereof in the Capital Stock of the Subsidiaries and STC, or (ii) by STFI in the Capital Stock of the Borrower; (b) Permitted Investments and investments that were Permitted Investments when made; (c) in the case of the Borrower, Interest Rate Protection Agreements entered into in accordance with Section 5.13; (d)intercompany loans permitted to be incurred as Indebtedness under Section 6.01(g); 59 (e) (i) loans and advances to employees of STFI, the Borrower or the Subsidiaries not to exceed $1,000,000 in the aggregate at any time outstanding and (ii) advances of payroll payments and expenses to employees in the ordinary course of business; (f) (i) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and (ii) prepayments and other credits to suppliers made in the ordinary course of business consistent with the past practices of the Acquired Business, STFI, the Borrower and the Subsidiaries; (g) investments, other than investments listed in paragraphs (a) through (f) of this Section, existing on the Closing Date and set forth on Schedule 6.04; (h) ownership interests in Unrestricted Subsidiaries, provided that the capitalization requirement set forth in clause (vii) of the definition of "Unrestricted Subsidiary" shall at all times be satisfied; (i) in the case of STFI, ownership interests in STFI Unrestricted Subsidiaries, provided that the capitalization requirement set forth in clause (g) of the definition of "STFI Unrestricted Subsidiary" shall at all times be satisfied; (j) investments in any fiscal year in Permitted Business Acquisitions funded solely with funds described in clause (g)(iii) of the definition of "STFI Unrestricted Subsidiary" and available in such fiscal year as set forth in such clause (iii), subject to the limitation set forth in the parenthetical set forth at the end of such clause (iii); and (k) other investments in Permitted Business Acquisitions, provided that the aggregate amount of consideration (whether cash or property, as valued at the time each such investment is made) for all investments made in Permitted Business Acquisitions under this paragraph (k) shall not exceed $3,500,000 for any fiscal year (of which not more than $2,500,000 may be in the form of cash) and shall not exceed $12,500,000 for the period following the Closing Date. SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions. Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets (whether now owned or hereafter acquired), other than assets of the Borrower constituting an Unrestricted Subsidiary, or any Capital Stock of any Subsidiary or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person, except that (a) the Borrower and any Subsidiary may purchase and sell inventory in the ordinary course of business, (b) if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing any wholly owned Subsidiary may merge into or consolidate with any other wholly owned Subsidiary in a transaction in which the surviving entity is a wholly owned Subsidiary and no person other than the Borrower or a wholly owned Subsidiary receives any consideration, (c) the Borrower and the Subsidiaries may acquire Permitted Business Acquisitions and other investments permitted by Section 6.04 and (d) the Subsidiaries may sell, lease or otherwise dispose of property for cash consideration equal to the fair market value of the asset sold, leased or otherwise disposed of, provided that (i) the Net Proceeds 60 thereof are applied in accordance with Section 2.13(b), (ii) the aggregate consideration received in respect of all transactions under this clause (d) shall not exceed $1,000,000 in any fiscal year and (iii) no sale may be made of the Capital Stock (or any warrant, right, or option to purchase any and Capital Stock or any security convertible into or exchangeable for any such Capital Stock) of any Subsidiary. SECTION 6.06. Dividends and Distributions; Restrictions on Ability of Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its Capital Stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire) any shares of any class of its Capital Stock or set aside any amount for any such purpose; provided, however, that (i) any Subsidiary may declare and pay dividends or make other distributions to the Borrower or to any wholly owned Subsidiary, and (ii) so long as immediately after giving effect to such payment or distribution, no Event of Default or Default shall have occurred and be continuing and the Borrower shall be in compliance, on a pro forma basis, with the covenants contained in Sections 6.11, 6.12, 6.13, 6.14 and 6.15 recomputed as of the last day of the most recently ended fiscal quarter of the Borrower as if such payment or distribution were made on the first day of each relevant period for testing compliance, the Borrower may declare and pay dividends or make other distributions to STFI (A) in an aggregate amount not in excess of $1,500,000 in any fiscal year, to be used by STFI to pay dividends on the Cumulative Convertible Preferred Stock, (B) to fund the payment by STFI of tax liabilities, legal, accounting and other professional fees and expenses, compensation, fees and expenses of the board of directors of STFI and fees and expenses associated with registration statements filed with the Securities and Exchange Commission and subsequent ongoing public reporting requirements, in each case to the extent actually incurred by STFI in connection with the business of its ownership of the Capital Stock of the Borrower, (C) in an aggregate amount not in excess of $400,000 in any fiscal year, to be used by STFI to pay dividends on its Series C Preferred Stock and on its Series D Preferred Stock, (D) solely to the extent a portion of Excess Cash Flow for the most recently ended fiscal year not subject to the mandatory prepayments in accordance with Section 2.13(c) is available for such purpose, to make mandatory redemptions required under Section 5(c) of the Certificate of Designation in respect of the Special Preferred Stock and (E) solely to the extent funds described in clauses (A) or (B) of clause (g)(iii) of the definition of "STFI Unrestricted Subsidiary" are available in such fiscal year as set forth in such clause (iii), subject to the limitation set forth in the parenthetical set forth at the end of such clause (iii), to be used by STFI to pay dividends on any of its Capital Stock; provided further, that no payment may be made under clause (A) or clause (D) above at any time that there shall have been outstanding for 30 days or more any amount due and payable by STFI in excess of $100,000 in respect of any liability purported to have been assumed by any person other than STFI in the Acquisition Transactions. This paragraph (a) shall not constitute a restriction on the payment of dividends on any of the preferred stock cancelled upon the exchange set forth in the Exchange Agreement, all of which preferred stock shall have been cancelled on or prior to the initial Credit Event hereunder as required under Section 4.02(n). (b) Permit any subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (i) pay any dividends or make any other distributions on its Capital Stock or any other equity interest or (ii) make or repay any loans or advances to the Borrower or the parent of such Subsidiary. 61 SECTION 6.07. Transactions with Affiliates. Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that the Borrower or any Subsidiary may engage in any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, provided that the foregoing shall not prohibit any issuance of securities of STFI or other awards, payments or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans approved by the Board of Directors of STFI. SECTION 6.08. Business of STFI, the Borrower and the Subsidiaries. Engage at any time in any business or business activity other than (a) in the case of STFI, the ownership of all the Capital Stock of the Borrower, the ownership of STFI Unrestricted Subsidiaries, the ownership of Permitted Business Acquisitions permitted under Section 6.04(j), the ownership of the general partnership interest in Financial Place Communications Company owned by STFI on the date hereof, the ownership of Capital Stock of STC and the ownership of certain contracts of STFI owned on the Closing Date after giving effect to the Acquisition Transactions, (b) in the case of the Borrower, being party to tenant service contracts and the ownership of Capital Stock of the Subsidiaries and the Unrestricted Subsidiaries and business activities reasonably incidental thereto and (c) in the case of the Subsidiaries, the business currently conducted by STFI and its subsidiaries or by the Acquired Business and business activities reasonably incidental thereto. SECTION 6.09. Other Indebtedness and Agreements. (a) Permit any waiver, supplement, modification, amendment, termination or release of (i) the Discount Notes, the Discount Note Indenture, the Discount Exchange Notes or the Discount Note Guarantees, (ii) the Merger Agreement, (iii) the Charter and Bylaws of STFI, as amended by the Amendments to Charter and Bylaws, (iv) the Certificates of Designation, (v) any other instrument or agreement (other than the Loan Documents) pursuant to which any other Indebtedness of STFI, the Borrower or any Subsidiary is outstanding in an aggregate principal amount in excess of $1,000,000 or (vi) any other material agreement of STFI, the Borrower or any Subsidiary, including the other Acquisition Documents. (b) Directly or indirectly, make any distribution or payment, whether in cash, property, securities or a combination thereof, other than scheduled payments of principal and interest as and when due (to the extent not prohibited by applicable subordination provisions), in respect of, or pay, or offer to commit to pay, or directly or indirectly redeem, repurchase, retire or otherwise acquire for consideration (or set apart any sum for the aforesaid purposes), or prepay or defease, any Indebtedness of STFI, the Borrower or any of the Subsidiaries (other than Indebtedness under the Loan Documents) prior to the stated maturity date of such Indebtedness, except in any fiscal year to the extent funds described in clause (A) of clause (g)(iii) of the definition of "STFI Unrestricted Subsidiary" are available in such fiscal year as set forth in such clause (iii), subject to the limitation set forth in the parenthetical set forth at the end of such clause (iii), such funds may be used to prepay Discount Notes or Discount Exchange Notes. (c) Permit any agreement of STFI, the Borrower or any of the Subsidiaries to include any provision that would allow the counterparty to offset against its obligations under such agreement the obligations owing by such counterparty to STFI, the Borrower or any of the Subsidiaries under any other agreement. 62 (d) Permit any agreement of the Borrower or any Subsidiary to include a restriction on the assignment of such agreement based on any change in control or similar provisions. (e) Make any cash payment on or in respect of the Discount Notes or the Discount Exchange Notes at any time that a cash payment is not required to be made. (f) Permit the Borrower to issue any Capital Stock, or permit any Subsidiary to issue any Capital Stock other than to the Borrower or a wholly owned Subsidiary. (g) Provide any management or service to any Unrestricted Subsidiary or any STFI Unrestricted Subsidiary except in consideration of cash remuneration in an amount not less than could have been obtained from a third party on an arm's length basis. (h) Designate any Indebtedness as "Designated Senior Indebtedness" for purposes of the Discount Note Indenture or any Discount Exchange Note Indenture. (i) Permit ANSI to terminate any agency relationship with any Guarantor or to modify the terms of any such agency in any manner that is less favorable to such Guarantor than the terms in effect immediately prior to such modification or permit ATG, ANSI or any of their subsidiaries at any time prior to the date on which it shall become a Guarantor to enter into any transaction with STFI, the Borrower or any Subsidiary that it would otherwise have been permitted to enter into as a Subsidiary under this Article VI. (j) Enter into any tenant service contract that would result in a breach of Section 3.10. (k) (i) fail to furnish to the Collateral Agent within two weeks after the Closing Date the results of all the searches of Uniform Commercial Code filings (or equivalent filings) contemplated by Section 4.02(h) that were not delivered on the Closing Date or (ii) fail to deliver to the Collateral Agent within four weeks after the Closing Date evidence satisfactory to the Collateral Agent that the Liens indicated in any financing statement (or similar document) disclosed in the results of any search furnished under clause (i) would be permitted under Section 6.02 or have been released. SECTION 6.10. Capital Expenditures. Permit the aggregate amount of Capital Expenditures made by STFI, the Borrower and the Subsidiaries taken as a whole in any fiscal year to exceed the amount set forth below opposite such period: Fiscal Period Capital Expenditures April 1, 1996 - March 31, 1997 $13,500,000 April 1, 1997 - March 31, 1998 14,000,000 April 1, 1998 - March 31, 1999 15,500,000 April 1, 1999 - March 31, 2000 16,000,000 April 1, 2000 - March 31, 2001 16,500,000 April 1, 2001 - March 31, 2002 17,500,000 April 1, 2002 - March 31, 2003 18,000,000; 63 provided, however, that to the extent Capital Expenditures in any fiscal year are less than the amount set forth above opposite such year, up to $2,000,000 of such unused amount in any fiscal year may be carried forward to the next succeeding fiscal year. SECTION 6.11. Minimum EBITDA. Permit EBITDA of STFI, the Borrower and the Subsidiaries at the end of any fiscal quarter to be less than the amount set forth for such quarter on Schedule 6.11. SECTION 6.12. Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter to be less than 1.00. SECTION 6.13. Leverage Ratio. Permit the Leverage Ratio as of the end of any fiscal quarter to be in excess of the ratio set forth for such quarter on Schedule 6.13. SECTION 6.14. Interest Expense Coverage Ratio. Permit the Interest Expense Coverage Ratio as of the end of any fiscal quarter to be less than that set forth for such quarter on Schedule 6.14. SECTION 6.15. Minimum Net Worth. Permit Net Worth as of the end of any fiscal quarter to be less than the Minimum Net Worth as of such date. ARTICLE VII. EVENTS OF DEFAULT In case of the happening of any of the following events ("Events of Default"): (a) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C Disbursement or in the payment of any interest on any Loan or any Fee or L/C Disbursement or any other amount (other than an amount referred to in (a) above) due under any Loan Document, when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the due observance or performance by STFI, the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.01(a), 5.05 or 5.08 or in Article VI; (d) default shall be made in the due observance or performance by STFI, the Borrower or any Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in (b), or (c) above) and such default shall continue unremedied for a period of 15 days after notice thereof from the Administrative Agent or any Lender to the Borrower; (e) there shall have occurred a Change in Control; 64 (f) STFI, the Borrower or any Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness in a principal amount in excess of $1,000,000, when and as the same shall become due and payable, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of STFI, the Borrower or any Subsidiary, or of a substantial part of the property or assets of STFI, the Borrower or any Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for STFI, the Borrower or any Subsidiary or for a substantial part of the property or assets of STFI, the Borrower or a Subsidiary or (iii) the winding-up or liquidation of STFI, the Borrower or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) STFI, the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for STFI, the Borrower or any Subsidiary or for a substantial part of the property or assets of STFI, the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; (i) one or more judgments for the payment of money in an aggregate amount in excess of $1,000,000 shall be rendered against STFI, the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of STFI, the Borrower or any Subsidiary to enforce any such judgment; (j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other such ERISA Events, could reasonably be expected to result in liability of the Borrower and its ERISA Affiliates in an aggregate amount exceeding $1,000,000 or requires payments exceeding $500,000 in any year; (k) any security interest purported to be created by any Security Document shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Collateral Agent to maintain 65 possession of certificates representing securities pledged under the Pledge Agreement and except to the extent that such loss is covered by a lender's title insurance policy and the related insurer promptly after such loss shall have acknowledged in writing that such loss is covered by such title insurance policy; or (l) any Loan Document shall not be for any reason, or shall be asserted by STFI, the Borrower or any Subsidiary not to be, in full force and effect and enforceable in all material respects in accordance with its terms; then, and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to the Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding. ARTICLE VIII. THE AGENTS In order to expedite the transactions contemplated by this Agreement, Credit Suisse is hereby appointed to act as Administrative Agent and Collateral Agent on behalf of the Lenders and the Fronting Banks (for purposes of this Article VIII, the Administrative Agent and the Collateral Agent are referred to collectively as the "Agents"). Each of the Lenders and each assignee of any such Lender, hereby irrevocably authorizes the Agents to take such actions on behalf of such Lender or assignee or Fronting Bank and to exercise such powers as are specifically delegated to the Agents by the terms and provisions hereof and of the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders and the Fronting Banks, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders and the Fronting Banks all payments of principal of and interest on the Loans, all payments in respect of L/C Disbursements and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender or Fronting Bank its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrower of any Event of Default specified in this Agreement of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender and Fronting Bank copies of all notices, financial statements and other materials delivered by the Borrower or any other Loan Party pursuant to this Agreement or the other Loan Documents as received by the Administrative Agent (other than such materials delivered pursuant to Section 5.04) and the Administrative Agent shall promptly after receipt thereof deliver such notices and distribute such copies to the Lenders and the Fronting Banks, as applicable. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect 66 thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents. In the event that any party other than the Lenders and the Agents shall participate in all or any portion of the Collateral pursuant to the Security Documents, all rights and remedies in respect of such Collateral shall be controlled by the Collateral Agent. Notwithstanding anything herein to the contrary, no Lender identified herein as Documentation Agent shall have any separate duties, responsibilities, obligations or authority as Documentation Agent hereunder. Neither the Agents nor any of their respective directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or wilful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower or any other Loan Party of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Agents shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or any other Loan Documents, instruments or agreements. The Agents shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Agents nor any of their respective directors, officers, employees or agents shall have any responsibility to the Borrower or any other Loan Party on account of the failure of or delay in performance or breach by any Lender or Fronting Bank of any of its obligations hereunder or to any Lender or Fronting Bank on account of the failure of or delay in performance or breach by any other Lender or Fronting Bank or the Borrower or any other Loan Party of any of their respective obligations hereunder or under any other Loan Document or in connection herewith or therewith. Each of the Agents may execute any and all duties hereunder by or through agents or employees and each of the Agents shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders hereby acknowledge that neither Agent shall be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. Subject to the appointment and acceptance of a successor Agent as provided below, either Agent (which term includes, for the purposes of this paragraph, the Documentation Agent) may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any appointment as Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations hereunder. After the Agent's resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 67 With respect to the Loans made by it hereunder, any Agent (which term includes, for the purposes of this paragraph, the Documentation Agent) in its individual capacity and not as Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not an Agent, and the Agents and their Affiliates may accept deposits from, lend money to and generally engage in any kind of business with STFI, the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent. Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata share (based on its Commitments hereunder or, if such Commitments have expired or been terminated, in accordance with the respective principal amounts of their applicable outstanding Loans) of any expenses incurred for the benefit of the Lenders by the Agents, including reasonable counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, that shall not have been reimbursed (but without limiting any obligation of the Borrower or any Loan Party hereunder or under any other Loan Document to reimburse the same) by the Borrower and (b) to indemnify and hold harmless each Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against it in its capacity as Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed (but without limiting any obligation of the Borrower or any Loan Party hereunder or under any other Loan Document to reimburse the same) by the Borrower or any other Loan Party, provided that no Lender shall be liable to an Agent or any such other indemnified person for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Agent or any of its directors, officers, employees or agents. Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder. In its capacity as Administrative Agent hereunder, the Administrative Agent will serve as Representative of the Bank Indebtedness under the Discount Note Indenture and agrees to notify each Lender of any notice received by it as such Representative. ARTICLE IX. MISCELLANEOUS SECTION 9.01. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower or STFI, to it at 100 Great Meadow Road, Wethersfield, CT 06109, Attention of Chief Executive Officer (Telecopy No. (203) 258-2455); 68 (b) if to the Administrative Agent, to Credit Suisse, Tower 49, 12 East 49th Street, New York, New York 10017, Attention of Lisa Perrotto, Agency Group (Telecopy No. (212) 238-5073), with a copy to Credit Suisse, Attention of Jack Deutsch (Telecopy No. (212) 238-5838); and (c) if to a Lender, to it at its address (or telecopy number) set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower or STFI herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and the Fronting Banks and shall survive the making by the Lenders of the Loans and the issuance of Letters of Credit by the Fronting Banks, regardless of any investigation made by the Lenders or the Fronting Banks or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. The provisions of Sections 2.14, 2.16, 2.20 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent, the Documentation Agent, any Lender or the Fronting Banks. SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, STFI and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, STFI, the Administrative Agent, the Documentation Agent, the Fronting Banks or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. (b) Each Lender may assign to one or more financial institutions all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to a Lender or an Affiliate of such Lender, (x) the Administrative Agent (and, in the case of any assignment of a Revolving Credit Commitment, the Fronting Banks) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed) and (y) the amount of the Commitments and, without duplication, Loans of the assigning Lender subject to each such assignment (determined as of the date the 69 Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be in integral multiples of $1,000,000 and in a minimum principal amount of $5,000,000 (or, if less, the entire remaining amount of the Commitments and Loans of such Lender) (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with (other than in the case of an assignment by a Lender to an Affiliate of such Lender) a processing and recordation fee of $3,500 and (iii) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and the documents required pursuant to Section 2.20(e). Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be (unless waived by the Administrative Agent) at least five Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its account and not yet paid). (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Term Loan Commitment and Revolving Credit Commitment, and the outstanding balances of its Term Loans and Revolving Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 3.05(a) or delivered pursuant to Section 5.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent and the Collateral Agent, respectively, by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, 70 and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive and the Borrower, the Administrative Agent, the Fronting Banks, the Collateral Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Fronting Banks, the Collateral Agent, the Documentation Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Fronting Bank and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders and the Fronting Bank. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e). (f) Each Lender may without the consent of the Borrower, the Fronting Banks or the Administrative Agent sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained in Sections 2.14, 2.16 and 2.20 to the same extent as if they were Lenders and (iv) the Borrower, the Administrative Agent, the Fronting Banks and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans or L/C Disbursements and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder or the amount of principal of or the rate at which interest is payable on the Loans, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans or increasing or extending the Commitments). (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16. (h) Any Lender may at any time assign all or any portion of its rights under this Agreement to a Federal Reserve Bank to secure extensions of credit by such Federal Reserve Bank to such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such Bank for such Lender as a party hereto. In order to facilitate such an assignment to a Federal Reserve Bank, the Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to the Borrower by the assigning Lender hereunder. 71 (i) Neither STFI nor the Borrower shall assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent, the Fronting Banks and each Lender, and any attempted assignment without such consent shall be null and void. (j) In the event that Standard & Poor's Ratings Group or Moody's Investors Service, Inc. shall, after the date that any Lender becomes a Revolving Credit Lender, downgrade the long-term credit ratings of such Lender, and the resulting ratings shall be below BBB+ or Baa1, then any Fronting Bank shall have the right, but not the obligation, at its own expense, upon notice to such Lender and the Administrative Agent, to replace (or to request the Borrower to use its reasonable efforts to replace) such Lender with an assignee (in accordance with and subject to the restrictions contained in paragraph (b) above), and such Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in paragraph (b) above) all its interests, rights and obligations in respect of its Revolving Credit Commitment to such assignee; provided, however, that (i) no such assignment shall conflict with any law, rule and regulation or order of any Governmental Authority and (ii) such Fronting Bank or such assignee, as the case may be, shall pay to such Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by such Lender hereunder and all other amounts accrued for such Lender's account or owed to it hereunder. SECTION 9.05. Expenses; Indemnity. (a) The Borrower and STFI agree, jointly and severally, to pay all out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent, the Documentation Agent and the Fronting Banks in connection with the syndication of the credit facilities provided for herein and the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby or thereby contemplated shall be consummated) or incurred by the Administrative Agent, the Collateral Agent, the Documentation Agent or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made or Letters of Credit issued hereunder, including the fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent and the Collateral Agent, and, in connection with any such enforcement or protection, the fees, charges and disbursements of any other counsel for the Administrative Agent, the Collateral Agent, the Documentation Agent or any Lender. (b) The Borrower and STFI agree, jointly and severally, to indemnify the Administrative Agent, the Collateral Agent, the Documentation Agent, each Lender and each Fronting Bank, each Affiliate of any of the foregoing persons and each of their respective directors, officers, employees and agents (each such person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby, (ii) the use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged presence or Release of Hazardous Materials on any property owned or operated by the Borrower or any of the Subsidiaries, or any Environmental Claim related in any way to the Borrower or the Subsidiaries; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. 72 (c) The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent, the Documentation Agent, any Lender or any Fronting Bank. All amounts due under this Section 9.05 shall be payable on written demand therefor. SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by such Lender and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower or STFI against any of and all the obligations of the Borrower or STFI now or hereafter existing under this Agreement and the other Loan Documents, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS OTHERWISE EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK. SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Administrative Agent, the Collateral Agent, the Documentation Agent, any Lender or any Fronting Bank in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Collateral Agent, the Fronting Banks, the Documentation Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Borrower or STFI in any case shall entitle the Borrower or STFI to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower, STFI and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan or any date for reimbursement of an L/C Disbursement, 73 or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan or L/C Disbursement, without the prior written consent of each Lender affected thereby, (ii) increase or extend the Commitment or decrease or extend the payment date of the Commitment Fees of any Lender without the prior written consent of such Lender, (iii) advance any Installment Date or any other date on which principal of the Term Loans is due without the prior written consent of Lenders holding Term Loans and Revolving Credit Commitments representing (A) at least 80% of the aggregate principal amount of the then outstanding Tranche A Term Loans, (B) at least 80% of the aggregate principal amount of the then outstanding Tranche B Term Loans and (C) at least 80% of the aggregate principal amount of the then outstanding Revolving Credit Commitments, (iv) effect any waiver, amendment or modification that by its terms adversely affects the rights in respect of payments or collateral of the Revolving Credit Lenders or Lenders participating in any Tranche differently from those of the Revolving Credit Lenders or Lenders participating in other Tranches, as the case may be, without the consent of a majority in interest of the Revolving Credit Lenders, if adversely affected, or Lenders participating in the adversely affected Tranche, as the case may be, or change the relative rights in respect of payments or collateral of the Revolving Credit Lenders or Lenders participating in different Tranches without the consent of a majority in interest of the Revolving Credit Lenders, if adversely affected, or Lenders participating in each adversely affected Tranche, as the case may be, or (v) amend or modify the provisions of Section 2.17 or 9.04(i), the provisions of this Section 9.08 or the definition of the term "Required Lenders" or release any Guarantor or all or substantially all the Collateral, without the prior written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent, any Fronting Bank or the Documentation Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the Collateral Agent, such Fronting Bank or the Documentation Agent. SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan or participation in any L/C Disbursement, together with all fees, charges and other amounts which are treated as interest on such Loan or participation in such L/C Disbursement under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or participation in accordance with applicable law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the operation of this Section 9.09 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents. SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE 74 OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11. SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.13. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 9.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of STFI and the Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Collateral Agent, the Documentation Agent, any Fronting Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower, STFI or their respective properties in the courts of any jurisdiction. (b) Each of STFI and the Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 75 (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.16. Confidentiality. The Administrative Agent, the Collateral Agent, the Documentation Agent, each Fronting Bank and each Lender agrees to keep confidential (and to use its best efforts to cause its respective agents and representatives to keep confidential) the Information (as defined below) and all copies thereof, extracts therefrom and analyses or other materials based thereon, except that the Administrative Agent, the Collateral Agent, the Documentation Agent, any Fronting Bank or any Lender shall be permitted to disclose Information (a) to such of its respective officers, directors, employees, agents, affiliates and representatives as need to know such Information in connection with a business relationship with STFI, the Borrower or any Subsidiary, (b) to the extent requested by any regulatory authority, (c) to the extent otherwise required by applicable laws and regulations or by any subpoena or similar legal process, (d) in connection with any suit, action or proceeding relating to the enforcement of its rights hereunder or under the other Loan Documents or (e) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.16 or (ii) becomes available to the Administrative Agent, the Documentation Agent, any Fronting Bank, any Lender or the Collateral Agent on a nonconfidential basis from a source other than the Borrower or STFI. For the purposes of this Section, "Information" shall mean all financial statements, certificates, reports, agreements and written information (including all analyses, compilations and studies prepared by the Administrative Agent, the Collateral Agent, the Documentation Agent, the Fronting Bank or any Lender based on any of the foregoing) that are received from the Borrower or STFI and related to the Borrower or STFI, any shareholder of the Borrower or STFI or any employee, customer or supplier of the Borrower or STFI, other than any of the foregoing that were available to the Administrative Agent, the Collateral Agent, the Documentation Agent, any Fronting Bank or any Lender on a nonconfidential basis prior to its disclosure thereto by the Borrower or STFI, and which are in the case of Information provided after the date hereof, clearly identified at the time of delivery as confidential. The provisions of this Section 9.16 shall remain operative and in full force and effect regardless of the expiration and term of this Agreement for a period of one year. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Treasurer 76 SHARED TECHNOLOGIES INC., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Treasurer CREDIT SUISSE, individually and as Administrative Agent, Collateral Agent and Fronting Bank, by /s/ Kathleen D. O'Brien Name: Kathleen D. O'Brien Title: Member of Senior Management by /s/ Jack Deutsch Name: Jack Deutsch Title: Associate CITICORP USA INC., individually and as Documentation Agent, by /s/ Marjorie Futornick Name: Marjorie Futornick Title: Vice President NATIONSBANK, N.A., individually and as Documentation Agent, by /s/ John D. Mindnich Name: John D. Mindnich Title: Senior Vice President 77 CAISSE NATIONALE DE CREDIT AGRICOLE, by /s/ David Bouhl, F.V.P. Name: David Bouhl, F.V.P. Title: Head of Corporate Banking Chicago CHL HIGH YIELD LOAN PORTFOLIO, (a unit of Chemical Bank) by /s/ Andrew D. Gordon Name: Andrew D. Gordon Title: Managing Director FIRST SOURCE FINANCIAL LLP, by FIRST SOURCE FINANCIAL, INC., its Agent/Manager by /s/ Gary L. Francis Name: Gary L. Francis Title: Senior Vice President PILGRIM PRIME RATE TRUST, by /s/ Michael J. Bacevich Name: Michael J. Bacevich Title: Vice President VAN KAMPEN AMERICAN CAPITAL, PRIME RATE INCOME TRUST, by /s/ Jeffrey W. Maillet Name: Jeffrey W. Maillet Title: Sr. Vice Pres. - Portfolio Mgr. 78 SENIOR HIGH INCOME PORTFOLIO, INC., by /s/ John W. Fraser Name: John W. Fraser Title: Authorized Signatory MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., by /s/ John W. Fraser Name: John W. Fraser Title: Authorized Signatory 79 EXHIBIT A [Form of] SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP. ADMINISTRATIVE QUESTIONNAIRE Please accurately complete the following information and return via Telecopy to the attention of Lisa Perrotto at Credit Suisse, Agency Group as soon as possible, at Telecopy No. (212) 238-5073. - -------------------------------------------------------------------------------- LENDER LEGAL NAME TO APPEAR IN DOCUMENTATION: GENERAL INFORMATION - DOMESTIC LENDING OFFICE: Institution Name: Street Address: City, State, Zip Code: GENERAL INFORMATION - EURODOLLAR LENDING OFFICE: Institution Name: Street Address: City, State, Zip Code: POST-CLOSING, ONGOING CREDIT CONTACTS/NOTIFICATION METHODS: CREDIT CONTACTS: Primary Contact: Street Address: City, State, Zip Code: Phone Number: Telecopy Number: Backup Contact: Street Address: City, State, Zip Code: Phone Number: Telecopy Number: TAX WITHHOLDING: Nonresident Alien Y* N * Form 4224 Enclosed Tax ID Number _________________________ POST-CLOSING, ONGOING ADMINISTRATIVE CONTACTS/NOTIFICATION METHODS: ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, FEES, ETC. Contact: Street Address: City, State, Zip Code: Phone Number: Telecopy Number: PAYMENT INSTRUCTIONS: Name of Bank to which funds are to be transferred: Routing Transit/ABA number of Bank to which funds are to be transferred: Name of Account, if applicable: Account Number: 2 Additional information: MAILINGS: Please specify the person to whom the Borrower should send financial and compliance information received subsequent to the closing (if different from primary credit contact): Name: Street Address: City, State, Zip Code: It is very important that all the above information be accurately completed and that this questionnaire be returned to the person specified in the introductory paragraph of this questionnaire as soon as possible. If there is someone other than yourself who should receive this questionnaire, please notify us of that person's name and telecopy number and we will telecopy a copy of the questionnaire. If you have any questions about this form, please call Lisa Perrotto at (212) 238-5056. 3 EXHIBIT B [Form of] ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of March 12, 1996 (the "Credit Agreement"), among Shared Technologies Fairchild Communications Corp., a Delaware corporation (the "Borrower"), Shared Technologies Inc., a Delaware corporation ("STFI", which term shall, after the Merger referred to herein, include the surviving corporation in such Merger), the financial institutions from time to time party hereto, initially consisting of those financial institutions listed on Schedule 2.01 (the "Lenders"), CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"). Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below (but not prior to the registration of the information contained herein in the Register pursuant to Section 9.04(e) of the Credit Agreement), the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the Credit Agreement and the other Loan Documents, including, without limitation, the amounts and percentages set forth below of (i) the Commitments of the Assignor on the Effective Date, (ii) the Loans owing to the Assignor which are outstanding on the Effective Date and (iii) participations in Letters of Credit and L/C Disbursements which are outstanding on the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 9.04(c) of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 2. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is organized under the laws of a jurisdiction outside the United States, the forms specified in Section 2.20(e) of the Credit Agreement, duly completed and executed by such Assignee, (ii) if the Assignee is not already a Lender under the Credit Agreement, an Administrative Questionnaire in the form of Exhibit A to the Credit Agreement and (iii) a processing and recordation fee of $3,500. 3. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address for Notices: Effective Date of Assignment (may not be fewer than 5 Business Days after the Date of Assignment):
Percentage Assigned of Applicable Facility/Commitment (set forth, to at least 8 decimals, as a percentage of the Facility and the Principal Amount aggregate Commitments of Facility/Commitment Assigned all Lenders thereunder) Revolving Credit Commitment $ % Tranche A Commitment $ % Tranche A Term Loans $ % Tranche B Commitment $ % Tranche B Term Loans $ %
The terms set forth above are hereby agreed to: Accepted */ _________________, as Assignor CREDIT SUISSE, as Administrative Agent by:___________________________ by:________________________ Name: Name: Title: Title: by:________________________ Name: Title: _________________, as Assignee [Fronting Bank] by:________________________ Name: Title: 2 */ To be completed to the extent consents are required under Section 9.04(b) of the Credit Agreement. 3 EXHIBIT C FORM OF BORROWING REQUEST Credit Suisse, as Administrative Agent for the Lenders referred to below, Tower 49 12 East 49th Street New York, NY 10017 Attention of [ ] [Date] Ladies and Gentlemen: The undersigned, Shared Technologies Fairchild Communications Corp. (the "Company"), refers to the Credit Agreement dated as of March 12, 1996 (the "Credit Agreement"), among the Company, Shared Technologies Inc., ("STFI", which term shall, after the Merger referred to herein, include the surviving corporation in such Merger), the financial institutions from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Company hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that it requests a Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made: (A) Date of Borrowing (which is a Business Day ______________________ (B) Principal Amount of Borrowing 1/ ______________________ - --------------------- 1/ Not less than $5,000,000 and in an integral multiple of $1,000,000, but in any event not exceeding, as applicable, the available Total Revolving Credit Commitment or the aggregate amount of the Term Loan Commitments available at such time. (C) Interest rate basis ____________________ (D) Type of Borrowing Request 2/ ____________________ - (E) Interest Period 3/ ____________________ (F) Funds are requested to be disbursed as follows: Dollar Amount ____________________ Bank Name ____________________ Bank ABA # ____________________ Beneficiary Name ____________________ Beneficiary A/C # ____________________ REF ____________________ Upon acceptance of any or all of the Loans offered by the Lenders in response to this request, the Company shall be deemed to have represented and warranted that the conditions to lending specified in Sections 4.01(b) and (c) of the Credit Agreement have been satisfied. SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., by ______________________ Name: Title: [Responsible Officer] - --------------------- 2/ Specify (a) Borrowing of Tranche A Term Loans, Borrowing of Tranche B Term Loans or Revolving Credit Borrowing and (b) Eurodollar Borrowing or ABR Borrowing. 3/ Which shall be subject to the definition of "Interest Period" and end not later than the Tranche A Maturity Date, the Tranche B Maturity Date or the Revolving Credit Maturity Date (applicable only for Eurodollar Borrowings only). 2 EXHIBIT D INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of March 12, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), each Subsidiary of the Borrower listed on Schedule I hereto (the "Guarantors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent") and (b) the Subsidiary Guarantee Agreement dated as of March 12, 1996, among the Guarantors and the Collateral Agent (the "Guarantee Agreement"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. The Guarantors have guaranteed such Loans and the other Obligations (as defined in the Guarantee Agreement) of the Borrower under the Credit Agreement pursuant to the Guarantee Agreement; certain Guarantors have granted Liens on and security interests in certain of their assets to secure such guarantees. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Borrower and the Guarantors of an agreement in the form hereof. Accordingly, the Borrower, each Guarantor and the Collateral Agent agree as follows: SECTION 1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 3), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under the Guarantee Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to any Security Document to satisfy a claim of any Secured Party, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold. SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing Guarantor") agrees (subject to Section 3) that, in the event a payment shall be made by any other Guarantor under the Guarantee Agreement or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy a claim of any Secured Party and such other Guarantor (the "Claiming Guarantor") shall not have been fully indemnified by the Borrower as provided in Section 1, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 12, the date of the Supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 2 shall be subrogated to the rights of such Claiming Guarantor under Section 1 to the extent of such payment. SECTION 3. Subordination. Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 1 and 2 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 1 and 2 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder. SECTION 4. Termination. This Agreement shall survive and be in full force and effect so long as any Obligation is outstanding and has not been indefeasibly paid in full in cash, and so long as the L/C Exposure has not been reduced to zero or any of the Commitments under the Credit Agreement have not been terminated, and shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. No Waiver; Amendment. (a) No failure on the part of the Collateral Agent or any Guarantor to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Collateral Agent or any Guarantor preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. None of the Collateral Agent and the Guarantors shall be deemed to have waived any rights hereunder unless such waiver shall be in writing and signed by such parties. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Borrower, the Guarantors and the Collateral Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 7. Notices. All communications and notices hereunder shall be in writing and given as provided in the Guarantee Agreement and addressed as specified therein. SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the parties that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. Neither the Borrower nor any Guarantor may assign or transfer any of its rights or obligations hereunder (and any such attempted assignment or transfer shall be void) without the prior written consent of the Required Lenders. 2 Notwithstanding the foregoing, at the time any Guarantor is released from its obligations under the Guarantee Agreement in accordance with such Guarantee Agreement and the Credit Agreement, such Guarantor will cease to have any rights or obligations under this Agreement. SECTION 9. Survival of Agreement; Severability. (a) All covenants and agreements made by the Borrower and each Guarantor herein and in the certificates or other instruments prepared or delivered in connection with this Agreement or the other Loan Documents shall be considered to have been relied upon by the Collateral Agent, the other Secured Parties and each Guarantor and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Fronting Banks, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loans or any other fee or amount payable under the Credit Agreement or this Agreement or under any of the other Loan Documents is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In case any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 10. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall be effective with respect to any Guarantor when a counterpart bearing the signature of such Guarantor shall have been delivered to the Collateral Agent. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 11. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. SECTION 12. Additional Guarantors. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not such a Subsidiary on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming such a Subsidiary. Upon execution and delivery, after the date hereof, by the Collateral Agent and such a Subsidiary of an instrument in the form of Annex 1 hereto, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor hereunder. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor 3 hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first appearing above. SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., by _____________________________ Name: Title: EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO, as a Guarantor, by _____________________________ Name: Title: Authorized Officer CREDIT SUISSE, as Collateral Agent, by _____________________________ Name: Title: by _____________________________ Name: Title: 4 SCHEDULE I GUARANTORS to the Indemnity Subrogation and Contribution Agreement Name Address 5 Annex 1 to the Indemnity, Subrogation and Contribution Agreement SUPPLEMENT NO. dated as of [ ], to the Indemnity, Subrogation and Contribution Agreement dated as of March 12, 1996 (as the same may be amended, supplemented or otherwise modified from time to time, the "Indemnity, Subrogation and Contribution Agreement"), among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower") each Subsidiary of the Borrower listed on Shedule I thereto (the "Guarantors"), and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). A. Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent") and (b) the Subsidiary Guarantee Agreement dated as of March 12, 1996, among the Guarantors and the Collateral Agent (the "Guarantee Agreement"). B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indemnity, Subrogation and Contribution Agreement and the Credit Agreement. C. The Borrower and the Guarantors have entered into the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not such a Subsidiary on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary. Section 12 of the Indemnity, Subrogation and Contribution Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Indemnity, Subrogation and Contribution Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation and Contribution Agreement, the New Guarantor by its signature below becomes a Guarantor under the Indemnity, Subrogation and Contribution Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Indemnity, Subrogation and Contribution Agreement applicable to it as a Guarantor thereunder. Each reference to a "Guarantor" in the Indemnity, Subrogation and Contribution Agreement shall be deemed to include the New Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Indemnity, Subrogation and Contribution Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Indemnity, Subrogation and Contribution Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 7 of the Indemnity, Subrogation and Contribution Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature. 2 SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly executed this Supplement to the Indemnity, Subrogation and Contribution Agreement as of the day and year first above written. [Name Of New Guarantor], by ____________________________ Name: Title: Address: CREDIT SUISSE, as Collateral Agent, by ____________________________ Name: Title: by ____________________________ Name: Title: 3 SCHEDULE I to Supplement No.___ to the Indemnity Subrogation and Contribution Agreement GUARANTORS Name Address EXHIBIT E PARENT GUARANTEE AGREEMENT dated as of March 12, 1996, between SHARED TECHNOLOGIES INC., a Delaware corporation (the "Guarantor", which term shall, after the Merger referred to in the Credit Agreement referred to below, include the surviving corporation in such Merger) and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch, as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Shared Technologies Fairchild Communications Corp., a Delaware corporation (the "Borrower"), the Guarantor, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. As the owner of all of the issued and outstanding capital stock of the Borrower, the Guarantor acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders and the issuance of the Letters of Credit by the Fronting Banks. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Guarantor of a Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit, the Guarantor is willing to execute this Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents and (c) unless otherwise agreed upon in writing by the applicable Lender party thereto, all obligations of the Borrower, monetary or otherwise, under each Interest Rate Protection Agreement entered into with a counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). The Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. The Guarantor further agrees that (a) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VII of the Credit Agreement for the purposes of the Guarantor's guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (b) in the event of any declaration of acceleration of such obligations as provided in such Article VII, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purposes of this Section. SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, the Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of the Guarantor hereunder shall not be affected by (a) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other guarantor of the Obligations under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other guarantor of the Obligations or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or any other Secured Party. SECTION 3. Security. The Guarantor authorizes the Collateral Agent and each of the other Secured Parties to (a) take and hold security for the payment of this Guarantee and the Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may determine and (c) release or substitute any one or more endorsees, other guarantors or other obligors. SECTION 4. Guarantee of Payment. The Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person. SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of the Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of the Guarantor or that would otherwise operate as a discharge of the Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the 2 Obligations). SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, the Guarantor waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor or exercise any other right or remedy available to them against the Borrower or any other guarantor, without affecting or impairing in any way the liability of the Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. To the fullest extent permitted by applicable law, the Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of the Guarantor against the Borrower or any other guarantor, as the case may be, or any security. SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against the Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent or such other Secured Party as designated thereby in cash the amount of such unpaid Obligations. Upon payment by the Guarantor of any sums to the Collateral Agent or any Secured Party as provided above, all rights of the Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by the Guarantor is hereby subordinated in right of payment to the prior payment in full of the Obligations. If any amount shall erroneously be paid to the Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Collateral Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 8. Information. The Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that the Guarantor assumes and incurs hereunder, and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise the Guarantor of information known to it or any of them regarding such circumstances or risks. SECTION 9. Termination. The Guarantee made hereunder (a) shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and the Fronting Banks have no further obligation to issue Letters of Credit under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party or the Guarantor upon the bankruptcy or reorganization of the Borrower, the Guarantor or otherwise. 3 SECTION 10. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantor that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective when a counterpart hereof executed on behalf of the Guarantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon the Guarantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of the Guarantor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that the Guarantor shall not have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). SECTION 11. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantor and the Collateral Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 13. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to the Guarantor shall be given to it at 100 Great Meadow Road Wethersfield, CT 06109, Attention of Chief Executive Officer. SECTION 14. Survival of Agreement. All covenants, agreements, representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Fronting Banks regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments and the L/C Commitment have not been terminated. SECTION 15. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract, 4 and shall become effective as provided in Section 10. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 16. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SHARED TECHNOLOGIES INC., as Guarantor, by ____________________________ Name: Title: CREDIT SUISSE, as Collateral Agent, by ____________________________ Name: Title: by ____________________________ Name: Title: EXHIBIT F PLEDGE AGREEMENT dated as of March 13, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI", which term shall, after the Merger referred to in the Credit Agreement referred to below, include the surviving corporation in such Merger), each Subsidiary of the Borrower listed on Schedule I hereto (each such Subsidiary individually a "Subsidiary Pledgor" and collectively, the "Subsidiary Pledgors"; the Borrower, STFI and the Subsidiary Pledgors are referred to collectively herein as the "Pledgors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"), (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"; and, collectively with the Parent Guarantee Agreement, the "Guarantee Agreements") among the Subsidiary Pledgors and the Collateral Agent. The Lenders have agreed to make Loans to the Borrower and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. STFI and the Subsidiary Guarantors have agreed to guarantee, among other things, all the obligations of the Borrower under the Credit Agreement. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Pledgors of a Pledge Agreement in the form hereof to secure (a) the due and punctual payment by the Borrower of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of STFI under or pursuant to the Parent Guarantee Agreement or the other Loan Documents, (d) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of each Subsidiary Pledgor under or pursuant to the Subsidiary Guarantee Agreement or the other Loan Documents and (e) the due and punctual payment and performance of all obligations of the Borrower under each Interest Rate Protection Agreement entered into with any counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (e) being referred to collectively as the "Obligations"). Capitalized terms used herein and not defined herein shall have meanings assigned to such terms in the Credit Agreement. Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agree as follows: SECTION 1. Pledge. As security for the payment and performance, as the case may be, in full of the Obligations, each Pledgor hereby transfers, grants, bargains, sells, conveys, hypothecates, pledges, sets over and delivers unto the Collateral Agent, its successors and assigns, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in all of the Pledgor's right, title and interest in, to and under (a) the shares of capital stock owned by it and listed on Schedule II hereto and any shares of capital stock obtained in the future by the Pledgor and the certificates representing all such shares (the "Pledged Stock"); provided that the Pledged Stock shall not include, to the extent that applicable law requires that a subsidiary of the Pledgor issue directors' qualifying shares, such qualifying shares; (b)(i) the debt securities listed opposite the name of the Pledgor on Schedule II hereto, (ii) any debt securities in the future issued to the Pledgor and (iii) the promissory notes and any other instruments evidencing such debt securities (the "Pledged Debt Securities"); (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms hereof; (d) subject to Section 5, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed, in respect of, in exchange for or upon the conversion of the securities referred to in clauses (a) and (b) above; (e) subject to Section 5, all rights and privileges of the Pledgor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the "Collateral"). Upon delivery to the Collateral Agent, (a) any stock certificates, notes or other securities now or hereafter included in the Collateral (the "Pledged Securities") shall be accompanied by undated stock powers duly executed in blank or other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (b) all other property comprising part of the Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities theretofore and then being pledged hereunder, which schedule shall be attached hereto as Schedule II and made a part hereof. Each schedule so delivered shall supersede any prior schedules so delivered. TO HAVE AND TO HOLD the Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth. SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Securities, and any and all certificates or other instruments or documents representing the Collateral. (b) Each Pledgor will cause any Indebtedness for borrowed money owed to the Pledgor by 2 any person to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent pursuant to the terms thereof. SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby represents, warrants and covenants, as to itself and the Collateral pledged by it hereunder, to and with the Collateral Agent that: (a) the Pledged Stock represents that percentage as set forth on Schedule II of the issued and outstanding shares of each class of the capital stock of the issuer with respect thereto; (b) except for the security interest granted hereunder, the Pledgor (i) is and will at all times continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Collateral, other than pursuant hereto, and (iv) subject to Section 5, will cause any and all Collateral, whether for value paid by the Pledgor or otherwise, to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder; (c) the Pledgor (i) has the power and authority to pledge the Collateral in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than the Lien created by this Agreement), however arising, of all persons whomsoever; (d) no consent of any other person (including stockholders or creditors of any Pledgor) and no consent or approval of any Governmental Authority or any securities exchange was or is necessary to the validity of the pledge effected hereby; (e) by virtue of the execution and delivery by the Pledgors of this Agreement, when the Pledged Securities, certificates or other documents representing or evidencing the Collateral are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a valid and perfected first lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations; (f) the pledge effected hereby is effective to vest in the Collateral Agent, on behalf of the Secured Parties, the rights of the Collateral Agent in the Collateral as set forth herein; (g) all of the Pledged Stock has been duly authorized and validly issued and is fully paid and nonassessable; (h) all information set forth herein relating to the Pledged Stock is accurate and complete in all material respects as of the date hereof; and (i) the pledge of the Pledged Stock pursuant to this Agreement does not violate Regulation G, T, U or X of the Federal Reserve Board or any successor thereto as of the date hereof. 3 SECTION 4. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent. Each Pledgor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and until an Event of Default shall have occurred and be continuing: (i) Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such Pledgor will not be entitled to exercise any such right if the result thereof could materially and adversely affect the rights inuring to a holder of the Pledged Securities or the rights and remedies of any of the Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same. (ii) The Collateral Agent shall execute and deliver to each Pledgor, or cause to be executed and delivered to each Pledgor, all such proxies, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above and to receive the cash dividends it is entitled to receive pursuant to subparagraph (iii) below. (iii) Each Pledgor shall be entitled to receive and retain any and all cash dividends, interest and principal paid on the Pledged Securities to the extent and only to the extent that such cash dividends, interest and principal are permitted by, and otherwise paid in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws. All noncash dividends, interest and principal, and all dividends, interest and principal paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid-in surplus, and all other distributions (other than distributions referred to in the preceding sentence) made on or in respect of the Pledged Securities, whether paid or payable in cash or otherwise, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and, if received by any Pledgor, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement). (b) Upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to dividends, interest or principal that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, 4 interest or principal. All dividends, interest or principal received by the Pledgor contrary to the provisions of this Section 5 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Pledgor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 7. After all Events of Default have been cured or waived, the Collateral Agent shall, within five Business Days after all such Events of Default have been cured or waived, repay to each Pledgor all cash dividends, interest or principal (without interest), that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) above and which remain in such account. (c) Upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 5, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights; provided further that, notwithstanding the foregoing, all voting and consensual rights and powers shall remain with the Pledgor pending receipt of any necessary approval of the Federal Communications Commission ("FCC") of any assignment of transfer of control of the FCC licenses held by the Borrower or any Subsidiary. After all Events of Default have been cured or waived, such Pledgor will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above. SECTION 6. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, subject to applicable regulatory and legal requirements, the Collateral Agent may sell the Collateral, or any part thereof, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby waive all rights of redemption, stay, valuation and appraisal any Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall give a Pledgor 10 days' prior written notice (which each Pledgor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of such Pledgor's Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent 5 may fix and state in the notice of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid in full by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Section 6, any Secured Party may bid for or purchase, free from any right of redemption, stay or appraisal on the part of any Pledgor (all said rights being also hereby waived and released), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to it from such Pledgor as a credit against the purchase price, and it may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to such Pledgor therefor. For purposes hereof, (a) a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof, (b) the Collateral Agent shall be free to carry out such sale pursuant to such agreement and (c) such Pledgor shall not be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 6 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions. SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of Collateral pursuant to Section 6, as well as any Collateral consisting of cash, shall be applied by the Collateral Agent as follows: FIRST, to the payment of all costs and expenses incurred by the Collateral Agent in connection with such sale or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the reasonable fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Loan Document on behalf of any Pledgor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and THIRD, to the Pledgors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct. 6 The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor agrees to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, other charges and disbursements of its counsel and of any experts or agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent hereunder or (iv) the failure by such Pledgor to perform or observe any of the provisions hereof. (b) Without limitation of its indemnification obligations under the other Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the Indemnitees (as defined in Section 9.05 of the Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, other charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby or (ii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) Any amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 8 shall remain operative and in full force and effect regardless of the termination of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 8 shall be payable on written demand therefor and shall bear interest at the rate specified in Section 2.06 of the Credit Agreement. SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent's name or in the name of such Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral, to endorse checks, drafts, orders and other instruments for the payment of money payable 7 to the Pledgor representing any interest or dividend or other distribution payable in respect of the Collateral or any part thereof or on account thereof and to give full discharge for the same, to settle, compromise, prosecute or defend any action, claim or proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer and to make any agreement respecting, or otherwise deal with, the same; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or wilful misconduct. SECTION 10. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or consent to any departure by any Pledgor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Pledgor in any case shall entitle such Pledgor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Collateral Agent and the Pledgor or Pledgors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement. SECTION 11. Securities Act, etc. In view of the position of the Pledgors in relation to the Pledged Securities, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the "Federal Securities Laws") with respect to any disposition of the Pledged Securities permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Securities, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Securities could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Securities under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Pledgor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Securities, limit the purchasers to those who will agree, among other things, to acquire such Pledged Securities for their own account, for investment, and not with a view to the distribution or resale thereof. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and 8 negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 11 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells. SECTION 12. Registration, etc. Each Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default hereunder, if for any reason the Collateral Agent desires to sell any of the Pledged Securities of the Borrower at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its best efforts to take or to cause the issuer of such Pledged Securities to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Collateral Agent to permit the public sale of such Pledged Securities. Each Pledgor further agrees to indemnify, defend and hold harmless the Collateral Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel (including, without limitation, reasonable fees and expenses to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to such Pledgor or the issuer of such Pledged Securities by the Collateral Agent or any other Secured Party expressly for use therein. Each Pledgor further agrees, upon such written request referred to above, to use its best efforts to qualify, file or register, or cause the issuer of such Pledged Securities to qualify, file or register, any of the Pledged Securities under the Blue Sky or other securities laws of such states as may be requested by the Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. Each Pledgor will bear all costs and expenses of carrying out its obligations under this Section 12. Each Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 12 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 12 may be specifically enforced. SECTION 13. Regulatory Approval. Notwithstanding anything to the contrary contained herein, the Collateral Agent will not take any action pursuant to this Pledge Agreement that would constitute or result in any assignment of an FCC license or any change of control of the Borrower, any Subsidiary, any Unrestricted Subsidiary or any STFI Unrestricted Subsidiary subject to regulation by the FCC if such assignment of FCC license or change of control would require under then existing law (including the written rules and regulations promulgated by the FCC), the prior approval of the FCC, without first obtaining such approval of the FCC. Each Pledgor agrees after the occurrence of any Event of Default to take any action that the Collateral Agent may reasonably request in order to obtain and enjoy the full rights and benefits granted to the Collateral Agent by this Pledge Agreement and each other agreement, instrument and document delivered to the Collateral Agent in connection herewith or in any document evidencing or securing the collateral for any of the Obligations, including specifically, at the Pledgor's own cost and expense, the use of Pledgor's best efforts to assist in obtaining approval of the FCC or any 9 applicable state regulatory authority for any action or transaction contemplated by this Pledge Agreement that is then required by law, and specifically, without limitation, upon request, to prepare, sign and file with the FCC or such state regulatory authority the assignor's or transferor's portion of any application or applications for consent to the assignment of license or transfer of control necessary or appropriate under the FCC's or such state regulatory authority's rules and regulations for approval of any Obligations secured hereby. SECTION 14. Security Interest Absolute. All rights of the Collateral Agent hereunder, the grant of a security interest in the Collateral and all obligations of each Pledgor hereunder, shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to any of the foregoing, (c) any exchange, release or nonperfection of any other collateral, or any release or amendment or waiver of or consent to or departure from any guaranty, for all or any of the Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Obligations or in respect of this Agreement (other than the indefeasible payment in full of all the Obligations). SECTION 15. Termination or Release. (a) This Agreement and the security interests granted hereby shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and the Fronting Banks have no further obligation to issue Letters of Credit under the Credit Agreement. (b) Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under the Credit Agreement to any person that is not a Pledgor, or, upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.08(b) of the Credit Agreement, the security interest in such Collateral shall be automatically released. (c) In connection with any termination or release pursuant to paragraph (a) or (b), the Collateral Agent shall execute and deliver to any Pledgor, at such Pledgor's expense, all documents that such Pledgor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 14 shall be without recourse to or warranty by the Collateral Agent. SECTION 16. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Pledgor shall be given to it at the address for notices set forth on Schedule I, with a copy to the Borrower. SECTION 17. Further Assurances. Each Pledgor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments, as the Collateral Agent may at any time reasonably request in connection with the administration and enforcement of this Agreement or with respect to the Collateral or any part thereof or in order better to assure and confirm unto the Collateral Agent its rights and remedies hereunder. SECTION 18. Binding Effect; Several Agreement; Assignments. Whenever in this 10 Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Pledgor that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. This Agreement shall become effective as to any Pledgor when a counterpart hereof executed on behalf of such Pledgor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Pledgor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Pledgor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Pledgor shall have the right to assign its rights hereunder or any interest herein or in the Collateral (and any such attempted assignment shall be void), except as expressly contemplated by this Agreement or the other Loan Documents. If all of the capital stock of a Pledgor is sold, transferred or otherwise disposed of to a person that is not an Affiliate of the Borrower pursuant to a transaction permitted by Section 6.05 of the Credit Agreement, such Pledgor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Pledgor and may be amended, modified, supplemented, waived or released with respect to any Pledgor without the approval of any other Pledgor and without affecting the obligations of any other Pledgor hereunder SECTION 19. Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by each Pledgor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Fronting Banks, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments and the L/C Commitments have not been terminated. (b) In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 20. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 21. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute a single contract, and shall become effective as provided in Section 18. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 22. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction 11 of, or to be taken into consideration in interpreting this Agreement. SECTION 23. Jurisdiction; Consent to Service of Process. (a) Each Pledgor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Pledgor or its properties in the courts of any jurisdiction. (b) Each Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 15. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 24. Waiver Of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 25. Additional Pledgors. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not a Subsidiary on the date of the Credit Agreement is required to enter in this Agreement as a Subsidiary Pledgor upon becoming a Subsidiary if such Subsidiary owns or possesses property of a type that would be considered Collateral hereunder. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Subsidiary Pledgor hereunder with the same force and effect as if originally named as a Subsidiary Pledgor herein. The execution and delivery of such instrument shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary 12 Pledgor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SHARED TECHNOLOGIES FAIRCHILD INC., by ----------------------------- Name: Title: SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., by ----------------------------- Name: Title: Authorized Officer THE SUBSIDIARY PLEDGORS LISTED ON SCHEDULE I HERETO, by ----------------------------- Name: Title: Authorized Officer CREDIT SUISSE, as Collateral Agent, by ------------------------------ Name: Title: by ------------------------------ Name: Title: 13 Schedule I to the Pledge Agreement SUBSIDIARY PLEDGORS Name Address Schedule II to the Pledge Agreement CAPITAL STOCK Number of Registered Number and Class Percentage Issuer Certificate Owner of Shares of Shares DEBT SECURITIES Principal Date of Maturity Issuer Amount Note Date Annex 1 to the Pledge Agreement SUPPLEMENT NO. dated as of , to the PLEDGE AGREEMENT dated as of March 13, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI", which term shall, after the Merger referred to in the Credit Agreement referred to below, include the surviving corporation in such Merger), each Subsidiary of the Borrower listed on Schedule I hereto (each such Subsidiary individually a "Subsidiary Pledgor" and collectively, the "Subsidiary Pledgors"; the Borrower, STFI and the Subsidiary Pledgors are referred to collectively herein as the "Pledgors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). A. Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"), (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"; and, collectively with the Parent Guarantee Agreement, the "Guarantee Agreements") among the Subsidiary Pledgors and the Collateral Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. C. The Pledgors have entered into the Pledge Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not a Subsidiary on the date of the Credit Agreement is required to enter into the Pledge Agreement as a Subsidiary Pledgor upon becoming a Subsidiary if such Subsidiary owns or possesses property of a type that would be considered Collateral under the Pledge Agreement. Section 25 of the Pledge Agreement provides that such Subsidiaries may become Subsidiary Pledgors under the Pledge Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Pledgor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Pledgor under the Pledge Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Pledgor agree as follows: SECTION 1. In accordance with Section 25 of the Pledge Agreement, the New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with the same force and effect as if originally named therein as a Pledgor and the New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Pledgor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Pledgor, as security for the payment and performance in full of the Obligations (as defined in the Pledge Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Pledgor's right, title and interest in and to the Collateral (as defined in the Pledge Agreement) of the New Pledgor. Each reference to a "Subsidiary Pledgor" or a "Pledgor" in the Pledge Agreement shall be deemed to include the New Pledgor. The Pledge Agreement is hereby incorporated herein by reference. SECTION 2. The New Pledgor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Pledgor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. The New Pledgor hereby represents and warrants that set forth on Schedule I attached hereto is a true and correct schedule of all its Pledged Securities. SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement shall remain in full force and effect. SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Pledge Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 15 of the Pledge Agreement. All communications and notices hereunder to the New Pledgor shall be given to it at the address set forth under its signature hereto, with a copy to the Borrower. 2 SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly executed this Supplement to the Pledge Agreement as of the day and year first above written. [Name of New Pledgor], by ____________________________ Name: Title: Address: CREDIT SUISSE, as Collateral Agent, by ____________________________ Name: Title: by ____________________________ Name: Title: 3 Schedule I to Supplement No. to the Pledge Agreement Pledged Securities of the New Pledgor CAPITAL STOCK Number of Registered Number and Class Percentage Issuer Certificate Owner of Shares of Shares DEBT SECURITIES Principal Date of Maturity Issuer Amount Note Date EXHIBIT G SECURITY AGREEMENT dated as of March 13, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI", which term shall, after the Merger referred to in the Credit Agreement referred to below, include the surviving corporation in such Merger), each subsidiary of the Borrower listed on Schedule I hereto (each such subsidiary individually a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors"; the Subsidiary Guarantors, STFI and the Borrower are referred to collectively herein as the "Grantors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined herein). Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent") and (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent. The Lenders have agreed to make Loans to the Borrower, and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of STFI and the Subsidiary Guarantors has agreed to guarantee, among other things, all the obligations of the Borrower under the Credit Agreement. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Grantors of an agreement in the form hereof to secure (a) the due and punctual payment by the Borrower of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to this Agreement and the other Loan Documents and (d) the due and punctual payment and performance of all obligations of the Borrower under each Interest Rate Protection Agreement entered into with any counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations described in the preceding clauses (a) through (d) being collectively called the "Obligations"). Accordingly, the Grantors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agree as follows: ARTICLE I Definitions SECTION 1.01. Definition of Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement. SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the following terms shall have the following meanings: "Account Debtor" shall mean any person who is or who may become obligated to any Grantor under, with respect to or on account of an Account. "Accounts" shall mean any and all right, title and interest of any Grantor to payment for goods and services sold or leased, including any such right evidenced by chattel paper, whether due or to become due, whether or not it has been earned by performance, and whether now or hereafter acquired or arising in the future, including accounts receivable from Affiliates of the Grantors. "Accounts Receivable" shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired. "Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts and (g) Proceeds. "Copyright License" shall mean any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by any Grantor or which such Grantor otherwise has the right to license, or granting any right to such Grantor under any Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement. "Copyrights" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including 2 registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule II. "Credit Agreement" shall have the meaning assigned to such term in the preliminary statement of this Agreement. "Documents" shall mean all instruments, files, records, ledger sheets and documents covering or relating to any of the Collateral. "Equipment" shall mean all equipment, furniture and furnishings, and all tangible personal property similar to any of the foregoing, including tools, parts and supplies of every kind and description, and all improvements, accessions or appurtenances thereto, that are now or hereafter owned by any Grantor. The term Equipment shall include Fixtures. "Fixtures" shall mean all items of Equipment, whether now owned or hereafter acquired, of any Grantor that become so related to particular real estate that an interest in them arises under any real estate law applicable thereto. "General Intangibles" shall mean all choses in action and causes of action and all other assignable intangible personal property of any Grantor of every kind and nature (other than Accounts Receivable) now owned or hereafter acquired by any Grantor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Interest Rate Protection Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts Receivable. "Intellectual Property" shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing. "Inventory" shall mean all goods of any Grantor, whether now owned or hereafter acquired, held for sale or lease, or furnished or to be furnished by any Grantor under contracts of service, or consumed in any Grantor's business, including raw materials, intermediates, work in process, packaging materials, finished goods, semi-finished inventory, scrap inventory, manufacturing supplies and spare parts, and all such goods that have been returned to or repossessed by or on behalf of any Grantor. "License" shall mean any Patent License, Trademark License, Copyright License or other license or sublicense to which any Grantor is a party, including those listed on Schedule III (other than those license agreements in existence on the date hereof and listed on Schedule III and those license agreements entered into after the date hereof, which by their terms prohibit assignment or a grant of a security interest by such Grantor as licensee thereunder). The Secured Parties shall have a security interest in all authorizations issued by the Federal Communications Commission ("FCC") or any state or 3 local regulatory agency to the maximum extent permitted by law, including, without limitation, the right to receive all proceeds derived from or in connection with the sale, assignment or transfer of such authorizations. "Obligations" shall have the meaning assigned to such term in the preliminary statement of this Agreement. "Patent License" shall mean any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement. "Patents" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, including those listed on Schedule IV, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein. "Perfection Certificate" shall mean a certificate substantially in the form of Annex 1 hereto, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer and the chief legal officer of the Borrower. "Proceeds" shall mean any consideration received from the sale, exchange, license, lease or other disposition of any asset or property that constitutes Collateral, any value received as a consequence of the possession of any Collateral and any payment received from any insurer or other person or entity as a result of the destruction, loss, theft, damage or other involuntary conversion of whatever nature of any asset or property which constitutes Collateral, and shall include, (a) any claim of any Grantor against any third party for (and the right to sue and recover for and the rights to damages or profits due or accrued arising out of or in connection with) (i) past, present or future infringement of any Patent now or hereafter owned by any Grantor, or licensed under a Patent License, (ii) past, present or future infringement or dilution of any Trademark now or hereafter owned by any Grantor or licensed under a Trademark License or injury to the goodwill associated with or symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past, present or future breach of any License and (iv) past, present or future infringement of any Copyright now or hereafter owned by any Grantor or licensed under a Copyright License and (b) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) the Fronting Banks, (e) each counterparty to an Interest Rate Protection Agreement entered into with the Borrower if such counterparty was a Lender at the time the Interest Rate Protection Agreement was entered into, (f) the beneficiaries of each indemnification obligation undertaken by any Grantor under any Loan Document and (g) the successors and assigns of each of the foregoing. "Security Interest" shall have the meaning assigned to such term in Section 2.01. 4 "Trademark License" shall mean any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement. "Trademarks" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, any State of the United States or any similar offices in any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule V, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill. SECTION 1.03. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. ARTICLE II Security Interest SECTION 2.01. Security Interest. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and transfers to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor's right, title and interest in, to and under the Collateral, whether now owned or any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (the "Security Interest"). Without limiting the foregoing, the Collateral Agent is hereby authorized to file one or more financing statements (including fixture filings), continuation statements, filings with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party. SECTION 2.02. No Assumption of Liability. The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral. 5 ARTICLE III Representations and Warranties The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that: SECTION 3.01. Title and Authority. Each Grantor has good and valid rights in and title to the Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval which has been obtained. SECTION 3.02. Filings. (a) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein is correct and complete. Fully executed Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Collateral have been delivered to the Collateral Agent for filing in each governmental, municipal or other office specified in Schedule 6 to the Perfection Certificate, which are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Collateral consisting of United States Patents, Trademarks and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. (b) Each Grantor shall ensure and represents and warrants that fully executed security agreements in the form hereof and containing a description of all Collateral consisting of Intellectual Property shall have been received and recorded within three months after the execution of this Agreement with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and within one month after the execution of this Agreement with respect to United States registered Copyrights for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. ss. 261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, or in any other necessary jurisdiction, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof). 6 SECTION 3.03. Validity of Security Interest. The Security Interest constitutes (a) a legal and valid security interest in all the Collateral securing the payment and performance of the Obligations, (b) subject to the filings described in Section 3.02 above, a perfected security interest in all Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (c) a security interest that shall be perfected in all Collateral in which a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the three month period (commencing as of the date hereof) pursuant to 35 U.S.C. ss. 261 or 15 U.S.C. ss. 1060 or the one month period (commencing as of the date hereof) pursuant to 17 U.S.C. ss. 205 and otherwise as may be required pursuant to the laws of any other necessary jurisdiction. The Security Interest is and shall be prior to any other Lien on any of the Collateral, other than Liens expressly permitted to be prior to the Security Interest pursuant to Section 6.02 of the Credit Agreement. SECTION 3.04. Absence of Other Liens. The Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement. The Grantor has not filed or consented to the filing of (a) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Collateral, (b) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (c) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement. ARTICLE IV Covenants SECTION 4.01. Change of Name; Location of Collateral; Records; Place of Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in writing of any change (i) in its corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in the location of its chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) in its identity or corporate structure or (iv) in its Federal Taxpayer Identification Number. Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral for which perfection or priority, as the case may be, may be established by any such filings. Each Grantor agrees promptly to notify the Collateral Agent if any material portion of the Collateral owned or held by such Grantor is damaged or destroyed. (b) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Collateral owned by it as is consistent with its current practices and 7 in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail satisfactory to the Collateral Agent showing the identity, amount and location of any and all Collateral. SECTION 4.02. Periodic Certification. Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to Section 5.04 of the Credit Agreement, the Borrower shall deliver to the Collateral Agent a certificate executed by a Financial Officer and the chief legal officer of the Borrower (a) setting forth the information required pursuant to Section 2 of the Perfection Certificate or confirming that there has been no change in such information since the date of such certificate or the date of the most recent certificate delivered pursuant to Section 4.02 and (b) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (a) above to the extent necessary to protect and perfect the Security Interest for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). Each certificate delivered pursuant to this Section 4.02 shall identify in the format of Schedule II, III, IV or V, as applicable, all Intellectual Property of any Grantor in existence on the date thereof and not then listed on such Schedules or previously so identified to the Collateral Agent. SECTION 4.03. Protection of Security. Each Grantor shall, at its own cost and expense, take any and all actions necessary to defend title to the Collateral against all persons and to defend the Security Interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement. SECTION 4.04. Further Assurances. Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent. Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule II, III, IV or V hereto or adding additional schedules hereto to specifically identify any asset or item that may constitute Copyrights, Licenses, Patents or Trademarks; provided, however, that any Grantor shall have the right, exercisable within 10 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its best efforts to take such action as 8 shall be necessary in order that all representations and warranties hereunder shall be true and correct with respect to such Collateral within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral. Each Grantor further agrees that if any authorization of such Grantor excluded from the Collateral pursuant to the final sentence of the definition of "License" could be included therein with the receipt of any approval of, or the taking of any action by, any Governmental Authority, such Grantor shall use its best efforts to obtain such approval or action as expeditiously as possible. SECTION 4.05. Inspection and Verification. The Collateral Agent and such persons as the Collateral Agent may reasonably designate shall have the right, at the Grantors' own cost and expense, to inspect the Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Collateral is located, to discuss the Grantors' affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Collateral, including, in the case of Accounts or Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party (it being understood that any such information shall be deemed to be "Information" subject to the provisions of Section 9.16 of the Credit Agreement). SECTION 4.06. Taxes; Encumbrances. At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral and not permitted pursuant to Section 6.02 of the Credit Agreement, and may pay for the maintenance and preservation of the Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this Section 4.06 shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents. SECTION 4.07. Assignment of Security Interest. If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other person to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other person granting the security interest. SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance. SECTION 4.09. Use and Disposition of Collateral. None of the Grantors shall make 9 or permit to be made an assignment, pledge or hypothecation of the Collateral or shall grant any other Lien in respect of the Collateral, except as expressly permitted by Section 6.02 of the Credit Agreement. None of the Grantors shall make or permit to be made any transfer of the Collateral and each Grantor shall remain at all times in possession of the Collateral owned by it, except that (a) Inventory may be sold in the ordinary course of business and (b) unless and until the Collateral Agent shall notify the Grantors that an Event of Default shall have occurred and be continuing and that during the continuance thereof the Grantors shall not sell, convey, lease, assign, transfer or otherwise dispose of any Collateral (which notice may be given by telephone if promptly confirmed in writing), the Grantors may use and dispose of the Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Credit Agreement or any other Loan Document. Without limiting the generality of the foregoing, each Grantor agrees that it shall not permit any Inventory to be in the possession or control of any warehouseman, bailee, agent or processor at any time unless such warehouseman, bailee, agent or processor shall have been notified of the Security Interest and shall have agreed in writing to hold the Inventory subject to the Security Interest and the instructions of the Collateral Agent and to waive and release any Lien held by it with respect to such Inventory, whether arising by operation of law or otherwise. SECTION 4.10. Limitation on Modification of Accounts. None of the Grantors will, without the Collateral Agent's prior written consent, grant any extension of the time of payment of any of the Accounts Receivable, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged. SECTION 4.11. Insurance. The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment in accordance with Section 5.02 of the Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this Section 4.11, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby. SECTION 4.12. Legend. Each Grantor shall legend, in form and manner satisfactory to the Collateral Agent, its Accounts Receivable and its books, records and documents evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts Receivable have been assigned to the Collateral Agent for the benefit of the Secured Parties and that the Collateral Agent has a security interest therein. 10 SECTION 4.13. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not, nor will it permit any of its licensees to, do any act, or omit to do any act, whereby any Patent which is material to the conduct of such Grantor's business may become invalidated or dedicated to the public, and agrees that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws. (b) Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor's business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights. (c) Each Grantor (either itself or through licensees) will, for each work covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws. (d) Each Grantor shall notify the Collateral Agent immediately if it knows or has reason to know that any Patent, Trademark or Copyright material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor's ownership of any Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same. (e) In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly informs the Collateral Agent, and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Collateral Agent's security interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable. (f) Each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor's business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties. 11 (g) In the event that any Grantor has reason to believe that any Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor's business has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Collateral. (h) Upon and during the continuance of an Event of Default, each Grantor shall use its best efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all of such Grantor's right, title and interest thereunder to the Collateral Agent or its designee. ARTICLE V Power of Attorney Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor's true and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent shall have the right, with power of substitution for each Grantor and in each Grantor's name or otherwise, for the use and benefit of the Collateral Agent and the Secured Parties, upon the occurrence and during the continuance of an Event of Default (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) subject to the mandatory requirements of applicable law, to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes, including assigning any contract to any Subsidiary or any other person at any time during the continuance of any Event of Default; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any Secured Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any Secured Party, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby, and no action taken or omitted to be taken by the Collateral Agent or any Secured Party with respect to the Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of any Grantor or to any claim or action against the Collateral Agent or any Secured Party. It is understood and agreed that the appointment of 12 the Collateral Agent as the agent and attorney-in-fact of the Grantors for the purposes set forth above is coupled with an interest and is irrevocable. The provisions of this Article V shall in no event relieve any Grantor of any of its obligations hereunder or under any other Loan Document with respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or any Secured Party to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any Secured Party of any other or further right which it may have on the date of this Agreement or hereafter, whether hereunder, under any other Loan Document, by law or otherwise. ARTICLE VI Remedies SECTION 6.01. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Collateral by the applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any such Collateral throughout the universe on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Collateral and without liability for trespass to enter any premises where the Collateral may be located for the purpose of taking possession of or removing the Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall give the Grantors 10 days' written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, 13 or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply the proceeds of any collection or sale of the Collateral, as well as any Collateral consisting of cash, as follows: FIRST, to the payment of all costs and expenses incurred by the Administrative Agent or the Collateral Agent (in its capacity as such hereunder or under any other Loan Document) in connection with such collection or sale or otherwise in connection with this Agreement or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and THIRD, to the Grantors, their successors or assigns, or as a court of competent 14 jurisdiction may otherwise direct. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 6.03. Grant of License to Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Article at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sub-license any of the Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any license, sub-license or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default. ARTICLE VII Miscellaneous SECTION 7.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Guarantor shall be given to it at its address or telecopy number set forth on Schedule I, with a copy to the Borrower. SECTION 7.02. Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest and all obligations of the Grantors hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement. SECTION 7.03. Survival of Agreement. All covenants, agreements, representations and warranties made by any Grantor herein and in the certificates or other instruments prepared or 15 delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the making by the Lenders of the Loans, and the execution and delivery to the Lenders of any notes evidencing such Loans, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect until this Agreement shall terminate. SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder. SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. (a) Each Grantor jointly and severally agrees to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, disbursements and other charges of its counsel and of any experts or agents, which the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from or other realization upon any of the Collateral, (iii) the exercise, enforcement or protection of any of the rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to perform or observe any of the provisions hereof. (b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees against, and hold each of them harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable fees, disbursements and other charges of counsel, incurred by or asserted against any of them arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating hereto or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.06 shall remain 16 operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any Lender. All amounts due under this Section 7.06 shall be payable on written demand therefor. SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the Collateral Agent, the Fronting Banks, the Administrative Agent and the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or any other Loan Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Grantor in any case shall entitle such Grantor or any other Grantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement. SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09. SECTION 7.10. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 17 SECTION 7.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract (subject to Section 7.04), and shall become effective as provided in Section 7.04. Delivery of an executed signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. SECTION 7.12. Headings. Article and Section headings used herein are for the purpose of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent, the Administrative Agent, the Fronting Banks or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Grantor or its properties in the courts of any jurisdiction. (b) Each Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement will affected the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 7.14. Termination. This Agreement and the Security Interest shall terminate when all the Obligations have been indefeasibly paid in full, the Lenders have no further commitment to lend, the L/C Exposure has been reduced to zero and the Fronting Banks have no further commitment to issue Letters of Credit under the Credit Agreement, at which time the Collateral Agent shall execute and deliver to the Grantors, at the Grantors' expense, all Uniform Commercial Code termination statements and similar documents which the Grantors shall reasonably request to evidence such termination. Any execution and delivery of termination statements or documents pursuant to this Section 7.14 shall be without recourse to or warranty by the Collateral Agent. A Subsidiary Guarantor shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Subsidiary Guarantor shall be automatically released in the event that all the capital stock of such Subsidiary Guarantor shall be sold, transferred or otherwise disposed of to a person that is not an Affiliate of the Borrower in accordance with the terms of the Credit Agreement; provided that the Required Lenders shall have consented to such sale, transfer or other disposition (to the extent required 18 by the Credit Agreement) and the terms of such consent did not provide otherwise. SECTION 7.15. Additional Grantors. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 2 hereto, such Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SHARED TECHNOLOGIES FAIRCHILD INC., by -------------------------- Name: Title: SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., by -------------------------- Name: Title: Authorized Officer EACH OF THE SUBSIDIARY GUARANTORS LISTED ON SCHEDULE I HERETO, by -------------------------- Name: Title: Authorized Officer 19 CREDIT SUISSE, as Collateral Agent, by -------------------------- Name: Title: by -------------------------- Name: Title: 20 SCHEDULE I SUBSIDIARY GUARANTORS SCHEDULE II COPYRIGHTS 22 SCHEDULE III LICENSES 23 SCHEDULE IV PATENTS 24 SCHEDULE V TRADEMARKS 25 Annex 1 to the Security Agreement [Form Of] PERFECTION CERTIFICATE Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, as documentation agent (individually and collectively in such capacity, the "Documentation Agent"), (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent. The undersigned, a Financial Officer and a Legal Officer, respectively, of STFI, hereby certify to the Collateral Agent and each other Secured Party as follows: 1. Names. (a) The exact corporate name of each Grantor, as such name appears in its respective certificate of incorporation, is as follows: (b) Set forth below is each other corporate name each Grantor has had in the past five years, together with the date of the relevant change: (c) Except as set forth in Schedule 1 hereto, no Grantor has changed its identity or corporate structure in any way within the past five years. Changes in identity or corporate structure would include mergers, consolidations and acquisitions, as well as any change in the form, nature or jurisdiction of corporate organization. If any such change has occurred, include in Schedule 1 the information required by Sections 1 and 2 of this certificate as to each acquiree or constituent party to a merger or consolidation. (d) The following is a list of all other names (including trade names or similar appellations) used by each Grantor or any of its divisions or other business units in connection with the conduct of its business or the ownership of its properties at any time during the past five years: (e) Set forth below is the Federal Taxpayer Identification Number of each Grantor: 2. Current Locations. (a) The chief executive office of each Grantor is located at the address set forth opposite its name below: Grantor Mailing Address County State (b) Set forth below opposite the name of each Grantor are all locations where such Grantor maintains any books or records relating to any Accounts Receivable (with each location at which chattel paper, if any, is kept being indicated by an "*"): Grantor Mailing Address County State (c) Set forth below opposite the name of each Grantor are all the places of business of such Grantor not identified in paragraph (a) or (b) above: Grantor Mailing Address County State (d) Set forth below opposite the name of each Grantor are all the locations where such Grantor maintains any Collateral not identified above: Grantor Mailing Address County State (e) Set forth below opposite the name of each Grantor are the names and addresses of all persons other than such Grantor that have possession of any of the Collateral of such Grantor: Grantor Mailing Address County State 3. Unusual Transactions. All Accounts Receivable have been originated by the Grantors and all Inventory has been acquired by the Grantors in the ordinary course of business. 4. File Search Reports. Attached hereto as Schedule 4(A) are true copies of file search reports from the Uniform Commercial Code filing offices where filings described in Section 3.19 of the Credit Agreement are to be made. Attached hereto as Schedule 4(B) is a true copy of each financing statement or other filing identified in such file search reports. 5. UCC Filings. Duly signed financing statements on Form UCC-1 in substantially the form of Schedule 5 hereto have been prepared for filing in the Uniform Commercial Code filing office in each jurisdiction where a Grantor has Collateral as identified in Section 2 hereof. 6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule setting forth, with respect to the filings described in Section 5 above, each filing and the filing office in which such filing is to be made. 7. Filing Fees. All filing fees and taxes payable in connection with the filings described in Section 5 above have been paid. 3 8. Stock Ownership. Attached hereto as Schedule 8 is a true and correct list of all the duly authorized, issued and outstanding stock of each Subsidiary and the record and beneficial owners of such stock. Also set forth on Schedule 8 is each equity Investment of STFI and each Subsidiary that represents 50% or less of the equity of the entity in which such investment was made. 9. Notes. Attached hereto as Schedule 9 is a true and correct list of all notes held by STFI and each Subsidiary and all intercompany notes between STFI and each Subsidiary of STFI and between each Subsidiary of STFI and each other such Subsidiary. 10. Advances. Attached hereto as Schedule 10 is (a) a true and correct list of all advances made by STFI to any Subsidiary of STFI or made by any Subsidiary of STFI to STFI or any other Subsidiary of STFI, which advances will be on and after the date hereof evidenced by one or more intercompany notes pledged to the Collateral Agent under the Pledge Agreement, and (b) a true and correct list of all unpaid intercompany transfers of goods sold and delivered by or to STFI or any Subsidiary of STFI. 11. Mortgage Filings. Attached hereto as Schedule 11 is a schedule setting forth, with respect to each Mortgaged Property, (i) the exact corporate name of the corporation that owns such property as such name appears in its certificate of incorporation, (ii) if different from the name identified pursuant to clause (i), the exact name of the current record owner of such property reflected in the records of the filing office for such property identified pursuant to the following clause and (iii) the filing office in which a Mortgage with respect to such property must be filed or recorded in order for the Collateral Agent to obtain a perfected security interest therein. IN WITNESS WHEREOF, the undersigned have duly executed this certificate on this [ ] day of [ ]. SHARED TECHNOLOGIES INC., by -------------------------- Name: Title:[Financial Officer] by -------------------------- Name: Title: [Legal Officer] 4 Annex 2 to the Security Agreement SUPPLEMENT NO. __ dated as of , to the Security Agreement dated as of March 12, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), SHARED TECHNOLOGIES INC., a Delaware corporation ("STFI"), each subsidiary of the Borrower listed on Schedule I thereto (each such subsidiary individually a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors"; the Subsidiary Guarantors, STFI and the Borrower are referred to collectively herein as the "Grantors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined herein). A. Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent") and (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement and the Credit Agreement. C. The Grantors have entered into the Security Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit. Section 7.15 of Security Agreement provides that additional Subsidiaries of STFI, the Borrower and the Subsidiaries may become Grantors under the Security Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Grantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under the Security Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Grantor agree as follows: SECTION 1. In accordance with Section 7.15 of the Security Agreement, the New Grantor by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Grantor, as security for the payment and performance in full of the Obligations (as defined in the Security Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Grantor's right, title and interest in and to the Collateral (as defined in the Security Agreement) of the New Grantor. Each reference to a "Grantor" in the Security Agreement shall be deemed to include the New Grantor. The Security Agreement is hereby incorporated herein by reference. SECTION 2. The New Grantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Grantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. The New Grantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Grantor and (b) set forth under its signature hereto, is the true and correct location of the chief executive office of the New Grantor. SECTION 5. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect. SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Security Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Security Agreement. All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature below. 2 SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly executed this Supplement to the Security Agreement as of the day and year first above written. [Name Of New Grantor], by -------------------------- Name: Title: Address: CREDIT SUISSE, as Collateral Agent, by -------------------------- Name: Title: by -------------------------- Name: Title: 3 SCHEDULE I to Supplement No.___ to the Security Agreement LOCATION OF COLLATERAL Description Location EXHIBIT H SUBSIDIARY GUARANTEE AGREEMENT dated as of March 13, 1996, among each of the subsidiaries listed on Schedule I hereto (each such subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), or SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI"), and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch, as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of the Guarantors is a wholly owned Subsidiary of the Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders, and the issuance of the Letters of Credit by the Fronting Banks. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Guarantors of a Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit, the Guarantors are willing to execute this Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents and (c) unless otherwise agreed upon in writing by the applicable Lender party thereto, all obligations of the Borrower, monetary or otherwise, under each Interest Rate Protection Agreement entered into with a counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. Each Guarantor further agrees that (a) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VII of the Credit Agreement for the purposes of such Guarantor's guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in such Article VII, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section. Anything contained in this Agreement to the contrary notwithstanding, the obligations of each Guarantor hereunder shall be limited to a maximum aggregate amount equal to the greatest amount that would not render such Guarantor's obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any provisions of applicable state law (collectively, the "Fraudulent Transfer Laws"), in each case after giving effect to all other liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Guarantor (a) in respect of intercompany indebtedness to the Borrower or Affiliates of the Borrower to the extent that such indebtedness would be discharged in an amount equal to or offset by the amount paid by such Guarantor hereunder and (b) under any Guarantee of senior unsecured indebtedness or Indebtedness subordinated in right of payment to the Obligations which Guarantee contains a limitation as to maximum amount similar to that set forth in this paragraph, pursuant to which the liability of such Guarantor hereunder is included in the liabilities taken into account in determining such maximum amount) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights of such Guarantor pursuant to (i) applicable law or (ii) any agreement providing for an equitable allocation among such Guarantor and other Affiliates of the Borrower of obligations arising under Guarantees by such parties (including the Indemnity, Subrogation and Contribution Agreement). SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other Guarantor under this Agreement or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or any other Secured Party. SECTION 3. Security. Each of the Guarantors authorizes the Collateral Agent and each of the other Secured Parties, to (a) take and hold security for the payment of this Guarantee and the 2 Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may determine and (c) release or substitute any one or more endorsees, other guarantors of other obligors. SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person. SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, each of the Guarantors waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor or exercise any other right or remedy available to them against the Borrower or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each of the Guarantors waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or guarantor, as the case may be, or any security. SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent or such other Secured Party as designated thereby in cash the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Collateral 3 Agent or any Secured Party as provided above, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior payment in full of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Collateral Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 8. Information. Each of the Guarantors assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. SECTION 9. Representations and Warranties. Each of the Guarantors represents and warrants as to itself that all representations and warranties relating to it contained in the Credit Agreement are true and correct. SECTION 10. Termination. The Guarantees made hereunder (a) shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and the Fronting Banks have no further obligation to issue Letters of Credit under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Collateral Agent, and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Guarantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If all of the capital stock of a Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by Section 6.05 of the Credit Agreement, such Guarantor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder. 4 SECTION 12. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Collateral Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 14. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to each Guarantor shall be given to it at its address set forth in Schedule I with a copy to the Borrower. SECTION 15. Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Fronting Banks regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments and the L/C Commitment have not been terminated. (b) In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 16. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single 5 contract, and shall become effective as provided in Section 11. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 17. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Guarantor or its properties in the courts of any jurisdiction. (b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 14. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 19. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19. SECTION 20. Additional Guarantors. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence on the date of the Credit Agreement is required to enter into this Agreement as a Guarantor upon becoming a 6 Subsidiary. Upon execution and delivery after the date hereof by the Collateral Agent and such a Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. SECTION 21. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Secured Party to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Secured Party, irrespective of whether or not such Secured Party shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Secured Party under this Section 21 are in addition to other rights and remedies (including other rights of setoff) which such Secured Party may have. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO, by ----------------------- Name: Title: CREDIT SUISSE, as Collateral Agent, by ----------------------- Name: Title: by ----------------------- Name: Title: 7 SCHEDULE I TO THE GUARANTEE AGREEMENT Guarantor Address Annex 1 to the Subsidiary Guarantee Agreement SUPPLEMENT NO. dated as of , to the Subsidiary Guarantee Agreement dated as of March 12, 1996, among each of the subsidiaries listed on Schedule I thereto (each such subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), or SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI"), and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch, as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). A. Referance is made to the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guarantee Agreement and the Credit Agreement. C. The Guarantors have entered into the Guarantee Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not a Subsidiary on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary. Section 20 of the Guarantee Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guarantee Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guarantee Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a "Guarantor" in the Guarantee Agreement shall be deemed to include the New Guarantor. The Guarantee Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Guarantee Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 14 of the Guarantee Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Borrower. 2 SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for its out-of-pocket expenses in connection with this Supplement, including the reasonable fees, disbursements and other charges of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly executed this Supplement to the Guarantee Agreement as of the day and year first above written. [Name Of New Guarantor], by -------------------------- Name: Title: Address: CREDIT SUISSE, as Collateral Agent, by -------------------------- Name: Title: by -------------------------- Name: Title: 3 SCHEDULE 2.01
Revolving Lenders' Credit Tranche A Term Tranche B Term Aggregate Lenders Commitments Loan Commitments Loan Commitments Commitments Credit Suisse $5,555,555.56 $11,111,111.11 $30,000,000.00 $46,666,666.67 Citicorp USA, Inc. 5,555,555.56 11,111,111.11 0.00 16,666,666.67 NationsBank, N.A. 5,555,555.55 11,111,111.11 0.00 16,666,666.66 First Source Financial, LLP 5,000,000.00 10,000,000.00 0.00 15,000,000.00 Caisse Nationale de Credit Agricole 3,333,333.33 6,666,666.67 0.00 10,000,000.00 CHL High Yield Loan Portfolio 0.00 0.00 10,000,000.00 10,000,000.00 Pilgrim Prime Rate Trust 0.00 0.00 10,000,000.00 10,000,000.00 VanKampen American Capital, Prime Rate Income Trust 0.00 0.00 10,000,000.00 10,000,000.00 Merrill Lynch Senior High Income Portfolio 0.00 0.00 5,000.000.00 5,000,000.00 Senior Floating Rate Fund, Inc. 0.00 0.00 5,000,000.00 5,000,000.00 ---------------------- ------------------------ ----------------------- ----------------------- ........$25,000,000.00 $50,000,000.00 $70,000,000.00 $145,000,000.00 ====================== ======================== ======================= =======================
Schedule 2.20 Fronting Banks Credit Suisse Schedule 4.02(a) 1. Opinion of Cahill, Gordon & Reindel, counsel for The Fairchild Corporation and RHI 2. Opinion of Swidler & Berlin, special regulatory counsel for STFI and the Borrower 3. Opinion of Finn Dixon & Herling, Connecticut counsel 4. Opinion of Richards, Layton & Finger, counsel for STFI 5. Opinion of Stuart Meister, Vice President Law and Administration of Fairchild Communications Services Company SCHEDULE 6.11
Minimum EBITDA Period From April 1, 1996 Ending EBITDA - -------------------------------- ------ June 30, 1996 8,000,000 September 30, 1996 20,000,000 December 31, 1996 30,000,000 4 Quarter Period Ending March 31, 1997 40,000,000 June 30, 1997 42,000,000 September 30, 1997 43,000,000 December 31, 1997 43,000,000 March 31, 1998 46,000,000 June 30, 1998 46,000,000 September 30, 1998 49,000,000 December 31, 1998 49,000,000 March 31, 1999 53,000,000 June 30, 1999 53,000,000 September 30, 1999 55,000,000 December 31, 1999 55,000,000 March 31, 2000 58,000,000 June 30, 2000 58,000,000 September 30, 2000 60,000,000 December 31, 2000 60,000,000 March 31, 2001 63,000,000 June 30, 2001 63,000,000 September 30, 2001 66,000,000 December 31, 2001 66,000,000 March 31, 2002 69,000,000 June 30, 2002 69,000,000 September 30, 2002 72,000,000 December 31, 2002 72,000,000 March 31, 2003 76,000,000
SCHEDULE 6.13
Leverage Ratio Period From April 1, 1996 Ending Ratio - -------------------------------- ----- September 30, 1996 6.10 December 31, 1996 6.00 4 Quarter Period Ending March 31, 1997 6.00 June 30, 1997 5.70 September 30, 1997 5.50 December 31, 1997 5.50 March 31, 1998 5.00 June 30, 1998 5.00 September 30, 1998 4.65 December 31, 1998 4.65 March 31, 1999 4.25 June 30, 1999 4.25 September 30, 1999 4.25 December 31, 1999 4.25 March 31, 2000 3.75 June 30, 2000 3.75 September 30, 2000 3.75 December 31, 2000 3.75 March 31, 2001 3.25 June 30, 2001 3.25 September 30, 2001 3.25 December 31, 2001 3.25 March 31, 2002 3.00 June 30, 2002 3.00 September 30, 2002 3.00 December 31, 2002 3.00 March 31, 2003 3.00
SCHEDULE 6.14
Interest Expense Coverage Ratio Period From April 1, 1996 Ending Ratio - -------------------------------- ----- June 30, 1996 2.50 September 30, 1996 3.00 December 31, 1996 3.00 4 Quarter Period Ending March 31, 1997 3.00 June 30, 1997 3.25 September 30, 1997 3.50 December 31, 1997 3.50 March 31, 1998 4.00 June 30, 1998 4.00 September 30, 1998 4.00 December 31, 1998 4.00 March 31, 1999 4.00 June 30, 1999 2.00 September 30, 1999 2.00 December 31, 1999 2.00 March 31, 2000 2.00 June 30, 2000 2.25 September 30, 2000 2.25 December 31, 2000 2.25 March 31, 2001 2.50 June 30, 2001 2.50 September 30, 2001 2.50 December 31, 2001 2.50 March 31, 2002 2.80 June 30, 2002 2.80 September 30, 2002 2.80 December 31, 2002 2.80 March 31, 2003 3.00
EX-10.4 22 SECURITY AGREEMENT EXHIBIT 10.4 SECURITY AGREEMENT dated as of March 13, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI", which term shall, after the Merger referred to in the Credit Agreement referred to below, include the surviving corporation in such Merger), each subsidiary of the Borrower listed on Schedule I hereto (each such subsidiary individually a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors"; the Subsidiary Guarantors, STFI and the Borrower are referred to collectively herein as the "Grantors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined herein). Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent") and (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent. The Lenders have agreed to make Loans to the Borrower, and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of STFI and the Subsidiary Guarantors has agreed to guarantee, among other things, all the obligations of the Borrower under the Credit Agreement. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Grantors of an agreement in the form hereof to secure (a) the due and punctual payment by the Borrower of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to this Agreement and the other Loan Documents and (d) the due and punctual payment and performance of all obligations of the Borrower under each Interest Rate Protection Agreement entered into with any counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations described in the preceding clauses (a) through (d) being collectively called the "Obligations"). Accordingly, the Grantors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agree as follows: ARTICLE I Definitions SECTION 1.01. Definition of Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement. SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the following terms shall have the following meanings: "Account Debtor" shall mean any person who is or who may become obligated to any Grantor under, with respect to or on account of an Account. "Accounts" shall mean any and all right, title and interest of any Grantor to payment for goods and services sold or leased, including any such right evidenced by chattel paper, whether due or to become due, whether or not it has been earned by performance, and whether now or hereafter acquired or arising in the future, including accounts receivable from Affiliates of the Grantors. "Accounts Receivable" shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired. "Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts and (g) Proceeds. "Copyright License" shall mean any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by any Grantor or which such Grantor otherwise has the right to license, or granting any right to such Grantor under any Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement. "Copyrights" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including 2 registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule II. "Credit Agreement" shall have the meaning assigned to such term in the preliminary statement of this Agreement. "Documents" shall mean all instruments, files, records, ledger sheets and documents covering or relating to any of the Collateral. "Equipment" shall mean all equipment, furniture and furnishings, and all tangible personal property similar to any of the foregoing, including tools, parts and supplies of every kind and description, and all improvements, accessions or appurtenances thereto, that are now or hereafter owned by any Grantor. The term Equipment shall include Fixtures. "Fixtures" shall mean all items of Equipment, whether now owned or hereafter acquired, of any Grantor that become so related to particular real estate that an interest in them arises under any real estate law applicable thereto. "General Intangibles" shall mean all choses in action and causes of action and all other assignable intangible personal property of any Grantor of every kind and nature (other than Accounts Receivable) now owned or hereafter acquired by any Grantor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Interest Rate Protection Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts Receivable. "Intellectual Property" shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing. "Inventory" shall mean all goods of any Grantor, whether now owned or hereafter acquired, held for sale or lease, or furnished or to be furnished by any Grantor under contracts of service, or consumed in any Grantor's business, including raw materials, intermediates, work in process, packaging materials, finished goods, semi-finished inventory, scrap inventory, manufacturing supplies and spare parts, and all such goods that have been returned to or repossessed by or on behalf of any Grantor. "License" shall mean any Patent License, Trademark License, Copyright License or other license or sublicense to which any Grantor is a party, including those listed on Schedule III (other than those license agreements in existence on the date hereof and listed on Schedule III and those license agreements entered into after the date hereof, which by their terms prohibit assignment or a grant of a security interest by such Grantor as licensee thereunder). The Secured Parties shall have a security interest in all authorizations issued by the Federal Communications Commission ("FCC") or any state or 3 local regulatory agency to the maximum extent permitted by law, including, without limitation, the right to receive all proceeds derived from or in connection with the sale, assignment or transfer of such authorizations. "Obligations" shall have the meaning assigned to such term in the preliminary statement of this Agreement. "Patent License" shall mean any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement. "Patents" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, including those listed on Schedule IV, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein. "Perfection Certificate" shall mean a certificate substantially in the form of Annex 1 hereto, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer and the chief legal officer of the Borrower. "Proceeds" shall mean any consideration received from the sale, exchange, license, lease or other disposition of any asset or property that constitutes Collateral, any value received as a consequence of the possession of any Collateral and any payment received from any insurer or other person or entity as a result of the destruction, loss, theft, damage or other involuntary conversion of whatever nature of any asset or property which constitutes Collateral, and shall include, (a) any claim of any Grantor against any third party for (and the right to sue and recover for and the rights to damages or profits due or accrued arising out of or in connection with) (i) past, present or future infringement of any Patent now or hereafter owned by any Grantor, or licensed under a Patent License, (ii) past, present or future infringement or dilution of any Trademark now or hereafter owned by any Grantor or licensed under a Trademark License or injury to the goodwill associated with or symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past, present or future breach of any License and (iv) past, present or future infringement of any Copyright now or hereafter owned by any Grantor or licensed under a Copyright License and (b) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) the Fronting Banks, (e) each counterparty to an Interest Rate Protection Agreement entered into with the Borrower if such counterparty was a Lender at the time the Interest Rate Protection Agreement was entered into, (f) the beneficiaries of each indemnification obligation undertaken by any Grantor under any Loan Document and (g) the successors and assigns of each of the foregoing. "Security Interest" shall have the meaning assigned to such term in Section 2.01. 4 "Trademark License" shall mean any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement. "Trademarks" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, any State of the United States or any similar offices in any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule V, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill. SECTION 1.03. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. ARTICLE II Security Interest SECTION 2.01. Security Interest. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and transfers to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor's right, title and interest in, to and under the Collateral, whether now owned or any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (the "Security Interest"). Without limiting the foregoing, the Collateral Agent is hereby authorized to file one or more financing statements (including fixture filings), continuation statements, filings with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party. SECTION 2.02. No Assumption of Liability. The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral. 5 ARTICLE III Representations and Warranties The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that: SECTION 3.01. Title and Authority. Each Grantor has good and valid rights in and title to the Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval which has been obtained. SECTION 3.02. Filings. (a) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein is correct and complete. Fully executed Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Collateral have been delivered to the Collateral Agent for filing in each governmental, municipal or other office specified in Schedule 6 to the Perfection Certificate, which are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Collateral consisting of United States Patents, Trademarks and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. (b) Each Grantor shall ensure and represents and warrants that fully executed security agreements in the form hereof and containing a description of all Collateral consisting of Intellectual Property shall have been received and recorded within three months after the execution of this Agreement with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and within one month after the execution of this Agreement with respect to United States registered Copyrights for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. ss. 261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, or in any other necessary jurisdiction, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof). 6 SECTION 3.03. Validity of Security Interest. The Security Interest constitutes (a) a legal and valid security interest in all the Collateral securing the payment and performance of the Obligations, (b) subject to the filings described in Section 3.02 above, a perfected security interest in all Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (c) a security interest that shall be perfected in all Collateral in which a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the three month period (commencing as of the date hereof) pursuant to 35 U.S.C. ss. 261 or 15 U.S.C. ss. 1060 or the one month period (commencing as of the date hereof) pursuant to 17 U.S.C. ss. 205 and otherwise as may be required pursuant to the laws of any other necessary jurisdiction. The Security Interest is and shall be prior to any other Lien on any of the Collateral, other than Liens expressly permitted to be prior to the Security Interest pursuant to Section 6.02 of the Credit Agreement. SECTION 3.04. Absence of Other Liens. The Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement. The Grantor has not filed or consented to the filing of (a) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Collateral, (b) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (c) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement. ARTICLE IV Covenants SECTION 4.01. Change of Name; Location of Collateral; Records; Place of Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in writing of any change (i) in its corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in the location of its chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) in its identity or corporate structure or (iv) in its Federal Taxpayer Identification Number. Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral for which perfection or priority, as the case may be, may be established by any such filings. Each Grantor agrees promptly to notify the Collateral Agent if any material portion of the Collateral owned or held by such Grantor is damaged or destroyed. (b) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Collateral owned by it as is consistent with its current practices and 7 in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail satisfactory to the Collateral Agent showing the identity, amount and location of any and all Collateral. SECTION 4.02. Periodic Certification. Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to Section 5.04 of the Credit Agreement, the Borrower shall deliver to the Collateral Agent a certificate executed by a Financial Officer and the chief legal officer of the Borrower (a) setting forth the information required pursuant to Section 2 of the Perfection Certificate or confirming that there has been no change in such information since the date of such certificate or the date of the most recent certificate delivered pursuant to Section 4.02 and (b) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (a) above to the extent necessary to protect and perfect the Security Interest for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). Each certificate delivered pursuant to this Section 4.02 shall identify in the format of Schedule II, III, IV or V, as applicable, all Intellectual Property of any Grantor in existence on the date thereof and not then listed on such Schedules or previously so identified to the Collateral Agent. SECTION 4.03. Protection of Security. Each Grantor shall, at its own cost and expense, take any and all actions necessary to defend title to the Collateral against all persons and to defend the Security Interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement. SECTION 4.04. Further Assurances. Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent. Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule II, III, IV or V hereto or adding additional schedules hereto to specifically identify any asset or item that may constitute Copyrights, Licenses, Patents or Trademarks; provided, however, that any Grantor shall have the right, exercisable within 10 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its best efforts to take such action as 8 shall be necessary in order that all representations and warranties hereunder shall be true and correct with respect to such Collateral within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral. Each Grantor further agrees that if any authorization of such Grantor excluded from the Collateral pursuant to the final sentence of the definition of "License" could be included therein with the receipt of any approval of, or the taking of any action by, any Governmental Authority, such Grantor shall use its best efforts to obtain such approval or action as expeditiously as possible. SECTION 4.05. Inspection and Verification. The Collateral Agent and such persons as the Collateral Agent may reasonably designate shall have the right, at the Grantors' own cost and expense, to inspect the Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Collateral is located, to discuss the Grantors' affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Collateral, including, in the case of Accounts or Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party (it being understood that any such information shall be deemed to be "Information" subject to the provisions of Section 9.16 of the Credit Agreement). SECTION 4.06. Taxes; Encumbrances. At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral and not permitted pursuant to Section 6.02 of the Credit Agreement, and may pay for the maintenance and preservation of the Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this Section 4.06 shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents. SECTION 4.07. Assignment of Security Interest. If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other person to secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other person granting the security interest. SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance. SECTION 4.09. Use and Disposition of Collateral. None of the Grantors shall make 9 or permit to be made an assignment, pledge or hypothecation of the Collateral or shall grant any other Lien in respect of the Collateral, except as expressly permitted by Section 6.02 of the Credit Agreement. None of the Grantors shall make or permit to be made any transfer of the Collateral and each Grantor shall remain at all times in possession of the Collateral owned by it, except that (a) Inventory may be sold in the ordinary course of business and (b) unless and until the Collateral Agent shall notify the Grantors that an Event of Default shall have occurred and be continuing and that during the continuance thereof the Grantors shall not sell, convey, lease, assign, transfer or otherwise dispose of any Collateral (which notice may be given by telephone if promptly confirmed in writing), the Grantors may use and dispose of the Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Credit Agreement or any other Loan Document. Without limiting the generality of the foregoing, each Grantor agrees that it shall not permit any Inventory to be in the possession or control of any warehouseman, bailee, agent or processor at any time unless such warehouseman, bailee, agent or processor shall have been notified of the Security Interest and shall have agreed in writing to hold the Inventory subject to the Security Interest and the instructions of the Collateral Agent and to waive and release any Lien held by it with respect to such Inventory, whether arising by operation of law or otherwise. SECTION 4.10. Limitation on Modification of Accounts. None of the Grantors will, without the Collateral Agent's prior written consent, grant any extension of the time of payment of any of the Accounts Receivable, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged. SECTION 4.11. Insurance. The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment in accordance with Section 5.02 of the Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this Section 4.11, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby. SECTION 4.12. Legend. Each Grantor shall legend, in form and manner satisfactory to the Collateral Agent, its Accounts Receivable and its books, records and documents evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts Receivable have been assigned to the Collateral Agent for the benefit of the Secured Parties and that the Collateral Agent has a security interest therein. 10 SECTION 4.13. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not, nor will it permit any of its licensees to, do any act, or omit to do any act, whereby any Patent which is material to the conduct of such Grantor's business may become invalidated or dedicated to the public, and agrees that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws. (b) Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor's business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights. (c) Each Grantor (either itself or through licensees) will, for each work covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws. (d) Each Grantor shall notify the Collateral Agent immediately if it knows or has reason to know that any Patent, Trademark or Copyright material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor's ownership of any Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same. (e) In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly informs the Collateral Agent, and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Collateral Agent's security interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable. (f) Each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor's business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties. 11 (g) In the event that any Grantor has reason to believe that any Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor's business has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Collateral. (h) Upon and during the continuance of an Event of Default, each Grantor shall use its best efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all of such Grantor's right, title and interest thereunder to the Collateral Agent or its designee. ARTICLE V Power of Attorney Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor's true and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent shall have the right, with power of substitution for each Grantor and in each Grantor's name or otherwise, for the use and benefit of the Collateral Agent and the Secured Parties, upon the occurrence and during the continuance of an Event of Default (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) subject to the mandatory requirements of applicable law, to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes, including assigning any contract to any Subsidiary or any other person at any time during the continuance of any Event of Default; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any Secured Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any Secured Party, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby, and no action taken or omitted to be taken by the Collateral Agent or any Secured Party with respect to the Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of any Grantor or to any claim or action against the Collateral Agent or any Secured Party. It is understood and agreed that the appointment of 12 the Collateral Agent as the agent and attorney-in-fact of the Grantors for the purposes set forth above is coupled with an interest and is irrevocable. The provisions of this Article V shall in no event relieve any Grantor of any of its obligations hereunder or under any other Loan Document with respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or any Secured Party to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any Secured Party of any other or further right which it may have on the date of this Agreement or hereafter, whether hereunder, under any other Loan Document, by law or otherwise. ARTICLE VI Remedies SECTION 6.01. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Collateral by the applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any such Collateral throughout the universe on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Collateral and without liability for trespass to enter any premises where the Collateral may be located for the purpose of taking possession of or removing the Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall give the Grantors 10 days' written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, 13 or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply the proceeds of any collection or sale of the Collateral, as well as any Collateral consisting of cash, as follows: FIRST, to the payment of all costs and expenses incurred by the Administrative Agent or the Collateral Agent (in its capacity as such hereunder or under any other Loan Document) in connection with such collection or sale or otherwise in connection with this Agreement or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and THIRD, to the Grantors, their successors or assigns, or as a court of competent 14 jurisdiction may otherwise direct. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 6.03. Grant of License to Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Article at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sub-license any of the Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any license, sub-license or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default. ARTICLE VII Miscellaneous SECTION 7.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Guarantor shall be given to it at its address or telecopy number set forth on Schedule I, with a copy to the Borrower. SECTION 7.02. Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest and all obligations of the Grantors hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement. SECTION 7.03. Survival of Agreement. All covenants, agreements, representations and warranties made by any Grantor herein and in the certificates or other instruments prepared or 15 delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the making by the Lenders of the Loans, and the execution and delivery to the Lenders of any notes evidencing such Loans, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect until this Agreement shall terminate. SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder. SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. (a) Each Grantor jointly and severally agrees to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, disbursements and other charges of its counsel and of any experts or agents, which the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from or other realization upon any of the Collateral, (iii) the exercise, enforcement or protection of any of the rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to perform or observe any of the provisions hereof. (b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees against, and hold each of them harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable fees, disbursements and other charges of counsel, incurred by or asserted against any of them arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating hereto or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.06 shall remain 16 operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any Lender. All amounts due under this Section 7.06 shall be payable on written demand therefor. SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the Collateral Agent, the Fronting Banks, the Administrative Agent and the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or any other Loan Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Grantor in any case shall entitle such Grantor or any other Grantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement. SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09. SECTION 7.10. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 17 SECTION 7.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract (subject to Section 7.04), and shall become effective as provided in Section 7.04. Delivery of an executed signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. SECTION 7.12. Headings. Article and Section headings used herein are for the purpose of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent, the Administrative Agent, the Fronting Banks or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Grantor or its properties in the courts of any jurisdiction. (b) Each Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement will affected the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 7.14. Termination. This Agreement and the Security Interest shall terminate when all the Obligations have been indefeasibly paid in full, the Lenders have no further commitment to lend, the L/C Exposure has been reduced to zero and the Fronting Banks have no further commitment to issue Letters of Credit under the Credit Agreement, at which time the Collateral Agent shall execute and deliver to the Grantors, at the Grantors' expense, all Uniform Commercial Code termination statements and similar documents which the Grantors shall reasonably request to evidence such termination. Any execution and delivery of termination statements or documents pursuant to this Section 7.14 shall be without recourse to or warranty by the Collateral Agent. A Subsidiary Guarantor shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Subsidiary Guarantor shall be automatically released in the event that all the capital stock of such Subsidiary Guarantor shall be sold, transferred or otherwise disposed of to a person that is not an Affiliate of the Borrower in accordance with the terms of the Credit Agreement; provided that the Required Lenders shall have consented to such sale, transfer or other disposition (to the extent required 18 by the Credit Agreement) and the terms of such consent did not provide otherwise. SECTION 7.15. Additional Grantors. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 2 hereto, such Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SHARED TECHNOLOGIES FAIRCHILD INC., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer MULTI-TENANT SERVICES, INC., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer BOSTON TELECOMMUNICATIONS GROUP, INC., d/b/a BOSTON TELECOMMUNICATIONS COMPANY, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer 19 FINANCIAL PLACE COMMUNICATIONS COMPANY, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer of Shared Technologies Fairchild Inc., its General Partner STI INTERNATIONAL, INC., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer OFFICE TELEPHONE MANAGEMENT, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer VSI CORPORATION, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer CREDIT SUISSE, as Collateral Agent, by /s/ Kathleen D. O'Brien Name: Kathleen D. O'Brien Title: Member of Senior Management by /s/ Will Ziglar Name: Will Ziglar Title: Associate 20 SCHEDULE I SUBSIDIARY GUARANTORS 21 SCHEDULE II COPYRIGHTS 22 SCHEDULE III LICENSES 23 SCHEDULE IV PATENTS 24 SCHEDULE V TRADEMARKS 25 Annex 1 to the Security Agreement [Form Of] PERFECTION CERTIFICATE Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, as documentation agent (individually and collectively in such capacity, the "Documentation Agent"), (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent. The undersigned, a Financial Officer and a Legal Officer, respectively, of STFI, hereby certify to the Collateral Agent and each other Secured Party as follows: 1. Names. (a) The exact corporate name of each Grantor, as such name appears in its respective certificate of incorporation, is as follows: (b) Set forth below is each other corporate name each Grantor has had in the past five years, together with the date of the relevant change: (c) Except as set forth in Schedule 1 hereto, no Grantor has changed its identity or corporate structure in any way within the past five years. Changes in identity or corporate structure would include mergers, consolidations and acquisitions, as well as any change in the form, nature or jurisdiction of corporate organization. If any such change has occurred, include in Schedule 1 the information required by Sections 1 and 2 of this certificate as to each acquiree or constituent party to a merger or consolidation. (d) The following is a list of all other names (including trade names or similar appellations) used by each Grantor or any of its divisions or other business units in connection with the conduct of its business or the ownership of its properties at any time during the past five years: (e) Set forth below is the Federal Taxpayer Identification Number of each Grantor: 2. Current Locations. (a) The chief executive office of each Grantor is located at the address set forth opposite its name below: Grantor Mailing Address County State (b) Set forth below opposite the name of each Grantor are all locations where such Grantor maintains any books or records relating to any Accounts Receivable (with each location at which chattel paper, if any, is kept being indicated by an "*"): Grantor Mailing Address County State (c) Set forth below opposite the name of each Grantor are all the places of business of such Grantor not identified in paragraph (a) or (b) above: Grantor Mailing Address County State (d) Set forth below opposite the name of each Grantor are all the locations where such Grantor maintains any Collateral not identified above: Grantor Mailing Address County State (e) Set forth below opposite the name of each Grantor are the names and addresses of all persons other than such Grantor that have possession of any of the Collateral of such Grantor: Grantor Mailing Address County State 3. Unusual Transactions. All Accounts Receivable have been originated by the Grantors and all Inventory has been acquired by the Grantors in the ordinary course of business. 4. File Search Reports. Attached hereto as Schedule 4(A) are true copies of file search reports from the Uniform Commercial Code filing offices where filings described in Section 3.19 of the Credit Agreement are to be made. Attached hereto as Schedule 4(B) is a true copy of each financing statement or other filing identified in such file search reports. 5. UCC Filings. Duly signed financing statements on Form UCC-1 in substantially the form of Schedule 5 hereto have been prepared for filing in the Uniform Commercial Code filing office in each jurisdiction where a Grantor has Collateral as identified in Section 2 hereof. 6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule setting forth, with respect to the filings described in Section 5 above, each filing and the filing office in which such filing is to be made. 7. Filing Fees. All filing fees and taxes payable in connection with the filings described in Section 5 above have been paid. 2 8. Stock Ownership. Attached hereto as Schedule 8 is a true and correct list of all the duly authorized, issued and outstanding stock of each Subsidiary and the record and beneficial owners of such stock. Also set forth on Schedule 8 is each equity Investment of STFI and each Subsidiary that represents 50% or less of the equity of the entity in which such investment was made. 9. Notes. Attached hereto as Schedule 9 is a true and correct list of all notes held by STFI and each Subsidiary and all intercompany notes between STFI and each Subsidiary of STFI and between each Subsidiary of STFI and each other such Subsidiary. 10. Advances. Attached hereto as Schedule 10 is (a) a true and correct list of all advances made by STFI to any Subsidiary of STFI or made by any Subsidiary of STFI to STFI or any other Subsidiary of STFI, which advances will be on and after the date hereof evidenced by one or more intercompany notes pledged to the Collateral Agent under the Pledge Agreement, and (b) a true and correct list of all unpaid intercompany transfers of goods sold and delivered by or to STFI or any Subsidiary of STFI. 11. Mortgage Filings. Attached hereto as Schedule 11 is a schedule setting forth, with respect to each Mortgaged Property, (i) the exact corporate name of the corporation that owns such property as such name appears in its certificate of incorporation, (ii) if different from the name identified pursuant to clause (i), the exact name of the current record owner of such property reflected in the records of the filing office for such property identified pursuant to the following clause and (iii) the filing office in which a Mortgage with respect to such property must be filed or recorded in order for the Collateral Agent to obtain a perfected security interest therein. IN WITNESS WHEREOF, the undersigned have duly executed this certificate on this [ ] day of [ ]. SHARED TECHNOLOGIES INC., by Name: Title: [Financial Officer] by Name: Title: [Legal Officer] 3 Annex 2 to the Security Agreement SUPPLEMENT NO. __ dated as of , to the Security Agreement dated as of March 12, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), SHARED TECHNOLOGIES INC., a Delaware corporation ("STFI"), each subsidiary of the Borrower listed on Schedule I thereto (each such subsidiary individually a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors"; the Subsidiary Guarantors, STFI and the Borrower are referred to collectively herein as the "Grantors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined herein). A. Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent") and (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement and the Credit Agreement. C. The Grantors have entered into the Security Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit. Section 7.15 of Security Agreement provides that additional Subsidiaries of STFI, the Borrower and the Subsidiaries may become Grantors under the Security Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Grantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under the Security Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Grantor agree as follows: SECTION 1. In accordance with Section 7.15 of the Security Agreement, the New Grantor by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Grantor, as security for the payment and performance in full of the Obligations (as defined in the Security Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Grantor's right, title and interest in and to the Collateral (as defined in the Security Agreement) of the New Grantor. Each reference to a "Grantor" in the Security Agreement shall be deemed to include the New Grantor. The Security Agreement is hereby incorporated herein by reference. SECTION 2. The New Grantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Grantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. The New Grantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Grantor and (b) set forth under its signature hereto, is the true and correct location of the chief executive office of the New Grantor. SECTION 5. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect. SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Security Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Security Agreement. All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature below. 2 SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly executed this Supplement to the Security Agreement as of the day and year first above written. [Name Of New Grantor], by Name: Title: Address: CREDIT SUISSE, as Collateral Agent, by Name: Title: by Name: Title: 3 SCHEDULE I to Supplement No.___ to the Security Agreement LOCATION OF COLLATERAL Description Location EX-10.5 23 PLEDGE AGREEMENT EXHIBIT 10.5 CONFORMED COPY PLEDGE AGREEMENT dated as of March 13, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI", which term shall, after the Merger referred to in the Credit Agreement referred to below, include the surviving corporation in such Merger), each Subsidiary of the Borrower listed on Schedule I hereto (each such Subsidiary individually a "Subsidiary Pledgor" and collectively, the "Subsidiary Pledgors"; the Borrower, STFI and the Subsidiary Pledgors are referred to collectively herein as the "Pledgors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"), (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"; and, collectively with the Parent Guarantee Agreement, the "Guarantee Agreements") among the Subsidiary Pledgors and the Collateral Agent. The Lenders have agreed to make Loans to the Borrower and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. STFI and the Subsidiary Guarantors have agreed to guarantee, among other things, all the obligations of the Borrower under the Credit Agreement. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Pledgors of a Pledge Agreement in the form hereof to secure (a) the due and punctual payment by the Borrower of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of STFI under or pursuant to the Parent Guarantee Agreement or the other Loan Documents, (d) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of each Subsidiary Pledgor under or pursuant to the Subsidiary Guarantee Agreement or the other Loan Documents and (e) the due and punctual payment and performance of all obligations of the Borrower under each Interest Rate Protection Agreement entered into with any counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (e) being referred to collectively as the "Obligations"). Capitalized terms used herein and not defined herein shall have meanings assigned to such terms in the Credit Agreement. Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agree as follows: SECTION 1. Pledge. As security for the payment and performance, as the case may be, in full of the Obligations, each Pledgor hereby transfers, grants, bargains, sells, conveys, hypothecates, pledges, sets over and delivers unto the Collateral Agent, its successors and assigns, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in all of the Pledgor's right, title and interest in, to and under (a) the shares of capital stock owned by it and listed on Schedule II hereto and any shares of capital stock obtained in the future by the Pledgor and the certificates representing all such shares (the "Pledged Stock"); provided that the Pledged Stock shall not include, to the extent that applicable law requires that a subsidiary of the Pledgor issue directors' qualifying shares, such qualifying shares; (b)(i) the debt securities listed opposite the name of the Pledgor on Schedule II hereto, (ii) any debt securities in the future issued to the Pledgor and (iii) the promissory notes and any other instruments evidencing such debt securities (the "Pledged Debt Securities"); (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms hereof; (d) subject to Section 5, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed, in respect of, in exchange for or upon the conversion of the securities referred to in clauses (a) and (b) above; (e) subject to Section 5, all rights and privileges of the Pledgor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the "Collateral"). Upon delivery to the Collateral Agent, (a) any stock certificates, notes or other securities now or hereafter included in the Collateral (the "Pledged Securities") shall be accompanied by undated stock powers duly executed in blank or other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (b) all other property comprising part of the Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities theretofore and then being pledged hereunder, which schedule shall be attached hereto as Schedule II and made a part hereof. Each schedule so delivered shall supersede any prior schedules so delivered. TO HAVE AND TO HOLD the Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth. SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly to deliver 2 or cause to be delivered to the Collateral Agent any and all Pledged Securities, and any and all certificates or other instruments or documents representing the Collateral. (b) Each Pledgor will cause any Indebtedness for borrowed money owed to the Pledgor by any person to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent pursuant to the terms thereof. SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby represents, warrants and covenants, as to itself and the Collateral pledged by it hereunder, to and with the Collateral Agent that: (a) the Pledged Stock represents that percentage as set forth on Schedule II of the issued and outstanding shares of each class of the capital stock of the issuer with respect thereto; (b) except for the security interest granted hereunder, the Pledgor (i) is and will at all times continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Collateral, other than pursuant hereto, and (iv) subject to Section 5, will cause any and all Collateral, whether for value paid by the Pledgor or otherwise, to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder; (c) the Pledgor (i) has the power and authority to pledge the Collateral in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than the Lien created by this Agreement), however arising, of all persons whomsoever; (d) no consent of any other person (including stockholders or creditors of any Pledgor) and no consent or approval of any Governmental Authority or any securities exchange was or is necessary to the validity of the pledge effected hereby; (e) by virtue of the execution and delivery by the Pledgors of this Agreement, when the Pledged Securities, certificates or other documents representing or evidencing the Collateral are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a valid and perfected first lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations; (f) the pledge effected hereby is effective to vest in the Collateral Agent, on behalf of the Secured Parties, the rights of the Collateral Agent in the Collateral as set forth herein; (g) all of the Pledged Stock has been duly authorized and validly issued and is fully paid and nonassessable; (h) all information set forth herein relating to the Pledged Stock is accurate and complete in all material respects as of the date hereof; and 3 (i) the pledge of the Pledged Stock pursuant to this Agreement does not violate Regulation G, T, U or X of the Federal Reserve Board or any successor thereto as of the date hereof. SECTION 4. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent. Each Pledgor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and until an Event of Default shall have occurred and be continuing: (i) Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such Pledgor will not be entitled to exercise any such right if the result thereof could materially and adversely affect the rights inuring to a holder of the Pledged Securities or the rights and remedies of any of the Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same. (ii) The Collateral Agent shall execute and deliver to each Pledgor, or cause to be executed and delivered to each Pledgor, all such proxies, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above and to receive the cash dividends it is entitled to receive pursuant to subparagraph (iii) below. (iii) Each Pledgor shall be entitled to receive and retain any and all cash dividends, interest and principal paid on the Pledged Securities to the extent and only to the extent that such cash dividends, interest and principal are permitted by, and otherwise paid in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws. All noncash dividends, interest and principal, and all dividends, interest and principal paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid-in surplus, and all other distributions (other than distributions referred to in the preceding sentence) made on or in respect of the Pledged Securities, whether paid or payable in cash or otherwise, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and, if received by any Pledgor, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral 4 Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement). (b) Upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to dividends, interest or principal that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest or principal. All dividends, interest or principal received by the Pledgor contrary to the provisions of this Section 5 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Pledgor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 7. After all Events of Default have been cured or waived, the Collateral Agent shall, within five Business Days after all such Events of Default have been cured or waived, repay to each Pledgor all cash dividends, interest or principal (without interest), that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) above and which remain in such account. (c) Upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 5, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights; provided further that, notwithstanding the foregoing, all voting and consensual rights and powers shall remain with the Pledgor pending receipt of any necessary approval of the Federal Communications Commission ("FCC") of any assignment of transfer of control of the FCC licenses held by the Borrower or any Subsidiary. After all Events of Default have been cured or waived, such Pledgor will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above. SECTION 6. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, subject to applicable regulatory and legal requirements, the Collateral Agent may sell the Collateral, or any part thereof, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby waive all rights of redemption, stay, valuation and appraisal any Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. 5 The Collateral Agent shall give a Pledgor 10 days' prior written notice (which each Pledgor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of such Pledgor's Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid in full by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Section 6, any Secured Party may bid for or purchase, free from any right of redemption, stay or appraisal on the part of any Pledgor (all said rights being also hereby waived and released), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to it from such Pledgor as a credit against the purchase price, and it may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to such Pledgor therefor. For purposes hereof, (a) a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof, (b) the Collateral Agent shall be free to carry out such sale pursuant to such agreement and (c) such Pledgor shall not be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 6 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions. SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of Collateral pursuant to Section 6, as well as any Collateral consisting of cash, shall be applied by the Collateral Agent as follows: FIRST, to the payment of all costs and expenses incurred by the Collateral Agent in connection with such sale or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the reasonable fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Loan Document on behalf of any Pledgor and any other 6 costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and THIRD, to the Pledgors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor agrees to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, other charges and disbursements of its counsel and of any experts or agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent hereunder or (iv) the failure by such Pledgor to perform or observe any of the provisions hereof. (b) Without limitation of its indemnification obligations under the other Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the Indemnitees (as defined in Section 9.05 of the Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, other charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby or (ii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) Any amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 8 shall remain operative and in full force and effect regardless of the termination of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. 7 All amounts due under this Section 8 shall be payable on written demand therefor and shall bear interest at the rate specified in Section 2.06 of the Credit Agreement. SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent's name or in the name of such Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral, to endorse checks, drafts, orders and other instruments for the payment of money payable to the Pledgor representing any interest or dividend or other distribution payable in respect of the Collateral or any part thereof or on account thereof and to give full discharge for the same, to settle, compromise, prosecute or defend any action, claim or proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer and to make any agreement respecting, or otherwise deal with, the same; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or wilful misconduct. SECTION 10. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or consent to any departure by any Pledgor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Pledgor in any case shall entitle such Pledgor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Collateral Agent and the Pledgor or Pledgors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement. SECTION 11. Securities Act, etc. In view of the position of the Pledgors in relation to the Pledged Securities, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect 8 being called the "Federal Securities Laws") with respect to any disposition of the Pledged Securities permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Securities, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Securities could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Securities under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Pledgor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Securities, limit the purchasers to those who will agree, among other things, to acquire such Pledged Securities for their own account, for investment, and not with a view to the distribution or resale thereof. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 11 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells. SECTION 12. Registration, etc. Each Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default hereunder, if for any reason the Collateral Agent desires to sell any of the Pledged Securities of the Borrower at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its best efforts to take or to cause the issuer of such Pledged Securities to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Collateral Agent to permit the public sale of such Pledged Securities. Each Pledgor further agrees to indemnify, defend and hold harmless the Collateral Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel (including, without limitation, reasonable fees and expenses to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to such Pledgor or the issuer of such Pledged Securities by the Collateral Agent or any other Secured Party expressly for use therein. Each Pledgor further agrees, upon such written request referred to above, to use its best efforts to qualify, file or register, or cause the issuer of such Pledged Securities to qualify, file or register, any of the Pledged Securities under the Blue Sky or other securities laws of such states as may be requested by the Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. Each Pledgor will bear all costs and 9 expenses of carrying out its obligations under this Section 12. Each Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 12 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 12 may be specifically enforced. SECTION 13. Regulatory Approval. Notwithstanding anything to the contrary contained herein, the Collateral Agent will not take any action pursuant to this Pledge Agreement that would constitute or result in any assignment of an FCC license or any change of control of the Borrower, any Subsidiary, any Unrestricted Subsidiary or any STFI Unrestricted Subsidiary subject to regulation by the FCC if such assignment of FCC license or change of control would require under then existing law (including the written rules and regulations promulgated by the FCC), the prior approval of the FCC, without first obtaining such approval of the FCC. Each Pledgor agrees after the occurrence of any Event of Default to take any action that the Collateral Agent may reasonably request in order to obtain and enjoy the full rights and benefits granted to the Collateral Agent by this Pledge Agreement and each other agreement, instrument and document delivered to the Collateral Agent in connection herewith or in any document evidencing or securing the collateral for any of the Obligations, including specifically, at the Pledgor's own cost and expense, the use of Pledgor's best efforts to assist in obtaining approval of the FCC or any applicable state regulatory authority for any action or transaction contemplated by this Pledge Agreement that is then required by law, and specifically, without limitation, upon request, to prepare, sign and file with the FCC or such state regulatory authority the assignor's or transferor's portion of any application or applications for consent to the assignment of license or transfer of control necessary or appropriate under the FCC's or such state regulatory authority's rules and regulations for approval of any Obligations secured hereby. SECTION 14. Security Interest Absolute. All rights of the Collateral Agent hereunder, the grant of a security interest in the Collateral and all obligations of each Pledgor hereunder, shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to any of the foregoing, (c) any exchange, release or nonperfection of any other collateral, or any release or amendment or waiver of or consent to or departure from any guaranty, for all or any of the Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Obligations or in respect of this Agreement (other than the indefeasible payment in full of all the Obligations). SECTION 15. Termination or Release. (a) This Agreement and the security interests granted hereby shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and the Fronting Banks have no further obligation to issue Letters of Credit under the Credit Agreement. (b) Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under the Credit Agreement to any person that is not a Pledgor, or, upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.08(b) of the Credit Agreement, the security interest in such Collateral shall be automatically 10 released. (c) In connection with any termination or release pursuant to paragraph (a) or (b), the Collateral Agent shall execute and deliver to any Pledgor, at such Pledgor's expense, all documents that such Pledgor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 14 shall be without recourse to or warranty by the Collateral Agent. SECTION 16. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Pledgor shall be given to it at the address for notices set forth on Schedule I, with a copy to the Borrower. SECTION 17. Further Assurances. Each Pledgor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments, as the Collateral Agent may at any time reasonably request in connection with the administration and enforcement of this Agreement or with respect to the Collateral or any part thereof or in order better to assure and confirm unto the Collateral Agent its rights and remedies hereunder. SECTION 18. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Pledgor that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. This Agreement shall become effective as to any Pledgor when a counterpart hereof executed on behalf of such Pledgor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Pledgor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Pledgor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Pledgor shall have the right to assign its rights hereunder or any interest herein or in the Collateral (and any such attempted assignment shall be void), except as expressly contemplated by this Agreement or the other Loan Documents. If all of the capital stock of a Pledgor is sold, transferred or otherwise disposed of to a person that is not an Affiliate of the Borrower pursuant to a transaction permitted by Section 6.05 of the Credit Agreement, such Pledgor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Pledgor and may be amended, modified, supplemented, waived or released with respect to any Pledgor without the approval of any other Pledgor and without affecting the obligations of any other Pledgor hereunder SECTION 19. Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by each Pledgor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Fronting Banks, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments and the L/C Commitments have not been terminated. 11 (b) In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 20. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 21. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute a single contract, and shall become effective as provided in Section 18. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 22. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting this Agreement. SECTION 23. Jurisdiction; Consent to Service of Process. (a) Each Pledgor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Pledgor or its properties in the courts of any jurisdiction. (b) Each Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 15. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 12 SECTION 24. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 25. Additional Pledgors. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not a Subsidiary on the date of the Credit Agreement is required to enter in this Agreement as a Subsidiary Pledgor upon becoming a Subsidiary if such Subsidiary owns or possesses property of a type that would be considered Collateral hereunder. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Subsidiary Pledgor hereunder with the same force and effect as if originally named as a Subsidiary Pledgor herein. The execution and delivery of such instrument shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary Pledgor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SHARED TECHNOLOGIES FAIRCHILD INC., by____________________________ /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., by___________________________ /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer 13 MULTI-TENANT SERVICES, INC., by__________________________ /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer BOSTON TELECOMMUNICATIONS GROUP, INC. d/b/a BOSTON TELECOMMUNICATIONS COMPANY, by__________________________ /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer FINANCIAL PLACE COMMUNICATIONS COMPANY, by__________________________ /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer of Shared Technologies Fairchild Inc., its General Partner STI INTERNATIONAL, INC., by__________________________ /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer OFFICE TELEPHONE MANAGEMENT, by__________________________ /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer VSI CORPORATION, by_________________________ /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer 14 CREDIT SUISSE, as Collateral Agent, by_________________________ /s/ Kathleen D. O'Brien Name: Kathleen D. O'Brien Title: Member of Senior Management by_________________________ /s/ Will Ziglar Name: Will Ziglar Title: Associate 15 SUBSIDIARY PLEDGORS Name Address 16 CAPITAL STOCK Schedule II to the Pledge Agreement Number of Registered Number and Class Percentage Issuer Certificate Owner of Shares of Shares DEBT SECURITIES Principal Date of Maturity Issuer Amount Note Date 17 Annex 1 to the Pledge Agreement SUPPLEMENT NO. dated as of , to the PLEDGE AGREEMENT dated as of March 13, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI", which term shall, after the Merger referred to in the Credit Agreement referred to below, include the surviving corporation in such Merger), each Subsidiary of the Borrower listed on Schedule I hereto (each such Subsidiary individually a "Subsidiary Pledgor" and collectively, the "Subsidiary Pledgors"; the Borrower, STFI and the Subsidiary Pledgors are referred to collectively herein as the "Pledgors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). A. Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"), (b) the Parent Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Subsidiary Guarantee Agreement"; and, collectively with the Parent Guarantee Agreement, the "Guarantee Agreements") among the Subsidiary Pledgors and the Collateral Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. C. The Pledgors have entered into the Pledge Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not a Subsidiary on the date of the Credit Agreement is required to enter into the Pledge Agreement as a Subsidiary Pledgor upon becoming a Subsidiary if such Subsidiary owns or possesses property of a type that would be considered Collateral under the Pledge Agreement. Section 25 of the Pledge Agreement provides that such Subsidiaries may become Subsidiary Pledgors under the Pledge Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Pledgor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Pledgor under the Pledge Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Pledgor agree as follows: SECTION 1. In accordance with Section 25 of the Pledge Agreement, the New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with the same force and effect as if originally named therein as a Pledgor and the New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Pledgor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Pledgor, as security for the payment and performance in full of the Obligations (as defined in the Pledge Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Pledgor's right, title and interest in and to the Collateral (as defined in the Pledge Agreement) of the New Pledgor. Each reference to a "Subsidiary Pledgor" or a "Pledgor" in the Pledge Agreement shall be deemed to include the New Pledgor. The Pledge Agreement is hereby incorporated herein by reference. SECTION 2. The New Pledgor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Pledgor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. The New Pledgor hereby represents and warrants that set forth on Schedule I attached hereto is a true and correct schedule of all its Pledged Securities. SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement shall remain in full force and effect. SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Pledge Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 15 of the Pledge Agreement. All communications and notices hereunder to the New Pledgor shall be given to it at the address set forth under its signature hereto, with a copy to the Borrower. 2 SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly executed this Supplement to the Pledge Agreement as of the day and year first above written. [Name of New Pledgor], by_____________________ Name: Title: Address: CREDIT SUISSE, as Collateral Agent, by_____________________ Name: Title: by_____________________ Name: Title: 3 Schedule I to Supplement No. to the Pledge Agreement Pledged Securities of the New Pledgor CAPITAL STOCK Number of Registered Number and Class Percentage Issuer Certificate Owner of Shares of Shares DEBT SECURITIES Principal Date of Maturity Issuer Amount Note Date EX-10.6 24 PLEDGE AGREEMENT EXHIBIT 10.6 PLEDGE AGREEMENT PLEDGE AGREEMENT (the "Agreement"), dated as of March 13, 1996, made by RHI HOLDINGS, INC., a Delaware corporation ("Pledgor"), in favor of Gadsby & Hannah (the "Pledgee"). R E C I T A L S : A. Pursuant to the terms of an Agreement to Exchange 6% Cumulative Convertible Preferred Stock and Special Preferred Stock dated as of March 1, 1996 (the "Exchange Agreement") among Shared Technologies Inc. ("Shared Technologies"), The Fairchild Corporation ("TFC"), RHI and Fairchild Industries, Inc. (a wholly-owned subsidiary of RHI), RHI has received 250,000 shares of Series I 6% Cumulative Convertible Preferred Stock, par value $.01 per share (the "Convertible Preferred Stock"), of Shared Technologies and 200,000 shares of Series J Special Preferred Stock, par value $.01 per share (the "Special Preferred Stock" and, together with the Convertible Preferred Stock, the "Preferred Stock"). B. This Agreement is given by Pledgor in favor of Pledgee for the benefit of Shared Technologies to secure the payment and performance by the Indemnifying Parties (as hereinafter defined) of Indemnification Agreements dated the date hereof (the "Indemnification Agreements") between Shared Technologies and each of TFC, RHI, and Fairchild Holding Corp. (collectively, the "Indemnifying Parties"). A G R E E M E N T : NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Pledgee hereby agree as follows: SECTION 1. Pledge. As collateral security for the payment and performance when due of all of the Indemnifying Parties' obligations to Shared Technologies under the Indemnification Agreements (the "Secured Obligations"), Pledgor hereby pledges, assigns and grants to Pledgee for the benefit of and as agent for Shared Technologies, until this Agreement terminates, a continuing first priority security interest in and to all of the right, title and interest of Pledgor in shares of Preferred Stock of Shared Technologies described in Schedule I hereto (the "Pledged Shares"). The term "Pledged Collateral" shall mean (i) the Pledged Shares and all other securities or property -2- issued in exchange or as replacement for (by reason of merger, reorganization or otherwise) the Pledged Shares by the Company or a third party ("New Pledged Shares") and (ii) all other assets or property substituted for the Pledged Shares in accordance with Section 6 of this Agreement. SECTION 2. Delivery of Pledged Shares. The certificates representing the Pledged Shares, together with stock powers, are, concurrently with the execution of this Agreement, being delivered to Pledgee (and with respect to any New Pledged Shares will be promptly delivered to Pledgee when received by Pledgor) and will be held by Pledgee pursuant to and in accordance with the terms of this Agreement. SECTION 3. Voting Rights; Distributions; etc. (a) Pledgor shall be entitled to exercise any and all voting and other consensual rights (including rights to exercise) pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms or purpose of this Agreement. (b) Pledgor shall be entitled to receive and retain, and to utilize free and clear of the lien of this Agreement, any and all dividends or distributions made with respect to the Pledged Collateral, provided, however, if a Dispute Notice (as hereinafter defined) has been delivered, until there has been a resolution of the dispute to which such Dispute Notice relates, all dividends and distributions on the portion of Pledged Collateral required to satisfy Shared Technologies' claims under the relevant Dispute Notice, shall be delivered to and held by the Pledge Agent. Upon resolution of the dispute which is the subject of the Dispute Notice all dividends and distributions shall forthwith be delivered to the party in whose favor the dispute was resolved. (c) Pledgee shall be deemed without further action or formality to have granted to Pledgor all necessary consents relating to voting rights and shall, if necessary, upon written request of Pledgor, from time to time execute and deliver (or cause to be executed and delivered) to Pledgor all such instruments as Pledgor may reasonably request in order to permit Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 3(a) hereof and to receive the dividends and distributions which it is authorized to receive and retain pursuant to Section 3(b) hereof. SECTION 4. Other Liens. Pledgor shall not (i) sell, convey, assign or otherwise dispose of (except pursuant to Section 6), or grant any option, right or warrant with respect to, -3- any of the Pledged Collateral, or (ii) create or permit to exist any lien upon or with respect to any Pledged Collateral other than the lien and security interest granted to Pledgee for the benefit of Shared Technologies under this Agreement. SECTION 5. Cancellation of Pledged Shares upon Payment Default. In the event that Shared Technologies claims it is entitled to a payment from an Indemnifying Party in accordance with the terms of an Indemnification Agreement because of a payment that Shared Technologies has made or is then obligated to make to a third party and for which it is entitled to indemnification under the Indemnification Agreements, such Indemnifying Party shall have 30 days (the "Notice Period") from its receipt of written notice of such claim to pay to Shared Technologies the amount of such claim in cash or dispute responsibility for indemnification of such claim by delivering a written notice thereof to Shared Technologies (a "Dispute Notice"). In the event that such Indemnifying Party fails to pay any such claim or deliver a Dispute Notice within such 30- day period, Pledgee shall deliver to Shared Technologies, at Shared Technologies' request (a "Pledge Notice"), Pledged Shares or, if applicable, New Pledged Shares (in each case valued at their liquidation preference) in an amount equal to such claimed amount and Shared Technologies shall cancel the same and they will cease to be Pledged Collateral for all purposes of this Agreement. In the event of a claim subject to a Dispute Notice, upon settlement of such dispute, if the Indemnifying Party fails to pay the amount owing to Shared Technologies, if any, as a result of such settlement (the "Undisputed Claim Amount"), within 30 days thereof, Pledgee shall deliver to Shared Technologies, upon delivery to Pledgee of a Pledge Notice, Pledged Shares or, if applicable, New Pledged Shares (in each case valued at their liquidation preference) equal to the Undisputed Claim Amount and Shared Technologies shall cancel the same. Any such cancellation of Pledged Shares or New Pledged Shares pursuant to this Section 5 will be deemed to have satisfied the Indemnifying Party's obligations under the Indemnification Agreements for the claim to the extent of the liquidation preference of the Pledged Shares or New Pledged Shares so cancelled. The foregoing rights of Shared Technologies shall not obviate Shared Technologies' other available rights to seek indemnification payments from the Indemnifying Parties. SECTION 6. Substitution of Collateral. At its election, Pledgor may substitute property or assets owned by it for all or a portion of the Pledged Shares (or New Pledged Shares) so long as (i) the fair market value of such substitute property or assets is at least equal to the fair market value of the Pledged Shares (or New Pledged Shares) for which substitution is sought, as evidenced by the written opinion of an investment banking firm of nationally -4- recognized standing reasonably acceptable to Shared Technologies, (ii) such substitute property or assets are not subject to any other lien or security interest at the time of such substitution, (iii) Pledgor delivers to Pledgee such instruments and documents which are necessary for Pledgee to perfect a first priority lien on and security interest in such substitute property or assets and (iv) Pledgor, Pledgee and Shared Technologies shall have entered into such amendments or supplements to this Agreement as are reasonably requested by Pledgee and Shared Technologies in order to ensure Pledgee's rights and remedies hereunder with respect to such substituted property or assets. SECTION 7. Termination of Agreement; Release of Pledged Collateral. On the Termination Date, this Agreement shall terminate and Pledgee's and Shared Technologies' rights with respect to the Pledged Collateral shall terminate and Pledgee shall promptly deliver the certificates (or other property or assets) representing the Pledged Collateral to Pledgor, free and clear of any lien or encumbrance thereon. "Termination Date" means the later to occur of (i) the third anniversary of the date of this Agreement and (ii) the date on which the consolidated net worth (computed in accordance with generally accepted accounting principles) of The Fairchild Corporation at such time (as evidenced by an audited balance sheet delivered to Pledgee by Pledgor) is at least (x) $25 million greater than such net worth at September 30, 1995 (excluding for such purpose any value attributed to the Preferred Stock on such balance sheet) and (y) $225 million (including for such purpose the value of the Preferred Stock); provided that in the event of any outstanding claims under the Indemnification Agreements that are subject to a Dispute Notice, the Termination Date shall not be deemed to occur with respect to an amount of Pledged Collateral equal to the claim which is the subject of such Dispute Notice, until such dispute is resolved unless, as to any such claim, the appropriate Indemnifying Parties accept, by written agreement reasonably satisfactory to Shared Technologies, full and unconditional liability for such claim and agree to assume the defense thereof and full responsibility therefor (an "Assumption"). The foregoing provisions notwithstanding, in the event that a Pledge Notice has been delivered as to which Pledgor has not yet responded and the Notice Period has not yet expired, such claims shall be subject to the terms of the proviso of the preceding sentence until the earlier to occur of the payment by Pledgor of the Undisputed Claim Amount or delivery by Pledgor to Shared Technologies of an Assumption. SECTION 8. Continuing Security Interest; Assignment. This Agreement shall create a continuing security interest in the Pledged Shares and shall (i) be binding upon Pledgor, its successors and assigns, and (ii) inure, together with the rights -5- and remedies of each of Pledgee and Shared Technologies hereunder, to the benefit of each of Pledgee and Shared Technologies and their respective successors, transferees and assigns; no other Person (including, without limitation, any other creditor of Pledgor or Shared Technologies) shall have any interest herein or any right or benefit with respect hereto. SECTION 9. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. SECTION 10. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11. Execution in Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto 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 to be an original, but all such counterparts together shall constitute one and the same agreement. SECTION 12. Headings. The Section headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. SECTION 13. Arbitration. Any controversy, dispute or question arising out of or in connection with this Agreement, or the interpretation, performance or non-performance of this Agreement or any breach hereof, shall be determined by arbitration held in New York, in accordance with the then existing rules of the American Arbitration Association. Any decision or award of such arbitration shall be final, conclusive and binding on the parties hereto. Nothing contained herein shall in any way deprive either party of its right to obtain injunctions or other equitable relief, including preliminary relief pending arbitration. All costs and expenses (including counsel and expert witness fees) associated with any such arbitration shall be paid by the party adjudged by the arbitrator to be responsible for the costs. Any award rendered by an arbitrator shall be enforceable in any court of competent jurisdiction. -6- SECTION 14. Pledgee. Shared Technologies hereby appoints Gadsby & Hannah as its agent to act as its pledge agent with respect to the Pledged Collateral pursuant to this Agreement. The actions of Pledgee hereunder are subject to the provisions of this Agreement. Pledgee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of Pledged Collateral), in accordance with this Agreement. Pledgee may resign as long as Pledgee is replaced by a successor Pledgee approved by Pledgor and Shared Technologies. Upon the acceptance of any appointment as Pledgee by a successor Pledgee, that successor Pledgee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Pledgee under this Agreement, and the retiring Pledgee shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Pledgee's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Pledgee. SECTION 15. Notices. (a) Any notice or communication to any party hereto shall be duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), facsimile or overnight air courier guaranteeing next day delivery to such other party's address. If to RHI Holdings, Inc.: 300 West Service Road P.O. Box 10803 Chantilly, VA 22001 Facsimile No.: (703) 888-5674 Attention: Donald Miller, Esq. with a copy to: James J. Clark, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Facsimile No.: (212) 269-5420 -7- If to Shared Technologies Inc.: 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Facsimile No.: (203) 258-2401 Attention: Legal Department with a copy to: Walter D. Wekstein, Esq. Harold J. Carroll, Esq. Gadsby & Hannah 125 Summer Street Boston, MA 02110 Facsimile No.: (617) 345-7050 If to Gadsby & Hannah: 125 Summer Street Boston, MA 02110 Facsimile No.: (617) 345-7050 Walter D. Wekstein, Esq. Harold J. Carroll, Esq. Gadsby & Hannah 125 Summer Street Boston, MA 02110 Facsimile No.: (617) 345-7050 (b) All notices and communications will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, if mailed; when sent, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. SECTION 16. Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. -8- IN WITNESS WHEREOF, Pledgor has caused this Agreement to be executed and delivered by its duly authorized officer as of the date first above written. RHI HOLDINGS, INC., as Pledgor By: /s/ John Flynn ---------------------- Name: Title: GADSBY & HANNAH as Pledgee By: /s/ Marianne Gilleran ---------------------- Name: Title: SHARED TECHNOLOGIES INC. By: /s/ Vincent DiVincenzo ---------------------- Name: Title: SCHEDULE I Pledged Shares
CLASS PAR CERTIFICATE NUMBER ISSUER OF STOCK VALUE NO(S). 0F SHARES - ------ -------- ----- ------ --------- Shared Technologies Series I 6% $.01 1 235,000 Fairchild Inc. Cumulative Convertible Preferred Shared Technologies Series $.01 1 200,000 Fairchild Inc. Special Preferred
EX-10.7 25 PARENT GUARANTEE AGREEMENT EXHIBIT 10.7 CONFORMED COPY PARENT GUARANTEE AGREEMENT dated as of March 12, 1996, between SHARED TECHNOLOGIES INC., a Delaware corporation (the "Guarantor", which term shall, after the Merger referred to in the Credit Agreement referred to below, include the surviving corporation in such Merger) and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch, as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Shared Technologies Fairchild Communications Corp., a Delaware corporation (the "Borrower"), the Guarantor, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. As the owner of all of the issued and outstanding capital stock of the Borrower, the Guarantor acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders and the issuance of the Letters of Credit by the Fronting Banks. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Guarantor of a Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit, the Guarantor is willing to execute this Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents and (c) unless otherwise agreed upon in writing by the applicable Lender party thereto, all obligations of the Borrower, monetary or otherwise, under each Interest Rate Protection Agreement entered into with a counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). The Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. The Guarantor further agrees that (a) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VII of the Credit Agreement for the purposes of the Guarantor's guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (b) in the event of any declaration of acceleration of such obligations as provided in such Article VII, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purposes of this Section. SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, the Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of the Guarantor hereunder shall not be affected by (a) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other guarantor of the Obligations under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other guarantor of the Obligations or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or any other Secured Party. SECTION 3. Security. The Guarantor authorizes the Collateral Agent and each of the other Secured Parties to (a) take and hold security for the payment of this Guarantee and the Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may determine and (c) release or substitute any one or more endorsees, other guarantors or other obligors. SECTION 4. Guarantee of Payment. The Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person. SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of the Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any 2 other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of the Guarantor or that would otherwise operate as a discharge of the Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, the Guarantor waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor or exercise any other right or remedy available to them against the Borrower or any other guarantor, without affecting or impairing in any way the liability of the Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. To the fullest extent permitted by applicable law, the Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of the Guarantor against the Borrower or any other guarantor, as the case may be, or any security. SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against the Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, the Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent or such other Secured Party as designated thereby in cash the amount of such unpaid Obligations. Upon payment by the Guarantor of any sums to the Collateral Agent or any Secured Party as provided above, all rights of the Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by the Guarantor is hereby subordinated in right of payment to the prior payment in full of the Obligations. If any amount shall erroneously be paid to the Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Collateral Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 8. Information. The Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that the Guarantor assumes and incurs hereunder, and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise the Guarantor of information known to it or any of them regarding such circumstances or risks. SECTION 9. Termination. The Guarantee made hereunder (a) shall terminate when 3 all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and the Fronting Banks have no further obligation to issue Letters of Credit under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party or the Guarantor upon the bankruptcy or reorganization of the Borrower, the Guarantor or otherwise. SECTION 10. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantor that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective when a counterpart hereof executed on behalf of the Guarantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon the Guarantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of the Guarantor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that the Guarantor shall not have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). SECTION 11. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantor and the Collateral Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 13. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to the Guarantor shall be given to it at 100 Great Meadow Road Wethersfield, CT 06109, Attention of Chief Executive Officer. SECTION 14. Survival of Agreement. All covenants, agreements, representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be 4 considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Fronting Banks regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments and the L/C Commitment have not been terminated. SECTION 15. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 10. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 16. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SHARED TECHNOLOGIES INC., as Guarantor, by_______________________ /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer CREDIT SUISSE, as Collateral Agent, by_______________________ /s/ Kathleen D. O'Brien Name: Kathleen D. O'Brien Title: Member of Senior Management by_______________________ /s/ Will Ziglar Name: Will Ziglar Title: Associate 5 EX-10.8 26 SUBSIDIARY GUARANTEE AGREEMENT EXHIBIT 10.8 SUBSIDIARY GUARANTEE AGREEMENT dated as of March 13, 1996, among each of the subsidiaries listed on Schedule I hereto (each such subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), or SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI"), and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch, as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of the Guarantors is a wholly owned Subsidiary of the Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders, and the issuance of the Letters of Credit by the Fronting Banks. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Guarantors of a Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit, the Guarantors are willing to execute this Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents and (c) unless otherwise agreed upon in writing by the applicable Lender party thereto, all obligations of the Borrower, monetary or otherwise, under each Interest Rate Protection Agreement entered into with a counterparty that was a Lender at the time such Interest Rate Protection Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. Each Guarantor further agrees that (a) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VII of the Credit Agreement for the purposes of such Guarantor's guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in such Article VII, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section. Anything contained in this Agreement to the contrary notwithstanding, the obligations of each Guarantor hereunder shall be limited to a maximum aggregate amount equal to the greatest amount that would not render such Guarantor's obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any provisions of applicable state law (collectively, the "Fraudulent Transfer Laws"), in each case after giving effect to all other liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Guarantor (a) in respect of intercompany indebtedness to the Borrower or Affiliates of the Borrower to the extent that such indebtedness would be discharged in an amount equal to or offset by the amount paid by such Guarantor hereunder and (b) under any Guarantee of senior unsecured indebtedness or Indebtedness subordinated in right of payment to the Obligations which Guarantee contains a limitation as to maximum amount similar to that set forth in this paragraph, pursuant to which the liability of such Guarantor hereunder is included in the liabilities taken into account in determining such maximum amount) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights of such Guarantor pursuant to (i) applicable law or (ii) any agreement providing for an equitable allocation among such Guarantor and other Affiliates of the Borrower of obligations arising under Guarantees by such parties (including the Indemnity, Subrogation and Contribution Agreement). SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other Guarantor under this Agreement or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or any other Secured Party. SECTION 3. Security. Each of the Guarantors authorizes the Collateral Agent and each of the other Secured Parties, to (a) take and hold security for the payment of this Guarantee and the 2 Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may determine and (c) release or substitute any one or more endorsees, other guarantors of other obligors. SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person. SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, each of the Guarantors waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor or exercise any other right or remedy available to them against the Borrower or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each of the Guarantors waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or guarantor, as the case may be, or any security. SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent or such other Secured Party as designated thereby in cash the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Collateral 3 Agent or any Secured Party as provided above, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior payment in full of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Collateral Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 8. Information. Each of the Guarantors assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. SECTION 9. Representations and Warranties. Each of the Guarantors represents and warrants as to itself that all representations and warranties relating to it contained in the Credit Agreement are true and correct. SECTION 10. Termination. The Guarantees made hereunder (a) shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and the Fronting Banks have no further obligation to issue Letters of Credit under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Collateral Agent, and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Guarantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If all of the capital stock of a Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by Section 6.05 of the Credit Agreement, such Guarantor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder. 4 SECTION 12. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Collateral Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 14. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to each Guarantor shall be given to it at its address set forth in Schedule I with a copy to the Borrower. SECTION 15. Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Fronting Banks regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments and the L/C Commitment have not been terminated. (b) In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 16. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single 5 contract, and shall become effective as provided in Section 11. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 17. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Guarantor or its properties in the courts of any jurisdiction. (b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 14. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 19. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19. SECTION 20. Additional Guarantors. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence on the date of the Credit Agreement is required to enter into this Agreement as a Guarantor upon becoming a 6 Subsidiary. Upon execution and delivery after the date hereof by the Collateral Agent and such a Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. SECTION 21. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Secured Party to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Secured Party, irrespective of whether or not such Secured Party shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Secured Party under this Section 21 are in addition to other rights and remedies (including other rights of setoff) which such Secured Party may have. 7 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer MULTI-TENANT SERVICES, INC., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer BOSTON TELECOMMUNICATIONS GROUP, INC., d/b/a BOSTON TELECOMMUNICATIONS COMPANY, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer FINANCIAL PLACE COMMUNICATIONS COMPANY, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer of Shared Technologies Fairchild Inc., its General Partner STI INTERNATIONAL, INC., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer 8 OFFICE TELEPHONE MANAGEMENT, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer VSI CORPORATION, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer CREDIT SUISSE, as Collateral Agent, by /s/ Kathleen D. O'Brien Name: Kathleen D. O'Brien Title: Member of Senior Management by /s/ Will Ziglar Name: Will Ziglar Title: Associate 9 SCHEDULE I TO THE GUARANTEE AGREEMENT Guarantor Address Annex 1 to the Subsidiary Guarantee Agreement SUPPLEMENT NO. dated as of , to the Subsidiary Guarantee Agreement dated as of March 12, 1996, among each of the subsidiaries listed on Schedule I thereto (each such subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), or SHARED TECHNOLOGIES FAIRCHILD INC., a Delaware corporation ("STFI"), and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch, as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). A. Reference is made to the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guarantee Agreement and the Credit Agreement. C. The Guarantors have entered into the Guarantee Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not a Subsidiary on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary. Section 20 of the Guarantee Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guarantee Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guarantee Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a "Guarantor" in the Guarantee Agreement shall be deemed to include the New Guarantor. The Guarantee Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Guarantee Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section14 of the Guarantee Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Borrower. SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for its out-of-pocket expenses in connection with this Supplement, including the reasonable fees, disbursements and other charges of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly executed this Supplement to the Guarantee Agreement as of the day and year first above written. [Name Of New Guarantor], by Name: Title: Address: CREDIT SUISSE, as Collateral Agent, by Name: Title: by Name: Title: EX-10.9 27 AGREEMENT TO EXCHANGE EXHIBIT 10.9 AGREEMENT TO EXCHANGE 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK AND SPECIAL PREFERRED STOCK This AGREEMENT TO EXCHANGE SPECIAL PREFERRED STOCK dated as of March 1, 1996 ("Exchange Agreement"), is made by and among Fairchild Industries, Inc., a Delaware corporation ("Fairchild"), RHI Holdings, Inc., a Delaware corporation ("RHI"), The Fairchild Corporation, a Delaware corporation ("TFC"), and Shared Technologies Inc., a Delaware corporation ("Shared Technologies"). Terms not otherwise defined herein which are defined in that certain Agreement and Plan of Merger dated as of November 9, 1995, as amended by the First Amendment to Agreement and Plan of Merger dated as of February 2, 1996 (the "First Amendment"), as further amended by the Second Amendment to Agreement and Plan of Merger dated as of February 23, 1996 (the "Second Amendment"), as further amended by the Third Amendment to Agreement and Plan of Merger dated as of February 23, 1996 (the "Third Amendment"), including the exhibits and schedules thereto (the Agreement and Plan of Merger, as amended by the First Amendment, the Second Amendment and the Third Amendment, are referred to collectively herein as the "Merger Agreement") by and among Fairchild, RHI, TFC and Shared Technologies, shall have the same respective meanings herein as therein. WHEREAS, Section 3.1 of the Merger Agreement provides that RHI will be issued the 6% Cumulative Convertible Preferred Stock and the Special Preferred Stock of the Surviving Corporation which stock has been authorized by Shared Technologies' Board of Directors and designated as Series G and Series H respectively (the "Series G and Series H Stock"); and WHEREAS, the terms for such Series G and Series H Stock contain certain provisions which would be inconsistent with certain financing arrangements currently being negotiated by the Surviving Corporation; and WHEREAS, RHI has agreed to exchange the Series G and Series H Stock to be issued to it upon the consummation of the Merger for an equivalent number of shares of 6% Cumulative Convertible Preferred Stock and Special Preferred Stock which stock has also been authorized by Shared Technologies' Board of Directors and designated as Series I and Series J respectively (the "Series I and Series J Stock") containing such powers, designations, preferences and other rights, qualifications, restrictions and limitations as described herein (the "Exchange"). NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I POST-MERGER EXCHANGE OF PREFERRED STOCK 1.1 Immediately following the filing of the Certificate of Merger contemplated by Section 1.2 of the Merger Agreement, RHI shall surrender to the Surviving Corporation all of the shares of the Series G and Series H Stock issued to it in connection with the Merger in exchange for an equivalent number of shares of the Series I and Series J Stock. All shares of the Series G and Series H Stock and the Special Preferred Stock surrendered to the Surviving Corporation shall be canceled on the books and records of the Surviving Corporation. 1.2 The powers, designations, preferences and other rights, qualifications, restrictions and limitations of the Series I and Series J Stock shall be as set forth in the Designations thereof appended hereto as Annexes A and B. 1.3. Shared Technologies agrees that upon the Exchange, the representations, warranties and indemnifications made by Shared Technologies with respect to the Series G and Series H Stock in the Merger Agreement shall be applicable to the Series I and Series J Stock and Fairchild and TFC hereby agree that the Series I and Series J Stock will be substituted for the Series G and Series H Stock pursuant to the Pledge Agreement and all references to the Series G and Series H Stock in such Pledge Agreement, the Shareholders' Agreement and Indemnification Agreements shall be deemed to refer to the Series I and Series J Stock. 2 ARTICLE II PROVISIONS OF GENERAL APPLICATION 2.1 Any notice or communication to any party hereto shall be duly given if sent in the form and manner prescribed in the Merger Agreement. 2.2 This Exchange Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 2.3 This Exchange Agreement may be varied or amended only by written action of all of the parties hereto. This Exchange Agreement shall be governed by, and construed in accordance with laws of the State of Delaware without regard to principles of conflicts of laws. IN WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement to be executed by their duly authorized officers, all as of the day and year first above written. SHARED TECHNOLOGIES INC. THE FAIRCHILD CORPORATION By: /s/ Vincent DiVincenzo By: /s/ Michael T. Alcox ---------------------- -------------------- FAIRCHILD INDUSTRIES, INC. RHI HOLDINGS, INC. By: /s/ Michael T. Alcox By: /s/ Michael T. Alcox -------------------- -------------------- ACCEPTED AND AGREED TO BY: FAIRCHILD HOLDING CORP. By: /s/ Michael T. Alcox -------------------- 3 EX-10.10 28 SHAREHOLDERS' AGREEMENT EXHIBIT 10.10 ================================================================================ SHAREHOLDERS' AGREEMENT among SHARED TECHNOLOGIES INC. RHI HOLDINGS, INC. and ANTHONY D. AUTORINO ================================================================================ SHAREHOLDERS' AGREEMENT This SHAREHOLDERS' AGREEMENT (this "Agreement") is executed on March 13, 1996, by and among Shared Technologies Inc., a Delaware corporation (the "Company"), RHI Holdings Inc. ("RHI") and Anthony D. Autorino, shareholders of Shared Technologies Inc. (RHI and Anthony D. Autorino and their respective legal representatives, successors and assigns are referred to herein individually as a "Shareholder" and collectively as the "Shareholders"). WHEREAS, pursuant to the terms of an Agreement and Plan of Merger dated as of November 9, 1995, as amended (the "Merger Agreement") among the Company, The Fairchild Corporation, RHI and RHI's subsidiary, Fairchild Industries, Inc. ("FII"), FII is merging with and into the Company (the "Merger"); WHEREAS, each Shareholder owns as of the date hereof (after giving effect to the Merger) the number of shares of common stock, $.004 par value per share ("Common Stock"), of the Company set forth opposite such Shareholder's name on Schedule I; WHEREAS, the shares of Common Stock owned by the Shareholders represent approximately 47% of the issued and outstanding Common Stock of the Company; WHEREAS, the Shareholders and the Company deem it to be in their respective best interests to impose certain restrictions on, and to provide for certain rights and obligations in respect of, the shares of Common Stock owned by them or any interest therein, now or hereafter held by the Shareholders or the Company; NOW, THEREFORE, in consideration of the mutual promises, covenants, agreements and conditions made herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereto hereby agree as follows: ARTICLE I. RESTRICTIONS ON TRANSFERS AND PURCHASES BY THE SHAREHOLDERS 1.1. General Restrictions. (a) No share of Common Stock, Convertible Preferred Stock, any other capital stock or equity security (excluding the Special Preferred Stock) of the Company or any interest in any of the foregoing, owned as of the date hereof (beneficially or otherwise) by any Shareholder (the "Shares") shall be sold, -2- assigned, donated or transferred in any manner (collectively, a "Transfer"), except in accordance with this Agreement; provided, that the pledge or grant of a security interest in Shares, and any subsequent foreclosure thereof and sale or transfer resulting from such foreclosure, effected in good faith in a bona fide transaction with andddddds institutional lender, shall not constitute a Transfer and shall not be prevented by the terms of this Agreement. (b) Except for (i) Common Stock issuable upon conversion of Convertible Preferred Stock, or exercise of stock options, (ii) shares of Common Stock issued by the Company to RHI to satisfy indemnification obligations of the Company under the Merger Agreement and (iii) shares of Common Stock issued as a dividend or distribution to shareholders of the Company, no Shareholder shall purchase or acquire, directly or indirectly, any additional shares of Common Stock during the two-year period following the date of this Agreement without the prior approval of not less than 80% of the members of the Board of Directors of the Company. (c) Except for Transfers permitted by Section 1.2, no Shareholder shall Transfer any Shares during the two-year period following the date of this Agreement without the prior approval of not less than 80% of the members of the Board of Directors and full compliance with the Securities Act of 1933, as amended (the "Act"), and any applicable state securities laws. If the Board of Directors approves a Transfer within such two-year period after the date of this Agreement, the conditions of this Agreement, including, but not limited to this Article I, must be met. Every Transfer of Shares by a Shareholder pursuant to this paragraph shall be subject to the condition that the proposed transferee, if not already bound by this Agreement, shall first agree in writing, in form satisfactory to the Company, to be bound by the terms hereof. 1.2. Certain Permitted Transfers. (a) Notwithstanding any other provision of this Agreement, either Shareholder may, at any time following notice to the other Shareholder, Transfer any of his or her Shares or any interest therein to (i) an entity that is directly or indirectly controlled by such Shareholder or an affiliate of such Shareholder, (ii) his or her spouse, children, grandchildren or parents or a trust solely for the benefit of any such person or persons or (iii) to any other person not mentioned in clauses (i) and (ii) of this Section 1.2(a) as long as the aggregate of all such Transfers made by either Shareholder pursuant to this clause (iii) does not exceed 10% of the number of shares of Common Stock owned by such Shareholder as of the date of this Agreement, in each case without -3- the consent of any other party hereto and without first offering such Shares to any other party; provided, however, that such Transfer must be in full compliance with the Act, all applicable state securities laws. Every Transfer of Shares by a Shareholder pursuant to clauses (i) and (ii) of this paragraph shall be subject to the condition that the proposed transferee, if not already bound by this Agreement, shall first agree in writing, in form satisfactory to the Company, to be bound by the terms hereof. In addition, notwithstanding any other provision of this Agreement, shares of Common Stock, Convertible Preferred Stock or other capital stock or equity securities of the Company acquired by either Shareholder after the date of this Agreement (other than through the exercise of options or warrants or through the conversion of convertible securities outstanding as of the date hereof and other than shares received as a result of stock splits or stock dividends) shall not be subject to any of the provisions of Article I of this Agreement. 1.3. First Negotiation Rights. Subject to Sections 1.4 and 1.5, following the expiration of the two-year period after the date of this Agreement, a Shareholder may Transfer any or all Shares (or any interest therein) owned by it free and clear of all restrictions and other obligations imposed by this Agreement provided such Shareholder first complies with Section 1.3. If any Shareholder (for purposes of this Section 1.3, the "Offering Party") desires to Transfer all or any portion of the Shares (or any interest therein) held by such Offering Party, the Offering Party shall deliver written notice to the other parties hereto (the "Notice"), which Notice shall state the number of Shares (or interest therein) which the Offering Party owns and wishes to sell (the "Offered Shares"). By giving the Notice, the Offering Party shall be deemed to have granted to the other parties hereto an option to negotiate for the purchase of all of (but not less than all of) such shares at a price to be negotiated and agreed to (the "Negotiated Price") by the Offering Party and such other Shareholder for a 30-day period following the date of the Notice. 1.4. Take-Along Rights. (a) Notwithstanding Section 1.3 of this Agreement, neither Shareholder may effect a Transfer (or a series of related Transfers) of Shares (except for Transfers permitted by Section 1.2) constituting more than 50% of the Shares then owned by such Shareholder to one person or a related group of persons (other than Transfers effected by sales of Shares through underwriters in a -4- public offering or in the securities markets generally) (the "Section 1.4 Shares") without first complying with this Section 1.4. If either Shareholder (for purposes of this Section 1.4, the "Section 1.4 Offering Party") desires to Transfer the Section 1.4 Shares, such shareholder shall give written notice (the "Take-Along Notice") to the other Shareholder (the "Non-Selling Shareholder") stating (i) the name and address of the transferee (the "Non- Qualified Transferee"), and (ii) the price and terms upon which the Non-Qualified Transferee proposes to purchase the Section 1.4 Shares. The Non-Selling Shareholder shall have the irrevocable and exclusive option, but not the obligation (the "Take-Along Option"), to sell to the Non-Qualified Transferee, up to such number of Shares proposed to be sold by the Section 1.4 Offering Party (the "Included Shares") determined in accordance with Section 1.4(b), at the price and on the terms set forth in the Take-Along Notice. The Take-Along Option shall be exercised by the Non-Selling Shareholder by giving written notice to the Section 1.4 Offering Party, within ten business days of receipt of the Take-Along Notice, indicating its election to exercise the Take-Along Option (the "Participating Shareholder"). Failure by such Non-Selling Shareholder to give such notice within the ten business day period shall be deemed an election by such Non-Selling Shareholder not to sell its Shares pursuant to that Take-Along Notice. The closing with respect to any sale to a Non-Qualified Transferee pursuant to this Section shall be held at the time and place specified in the Take-Along Notice but in any event within 30 days of the date the Take-Along Notice is given; provided, that if through the exercise of reasonable efforts the Section 1.4 Offering Party is unable to cause such transaction to close within 30 days, such period may be extended for such reasonable period of time as may be necessary to close such transaction. Consummation of the sale of Shares by the Section 1.4 Offering Party to a Non-Qualified Transferee shall be conditioned upon consummation of the sale by the Participating Shareholder to such Non-Qualified Transferee of the Included Shares, if any. (b) The number of Shares purchased from the Participating Shareholder shall be determined by multiplying the number of Shares proposed to be purchased from the Section 1.4 Offering Party by a Non-Qualified Transferee by a fraction, the numerator of which is the total number of Shares owned by the Participating Shareholder and the denominator of which is the sum of the total number of Shares owned by the Section 1.4 Offering Party and the Participating Shareholder. (c) The Section 1.4 Offering Party shall arrange for payment directly by the Non-Qualified Transferee to the Participating Shareholder, upon delivery of the certificate or -5- certificates representing the Shares duly endorsed for transfer, together with such other documents as the Non-Qualified Transferee may reasonably request. The reasonable costs and expenses incurred by the Section 1.4 Offering Party and the Participating Shareholder in connection with a sale of Shares subject to this Section 1.4 shall be allocated pro rata based upon the number of Shares sold by each Shareholder to a Non-Qualified Transferee. (d) If at end of 30 days following the date on which a Take-Along Notice was given, the sale of Shares by the Section 1.4 Offering Party and the sale of the Included Shares have not been completed in accordance with the terms of the Non-Qualified Transferee's offer, all certificates representing the Included Shares shall be returned to the Non-Selling Shareholder, and all the restrictions on transfer contained in this Agreement with respect to Shares owned by the Section 1.4 Offering Party shall again be in effect. 1.5. Right of First Refusal. (a) Notwithstanding Section 1.3 of this Agreement, if at any time following the expiration of the two-year period after the date of this Agreement, either Shareholder receives an offer (or related series of offers) (an "Offer") from any person or related group of persons to purchase a number of Shares equal to 10% or more of the outstanding Shares of the Company (the "Section 1.5 Shares") and such Shareholder desires to accept the Offer, (the "Selling Shareholder") shall give written notice of its intent to accept the Offer (a "Transfer Notice") to the other Shareholder (the "Section 1.5 Non-Selling Shareholder"). Such notice shall contain a true and complete description of the Offer (including a copy thereof) containing (i) the Shares subject to such Offer, (ii) the proposed purchase price, (iii) the identity of the person or group making the Offer and, if known by the Selling Shareholder, whether they are an agent for another party and (iv) all other material terms and conditions of the Offer. The Section 1.5 Non-Selling Shareholder shall have the right, but not the obligation, to purchase the Shares subject to the Offer (the "First Option") on the same terms and conditions as set forth in such notice, which option shall be exercised by delivering to the Selling Shareholder written notice of its commitment to purchase the Shares subject to the Offer within five business days after receipt of the Transfer Notice (the "Option Period"). Failure by the Section 1.5 Non-Selling Shareholder to give such notice within such five-business-day period shall be deemed an election by such Section 1.5 Non-Selling Shareholder not to purchase the Section 1.5 Shares. -6- (b) The purchase of any Shares pursuant to the exercise of the First Option shall be completed not later than 45 days following delivery of the Transfer Notice with respect to such Shares. In the event that the First Option is not exercised, the Selling Shareholder shall have the right for a period of 45 days after the termination of the Option Period to transfer the Shares subject to such Offer to the person named in the Transfer Notice and on terms and conditions no less favorable to the Selling Shareholder than those set forth in the Transfer Notice. (c) This Section 1.5 shall not be applicable with respect to Transfers of Shares effected through underwriters in a public offering or in the securities markets generally or Transfers permitted under Section 1.2. ARTICLE II. LEGEND In addition to any other legend required by applicable law, all certificates representing Shares owned by any Shareholder (other than Shares subject to Section 1.2(a)(iii)), or their permitted transferees, shall bear legend number (1) to assure the enforceability of this Agreement until such time as such shares are sold to a non-Shareholder after the two-year period following the date of this Agreement in accordance with the terms hereof. All certificates representing shares not registered under the Act shall bear in addition to legend (1), legend (2): (1) "THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AN AGREEMENT ON FILE AT THE OFFICES OF THE CORPORATION. THE CORPORATION WILL FURNISH A COPY OF SUCH AGREEMENT TO THE RECORD HOLDER OF THIS INSTRUMENT WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE." (2) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL WITH RESPECT TO SUCH EXEMPTION." ARTICLE III. VOTING COVENANTS (a) The Company and the Shareholders agree to take all actions necessary to cause the Board of Directors of the Company to -7- consist at all times of eleven directors (subject to the rights of any holders of Preferred Stock of the Company to elect directors in the event of a dividend arrearage). The nominees to the Board of Directors shall be determined in the following manner: the Shareholders (other than RHI) shall nominate seven (7) members and RHI shall nominate four (4) members; provided, that so long as Mel D. Borer shall be the President of the Company, the Shareholders and the Company will take all actions necessary to elect Mr. Borer as a member of the Board of Directors and during such time as Mr. Borer is the President and a Director RHI shall only be entitled to nominate three (3) members. In the event that any Shareholder reasonably objects to the nomination of any particular person or persons as a director, the Shareholder who nominated such person or persons shall withdraw such nomination and nominate another person or persons in replacement thereof. (b) Each Shareholder shall, in any election for the Company's Board of Directors, vote to cause the nominee or nominees of each party listed in this section to be elected to the Board of Directors of the Company. Each Shareholder shall cause the holder of any proxy given by such Shareholder to comply with this Article III. (c) Should any director elected to the Board be removed, become incapacitated, or die (the "Affected Director") the shareholder or party which nominated the Affected Director shall have the right to designate a replacement director to complete the term of the Affected Director on the Board of Directors of the Company. (d) The Company and the Shareholders agree to take all actions necessary to cause the Executive Committee of the Board of Directors to consist of Anthony D. Autorino, who shall be Chairman and Chief Executive Officer of the Company, the President and Chief Operating Officer of the Company (who initially shall be Mel D. Borer) and Jeffrey J. Steiner (or another person designated by RHI), who shall be Vice-Chairman of the Company. ARTICLE IV. MISCELLANEOUS 4.1. Termination. This Agreement, and all rights and obligations of each party hereto, shall terminate upon (i) agreement of all of the Shareholders and the Company, (ii) the voluntary or involuntary dissolution of the Company, (iii) the sale of all or substantially all of the assets of the Company, (iv) when either Shareholder and its affiliates own less than 25% of the shares of Common Stock (including options to purchase shares of Common Stock) owned by such Shareholder on the date of this -8- Agreement (adjusted accordingly for any stock splits or stock dividends by the Company after the date hereof) or (v) on the date that Anthony D. Autorino is no longer the Chief Executive Officer of the Company. 4.2. Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 4.3. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of the parties under this Agreement would not be materially and adversely affected thereby, such provision shall be fully separable, and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part thereof, the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance therefrom, and in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible, and the parties hereto request the court or any arbitrator to whom disputes relating to this Agreement are submitted to reform the otherwise illegal, invalid or unenforceable provision in accordance with this Section 4.3. 4.4. Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. 4.5. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more of the counterparts have been signed by each party and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 4.6. Notices. All notices, consents, requests, instructions, approvals and other communications provided for herein shall be validly given, if in writing and delivered -9- personally, by confirmed telecopy or sent by registered mail, postage prepaid, to: if to any Shareholder: addressed to such Shareholder at the address set forth opposite such Shareholders' name in Schedule I if to the Company: Shared Technologies Inc. 100 Great Meadow Road, Suite 104 Suite 104 Wethersfield, Connecticut 06109 Facsimile No.: (203) 258-2401 Attention: Legal Department or to such other address as any party may, from time to time, designate in a written notice given in a like manner, and any such notice or communication shall be deemed to have been given on the fifth business day after the date so sent, unless actually received earlier. 4.7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 4.8. Specific Performance. Each party hereto acknowledges that monetary damages would not adequately compensate the other parties hereto for the breach of this Agreement and that this Agreement shall therefore be specifically enforceable, and any breach or threatened breach of this Agreement shall be the proper subject of a temporary or permanent injunction or restraining order. Further, each party hereto and its successors, heirs, representatives and assigns waive any claim or defense that there is an adequate remedy at law for such breach or threatened breach. 4.9. Attorney's Fees. If attorneys' fees or other costs are incurred to secure performance of any of the obligations herein provided for, or to establish damages for the breach thereof, or to obtain any other appropriate relief, whether by way of prosecution or defense, the prevailing party or parties shall be entitled to recover reasonable attorney's fees and costs incurred therein. 4.10. Waiver. No amendment or waiver of any provision of this Agreement, nor consent to any departure therefrom, shall be effective unless the same shall be in writing and signed by each -10- party thereto, and then such waiver or consent shall be effective only in a specific instance and for the specific purpose for which given. No failure on the part of a party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in this Agreement are cumulative and not exclusive of any remedies provided by law. 4.11. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of each party hereto and his or its successors, heirs, representatives and permitted assigns. This Agreement shall be binding upon and inure to the benefit of each individual signatory hereto and his, her or its respective heirs, personal representatives and assigns, and any receiver, trustee in bankruptcy or representative of the creditors of each such person. 4.12. Person Defined. For purposes of this Agreement, "Person" means all natural persons, corporations, business trusts, associations, companies, partnerships, joint ventures, and other entities and governments and agencies and political subdivisions. 4.13. After-Acquired Shares. Subject to Section 1.1(b), whenever a Shareholder shall hereafter acquire any shares of Common Stock, Convertible Preferred Stock or rights or options with respect thereto, such shares so acquired shall be voted in accordance with the terms of Article III of this Agreement but shall not otherwise be subject to any of the other terms and conditions contained herein. -11- IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the parties hereto, all as of the date first above written. SHARED TECHNOLOGIES INC. By: /s/ Anthony D. Autorino --------------------------- Name: Title: RHI HOLDINGS, INC. By: /s/ John C. Flynn --------------------------- Name: Title: /s/ Anthony D. Autorino ------------------------------- Anthony D. Autorino SCHEDULE I List of Shareholders
Common Shareholder and Address Stock - ----------------------- ----- RHI Holdings, Inc. 6,000,000 300 West Service Road P.O. Box 10803 Chantilly, VA 22001 Anthony D. Autorino 786,118 c/o Shared Technologies Inc. 100 Great Meadow Road Suite 104 Wethersfield, CT 06109 Total 6,791,945
EX-10.11 29 TAX SHARING AGREEMENT EXHIBIT 10.11 TAX SHARING AGREEMENT THIS AGREEMENT is made this 13th day of March, 1996 by and among The Fairchild Corporation, a Delaware corporation ("TFC"), RHI Holdings, Inc., a Delaware corporation ("RHI") and Shared Technologies Inc., a Delaware corporation ("Shared Technologies"). WHEREAS, TFC currently owns all of the outstanding common stock of RHI, RHI currently owns all of the outstanding common stock of Fairchild Industries, Inc., a Delaware corporation ("FII"), and FII owns all of the outstanding common stock of VSI Corporation, a Delaware corporation ("VSI"); WHEREAS, the operations of TFC, RHI, FII and VSI are presently included in the consolidated Federal income tax return filed for an affiliated group (within the meaning of ss. 1504 of the Internal Revenue Code of 1986, as amended ("Code")) (the "TFC Group") of which TFC is the common parent; WHEREAS, TFC, RHI, FII and Shared Technologies have signed an Agreement and Plan of Merger on November 9, 1995, a First Amendment to Agreement and Plan of Merger as of February 2, 1996, a Second Amendment to Agreement and Plan of Merger as of February 23, 1996 and a Third Amendment to Agreement and Plan of Merger as of March 1, 1996 (as so amended, the "Merger Agreement") under which, inter alia, FII will merge into Shared Technologies; WHEREAS, TFC, RHI and Shared Technologies desire to enter into an agreement providing for payments among TFC, RHI and Shared Technologies with respect to certain tax benefits and for indemnification with respect to certain tax liabilities; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, agree as follows: 1. Indemnity A. Definition This agreement applies to all Federal, State, local, and foreign taxes (including income, franchise, withholding, and alternative minimum taxes), and also includes all interest, penalties and additions imposed with respect to such amounts (all such taxes and other amounts are collectively, "Taxes"). B. Tax Indemnification (1) TFC and RHI, jointly and severally, shall pay and indemnify and shall hold Shared Technologies harmless from and against (i) all Taxes and claims for Taxes paid or payable by FII or VSI with respect to any taxable year or period of FII or VSI or predecessor entities of either of them which ends on or before the date of the merger of FII into Shared Technologies (the "Deconsolidation Date"), including any tax liability which arises because FII and VSI cease on the Deconsolidation Date to be members of the TFC Group or of any other group filing a combined or consolidated tax return for foreign, state, or local tax purposes and including any tax liability of FII and VSI resulting from the Fairchild Reorganization as further described on Schedule 9.1 attached to the Merger Agreement, and (ii) all taxes and claims for Taxes paid or payable by FII or VSI by virtue of Section 1.1502-6 of the Treasury Regulations, or by virtue of any similar provision of foreign, state, or local law by reason that FII and VSI were members of a group which files or has filed a consolidated federal income tax return, or a combined or consolidated foreign, state, or local tax return. For purposes of this Agreement, any taxable year beginning before and ending after the Deconsolidation Date shall be treated as ending on the Deconsolidation Date. For purposes of this Agreement any income or deduction arising from transactions characterized as deferred intercompany transactions for Federal income tax purposes which occurred before the Deconsolidation Date shall be deemed attributable to a period ending on or before the Deconsolidation Date (the "Pre-Deconsolidation Period"). (2) Shared Technologies shall pay RHI and indemnify RHI and shall hold RHI harmless to the extent of any reduction in tax payable by Shared Technologies for any taxable year beginning on or after the Deconsolidation Date (a "Post-Deconsolidation Period") as a result of a final disallowance of any loss, deduction, or credit claimed by FII or VSI as members of the TFC Group in a Pre-Deconsolidation Period and the allowance of such deduction or credit in a Post-Deconsolidation Period (or as a result of a final determination that additional income is to be recognized in a Pre-Deconsolidation Period in lieu of income which had been recognized in a Post-Deconsolidation Period). Such payment shall be limited in all cases to the amount of the reduction in actual tax otherwise payable by Shared Technologies and shall be paid when the reduction in tax is recognized by Shared Technologies. (3) Notwithstanding any other representation and warranty or other provision in the Merger Agreement or this Agreement, any reduction in tax payable by Shared Technologies for a Post-Deconsolidation Period as a result of utilization of net operating loss carryforwards or tax credit carryforwards of FII and VSI originating in a Pre-Deconsolidation Period shall not result in any payment by Shared Technologies to RHI of any of the reduction in actual tax otherwise payable by Shared Technologies. All carryforwards and carrybacks shall be utilized in the order provided by the Code and Treasury Regulations thereunder. Notwithstanding any other representation and warranty or other provision in the Merger Agreement or this Agreement, TFC and RHI make no representation or warranty as to (i) the amount of any net operating loss and tax credits of the TFC Group allocable to FII or VSI on the Effective Date of the Merger of FII into Shared Technologies as a result of the operations of FII and VSI prior to the Effective Date; (ii) the amount of any net operating loss and tax credit of FII and VSI that will be utilized by other members of the TFC Group before the Deconsolidation Date; and (iii) the amount of any reduction in tax payable by Shared Technologies due to utilization of any net operating loss and tax credit of the TFC Group allocable to FII and VSI as a result of the operations of FII and VSI prior to the Effective Date. (4) Any reduction in tax payable by the TFC Group as a result of the allowance of any additional loss, deduction, or credit claimed by the TFC Group on a claim for refund or amended return filed after the Deconsolidation Date for a Pre-Deconsolidation Period shall result in payment by RHI to Shared Technologies of an amount equal to the increase in actual tax otherwise payable by Shared Technologies caused by the allowance of the loss, deduction or credit claimed by the TFC Group. Said payment shall be made at the time the increase in tax is paid by Shared Technologies. (5) Any reduction in tax payable by the TFC Group as a result of utilization of net operating losses or tax credits of FII or VSI that originated in a Post-Deconsolidation Period shall result in payment by RHI and TFC, jointly and severally, to Shared Technologies of an amount equal to the increase in actual tax otherwise payable by Shared Technologies caused by the TFC Group's use of such net operating loss or credit. RHI and TFC, jointly and severally, shall pay such amount at the time such increase is calculable. The TFC Group is not required to take any action to reduce its taxes to the extent such reduction causes a permanent tax detriment to the TFC Group. (6) Except as provided in Paragraph 1(B)(5), all tax refunds received by FII or VSI for any periods prior to the Deconsolidation Date received by Shared Technologies shall be promptly paid by Shared Technologies to RHI. (7) Shared Technologies is responsible for, and will not be indemnified for, any taxes arising out of an election under ss. 338 of the Code and Shared Technologies will not make any election under ss. 338 of the Code regarding the transactions contemplated by the Merger Agreement. Shared Technologies and RHI agree to report the merger of FII into Shared Technologies on their Federal and state income tax returns as a statutory merger under ss. 368(a)(1)(A) of the Code. Shared Technologies and RHI agree to report all dividends declared and paid by Shared Technologies to RHI with respect to Convertible Preferred Stock and Special Preferred Stock on their Federal and State Income Tax Returns as dividends. (8) If any item resulting in an indemnification hereunder is disallowed by a taxing authority and all remedies discussed in paragraph 2 below are exhausted, then the indemnitee shall promptly return the related indemnification amounts to the indemnitor. C. Time for Indemnification Unless otherwise specified herein, payments required under paragraph 1(B) above shall be made not later than the date or dates on which the estimated payments or returns are filed, or, if later, the date of any required notice or exhaustion of remedies, as applicable. D. Returns, Payments and Refunds (1) The TFC Group shall include the results of FII and VSI operations for the Pre-Deconsolidation Period, including the results of the Fairchild Reorganization as described in Schedule 9.1 to the Merger Agreement, in its consolidated Federal income tax return and any combined state tax return or report for the Pre-Deconsolidation Period. The TFC Group and RHI shall file or cause to be filed, when due, all required federal, state, foreign, local, and other returns, reports and declarations involving taxes for (either mandatorily or at the discretion of TFC and on a consolidated, separate or any other basis) the operations and assets, including the results of the Fairchild Reorganization as described in Schedule 9.1 to the Merger Agreement, of FII and VSI for all taxable periods ending or deemed to end on or before the Deconsolidation Date. Shared Technologies shall file or cause to be filed, when due, all required, Federal, state, foreign, local, and other returns, reports and declarations involving taxes for the operations and assets of FII and VSI for any taxable period beginning on or after the Deconsolidation Date. RHI and Shared Technologies shall cooperate in filing the returns, reports and declarations for FII and VSI described in this subparagraph (1) and shall make relevant records available to each other and to FII and VSI at no cost. Each return, report or declaration filed for a Pre-Deconsolidation Period pursuant to this subparagraph (1) shall be prepared in a manner consistent with the accounting principles and methods, elections and practices employed by the TFC Group in preparing the same or similar returns, reports and declarations for taxable periods prior to the Deconsolidation Date. (2) The TFC Group, RHI and Shared Technologies shall each pay or cause to be paid to the appropriate authorities all amounts payable with respect to any returns, reports or declarations which such party is required to file or cause to be filed pursuant to the preceding subparagraph (1). 2. Tax Contests A. If a written claim is made by any taxing authority that, if successful, could result in the indemnification of Shared Technologies by TFC or RHI hereunder (an "Indemnifiable Claim"), Shared Technologies shall promptly notify TFC and RHI in writing of such fact. In the event that such written notice is not given within thirty (30) days of the receipt of such claim, the obligation to indemnify with respect to such claim shall terminate if each of TFC and RHI is thereafter unable, directly or indirectly, to contest such claim, pursue other administrative remedies, or sue for refund upon payment of the amount which is the subject of the claim. B. Shared Technologies shall take, and shall cause FII and VSI to take, any and all actions in connection with any audit or similar proceeding relating to a Pre-Deconsolidation Period, or in connection with contesting any Indemnifiable Claim, as RHI shall reasonably request from time to time. RHI shall control all audits or similar proceedings relating to a Pre-Deconsolidation Period and all proceedings in connection with contesting any Indemnifiable Claim and shall be entitled to utilize counsel of its own choosing in connection therewith; provided that, where the results of any such contest would have a material adverse impact on the ability of Shared Technologies, FII or VSI to obtain the benefit of any item of deduction, loss or credit (or require Shared Technologies, FII or VSI to recognize additional income) in any Post-Deconsolidation Period, RHI shall reasonably consult with Shared Technologies in connection with such contest. In connection with any such proceedings, RHI, in its sole discretion, may: pursue or forego any administrative appeal, proceedings, hearings and conferences with the relevant taxing authority; pay the tax claims and sue for a refund (where applicable law permits such refund suits) or contest the claim in any other legally permissible manner; prosecute such contest to a determination in a court of initial jurisdiction and in any applicable appellate courts; or take any other action it deems appropriate. RHI shall reimburse Shared Technologies for all reasonable out-of-pocket costs (including fees and disbursements of outside counsel and accountants) incurred in complying with any request by RHI pursuant to the first sentence of this subparagraph (B). If costs are incurred in connection with a dispute involving both Pre-Deconsolidation Period and Post-Deconsolidation Periods, RHI and Shared Technologies shall agree on a reasonable allocation of such costs. C. Shared Technologies shall not settle or otherwise compromise any Indemnifiable Claim of FII and VSI without RHI's prior written consent; provided, however, that, nothing contained herein shall require Shared Technologies to contest a claim which it would otherwise be required to contest pursuant hereto if Shared Technologies shall reasonably consult with RHI with respect to such claim and shall waive payment by RHI of any amount that might otherwise be payable by RHI hereunder by way of indemnity in respect of such or any similar claim. D. The payments for Taxes among TFC, RHI and Shared Technologies under their agreement are not subject to the $4 Million Basket in Sections 11.2 and 11.3 of the Merger Agreement. 3. Interest If any amount payable by TFC or RHI to Shared Technologies or by Shared Technologies to TFC or RHI pursuant to this Agreement is not paid at the time set forth herein, the amount shall bear interest, from the date of such event, at a rate equal to the rate of interest as described in ss. 6621(a) of the Code and computed thereunder from time to time. 4. Entire Agreement: Prior Tax Agreements This Tax Agreement constitutes the entire agreement of the parties concerning the subject matter hereof and supersedes and terminates all prior tax agreements among TFC, RHI, FII, VSI and the parties hereto effective on the day immediately preceding the merger of FII into Shared Technologies. 5. Expenses Unless otherwise expressly provided in this Agreement, each party shall bear any and all expenses that arise from its respective obligations under this Agreement. 6. Amendment This Agreement may not be amended except by an agreement in writing signed by the parties hereto. 7. Notices All notices and other communications hereunder shall be in writing and shall be delivered by hand or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other addresses for the party as shall be specified by like notice) and shall be deemed given on the date on which such notice is received: If To: RHI Holdings, Inc. or to The Fairchild Corporation 300 West Service Road P.O. Box 10803 Chantilly, VA 22001 Facsimile No.: (703) 888-5674 Attention: Donald Miller, Esq. With a copy to: James J. Clark, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Facsimile No.: (212) 269-5420 If To: Shared Technologies Inc. 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Facsimile No.: (203) 258-2401 Attention: Legal Department With a copy to: Walter D. Wekstein, Esq. Harold J. Carroll, Esq. Gadsby & Hannah 125 Summer Street Boston, MA 02110 Facsimile No.: (617) 345-7050 8. Successors or Assigns This Agreement shall constitute a direct obligation of TFC, RHI and Shared Technologies and shall be binding upon, and shall inure to the benefit of, the successors and assigns of the corporations bound hereby. 9. Titles and Headings Titles and headings to sections herein are included for the convenience of reference only and are not intended to be a part, or to affect the meaning or interpretation, of this Agreement. 10. Legal Enforceability Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any party hereto, each party hereto acknowledges that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable. 11. Governing Law This Agreement shall be governed by the laws of the State of Delaware, without regard to the principles of conflict of laws thereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. SHARED TECHNOLOGIES INC. By: /s/ Vincent DiVincenzo Title THE FAIRCHILD CORPORATION By: /s/ John C. Flynn Title RHI HOLDINGS, INC. By: /s/ John C. Flynn Title EX-10.12 30 INDEMNIFICATION AGREEMENT EXHIBIT 10.12 INDEMNIFICATION AGREEMENT This Indemnification Agreement (the "Agreement") is made and entered into this 13th day of March, 1996 by and between Shared Technologies Inc. ("Shared Technologies"), a Delaware corporation, and Fairchild Holding Corp. ("FHC"), a Delaware corporation. W I T N E S S E T H : WHEREAS, Shared Technologies, The Fairchild Corporation, RHI Holdings Inc. and Fairchild Industries, Inc. ("Fairchild") have entered into an Agreement and Plan of Merger (the "Merger Agreement") dated as of November 9, 1995, as amended; and WHEREAS, FHC owns the assets and liabilities, and conducts the operations, of the aerospace and industrial fasteners business previously owned and conducted by Fairchild and its subsidiaries; and WHEREAS, capitalized terms used herein without definition shall have the respective meanings ascribed to such terms in the Merger Agreement; and WHEREAS, the execution and delivery of this Agreement is a condition to effecting the Merger at the Closing and the parties to the Merger Agreement have agreed to effect the Merger in reliance upon the execution and delivery of this Agreement; NOW, THEREFORE, in consideration of the transactions contemplated by the Merger Agreement and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Indemnification by FHC. FHC hereby agrees to indemnify and hold harmless Shared Technologies against any and all losses, liabilities and damages or actions or claims (or actions or proceedings whether commenced or threatened) in respect thereof (hereinafter referred to collectively as "Losses") resulting from any liability or claims (including without limitation counsel fees and expenses for Shared Technologies in the event FHC fails to assume the defense thereof) which related to the aerospace and industrial fasteners business as previously owned and conducted by Fairchild and its subsidiaries prior to the Effective Time, including without limitation those which have directly and indirectly been assumed by FHC pursuant to -2- the Fairchild Reorganization described in Schedule 9.1 to the Merger Agreement and including all Taxes (including but not limited to Taxes related to the Fairchild Reorganization). Notwithstanding the foregoing, in no event shall Shared Technologies be entitled to indemnification for, and the term "Losses" shall not include, any consequential damages or damages which are speculative, remote or conjectural (except to the extent represented by a successful claim by a third party). If any action, proceeding or claim shall be brought or asserted against Shared Technologies by any third party, which action, proceeding or claim, if determined adversely to the interests of Shared Technologies would entitle Shared Technologies to indemnity pursuant to this Agreement, Shared Technologies shall promptly, but in no event later than 10 days from the date Shared Technologies receives written notice of such action, proceeding or claim, notify FHC of the same in writing specifying in detail the basis of such claim and the facts pertaining thereto (but the failure to give such notice in a timely fashion shall not affect FHC' obligations under this Section 1 except to the extent it prejudiced or damaged FHC' ability to defend, settle or compromise such claim or to pay any Losses resulting therefrom), and FHC shall be entitled (but not obligated) to assume the defense thereof by giving written notice thereof within 10 days after FHC received notice of the claim from Shared Technologies to Shared Technologies and have the sole control of defense and settlement thereof (but only, with respect to any settlement, if such settlement involves an unconditional release of Shared Technologies or any of its subsidiaries), including the employment of counsel and the payment of all expenses. 2. Indemnification by Shared Technologies. Shared Technologies hereby agrees to indemnify and hold harmless FHC against any and all losses, liabilities and damages or actions or claims (or actions or proceedings whether commenced or threatened) in respect thereof (hereinafter referred to collectively as "STI Losses") resulting from (x) losses related to or arising out of the telecommunications systems and service business of Fairchild Communication Services Company and (y) the other obligations of Fairchild expressly assumed by Shared Technologies as specified on Schedule 9.1 to the Merger Agreement (including without limitation counsel fees and expenses of FHC in the event Shared Technologies fails to assume the defense thereof). Notwithstanding the foregoing, in no event shall FHC be entitled to indemnification for, and the term "STI Losses" shall not include, any consequential damages or damages which are speculative, remote -3- or conjectural (except to the extent represented by a successful claim by a third party). If any action, proceeding or claim shall be brought or asserted against FHC by any third party, which action, proceeding or claim, if determined adversely to the interests of FHC would entitle FHC to indemnity pursuant to this Agreement, FHC shall promptly, but in no event later than 10 days from the date FHC receives written notice of such action, proceeding or claim, notify Shared Technologies of the same in writing specifying in detail the basis of such claim and the facts pertaining thereto (but the failure to give such notice in a timely fashion shall not affect Shared Technologies' obligations under this Section 2 except to the extent it prejudiced or damaged Shared Technologies' ability to defend, settle or compromise such claim or to pay any Losses resulting therefrom), and Shared Technologies shall be entitled (but not obligated) to assume the defense thereof by giving written notice thereof within 10 days after Shared Technologies received notice of the claim from FHC to FHC and have the sole control of defense and settlement thereof (but only, with respect to any settlement, if such settlement involves an unconditional release of FHC or any of its subsidiaries), including the employment of counsel and the payment of all expenses. 3. Miscellaneous 3.1 Modification; Waivers. This Agreement may be modified or amended only with the written consent of each party hereto. No party hereto shall be released from its obligations hereunder without the written consent of the other party. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term, but any such waiver shall be effective only if in a writing signed by the party against which such waiver is to be asserted. Except as otherwise specifically provided herein, no delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. 3.2 Entire Agreement. This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all other prior -4- agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 3.3 Severability. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement or the application of such provision to other Persons or circumstances shall not be affected thereby; provided that the parties shall negotiate in good faith with respect to an equitable modification of the provision or application thereof held to be invalid. 3.4 Notices. (a) Any notice or communication to any party hereto shall be duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), facsimile or overnight air courier guaranteeing next day delivery, to such other party's address. If to Fairchild Holding Corp.: 300 West Service Road P.O. Box 10803 Chantilly, VA 22001 Facsimile No.: (703) 888-5674 Attention: Donald Miller, Esq. with a copy to: James J. Clark, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Facsimile No.: (212) 269-5420 If to Shared Technologies Inc.: 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Facsimile No.: (203) 258-2401 Attention: Legal Department with a copy to: Walter D. Wekstein, Esq. Gadsby & Hannah 125 Summer Street Boston, Massachusetts 02110 Facsimile No. (617) 345-7050 -5- (b) All notices and communications will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, if mailed; when receipt acknowledged, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. 3.5 Successors and Assigns. This Agreement shall inure to the benefit of and shall be binding upon FHC and Shared Technologies and their respective successors and assigns. 3.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which for all purposes shall be deemed to be an original and all of which together shall constitute the same agreement. 3.7 Headings. The Section headings in this Agreement are for convenience of reference only, and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. 3.8 Construction. This Agreement shall be governed, construed and enforced with the laws of the state of New York, without regard to principles of conflict of laws. -6- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers thereunto duly authorized as of the date first written above. FAIRCHILD FASTENERS, INC. By: /s/ John C. Flynn ---------------------------- Name: Title: SHARED TECHNOLOGIES INC. By: /s/ Vincent DiVincenzo ---------------------------- Name: Title: EX-10.13 31 INDEMNIFICATION AGREEMENT EXHIBIT 10.13 INDEMNIFICATION AGREEMENT This Indemnification Agreement (the "Agreement") is made and entered into this 13th day of March, 1996 by and between Shared Technologies Inc. ("Shared Technologies"), a Delaware corporation, The Fairchild Corporation ("TFC"), a Delaware corporation, and RHI Holdings Inc. ("RHI"), a Delaware corporation and the sole common stockholder of Fairchild Industries, Inc. ("Fairchild"). W I T N E S S E T H : WHEREAS, Shared Technologies, TFC, RHI and Fairchild have entered into an Agreement and Plan of Merger (the "Merger Agreement") dated as of November9, 1996, as amended; and WHEREAS, capitalized terms used herein without definition shall have the respective meanings ascribed to such terms in the Merger Agreement; and WHEREAS, TFC is the sole common stockholder of RHI; and WHEREAS, the execution and delivery of this Agreement is a condition to effecting the Merger at the Closing and each of the parties has agreed to effect the Merger in reliance upon the execution and delivery of this Agreement; NOW, THEREFORE, in consideration of the transactions contemplated by the Merger Agreement and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Indemnification by RHI and TFC. RHI and TFC, jointly and severally, hereby agree to indemnify and hold harmless Shared Technologies against any and all losses, liabilities and damages or actions or claims (or actions or proceedings, whether commenced or threatened) in respect thereof (hereinafter referred to collectively as "Losses") resulting from any liability or claims (including without limitation counsel fees and expenses of Shared Technologies in the event RHI and TFC fail to assume the defense thereof) which related to the operations of Fairchild Industries, Inc. or any of its subsidiaries prior to the Effective Time, including without limitation those which have been assumed by RHI pursuant to the Fairchild Reorganization described in Schedule 9.1 to the Merger Agreement and including all Taxes (including but not limited to taxes related to the Fairchild -2- Reorganization) except for (x) Losses related to or arising out of the telecommunications systems and service business of Fairchild Communication Services Company and (y) the other obligations of Fairchild expressly assumed by Shared Technologies as specified on Schedule 9.1 to the Merger Agreement (clauses (x) and (y) being defined as the "Assumed Liabilities"). Notwithstanding the foregoing, in no event shall Shared Technologies be entitled to indemnification for, and the term "Losses" shall not include any consequential damages or damages which are speculative, remote or conjectural (except to the extent represented by a successful claim by a third party). If any action, proceeding or claim shall be brought or asserted against Shared Technologies by any third party, which action, proceeding or claim, if determined adversely to the interests of Shared Technologies would entitle Shared Technologies to indemnity pursuant to this Agreement, Shared Technologies shall promptly, but in no event later than 10 days from the date Shared Technologies receives written notice of such action, proceeding or claim, notify TFC and RHI of the same in writing specifying in detail the basis of such claim and the facts pertaining thereto (but the failure to give such notice in a timely fashion shall not affect TFC's and RHI's obligations under this Section1 except to the extent it prejudiced or damaged their ability to defend, settle or compromise such claim or to pay any Losses resulting therefrom), and TFC and RHI shall be entitled (but not obligated) to assume the defense thereof by giving written notice thereof within 10 days after TFC and RHI received notice of the claim from Shared Technologies to Shared Technologies and have the sole control of defense and settlement thereof (but only, with respect to any settlement, if such settlement involves an unconditional release of Shared Technologies or any of its subsidiaries in respect of such claim), including the employment of counsel and the payment of all expenses. 2. Indemnification by Shared Technologies. Shared Technologies hereby agrees to indemnify and hold harmless RHI and TFC against any and all losses, liabilities and damages or actions or claims (or actions or proceedings, whether commenced or threatened) in respect thereof resulting from any liability or claims (including without limitation counsel fees and expenses of RHI and TFC in the event Shared Technologies fails to assume the defense thereof) which related to the Assumed Liabilities (hereinafter referred to collectively as "STI Losses"). Notwithstanding the foregoing, in no event shall TFC and RHI be entitled to indemnification for, and the term "STI Losses" shall not include, any consequential damages or damages which are -3- speculative, remote or conjectural (except to the extent represented by a successful claim by a third party). If any action, proceeding or claim shall be brought or asserted against RHI or TFC by any third party, which action, proceeding or claim, if determined adversely to the interests of RHI or TFC would entitle RHI or TFC to indemnity pursuant to this Agreement, RHI or TFC shall promptly, but in no event later than 10 days from the date RHI or TFC receives written notice of such action, proceeding or claim, notify Shared Technologies of the same in writing specifying in detail the basis of such claim and the facts pertaining thereto (but the failure to give such notice in a timely fashion shall not affect Shared Technologies' obligations under this Section2 except to the extent it prejudiced or damaged Shared Technologies' ability to defend, settle or compromise such claim or to pay any Losses resulting therefrom), and Shared Technologies shall be entitled (but not obligated) to assume the defense thereof by giving written notice thereof within 10 days after Shared Technologies received notice of the claim from RHI or TFC to RHI or TFC and have the sole control of defense and settlement thereof (but only, with respect to any settlement, if such settlement involves an unconditional release of TFC and RHI or any of their respective subsidiaries in respect of such claim), including the employment of counsel and the payment of all expenses. 3. Miscellaneous 3.1 Modification; Waivers. This Agreement may be modified or amended only with the written consent of each party hereto. No party hereto shall be released from its obligations hereunder without the written consent of the other party. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term, but any such waiver shall be effective only if in a writing signed by the party against which such waiver is to be asserted. Except as otherwise specifically provided herein, no delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. -4- 3.2 Entire Agreement. This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 3.3 Severability. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement or the application of such provision to other Persons or circumstances shall not be affected thereby; provided that the parties shall negotiate in good faith with respect to an equitable modification of the provision or application thereof held to be invalid. 3.4 Notices. (a) Any notice or communication to any party hereto shall be duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), facsimile or overnight air courier guaranteeing next day delivery, to such other party's address. If to RHI Holdings, Inc.: 300 West Service Road P.O. Box 10803 Chantilly, VA 22001 Facsimile No.: (703) 888-5674 Attention: Donald Miller, Esq. If to The Fairchild Corporation: 300 West Service Road P.O. Box 10803 Chantilly, VA 22001 Attention: Donald Miller, Esq. with a copy to: James J. Clark, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Facsimile No.: (212) 269-5420 -5- If to Shared Technologies Inc.: 100 Great Meadow Road, Suite 104 Wethersfield, CT 06109 Facsimile No.: (203) 258-2401 Attention: Legal Department with a copy to: Walter D. Wekstein, Esq. Gadsby & Hannah 125 Summer Street Boston, Massachusetts 02110 Facsimile No. (617) 345-7050 (b) All notices and communications will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, if mailed; when sent, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. 3.5 Successors and Assigns. This Agreement shall inure to the benefit of and shall be binding upon RHI, TFC and Shared Technologies and their respective successors and assigns. 3.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which for all purposes shall be deemed to be an original and all of which together shall constitute the same agreement. 3.7 Headings. The Section headings in this Agreement are for convenience of reference only, and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. 3.8 Construction. This Agreement shall be governed, construed and enforced with the laws of the state of New York, without regard to principles of conflict of laws. -6- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers thereunto duly authorized as of the date first written above. THE FAIRCHILD CORPORATION By: /s/ John C. Flynn ----------------------------- Name: Title: RHI HOLDINGS, INC. By: /s/ John C. Flynn ----------------------------- Name: Title: SHARED TECHNOLOGIES INC. By: /s/ Vincent DiVincenzo ----------------------------- Name: Title: EX-10.14 32 INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT EXHIBIT 10.14 CONFORMED COPY INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of March 12, 1996, among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower"), each person listed on Schedule I hereto (the "Guarantors") and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent") and (b) the Subsidiary Guarantee Agreement dated as of March 12, 1996, among the Guarantors and the Collateral Agent (the "Guarantee Agreement"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Fronting Banks have agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. The Guarantors have guaranteed such Loans and the other Obligations (as defined in the Guarantee Agreement) of the Borrower under the Credit Agreement pursuant to the Guarantee Agreement; certain Guarantors have granted Liens on and security interests in certain of their assets to secure such guarantees. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Borrower and the Guarantors of an agreement in the form hereof. Accordingly, the Borrower, each Guarantor and the Collateral Agent agree as follows: SECTION 1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 3), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under the Guarantee Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to any Security Document to satisfy a claim of any Secured Party, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold. SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing Guarantor") agrees (subject to Section 3) that, in the event a payment shall be made by any other Guarantor under the Guarantee Agreement or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy a claim of any Secured Party and such other Guarantor (the "Claiming Guarantor") shall not have been fully indemnified by the Borrower as provided in Section 1, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 12, the date of the Supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 2 shall be subrogated to the rights of such Claiming Guarantor under Section 1 to the extent of such payment. SECTION 3. Subordination. Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 1 and 2 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 1 and 2 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder. SECTION 4. Termination. This Agreement shall survive and be in full force and effect so long as any Obligation is outstanding and has not been indefeasibly paid in full in cash, and so long as the L/C Exposure has not been reduced to zero or any of the Commitments under the Credit Agreement have not been terminated, and shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. No Waiver; Amendment. (a) No failure on the part of the Collateral Agent or any Guarantor to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Collateral Agent or any Guarantor preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. None of the Collateral Agent and the Guarantors shall be deemed to have waived any rights hereunder unless such waiver shall be in writing and signed by such parties. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Borrower, the Guarantors and the Collateral Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 7. Notices. All communications and notices hereunder shall be in writing and given as provided in the Guarantee Agreement and addressed as specified therein. 2 SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the parties that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. Neither the Borrower nor any Guarantor may assign or transfer any of its rights or obligations hereunder (and any such attempted assignment or transfer shall be void) without the prior written consent of the Required Lenders. Notwithstanding the foregoing, at the time any Guarantor is released from its obligations under the Guarantee Agreement in accordance with such Guarantee Agreement and the Credit Agreement, such Guarantor will cease to have any rights or obligations under this Agreement. SECTION 9. Survival of Agreement; Severability. (a) All covenants and agreements made by the Borrower and each Guarantor herein and in the certificates or other instruments prepared or delivered in connection with this Agreement or the other Loan Documents shall be considered to have been relied upon by the Collateral Agent, the other Secured Parties and each Guarantor and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Fronting Banks, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loans or any other fee or amount payable under the Credit Agreement or this Agreement or under any of the other Loan Documents is outstanding and unpaid or the L/C Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In case any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 10. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall be effective with respect to any Guarantor when a counterpart bearing the signature of such Guarantor shall have been delivered to the Collateral Agent. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 11. Rules of Interpretation. The rules of interpretation specified in Section 1.02 of the Credit Agreement shall be applicable to this Agreement. SECTION 12. Additional Guarantors. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not such a Subsidiary on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming such a Subsidiary. Upon execution and delivery, after the date hereof, by the Collateral Agent and such a Subsidiary of an instrument in the form of Annex 1 hereto, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor hereunder. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any Guarantor 3 hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first appearing above. SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer MULTI-TENANT SERVICES, INC., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer BOSTON TELECOMMUNICATIONS GROUP, INC., d/b/a BOSTON TELECOMMUNICATIONS COMPANY, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer FINANCIAL PLACE COMMUNICATIONS COMPANY, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer of Shared Technologies Fairchild Inc., its General Partner 4 STI INTERNATIONAL, INC., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer OFFICE TELEPHONE MANAGEMENT, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer VSI CORPORATION, by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer CREDIT SUISSE, as Collateral Agent, by /s/ Kathleen D. O'Brien Name: Kathleen D. O'Brien Title: Member of Senior Management by /s/ Will Ziglar Name: Will Ziglar Title: Associate SHARED TECHNOLOGIES INC., by /s/ Vincent DiVincenzo Name: Vincent DiVincenzo Title: Authorized Officer 5 SCHEDULE I to the Indemnity Subrogation and Contribution Agreement GUARANTORS Name Address 6 Annex 1 to the Indemnity, Subrogation and Contribution Agreement SUPPLEMENT NO. dated as of [ ], to the Indemnity, Subrogation and Contribution Agreement dated as of March 12, 1996 (as the same may be amended, supplemented or otherwise modified from time to time, the "Indemnity, Subrogation and Contribution Agreement"), among SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware corporation (the "Borrower") each Subsidiary of the Borrower listed on Schedule I thereto (the "Guarantors"), and CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its New York branch ("Credit Suisse"), as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). A. Reference is made to (a) the Credit Agreement dated as of March 12, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time to time party thereto (the "Lenders"), Credit Suisse, as administrative agent (in such capacity, the "Administrative Agent") and as collateral agent (in such capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and NationsBank, N.A., as documentation agent (individually and collectively in such capacity, the "Documentation Agent") and (b) the Subsidiary Guarantee Agreement dated as of March 12, 1996, among the Guarantors and the Collateral Agent (the "Guarantee Agreement"). B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indemnity, Subrogation and Contribution Agreement and the Credit Agreement. C. The Borrower and the Guarantors have entered into the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of STFI, the Borrower or any Subsidiary that was not in existence or not such a Subsidiary on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary. Section 12 of the Indemnity, Subrogation and Contribution Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Indemnity, Subrogation and Contribution Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation and Contribution Agreement, the New Guarantor by its signature below becomes a Guarantor under the Indemnity, Subrogation and Contribution Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Indemnity, Subrogation and Contribution Agreement applicable to it as a Guarantor thereunder. Each reference to a "Guarantor" in the Indemnity, Subrogation and Contribution Agreement shall be deemed to include the New Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Indemnity, Subrogation and Contribution Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Indemnity, Subrogation and Contribution Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 7 of the Indemnity, Subrogation and Contribution Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature. SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly executed this Supplement to the Indemnity, Subrogation and Contribution Agreement as of the day and year first above written. 3 [Name Of New Guarantor], by Name: Title: Address: CREDIT SUISSE, as Collateral Agent, by Name: Title: by Name: Title: 4 SCHEDULE I to Supplement No.___ to the Indemnity Subrogation and Contribution Agreement GUARANTORS Name Address -----END PRIVACY-ENHANCED MESSAGE-----