-----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, Dqv88+yaKPP3mLOIisaJRuUl1xDmJFbp3lFr0yfmqUhjOwG7uFUXaYorr6FzjZdr fXUvSAkjaxq5N8jQZnf9VA== 0000950152-96-001623.txt : 19960423 0000950152-96-001623.hdr.sgml : 19960423 ACCESSION NUMBER: 0000950152-96-001623 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 24 FILED AS OF DATE: 19960422 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DUPLEX PRODUCTS INC CENTRAL INDEX KEY: 0000030547 STANDARD INDUSTRIAL CLASSIFICATION: MANIFOLD BUSINESS FORMS [2761] IRS NUMBER: 362109817 STATE OF INCORPORATION: DE FISCAL YEAR END: 1025 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-31674 FILM NUMBER: 96549035 BUSINESS ADDRESS: STREET 1: 1947 BETHANY RD CITY: SYCAMORE STATE: IL ZIP: 60178 BUSINESS PHONE: 8158952101 MAIL ADDRESS: STREET 1: PO BOX 1947 CITY: SYCAMORE STATE: IL ZIP: 60178 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: REYNOLDS & REYNOLDS CO CENTRAL INDEX KEY: 0000083588 STANDARD INDUSTRIAL CLASSIFICATION: MANIFOLD BUSINESS FORMS [2761] IRS NUMBER: 310421120 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 115 S LUDLOW ST CITY: DAYTON STATE: OH ZIP: 45402 BUSINESS PHONE: 5134432000 MAIL ADDRESS: STREET 1: P.O. BOX 2608 CITY: DAYTON STATE: OH ZIP: 45401 SC 14D1 1 REYNOLDS & REYNOLDS 1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ DUPLEX PRODUCTS INC. ------------------------ (NAME OF SUBJECT COMPANY) DELAWARE ACQUISITION CO. THE REYNOLDS AND REYNOLDS COMPANY ------------------------ (BIDDERS) COMMON STOCK, $1.00 PAR VALUE ------------------------ (TITLE OF CLASS OF SECURITIES) 26609310 ------------------------ (CUSIP NUMBER OF CLASS OF SECURITIES) ADAM M. LUTYNSKI, ESQ. GENERAL COUNSEL AND SECRETARY THE REYNOLDS AND REYNOLDS COMPANY 115 SOUTH LUDLOW STREET DAYTON, OHIO 45402 TELEPHONE: (513) 449-4189 ------------------------ (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) With a copy to: JEFFRY A. MELNICK, ESQ. COOLIDGE, WALL, WOMSLEY & LOMBARD, CO., LPA 33 WEST FIRST STREET, SUITE 600 DAYTON, OHIO 45402 TELEPHONE: (513) 223-8177 ------------------------ CALCULATION OF FILING FEE TRANSACTION VALUATION* AMOUNT OF FILING FEE** $89,775,336 $17,955.07 - ---------------- ----------------
*Estimated for purpose of calculating the filing fee only. The calculation assumes the purchase of 7,481,278 shares of common stock, $1.00 par value (the "SHARES"), which represents all Shares outstanding, together with the associated Rights issued pursuant to the Rights Agreement dated as of June 8, 1989 between Harris Trust and Savings Bank and Duplex Products Inc. (the "COMPANY"). **1/50th of one percent of the aggregate value of cash offered by Delaware Acquisition Co. for such number of Shares. / / Check box if any part of the fee is offset as provided in Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. AMOUNT PREVIOUSLY PAID: NOT APPLICABLE FILING PARTY: NOT APPLICABLE FORM OR REGISTRATION NO.: NOT APPLICABLE DATE FILED: NOT APPLICABLE
=============================================================================== 2 14D-1 CUSIP No. 26609310 - ----------------------------------------------------------------------------------------------- 1. Name of Reporting Persons S.S. or I.R.S. Identification No. of Above Persons DELAWARE ACQUISITION CO. (I.R.S. Identification Number to be applied for.) - ----------------------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a) / / (b) / / - ----------------------------------------------------------------------------------------------- 3. SEC Use Only - ----------------------------------------------------------------------------------------------- 4. Sources of Funds AF - ----------------------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / - ----------------------------------------------------------------------------------------------- 6. Citizenship or Place of Organization State of Delaware - ----------------------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Each Reporting Person 2,794,458* - ----------------------------------------------------------------------------------------------- 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / - ----------------------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row (7) 37.4%* - ----------------------------------------------------------------------------------------------- 10. Type of Reporting Person CO - -----------------------------------------------------------------------------------------------
*On April 20, 1996, The Reynolds and Reynolds Company, an Ohio corporation ("PARENT"), and Delaware Acquisition Co., a Delaware corporation and a wholly owned subsidiary of Parent ("PURCHASER"), entered into a Tender Agreement (the "TENDER AGREEMENT") with Smith (Donald) & Company, Inc. (the "TENDERING SHAREHOLDER"), shareholder of Duplex Products Inc. (the "COMPANY"), pursuant to which the Tendering Shareholder agreed, among other things, to tender an aggregate of 375,300 shares of common stock, $1.00 par value per share (the "SHARES"), of the Company owned by it (representing approximately 5% of the Shares outstanding calculated on a fully diluted basis) pursuant to Purchaser's offer to purchase all of the outstanding Shares. In addition, certain other shareholders of the Company (representing approximately an additional 32% of the Shares outstanding on a fully diluted basis) have expressed their present intent to tender their Shares pursuant to Purchaser's offer to purchase all of the outstanding Shares (collectively, the "EXPRESSIONS OF INTENT"). The filing of this information by Parent and Purchaser shall not be construed as an admission that either Parent or Purchaser, for purposes of Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, is the beneficial owner of any of the Shares covered by the Tender Agreement or the Expressions of Intent and such persons expressly disclaim any beneficial ownership. The Tender Agreement is described more fully in Section 11 of the Offer to Purchase, dated April 22, 1996, attached hereto as Exhibit (a)(1). 2 3 14D-1 CUSIP No. 26609310 - ----------------------------------------------------------------------------------------------- 1. Name of Reporting Persons S.S. or I.R.S. Identification No. of Above Persons THE REYNOLDS AND REYNOLDS COMPANY (36-2109817) - ----------------------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a) / / (b) / / - ----------------------------------------------------------------------------------------------- 3. SEC Use Only - ----------------------------------------------------------------------------------------------- 4. Sources of Funds BK, WC, OO - ----------------------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / - ----------------------------------------------------------------------------------------------- 6. Citizenship or Place of Organization State of Ohio - ----------------------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Each Reporting Person 2,794,458* - ----------------------------------------------------------------------------------------------- 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / - ----------------------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row (7) 37.4%* - ----------------------------------------------------------------------------------------------- 10. Type of Reporting Person CO - -----------------------------------------------------------------------------------------------
*On April 20, 1996, The Reynolds and Reynolds Company, an Ohio corporation ("PARENT"), and Delaware Acquisition Co., a Delaware corporation and a wholly owned subsidiary of Parent ("PURCHASER"), entered into a Tender Agreement (the "TENDER AGREEMENT") with Smith (Donald) & Company, Inc. (the "TENDERING SHAREHOLDER"), shareholder of Duplex Products Inc. (the "COMPANY"), pursuant to which the Tendering Shareholder agreed, among other things, to tender an aggregate of 375,300 shares of common stock, $1.00 par value per share (the "SHARES"), of the Company owned by it (representing approximately 5% of the Shares outstanding calculated on a fully diluted basis) pursuant to Purchaser's offer to purchase all of the outstanding Shares. In addition, certain other shareholders of the Company (representing approximately an additional 32% of the Shares outstanding on a fully diluted basis) have expressed their present intent to tender their Shares pursuant to Purchaser's offer to purchase all of the outstanding Shares (collectively, the "EXPRESSIONS OF INTENT"). The filing of this information by Parent and Purchaser shall not be construed as an admission that either Parent or Purchaser, for purposes of Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, is the beneficial owner of any of the Shares covered by the Tender Agreement or the Expressions of Intent and such persons expressly disclaim any beneficial ownership. The Tender Agreement is described more fully in Section 11 of the Offer to Purchase, dated April 22, 1996, attached hereto as Exhibit (a)(1). 3 4 TENDER OFFER This Tender Offer Statement on Schedule 14D-1 is filed by Delaware Acquisition Co., a Delaware corporation ("PURCHASER"), and The Reynolds and Reynolds Company, an Ohio corporation and the owner of all of the outstanding capital stock of Purchaser ("PARENT"), relating to the offer by Purchaser to purchase all outstanding shares of common stock, $1.00 par value (the "COMMON STOCK"), of Duplex Products Inc. (the "COMPANY"), and the associated preferred stock purchase rights (the "RIGHTS") issued pursuant to the Rights Agreement dated June 8, 1989 between the Company and Harris Trust and Savings Bank (the Common Stock and the Rights to be referred to collectively as the "SHARES") at $12.00 per Share, net to the seller in cash, on the terms and subject to the conditions set forth in the Offer to Purchase, dated April 22, 1996 (the "OFFER TO PURCHASE"), and in the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively (which, as amended from time to time, together constitute the "OFFER"). This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement on Schedule 13D with respect to the Tender Agreement and Expressions of Intent. The item numbers and responses thereto below are in accordance with the requirements of Schedule 14D-1. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Duplex Products Inc., a Delaware corporation (the "COMPANY"). The address of the Company's principal executive offices is 1947 Bethany Road, Sycamore, Illinois 60178. (b) The class of equity securities being sought is all of the outstanding shares of Common Stock, par value $1.00 per share, of the Company, together with the associated Rights. The information set forth on the cover page under "Introduction" in the Offer to Purchase and in Section 1 ("Terms of the Offer") of the Offer to Purchase is incorporated herein by reference. (c) The information concerning the principal market in which the Shares are traded and certain high and low sales prices for the Shares in such principal market set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Statement is filed by Purchaser and Parent. The information concerning the name, state or other place of organization, principal business and address of the principal office of each of Purchaser and Parent, and the information concerning the name, business address, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment or occupation is conducted, material occupations, positions, offices or employments during the last five years and citizenship of each of the executive officers and directors of Purchaser and Parent are set forth in the Introduction, Section 8 ("Certain Information Concerning the Purchaser and Parent") and Schedule I of the Offer to Purchase and are incorporated herein by reference. (e)-(f) During the last five years, neither Purchaser or Parent nor, to their knowledge, any of the persons listed in Schedule I ("Directors and Executive Officers") to the Offer to Purchase, (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in Sections 10 ("Background of the Offer; Contacts with the Company") and 11 ("Purpose of the Offer; Plans for the Company; Merger Agreement; Tender Agreement 4 5 and Expressions of Intent; Employment and Consulting Agreements; and Other Agreements") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(c) The information set forth under "Introduction" and in Section 9 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS. (a)-(e) The information set forth in the Introduction, Section 10 ("Background of the Offer; Contacts with the Company") and Section 11 ("Purpose of the Offer; Plans for the Company; Merger Agreement; Tender Agreement and Expressions of Intent; Employment and Consulting Agreements; and Other Agreements") of the Offer to Purchase is incorporated herein by reference. (f) and (g) The information set forth in Section 13 ("Effect of the Offer on the Market for Shares, Exchange Listing and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth under "Introduction" and in Section 8 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth under "Introduction" and in Section 11 ("Purpose of the Offer; Plans for the Company; Merger Agreement; Tender Agreement and Expressions of Intent; Employment and Consulting Agreements; and Other Agreements") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth under "Introduction" and in Section 16 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 8 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth under "Introduction" and in Section 11 ("Purpose of the Offer; Plans for the Company; Merger Agreement; Tender Agreement and Expressions of Intent; Employment and Consulting Agreements; and Other Agreements") of the Offer to Purchase is incorporated herein by reference. (b)-(c) The information set forth in Section 15 ("Regulatory Approvals; State Takeover Laws") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 13 ("Effect of the Offer on the Market for the Shares; Exchange Listing and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. (e) Not applicable. (f) The information set forth in the Offer to Purchase, the Letter of Transmittal, the Agreement and Plan of Merger dated as of April 20, 1996 among Parent, Purchaser and the Company, copies of which are attached hereto as Exhibits (a)(1), (a)(2) and (c)(1), respectively, is incorporated herein by reference. 5 6 ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Form of Offer to Purchase, dated April 22, 1996. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Summary Advertisement, dated April 22, 1996. (a)(8) Text of Press Release, dated April 22, 1996. (b)(1) Credit Agreement, dated as of September 29, 1995, among Bank of America Illinois, Parent and Reyna Financial Corporation. (b)(2) Amended and Restated Credit Agreement dated as of April 1, 1995 among NBD Bank, Parent and Reyna Financial Corporation. (b)(3) Commitment Letter, dated April 16, 1996, from NBD Bank, N.A. (b)(4) Credit Agreement, dated as of September 30, 1994, among PNC Bank, Ohio, National Association, Parent and Reyna Financial Corporation. (b)(5) Credit Agreement, dated as of June 30, 1994, among Bank One, Dayton, NA, Parent and Reyna Financial Corporation. (c)(1) Agreement and Plan of Merger, dated as of April 20, 1996, by and among Parent, Purchaser and the Company. (c)(2)(A) Tender Agreement, dated as of April 20, 1996, by and among Parent, Purchaser and Smith (Donald) & Company, Inc. (c)(2)(B) Letter from Tweedy, Browne Company L.P. dated as of April 20, 1996. (c)(2)(C) Letter from Brinson Partners, Inc. dated as of April 21, 1996. (c)(3) Confidentiality Agreement, dated March 3, 1996, by and between Parent and the Company, as amended by letter dated March 7, 1996 and letter dated April 16, 1996. (c)(4)(A) Consulting and Non-Competition Agreement, dated as of April 20, 1996, between Parent and Andrew A. Campbell. (c)(4)(B) Consulting and Non-Competition Agreement, dated as of April 20, 1996, between Parent and James R. Ramig. (c)(4)(C) Employment and Non-Competition Agreement, dated as of April 20, 1996, between the Company and Marc A. Loomer. (c)(4)(D) Employment and Non-Competition Agreement, dated as of April 20, 1996, between the Company and David B. Preston. (c)(4)(E) Employment and Non-Disclosure Agreement, dated as of April 20, 1996, between the Company and Mark A. Robinson. (d) Not Applicable. (e) Not applicable. (f) None. 6 7 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 22, 1996 THE REYNOLDS AND REYNOLDS COMPANY By: /s/ Dale L. Medford -------------------------------------- Name: Dale L. Medford Title: Vice President, Corporate Finance and Chief Financial Officer 7 8 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 22, 1996 DELAWARE ACQUISITION CO. By: /s/ Dale L. Medford -------------------------------------- Name: Dale L. Medford Title: Treasurer 8 9 EXHIBIT INDEX
PAGE EXHIBIT DESCRIPTION NO. ------- ----------- ---- (a) (1) -- Form of Offer to Purchase, dated April 22, 1996. (a) (2) -- Form of Letter of Transmittal. (a) (3) -- Form of Notice of Guaranteed Delivery. (a) (4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a) (5) -- Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a) (6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a) (7) -- Form of Summary Advertisement, dated April 22, 1996. (a) (8) -- Text of Press Release, dated April 22, 1996. (b) (1) -- Credit Agreement, dated as of September 29, 1995, among Bank of America Illinois, Parent and Reyna Financial Corporation. (b) (2) -- Amended and Restated Credit Agreement dated as of April 1, 1995 among NBD Bank, Parent and Reyna Financial Corporation. (b) (3) -- Commitment Letter dated April 16, 1996, from NBD Bank, N.A. (b) (4) -- Credit Agreement, dated as of September 30, 1994, among PNC Bank, Ohio, National Association, Parent and Reyna Financial Corporation. (b) (5) -- Credit Agreement, dated as of June 30, 1994, among Bank One, Dayton, NA, Parent and Reyna Financial Corporation. (c) (1) -- Agreement and Plan of Merger, dated as of April 20, 1996, by and among Parent, Purchaser and the Company. (c) (2) (A) -- Tender Agreement, dated as of April 20, 1996, by and among Parent, Purchaser and Smith (Donald) & Company, Inc. (c) (2) (B) -- Letter from Tweedy, Browne Company L.P. dated as of April 20, 1996. (c) (2) (C) -- Letter from Brinson Partners, Inc. dated as of April 21, 1996. (c) (3) -- Confidentiality Agreement, dated March 3, 1996, by and between Parent and the Company, as amended by letter dated March 7, 1996 and letter dated April 16, 1996. (c) (4) (A) -- Consulting and Non-Competition Agreement, dated as of April 20, 1996, between Parent and Andrew A. Campbell. (c) (4) (B) -- Consulting and Non-Competition Agreement, dated as of April 20, 1996, between Parent and James R. Ramig. (c) (4) (C) -- Employment and Non-Competition Agreement, dated as of April 20, 1996, between the Company and Marc A. Loomer. (c) (4) (D) -- Employment and Non-Competition Agreement, dated as of April 20, 1996, between the Company and David B. Preston. (c) (4) (E) -- Employment and Non-Disclosure Agreement, dated as of April 20, 1996, between the Company and Mark A. Robinson. (d) -- Not applicable. (e) -- Not applicable. (f) -- None.
9 EX-1.A 2 EXHIBIT (A)(1) 1 EXHIBIT (a)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF DUPLEX PRODUCTS INC. AT $12.00 NET PER SHARE IN CASH BY DELAWARE ACQUISITION CO. A WHOLLY OWNED SUBSIDIARY OF THE REYNOLDS AND REYNOLDS COMPANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 17, 1996, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES (AND THE ASSOCIATED RIGHTS) WHICH CONSTITUTE AT LEAST SEVENTY PERCENT (70%) OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTION 14. CERTAIN SHAREHOLDERS OF THE COMPANY HAVE EXPRESSED THEIR PRESENT INTENT TO TENDER IN THE OFFER, UPON THE TERMS AND SUBJECT TO THE CONDITIONS THEREOF, ALL SHARES OWNED BY SUCH SHAREHOLDERS (OR APPROXIMATELY 37% OF THE COMPANY'S OUTSTANDING SHARES CALCULATED ON A FULLY DILUTED BASIS). THE BOARD OF DIRECTORS OF DUPLEX PRODUCTS INC. UNANIMOUSLY HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF DUPLEX PRODUCTS INC., AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's shares of common stock, par value $1.00 per share (the "COMMON STOCK") and the associated Rights (as defined herein, and together with the Common Stock, the "SHARES") should either (i) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) evidencing tendered Shares, and any other required documents, to the Depositary or tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 3 or (ii) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. A shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such shareholder desires to tender such Shares. A shareholder who desires to tender Shares and whose certificates evidencing such Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer described in this Offer to Purchase on or prior to the Expiration Date, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance, or for additional copies of this Offer to Purchase, the Letter of Transmittal or other tender offer materials, may be directed to the Information Agent at its address and telephone number set forth on the back cover of this Offer to Purchase. A shareholder may also contact brokers, dealers, commercial banks and trust companies for assistance concerning the Offer. ------------------------ The Information Agent for the Offer is: GEORGESON & COMPANY, INC. APRIL 22, 1996 2 TABLE OF CONTENTS INTRODUCTION........................................................................ 1 1. TERMS OF THE OFFER.................................................................. 4 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES....................................... 5 3. PROCEDURES FOR TENDERING SHARES..................................................... 7 4. WITHDRAWAL RIGHTS................................................................... 9 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................. 9 6. PRICE RANGE OF SHARES; DIVIDENDS.................................................... 10 7. CERTAIN INFORMATION CONCERNING THE COMPANY.......................................... 10 8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT................................. 12 9. SOURCE AND AMOUNT OF FUNDS.......................................................... 14 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.................................. 15 11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; MERGER AGREEMENT; TENDER AGREEMENT AND EXPRESSIONS OF INTENT; EMPLOYMENT AND CONSULTING AGREEMENTS; AND OTHER AGREEMENTS... 16 12. DIVIDENDS AND DISTRIBUTIONS......................................................... 27 13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION........................................................................ 28 14. CONDITIONS OF THE OFFER............................................................. 29 15. REGULATORY APPROVALS; STATE TAKEOVER LAWS........................................... 31 16. FEES AND EXPENSES................................................................... 34 17. MISCELLANEOUS....................................................................... 34 Schedule I. Directors and Executive Officers of Parent and Purchaser
3 TO THE HOLDERS OF COMMON STOCK OF DUPLEX PRODUCTS INC.: INTRODUCTION Delaware Acquisition Co. (the "PURCHASER"), a Delaware corporation and a wholly owned subsidiary of The Reynolds and Reynolds Company, an Ohio corporation ("PARENT"), hereby offers to purchase all outstanding shares of common stock, par value $1.00 per share (the "COMMON STOCK"), of Duplex Products Inc., a Delaware corporation (the "COMPANY"), and the associated Preferred Stock Purchase Rights (the "RIGHTS" and, together with the Common Stock, the "SHARES") issued pursuant to the Rights Agreement dated June 8, 1989 (the "RIGHTS AGREEMENT") between the Company and Harris Trust and Savings Bank, at a price of $12.00 per Share, net to the seller in cash, without interest thereon (the "OFFER PRICE"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "OFFER"). Until the Distribution Date (as defined herein), the Rights will be evidenced by and trade with the certificates evidencing the Common Stock. See Section 11 for a brief description of the Rights Agreement and its application to the Offer and the Merger (as defined herein). Tendering Shareholder will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser will pay all charges and expenses of Harris Trust Company of New York, as Depositary (the "DEPOSITARY"), and Georgeson & Company, Inc., as Information Agent (the "INFORMATION AGENT"), incurred in connection with the Offer. See Section 16. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 5,236,895 SHARES (THE "MINIMUM CONDITION"), WHICH CONSTITUTE SEVENTY PERCENT (70%) OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS. THE COMPANY HAS INFORMED THE PURCHASER THAT, AS OF APRIL 19, 1996, THERE WERE 7,481,278 SHARES ISSUED AND OUTSTANDING (THERE WERE ALSO 188,000 COMMON SHARES RESERVED FOR ISSUANCE UPON EXERCISE OF THE OUTSTANDING OPTIONS GRANTED UNDER THE COMPANY'S STOCK OPTION PLANS, HOWEVER, THOSE OPTIONS ARE TO BE CANCELLED PURSUANT TO THE MERGER AGREEMENT; SEE SECTION 11). ASSUMING THE TENDER BY THE TENDERING SHAREHOLDER OF APPROXIMATELY 2,244,383 SHARES, THE PURCHASER WILL NEED TO PURCHASE AN ADDITIONAL 2,992,512 SHARES TO SATISFY THE MINIMUM CONDITION. THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS, BY UNANIMOUS VOTE, APPROVED EACH OF THE OFFER AND THE MERGER, HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. The Company has advised Parent that Duff & Phelps Capital Markets Company has delivered to the Board its opinion as to the fairness of the $12.00 per Share cash consideration to be received by the shareholders of the Company pursuant to the Offer and the Merger. Copies of the opinion of Duff & Phelps Capital Markets Company, which sets forth the factors considered and the assumptions made by Duff & Phelps Capital Markets Company are contained in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-9"), which is being mailed to shareholders herewith. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of April 20, 1996 (the "MERGER AGREEMENT"), by and among Parent, the Purchaser and the Company. The Merger Agreement provides that, among other things, as soon as practicable after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware ("DELAWARE LAW"), including provisions under Section 203 of Delaware Law described below relating to the required vote of unaffiliated 1 4 shareholders, Purchaser will be merged with and into the Company (the "MERGER"). Following consummation of the Merger, the Company will continue as the surviving corporation (the "SURVIVING CORPORATION") and will be a wholly owned subsidiary of Parent. At the effective time of the Merger (the "EFFECTIVE TIME"), each issued and outstanding Share, including the associated Rights, immediately prior to the Effective Time (other than Shares held in the treasury of the Company or held by shareholders who shall have demanded and perfected appraisal rights under Section 262 of Delaware Law) will be converted into the right to receive the Offer Price, without interest (the "MERGER CONSIDERATION"). The Merger Agreement is more fully described in Section 11. The Merger Agreement provides that, promptly upon the purchase by the Purchaser of Shares pursuant to the Offer and from time to time thereafter, the Purchaser shall be entitled to designate up to such number of directors, rounded up to the next whole number, on the Board as will give the Purchaser representation on the Board equal to the product of the total number of directors on the Board multiplied by the percentage that the aggregate number of Shares then beneficially owned by the Purchaser and its affiliates following such purchase bears to the total number of Shares then outstanding. In the Merger Agreement, the Company has agreed to use its best efforts promptly to cause the Purchaser's designees to be elected as directors of the Company, including increasing the size of the Board or securing the resignations of incumbent directors or both. The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including, if required by law, the approval and adoption of the Merger Agreement by the requisite vote of the shareholders of the Company. See Section 11. Under the Company's Restated Certificate of Incorporation and Delaware Law, except as otherwise described below, the affirmative vote of the holders of a majority of the outstanding Shares is required to approve and adopt the Merger Agreement and the Merger. Consequently, if the Purchaser acquires (pursuant to the Offer or otherwise) at least a majority of the then outstanding Shares, the Purchaser will have sufficient voting power to approve and adopt the Merger Agreement and the Merger without the vote of any other shareholder (note that the Minimum Condition requires a higher percentage of the Shares be tendered pursuant to the Offer and, if the Minimum Condition is not satisfied, no assurance can be given that Purchaser will waive the Minimum Condition or that the Company will grant the required consent to that waiver). Under Delaware Law, if the Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the then outstanding Shares, the Purchaser will be able to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, without a vote of the Company's shareholders. In such event, Parent, the Purchaser and the Company have agreed to take, at the request of the Purchaser, all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of the Company's shareholders. If, however, the Purchaser does not acquire at least 90% of the then outstanding Shares pursuant to the Offer or otherwise and a vote of the Company's shareholders is required under Delaware Law, a significantly longer period of time will be required to effect the Merger. See Section 11. Immediately after the execution of the Merger Agreement, Smith (Donald) & Company, Inc. entered into a Tender Agreement, dated as of April 20, 1996, with Parent and the Purchaser (the "TENDER AGREEMENT"). A total of 375,300 Shares, or approximately 5% of the outstanding Shares calculated on a fully diluted basis, are covered by the Tender Agreement. Pursuant to the Tender Agreement, the shareholder has agreed to validly tender pursuant to the Offer and not withdraw all Shares which are owned of record or beneficially by it prior to the Expiration Date (as defined in Section 1 below). The Tender Agreement is more fully described in Section 11. In addition to the Tender Agreement, certain other shareholders owning collectively 2,419,158 Shares, or approximately 32% of the outstanding Shares calculated on a fully diluted basis, have expressed their present intention to tender their Shares pursuant to the Offer. Parent and Andrew A. Campbell, President of the Company ("CAMPBELL"), have entered into a consulting and non-competition agreement dated as of April 20, 1996 (the "CAMPBELL CONSULTING AGREEMENT"), pursuant to which Parent has agreed to retain Campbell as a consultant for a period of two months from consummation of the Offer. The Campbell Consulting Agreement replaces a severance agreement and 2 5 other arrangements between Campbell and the Company which would have provided to Campbell certain "change of control" and severance compensation and benefits. The Campbell Consulting Agreement is more fully described in Section 11. Parent and James R. Ramig, Vice President -- Finance and Administration and Chief Financial Officer of the Company ("RAMIG"), have entered into a consulting and non-competition agreement dated as of April 20, 1996 (the "RAMIG CONSULTING AGREEMENT"), pursuant to which Parent has agreed to retain Ramig as a consultant for a period of three months from consummation of the Offer. The Ramig Consulting Agreement replaces a severance agreement and other arrangements between Ramig and the Company which would have provided to Ramig certain "change of control" and severance compensation and benefits. The Ramig Consulting Agreement is more fully described in Section 11. The Company and Marc A. Loomer, Vice President, Operations of the Company ("LOOMER"), have entered into an employment and non-competition agreement dated as of April 20, 1996 (the "LOOMER EMPLOYMENT AGREEMENT"), pursuant to which the Company has agreed to retain Loomer as an employee for a period of one year from consummation of the Offer and to provide certain other benefits. The Loomer Employment Agreement replaces a severance agreement and other arrangements between Loomer and the Company which would have provided to Loomer certain "change of control" and severance compensation and benefits. The Loomer Employment Agreement is more fully described in Section 11. The Company and David B. Preston, Vice President, Sales of the Company ("PRESTON"), have entered into an employment and non-competition agreement dated as of April 20, 1996 (the "PRESTON EMPLOYMENT AGREEMENT"), pursuant to which the Company has agreed to retain Preston as an employee for a period of one year from consummation of the Offer and to provide certain other benefits. The Preston Employment Agreement replaces a severance agreement and other arrangements between Preston and the Company which would have provided to Preston certain "change of control" and severance compensation and benefits. The Preston Employment Agreement is more fully described in Section 11. The Company and Mark A. Robinson, Vice President, General Counsel and Secretary of the Company ("ROBINSON"), have entered into an employment and non-disclosure agreement dated as of April 20, 1996 (the "ROBINSON EMPLOYMENT AGREEMENT"), pursuant to which the Company has agreed to retain Robinson as an employee for a period of one year from consummation of the Offer and to provide certain other benefits. The Robinson Employment Agreement replaces a severance agreement and other arrangements between Robinson and the Company which would have provided to Robinson certain "change of control" and severance compensation and benefits. The Robinson Employment Agreement is more fully described in Section 11. All of the Campbell Consulting Agreement, the Ramig Consulting Agreement, the Loomer Employment Agreement, the Preston Employment Agreement, and the Robinson Employment Agreement are expressly conditioned upon consummation of the Offer. Pursuant to the Merger Agreement, the Company has amended the Rights Agreement (the "RIGHTS AMENDMENT") in order to (i) prevent the Merger Agreement, the Tender Agreement, or the consummation of any of the transactions contemplated thereby, including without limitation, the Offer and the Merger, from resulting in the issuance of Rights or being deemed a trigger event under the terms of the Rights Agreement and to (ii) provide that neither Parent nor the Purchaser will be deemed to be an Acquiring Person (as defined in the Rights Agreement) by reason of the transactions expressly provided for in the Merger Agreement and the Tender Agreement. The Rights Amendment will render the Rights inoperative with respect to any acquisition of Shares by Parent, the Purchaser or any of their affiliates pursuant to the Merger Agreement and/or the Tender Agreement. Additionally, the Rights Amendment provides that the Rights Agreement will terminate immediately prior to the purchase of Shares by Purchaser pursuant to the Offer. The Company has informed the Purchaser that, as of April 19, 1996, there were 7,481,278 Shares issued and outstanding. As a result, as of such date, the Minimum Condition would be satisfied if the Purchaser acquires 5,236,895 Shares (as of April 19, 1996 there were also 188,000 Shares reserved for issuance upon 3 6 exercise of the outstanding options granted under the Company's option plans; however, pursuant to the Merger Agreement those options are to be cancelled -- see Section 11). THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. THE TENDER OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date (as hereinafter defined) and not withdrawn in accordance with Section 4. The term "EXPIRATION DATE" means 12:00 Midnight, New York City time, on Friday, May 17, 1996, unless and until the Purchaser, in its sole discretion (but subject to the terms of the Merger Agreement), shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Offer is conditioned upon, among other things, satisfaction of the Minimum Condition. If the Minimum Condition is not satisfied or any or all of the other events set forth in Section 14 shall have occurred or shall be determined by the Purchaser to have occurred prior to the Expiration Date, the Purchaser reserves the right (but shall not be obligated) to (i) decline to purchase any of the Shares tendered in the Offer and terminate the Offer, and return all tendered Shares to the Tendering Shareholder, (ii) except for the Minimum Condition, waive or amend any or all conditions to the Offer, to the extent permitted by applicable law and the provisions of the Merger Agreement, and, subject to complying with applicable rules and regulations of the Securities and Exchange Commission (the "COMMISSION"), purchase all Shares validly tendered, or (iii) extend the Offer and, subject to the right of shareholders to withdraw Shares until the Expiration Date, retain the Shares which have been tendered during the period or periods for which the Offer is extended. The Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including the occurrence of any of the events specified in Section 14, by giving oral or written notice of such extension to the Depositary. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw its Shares. See Section 4. Subject to the applicable regulations of the Commission, the Purchaser also expressly reserves the right, in its sole discretion (but subject to the terms of the Merger Agreement), at any time and from time to time, (i) to delay acceptance for payment of, or, regardless of whether such Shares were theretofore accepted for payment, payment for, any Shares pending receipt of any regulatory approval specified in Section 15 or in order to comply in whole or in part with any other applicable law, (ii) to terminate the Offer and not accept for payment any Shares if any of the conditions referred to in Section 14 has not been satisfied or upon the occurrence of any of the events specified in Section 14 and (iii) to waive any condition or otherwise amend the Offer in any respect by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and by making a public announcement thereof. The Merger Agreement provides that, without the consent of the Company, the Purchaser will not decrease the Offer Price, decrease the number of Shares sought in the Offer, waive the Minimum Condition, change the form of consideration payable in the Offer, or modify or add to the stated conditions, except that if on the Expiration Date (as duly extended, if applicable), all conditions to the Offer shall not have been satisfied or waived, the Offer may be extended from time to time until June 15, 1996. In addition, the Merger Agreement provides that without the consent of the Company, the Offer Price may be increased and the Offer may be extended to the extent required by law in connection with such an increase in the Offer Price. The Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") requires the Purchaser to pay the consideration offered or return the Shares 4 7 tendered promptly after the termination or withdrawal of the Offer, and (ii) the Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i)of the first sentence of the second preceding paragraph), any Shares upon the occurrence of any of the conditions specified in Section 14 without extending the period of time during which the Offer is open. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, with such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act, which require that material changes be promptly disseminated to shareholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Purchaser will extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. Subject to the terms of the Merger Agreement, if, prior to the Expiration Date, the Purchaser should decide to decrease the number of Shares being sought or to increase or decrease the consideration being offered in the Offer, such decrease in the number of Shares being sought or such increase or decrease in the consideration being offered will be applicable to all shareholders whose Shares are accepted for payment pursuant to the Offer and, if at the time notice of any such decrease in the number of Shares being sought or such increase or decrease in the consideration being offered is first published, sent or given to holders of such Shares, the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from and including the date that such notice is first so published, sent or given, the Offer will be extended at least until the expiration of such ten business day period. For purposes of the Offer, a "BUSINESS DAY" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. The Company has provided the Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related Letter of Transmittal, and other relevant materials, will be mailed to record holders of Shares whose names appear on the Company's shareholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will purchase, by accepting for payment, and will pay for, all Shares validly tendered prior to the Expiration Date (and not properly withdrawn in accordance with Section 4) promptly after the later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions set forth in Section 14. Subject to applicable rules of the Commission and the terms of the Merger Agreement, the Purchaser expressly reserves the right, in its discretion, to delay acceptance for payment of, or payment for, Shares pending receipt of any regulatory approvals specified in Section 15. See Section 15. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "SHARE CERTIFICATES") or timely confirmation of a book-entry transfer (a "BOOK-ENTRY CONFIRMATION") of such Shares, if such procedure is available, into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "BOOK-ENTRY TRANSFER FACILITY" and, collectively, the "BOOK-ENTRY TRANSFER FACILITIES") pursuant to the procedures set forth in Section 3, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, and (iii) any other documents required by the Letter of Transmittal. 5 8 The term "AGENT'S MESSAGE" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. On April 23, 1996, Parent anticipates filing with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "ANTITRUST DIVISION") a Premerger Notification and Report Form under the HSR Act in connection with the purchase of Shares pursuant to the Offer. Accordingly, it is anticipated that the waiting period under the HSR Act applicable to the Offer will expire at 11:59 p.m., New York City time, on May 8, 1996. Prior to the expiration or termination of such waiting period, the FTC or the Antitrust Division may extend such waiting period by requesting additional information or documentary material from Parent. If such a request is made with respect to the purchase of Shares in the Offer, the waiting period will expire at 11:59 p.m., New York City time, on the tenth calendar day after substantial compliance by Parent with such a request. Thereafter, the waiting period may only be extended by court order. The waiting period under the HSR Act may be terminated prior to its expiration by the FTC and the Antitrust Division. Parent will request early termination of the waiting period, although there can be no assurance that this request will be granted. Pursuant to the Merger Agreement, Purchaser may, but need not, extend the Offer until the applicable waiting period under the HSR Act shall have expired or been terminated. See Section 15 for additional information regarding the HSR Act. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, tendered Shares if, as and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares for payment. Payment for Shares accepted pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for Tendering Shareholder for the purpose of receiving payments from the Purchaser and transmitting payments to such Tendering Shareholder. Under no circumstances will interest on the purchase price for Shares be paid by the Purchaser, regardless of any delay in making such payment. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. If, prior to the Expiration Date, the Purchaser increases the consideration to be paid per Share pursuant to the Offer, the Purchaser will pay such increased consideration for all such Shares purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. Shareholders of the Company will be required to tender one Right for each Share tendered in order to effect a valid tender of such Share. If Rights Certificates have been distributed to holders of Shares prior to the consummation of the Offer, Rights Certificates representing a number of Rights equal to the number of Shares being tendered must be delivered to the Depositary in order for such Shares to be validly tendered. If Rights Certificates have not been distributed prior to the time Shares are accepted for payment by the Purchaser, a tender of Shares will also constitute a tender of the associated Rights. The Purchaser reserves the right to transfer or assign, in whole at any time, or in part from time to time, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of Tendering Shareholder to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 6 9 3. PROCEDURES FOR TENDERING SHARES. VALID TENDER OF SHARES. In order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either (i) the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect to the Shares at each Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in any of the Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message and any other required documents, must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date or the tendering shareholder must comply with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing being referred to as an "ELIGIBLE INSTITUTION"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If a Share Certificate is registered in the name of a person other than the person who or which signs the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed as described above. See Instructions 1 and 5 of the Letter of Transmittal. 7 10 Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's Share Certificates are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date or the procedure for book-entry transfer cannot be completed on or prior to the Expiration Date, such Shares may nevertheless be tendered if all the following conditions are satisfied: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser herewith, is received by the Depositary as provided below prior to the Expiration Date; and (iii) in the case of a guarantee of Delivery, the Share Certificates for all tendered Shares, in proper form for transfer, or a Book-Entry Confirmation, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantee and any other documents required by such Letter of Transmittal, are received by the Depositary within three American Stock Exchange ("AMEX") trading days after the date of execution of the Notice of Guaranteed Delivery. Any Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares purchased pursuant to the Offer will, in all cases, be made only after timely receipt by the Depositary of (i) the Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the delivery of such Shares, as applicable, (ii) a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and (iii) any other documents required by the Letter of Transmittal. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tendered Shares pursuant to any of the procedures described above will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding on all parties. The Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or if the acceptance for payment of, or payment for, such Shares may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, in its sole discretion, to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. None of Parent, the Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. APPOINTMENT AS PROXY. By executing a Letter of Transmittal as set forth above, a tendering shareholder irrevocably appoints designees of the Purchaser as such shareholder's proxies, each with full power of substitution, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by the Purchaser (and any and all non-cash dividends, distributions, rights, other Shares, or other securities issued or issuable in respect of such Shares on or after April 22, 1996). All such proxies shall be considered coupled with an interest in the tendered Shares. This appointment will be effective if, when, and only to the extent that, the Purchaser accepts such Shares for payment pursuant to the Offer. Upon such acceptance for payment, all prior proxies given by such shareholder with respect to such Shares and other securities will, without further action, be revoked, and no subsequent proxies may be given. The designees of the Purchaser will, with respect to the Shares and other securities for which the appointment is effective, be empowered to exercise all voting and other rights of such shareholder as they in their sole 8 11 discretion may deem proper at any annual, special, adjourned or postponed meeting of the Company's shareholders, by written consent or otherwise, and the Purchaser reserves the right to require that, in order for Shares or other securities to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares the Purchaser must be able to exercise full voting rights with respect to such Shares. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. The Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering shareholder and the Purchaser upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after June 20, 1996, or at such later time as may apply if the Offer is extended. If the Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that Tendering Shareholder is entitled to withdrawal rights as described in this Section 4. Any such delay will be by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. None of Parent, the Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn will thereafter be deemed to not have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares pursuant to the Offer or in the Merger will be a taxable transaction for federal income tax purposes and may 9 12 also be a taxable transaction under applicable state, local or foreign tax laws. In general, a shareholder will recognize gain or loss for federal income tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such shareholder's adjusted tax basis in such Shares. Assuming the Shares constitute capital assets in the hands of the shareholder, such gain or loss will be capital gain or loss and will be long term capital gain or loss if the holder has held the Shares for more than one year at the time of the sale. Gain or loss will be calculated separately for each block of Shares tendered pursuant to the Offer. The foregoing discussion may not be applicable to certain types of shareholders, including shareholders who acquired Shares pursuant to the exercise of stock options or otherwise as compensation, individuals who are not citizens or residents of the United States and foreign corporations, or entities that are otherwise subject to special tax treatment under the Internal Revenue Code of 1986, as amended. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS. 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally traded on the AMEX and quoted under the symbol DPX. The following table sets forth, for the quarters indicated, the high and low sales prices per Share on the AMEX as reported by the Dow Jones News Service.
MARKET PRICE -------------- HIGH LOW ---- --- FISCAL YEAR ENDED OCTOBER 28, 1994: First Quarter................................ $11 3/4 10 Second Quarter............................... 11 1/2 9 3/8 Third Quarter................................ 10 8 6/8 Fourth Quarter............................... 9 1/8 8 5/8 FISCAL YEAR ENDED OCTOBER 28, 1995: First Quarter................................ 9 6/8 6 3/4 Second Quarter............................... 9 1/4 7 1/4 Third Quarter................................ 9 1/8 7 4/5 Fourth Quarter............................... 8 8 7/8 FISCAL YEAR ENDED OCTOBER 27, 1996: First Quarter................................ 9 1/4 7 3/10
On April 19, 1996, the last full trading day prior to the public announcement of the execution of the Merger Agreement, the reported closing sales price of the Shares on the AMEX was $11 7/8 per Share. On April 19, 1996, the last full trading day prior to the date of this Offer to Purchase, the reported closing sales price of the Shares on the AMEX was $11 7/8 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. The Company did not pay any dividends during the 1994 and 1995 fiscal years and has not paid any dividends during the 1996 fiscal year. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Neither Parent nor the Purchaser assumes any responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Parent or the Purchaser. 10 13 The Company is a Delaware corporation and its principal executive offices are located at 1947 Bethany Road, Sycamore, Illinois 60178. The telephone number of the Company at such offices is (815) 895-2101. The Company began operations in 1947 as a designer and manufacturer of business forms primarily focused on government markets. Over the years, the Company has broadened considerably the scope of its products and services to keep pace with emerging technologies and the changing information management requirements of businesses. Today the Company serves both the business forms and information management needs of customers in financial, industrial, retail and commercial markets, with the primary objective of assisting them in improving the efficiency of their operations and lowering their cost of processing business critical information. FINANCIAL INFORMATION. Set forth below is certain selected consolidated financial information relating to the Company and its subsidiaries which has been excerpted or derived from the financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended October 28, 1995 (the "COMPANY FORM 10-K"). More comprehensive financial information is included in the Company Form 10-K and other documents filed by the Company with the Commission. The financial information that follows is qualified in its entirety by reference to the Company Form 10-K and other documents, including the financial statements and related notes contained therein. The Company Form 10-K and other documents may be examined and copies may be obtained from the offices of the Commission in the manner set forth below. DUPLEX PRODUCTS INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED LAST SATURDAY OF OCTOBER, ---------------------------------- 1995 1994 1993 -------- -------- -------- OPERATING STATEMENT DATA: Net Sales................................................ $275,728 $265,791 $258,867 Cost of Goods Sold....................................... $210,931 $204,062 $194,977 Total Costs and Expenses................................. $ 68,733 $ 76,520 $ 62,539 Earnings (Loss) before income taxes and accounting changes............................................... $ (3,042) $(14,747) $ 2,231 Net Earnings (Loss)...................................... $ (1,872) $(16,127) $ 2,454 PER SHARE INFORMATION Net Earnings (Loss) per share............................ $ (0.25) $ (2.12) $ 0.32 BALANCE SHEET DATA: Total Current Assets..................................... $ 96,246 $105,156 $108,584 Property, Plant, and Equipment, Net...................... $ 38,815 $ 37,000 $ 44,511 Total Assets............................................. $140,309 $146,208 $156,059 Total Current Liabilities................................ $ 31,799 $ 33,642 $ 25,212 Long-term Debt........................................... $ 4,695 $ 5,928 $ 7,150 Total Deferred Liabilities and Credits................... $ 6,177 $ 6,599 $ 6,434 Total Shareholders' Equity............................... $ 97,638 $100,039 $117,263
The Company is subject to the information and reporting requirements of the Exchange Act and is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities, any material interests of such persons in transactions with the Company and other matters is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. These reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at prescribed rates at the following regional offices of the Commission: Seven World Trade Center, New York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, 11 14 Illinois 60661. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Reports, proxy statements and other information concerning the Company should also be available for inspection at the offices of the AMEX, 86 Trinity Place, New York, New York 10006-1881. Except as otherwise noted in this Offer to Purchase, all of the information with respect to the Company and its affiliates set forth in this Offer to Purchase has been derived from publicly available information. 8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT. THE PURCHASER. The Purchaser, a newly incorporated Delaware corporation, has not conducted any business other than in connection with the Offer, the Merger Agreement and the Tender Agreement. All of the issued and outstanding shares of capital stock of the Purchaser are beneficially owned by Parent. The principal executive offices of the Purchaser are located at 115 South Ludlow Street, Dayton, Ohio 45402. The telephone number of the Purchaser at such offices is (513) 443-2000. PARENT. Parent is an Ohio corporation organized in 1889. The principal executive offices of Parent are located at 115 South Ludlow Street, Dayton, Ohio 45402. The telephone number of Parent at such offices is (513) 443-2000. Parent operates primarily in two business segments -- computer systems (automotive and healthcare markets) and business forms. Parent markets turnkey information management systems and professional services primarily to automobile dealers and to physician groups and integrated healthcare networks. The hardware sold is purchased from computer hardware manufacturers which specialize in platforms for the UNIX operating system. With a few exceptions, the application software products are owned by Parent and licensed to users. Some of the software products include standard programs for accounting, vehicle and parts inventory control and related billing, leasing, finance and insurance, and manufacturer communications. Through various subsidiaries, Parent provides financing for its computer systems primarily through non-cancelable financing leases. The business forms segment offers its products and services to value-seeking customers in the automotive, healthcare and general business segments. Products and services include standard and custom business forms, forms management services, promotional items, custom designed filing systems, dealership customer satisfaction measurement and management services, customer prospecting and promotional mailing services. Parent is subject to the information and reporting requirements of the Exchange Act and is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning Parent's directors and officers, their remuneration, stock options granted to them, the principal holders of Parent's securities, any material interests of such persons in transactions with Parent and other matters is required to be disclosed in proxy statements distributed to Parent's shareholders and filed with the Commission. These reports, proxy statements and other information should be available for inspection and copies may be obtained in the same manner as set forth for the Company in Section 7. The Parent's Common Stock is listed on the NYSE, and reports, proxy statements and other information concerning Parent should also be available for inspection at the offices of the NYSE, 20 Broad Street, New York, New York 10005. Set forth below are certain selected consolidated financial data with respect to Parent and its subsidiaries for Parent's last three fiscal years, excerpted or derived from audited financial statements presented in Parent's 1995 Annual Report to Shareholders filed by Parent with the Commission. More comprehensive financial information is included in such reports and other documents filed by Parent with the Commission. The financial information summary set forth below is qualified in its entirety by reference to those reports and other documents which have been filed with the Commission and all the financial information and related notes contained therein. 12 15 THE REYNOLDS AND REYNOLDS COMPANY SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SELECTED FINANCIAL DATA FOR THE YEARS ENDED SEPTEMBER 30 1995 1994 1993 1992 1991 - ------------------------------------- -------- -------- -------- -------- -------- CONSOLIDATED Net Sales and Revenues Information systems............. $888,580 $789,306 $677,748 $625,634 $614,679 Financial services.............. 22,311 19,488 19,218 19,190 17,320 -------- -------- -------- -------- -------- Total net sales and revenues.... $910,891 $808,794 $696,966 $644,824 $631,999 ======== ======== ======== ======== ======== Income Before Effect of Accounting Changes............................ $ 78,594 $ 66,204 $ 52,522 $ 38,092 $ 24,634 Effect of Accounting Changes(1)...... (19,106) 1,100 -------- -------- -------- -------- -------- Net Income........................... $ 78,594 $ 66,204 $ 33,416 $ 39,192 $ 24,634 ======== ======== ======== ======== ======== Earnings Per Common Share Income before effect of accounting changes............ $ 1.85 $ 1.51 $ 1.20 $ .81 $ .54 Effect of accounting changes(1).................... (.44) .03 -------- -------- -------- -------- -------- Net income...................... $ 1.85 $ 1.51 $ .76 $ .84 $ .54 ======== ======== ======== ======== ======== Return on Equity Income before effect of accounting changes............ 25.1% 23.8% 20.2% 14.8% 9.9% Net income...................... 25.1% 23.8% 12.9% 15.3% 9.9% Cash Dividends Per Class A Common Share.............................. $ .40 $ .33 $ .26 $ .225 $ .21 Book Value Per Outstanding Common Share.............................. $ 8.01 $ 6.94 $ 6.15 $ 5.90 $ 5.64 Assets Information systems............. $489,501 $480,592 $407,761 $366,173 $375,535 Financial services.............. 265,965 204,107 162,790 155,672 159,582 -------- -------- -------- -------- -------- Total assets.................... $755,466 $634,699 $570,551 $521,845 $535,117 ======== ======== ======== ======== ======== Long-Term Debt Information systems............. $ 41,443 $ 41,014 $ 40,000 $ 28,284 $ 40,541 Financial services.............. 92,425 76,638 62,771 70,250 73,075 -------- -------- -------- -------- -------- Total long-term debt............ $133,868 $117,652 $102,771 $ 98,534 $113,616 ======== ======== ======== ======== ======== Number of Employees.................. 6,036 5,478 5,636 4,995 5,225 INFORMATION SYSTEMS (with financial services on an equity basis) Current Ratio........................ 1.81 2.27 2.21 2.23 2.37 Net Property, Plant and Equipment.... $128,462 $117,485 $111,177 $105,014 $107,191 Total Debt........................... $ 51,649 $ 41,301 $ 40,000 $ 37,713 $ 54,573 Total Debt to Capitalization......... 13.4% 12.4% 13.2% 12.8% 17.5% - --------------- (1) Represents the cumulative effect of accounting changes for the adoption of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1993 and SFAS No. 109, "Accounting for Income Taxes" in 1992.
13 16 The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I hereto. Except as described in this Offer to Purchase, (i) none of the Purchaser, Parent nor, to the best knowledge of the Purchaser and Parent, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority-owned subsidiary of the Purchaser, Parent or any of the persons so listed beneficially owns or has any right to acquire, directly or indirectly, any Shares and (ii) none of the Purchaser, Parent nor, to the best knowledge of the Purchaser and Parent, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Shares during the past 60 days except as set forth in Schedule II hereto. Except as provided in the Merger Agreement, the Tender Agreement and the expressions of interest described in Section 11, and as otherwise described in this Offer to Purchase, none of the Purchaser, Parent nor, to the best knowledge of the Purchaser and Parent, any of the persons listed in Schedule I to this Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, since October 1, 1992, neither the Purchaser nor Parent nor, to the best knowledge of the Purchaser and Parent, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer. Except as set forth in this Offer to Purchase, since October 1, 1992, there have been no contracts, negotiations or transactions between any of the Purchaser, Parent, or any of their respective subsidiaries, or, to the best knowledge of the Purchaser and Parent, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. 9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Purchaser and Parent to consummate the Offer and the Merger (including the cash out of stock options) and to pay related fees and expenses (inclusive of estimated expenses of the Company) is estimated to be approximately $92 million. The Purchaser will obtain all of such funds from Parent or its affiliates. Parent will provide the $92 million for the foregoing transactions from its working capital and existing credit facilities (collectively, the "CREDIT AGREEMENTS"). Parent's existing credit facilities aggregate $110 million as follows: (a) $65 million -- NBD Bank ("NBD"); and (b) $15 million each with PNC Bank, Ohio, N.A. ("PNC"), Bank One, Dayton, NA ("BANK ONE") and Bank of America Illinois ("B OF A"). Loans made under the Credit Agreements bear interest at the Parent's option based on either (a) the London Inter-bank Offered Rate ("LIBOR") plus 3/5%- 5/8%, (b) each lender's prime rate, (c) each lender's certificate of deposit ("CD") rate plus 1/2%- 3/4%, or (d) a competitive bid rate among NBD, PNC and Bank One. The interest rate for LIBOR and CD loans varies with the interest period chosen by Parent. Parent may choose 30, 60 or 90-day interest periods for LIBOR and CD loans and up to 90 days for prime rate loans. The current interest rate for 90-day LIBOR loans is approximately 5.875% per annum, for 90-day CD loans is approximately 6.125% per annum and for prime rate loans is 8.25% per annum. Parent pays a fee of 25 basis points per annum on the unused portion of the Credit Agreements. The NBD Credit Agreement will reduce to $30 million approximately six months after consummation of the Offer. Each of the Credit Agreements provides that any outstanding loan balances at termination of the revolving portion of the Agreement shall be converted to 3-4 year quarterly amortizing term loans. 14 17 The Credit Agreements include representations and warranties, covenants, events of default and other terms customary to such financings. Each of the Credit Agreements is attached as an exhibit to the Schedule 14D-1 filed by Parent and the Purchaser in connection with the Offer. 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In late February, 1996, David J. Eskra, former Chairman of the Board and a current Director of the Company approached Terry D. Carder, former Chairman of the Board and Chief Executive Officer of Parent, to inquire into the potential interest of Parent in pursuing discussions regarding the possible acquisition of the Company by Parent. Mr. Eskra and Mr. Carder are neighbors. Following that discussion, Mr. Carder contacted Mr. Robert C. Nevin, President of Parent's Business Forms Division, to discuss Mr. Eskra's inquiry. Mr. Nevin indicated that Parent might have an interest in pursuing discussions and Mr. Carder reported that to Mr. Eskra in early March, 1996. Mr. Eskra then contacted Mr. John C. Colman, a Director of the Company and a member of the Company's Executive Committee. Mr. Colman contacted Mr. Nevin by telephone to discuss a possible meeting between the parties to determine whether discussions should proceed. The parties agreed to meet on March 16, 1996. In anticipation of the March 16, 1996 meeting, Mr. Mark A. Robinson, Secretary and General Counsel of the Company, sent by telecopier to Mr. Daniel W. Dittman, Senior Vice President of Parent's Business Forms Division, on March 3, 1996, a proposed form of confidentiality undertaking by Parent. On March 7, 1996, Mr. Dittman signed and returned the March 3, 1996 letter to Mr. Robinson, subject to the changes set forth in Mr. Dittman's letter of that date. Mr. Robinson executed a copy of Mr. Dittman's letter agreeing to the proposed changes and returned a signed copy to Mr. Dittman. On March 16, 1996, Messrs. Nevin, Dittman, Dale L. Medford (Vice President -- Finance and Chief Financial Officer of Parent) and Rodney A. Hedeen (Senior Vice President and General Manager of Parent's Business Forms Division), met with Messrs. Colman, Campbell, Robinson, Loomer, Preston and Ramig. At that meeting, the Company presented Parent with a binder containing many of the answers to the questions raised by Parent. The parties discussed various topics related to the Company and its recent performance. On March 21, 1996, Mr. Nevin and Mr. Colman spoke by telephone. Mr. Nevin indicated that Mr. Colman could report to the Company's Board of Directors at their March 22, 1996 meeting Reynolds' then-current intention to present to the Company's Board of Directors in person during the week of April 1, 1996 a proposal for the acquisition of the Company by Parent. On March 23, 1996, Mr. Colman contacted Mr. Medford by telephone and indicated that the matter had been discussed at the Company's Board of Directors meeting on March 22. The parties subsequently agreed to meet on April 3, 1996 for the purpose of receiving Parent's proposal. On April 3, 1996, Messrs. Nevin, Medford, Hedeen and Dittman, and outside counsel for Parent, Jeffry A. Melnick, met with Messrs. Colman and Robinson and John Bacon, a director of the Company. At that meeting, Parent reviewed a structure for a proposed transaction. Messrs. Bacon, Colman and Robinson determined that the offer was not within the range that would be acceptable to the Company's Board of Directors and the meeting terminated. On April 8, 1996, Mr. Colman contacted Mr. Nevin to determine whether Parent wanted to submit a revised proposal. Over the next two days, the parties exchanged several telephone conversations regarding various terms of Parent's revised proposal. On April 10, 1996, Mr. Bacon communicated to Mr. Medford the decision of the Company's Board of Directors to permit Parent to proceed with due diligence based upon Parent's revised proposal. From April 12 through April 19, Parent conducted an initial due diligence investigation regarding the Company. 15 18 Parent's Board of Directors met at 4:00 p.m. on April 19, 1996 to consider the Offer and the Merger and the related transactions. At that meeting, the Board approved the Offer and the Merger and the related transactions and authorized appropriate officers of Parent to take such actions as necessary to effect the same. By unanimous written consent dated as of April 19, 1996, the Board of Directors of the Purchaser approved the Offer and the Merger and the related transactions and authorized appropriate officers of Parent to take such actions as necessary to effect the same. The Company's Board of Directors met at 9:00 a.m. on April 20, 1996 to consider the Offer and the Merger and the related transactions. At that meeting, the Board unanimously approved the Offer and the Merger and the related transactions and authorized appropriate officers of Parent to take such actions as necessary to effect the same. The parties executed the Merger Agreement and the other agreements and documents described in this Offer on April 20, 1996. 11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; MERGER AGREEMENT; TENDER AGREEMENT AND EXPRESSIONS OF INTENT; EMPLOYMENT AND CONSULTING AGREEMENTS; AND OTHER AGREEMENTS. PURPOSE OF THE OFFER. The purpose of the Offer, the Merger, the Merger Agreement and the Tender Agreement is to enable Parent to acquire control of the Company's Board of Directors and the entire equity interest in the Company. Upon consummation of the Merger, the Company will become a wholly owned subsidiary of Parent. The Offer is being made pursuant to the Merger Agreement. PLANS FOR THE COMPANY. It is expected that, initially following the Merger, the business and operations of the Company will, except as set forth in this Offer to Purchase, be integrated into the operations of Parent as rapidly as practicable following the Merger. In addition, Parent will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger and will take such further actions as it deems appropriate under the circumstances then existing. Parent intends to cause the Shares to be delisted from the American Stock Exchange and deregistered under the Exchange Act as soon as practicable following purchase of Shares pursuant to the Offer. As a result, there will likely be no public market for the sale of Shares which are not so purchased. Parent further anticipates that as soon as practicable following the Effective Time, Parent will cause the Company, as the surviving corporation in the Merger, to be merged into Parent or dissolved and liquidated in one or more liquidating distributions. Further, Parent intends to sell those assets of the Company which are not useful to the integrated operation. MERGER AGREEMENT. THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE MERGER AGREEMENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACE AND IN THE MANNER SET FORTH IN SECTION 7 OF THIS OFFER TO PURCHASE. The Offer. The Merger Agreement provides that the Purchaser will commence the Offer and that, upon the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, the Purchaser will purchase all Shares validly tendered pursuant to the Offer. The Merger Agreement provides that, without the consent of the Company, the Purchaser will not decrease the Offer Price, decrease the number of Shares sought in the Offer, waive the Minimum Condition, change the form of consideration payable in the Offer, or modify or add to the stated conditions, except that if on the Expiration Date (as duly extended, if applicable), all conditions to the Offer shall not have been satisfied or waived, the Offer may be extended from time to time until June 15, 1996. In addition, the Merger Agreement provides that without the consent of the Company, the Offer Price may be increased and the Offer may be extended to the extent required by law in connection with such an increase in the Offer Price. 16 19 The Merger. The Merger Agreement provides that, subject to the terms and conditions thereof, and in accordance with Delaware Law, at the Effective Time, the Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of the Purchaser will cease and the Company will continue as the Surviving Corporation. The respective obligations of Parent and the Purchaser, on the one hand, and the Company, on the other hand, to effect the Merger are subject to the conditions that: (i) the Agreement shall have been approved and adopted by the requisite vote of the holders of Common Stock, if required by applicable law and the Restated Articles of Incorporation, in order to consummate the Merger; (ii) no statute, rule, order, decree or regulation shall have been enacted or promulgated by any foreign or domestic government or any governmental agency or authority of competent jurisdiction which prohibits the consummation of the Offer, the Merger or the Tender Agreement or has the effect of making illegal the purchase of Company Common Stock by Parent or the Purchaser and all foreign or domestic governmental consents, orders and approvals required for the consummation of the Offer and the Merger and the transactions contemplated by the Agreement shall have been obtained and shall be in effect at the Effective Time; (iii) no preliminary or permanent injunction or other order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits the consummation of the Offer or the Merger and the transactions contemplated by the Merger Agreement and which is in effect at the Effective Time, provided, however, that, in the case of a decree, injunction or other order, each of the parties shall have used reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any decree, injunction or other order that may be entered; and (iv) Parent, the Purchaser or their affiliates shall have purchased shares of Common Stock pursuant to the Offer. The Merger Agreement provides that at the Effective Time, each issued and outstanding share of Common Stock, including the associated Rights (other than Shares that are owned by the Company as treasury stock and any Shares owned by Parent, Purchaser or another wholly owned subsidiary of Purchaser) shall be converted into the right to receive the Offer Price, without interest. Pursuant to the Merger Agreement, each issued and outstanding share of common stock, no par value, of the Purchaser shall be converted into one fully paid and non-assessable share of common stock of the Surviving Corporation. Pursuant to the Merger Agreement, the Board of Directors of the Company has approved an amendment to the Rights Agreement (which shall be effected as soon as possible but in any event not later than two (2) days after public announcement of the Offer) (the "RIGHTS AMENDMENT") in order to (i) prevent the Merger Agreement, the Tender Agreement, the expressions of intent described below in this Section 11 or the consummation of any of the transactions contemplated thereby, including without limitation, the Offer and the consummation of the Offer and the Merger, from resulting in the issuance of Rights or being deemed a trigger event under the terms of the Rights Agreement and to (ii) provide that neither Parent nor the Purchaser will be deemed to be an Acquiring Person (as defined in the Rights Agreement) by reason of the transactions expressly provided for in the Merger Agreement and the Tender Agreement. The Rights Amendment will render the Rights inoperative with respect to any acquisition of Shares by Parent, the Purchaser or any of their affiliates pursuant to the Merger Agreement the Tender Agreement and/or the expressions of intent described below. Additionally, the Rights Amendment provides that the Rights Agreement will terminate immediately prior to the purchase of Shares by Purchaser pursuant to the Offer. The Company's Board of Directors. The Merger Agreement provides that, promptly upon the purchase of and payment for any Shares by Parent or any of its subsidiaries which represents at least a majority of the outstanding Shares (on a fully diluted basis), Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of directors on such Board (giving effect to the directors designated by Parent pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by the Purchaser, Parent or any of their affiliates bears to the total number of Shares then outstanding. The Company shall, upon request of the Purchaser, promptly either increase the size of its Board of Directors or, at the Company's election, secure the resignations of such number of its incumbent directors as is 17 20 necessary to enable Parent's designees to be so elected to the Company's Board, and shall cause Parent's designees to be so elected. The Merger Agreement also provides that the Company shall cause persons designated by Parent to constitute the same percentage (rounded up to the next whole number) as is on the Company's Board of Directors of (i) each committee of the Company's Board of Directors, (ii) each board of directors (or similar body) of each subsidiary of the Company and (iii) each committee (or similar body) of each such board, in each case only to the extent permitted by applicable law or the rules of any stock exchange on which the Shares are listed. Notwithstanding the foregoing, until the Effective Time, the Company shall use all reasonable efforts to retain as members of its Board of Directors at least two directors who are directors of the Company on the date of the Merger Agreement; provided, that subsequent to the purchase of and payment for Shares pursuant to the Offer, Parent shall always have its designees represent at least a majority of the entire Board of Directors. The Company's obligation to appoint the Purchaser's designees to the Board of Directors is subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Shareholders Meeting. Pursuant to the Merger Agreement, the Company will, if required by applicable law in order to consummate the Merger, duly call, give notice of, convene and hold a special meeting of its shareholders (the "SPECIAL MEETING") as soon as practicable following the acceptance for payment and purchase of Shares by the Purchaser pursuant to the Offer for the purpose of considering and taking action upon the Merger Agreement. The Merger Agreement provides that the Company will, if required by applicable law in order to consummate the Merger, prepare and file with the Commission a preliminary proxy or information statement relating to the Merger and the Merger Agreement and use its reasonable efforts (i) to obtain and furnish the information required to be included by the Commission in the Proxy Statement (as defined herein) and, after consultation with Parent, to respond promptly to any comments made by the Commission with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement (the "PROXY STATEMENT") to be mailed to its shareholders and (ii) to obtain the necessary approvals of the Merger and the Merger Agreement by its shareholders. If the Purchaser acquires at least a majority of the outstanding Shares, the Purchaser will have sufficient voting power to approve the Merger, even if no other shareholder votes in favor of the Merger. The Company has agreed, subject to the fiduciary obligations of the Board under applicable law as advised by independent counsel, to include in the Proxy Statement the recommendation of the Board that shareholders of the Company vote in favor of the approval of the Merger and the adoption of the Merger Agreement. Parent agrees that it will vote, or cause to be voted, all of the Shares then owned by it, the Purchaser or any of its other subsidiaries and affiliates in favor of the approval of the Merger and the adoption of the Merger Agreement. The Merger Agreement provides that in the event that Parent, the Purchaser or any other subsidiary of Parent acquires at least 90% of the outstanding Shares, pursuant to the Offer or otherwise, Parent, the Purchaser and the Company agree, at the request of Parent and subject to the terms of the Merger Agreement, to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of shareholders of the Company, in accordance with Delaware Law. Interim Operations. In the Merger Agreement, the Company has agreed that, except as expressly contemplated by the Merger Agreement or agreed to by Parent, prior to the time the directors of the Purchaser have been elected to, and shall constitute a majority of, the Board of Directors of the Company: (i) the business of the Company and its subsidiaries shall be conducted only in the ordinary and usual course and, to the extent consistent therewith, each of the Company and its subsidiaries shall use its best efforts to preserve its business organization intact and maintain its existing relations with customers, suppliers, employees, creditors and business partners; (ii) the Company will not, directly or indirectly, (a) sell, transfer or pledge or agree to sell, transfer or pledge any Common Stock, preferred stock or capital stock of any of its subsidiaries beneficially owned by it, either directly or indirectly; or (b) split, combine or reclassify the outstanding Common Stock or any outstanding capital stock of any of the subsidiaries of the Company; (iii) neither the Company nor any of its subsidiaries shall (a) amend its articles of incorporation or by-laws or similar organizational documents; (b) declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; (c) issue, sell, pledge, dispose of or encumber any 18 21 additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company or its subsidiaries, other than issuances pursuant to the exercise of Options (as defined in the Merger Agreement) outstanding as of the date of the Merger Agreement; (d) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any material assets other than in the ordinary and usual course of business and consistent with past practice, or incur or modify any material indebtedness or other liability, other than in the ordinary and usual course of business and consistent with past practice; (e) redeem, purchase or otherwise acquire directly or indirectly any of its capital stock; (f) grant any increase in the compensation payable or to become payable by the Company or any of its subsidiaries to any of its executive officers or key employees, or adopt any new or amend or otherwise increase or accelerate the payment or vesting of the amounts payable or to become payable under any existing bonus, incentive compensation, deferred compensation, severance, profit sharing, stock option, stock purchase, insurance, pension, retirement or other employee benefit plan agreement or arrangement; (g) enter into any employment or severance agreement with or, except in accordance with the existing written policies of the Company, grant any severance or termination pay to any officer, director or employee of the Company or any of its subsidiaries; (h) modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, except in the ordinary course of business and consistent with past practice; (i) permit any material insurance policy naming the Company as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent, except in the ordinary course of business and consistent with past practice; (j) incur or assume any long-term debt, or, except in the ordinary course of business, incur or assume any short-term indebtedness in amounts not consistent with past practice; (k) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except in the ordinary course of business and consistent with past practice; (l) make any loans, advances or capital contributions to, or investments in, any other person (other than to wholly owned subsidiaries of the Company or customary loans or advances to employees in accordance with past practice); (m) enter into any material commitment or transaction (including, but not limited to, any borrowing, capital expenditure or purchase, sale or lease of assets); (n) change any of the accounting principles used by it unless required by generally accepted accounting principles; (o) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of any such claims, liabilities or obligations, (1) in the ordinary course of business and consistent with past practice, of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its consolidated subsidiaries, (2) incurred in the ordinary course of business and consistent with past practice, or (3) which are legally required to be paid, discharged or satisfied (provided that if such claims, liabilities or obligations referred to in this clause (3) are legally required to be paid and are also not otherwise payable in accordance with clauses (1) or (2), the Company will notify Parent in writing if such claims, liabilities or obligations exceed, individually or in the aggregate, $50,000 in value, reasonably in advance of their payment); (p) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries (other than the Merger); (q) take, or agree to commit to take, any action that would make any representation or warranty of the Company contained in the Merger Agreement inaccurate in any respect at, or as of any time prior to, the Effective Time; or (r) enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing. No Solicitation. In the Merger Agreement, the Company has agreed that neither the Company nor any of its subsidiaries or affiliates shall (and the Company shall use its best efforts to cause its officers, directors, employees, representatives and agents not to), directly or indirectly, encourage, solicit, participate in or initiate discussions or negotiations with, or provide any information to, any corporation, partnership, person or other entity or group (other than Parent, or any of its affiliates or representatives) concerning any merger, tender offer, exchange offer, sale of assets, sale of shares of capital stock or debt securities or similar transactions involving the Company or any subsidiary, division or operating or principal business unit of the Company (an "ACQUISITION PROPOSAL"). The Company also agreed that it will immediately cease any existing activities, discussions or negotiations with any parties conducted prior to the date of the Merger Agreement with respect to any of the foregoing. The Merger Agreement provides that the Company may, directly or 19 22 indirectly, provide access and furnish information to a third party and may negotiate and participate in discussions and negotiations with such third party concerning an Acquisition Proposal if the Board of Directors of the Company reasonably believes such information or discussions will result in an Acquisition Proposal and if the Board of Directors reasonably and in good faith believes (and has received a written opinion to that effect from independent counsel) that failing to take such action would constitute a breach of its fiduciary duties and if such third party, as a condition to receipt of such information, executes a confidentiality agreement no less restrictive than the Confidentiality Agreement. The Merger Agreement further provides that, neither the Board of Directors of the Company nor any Committee thereof shall withdraw or modify in a manner adverse to Parent the approval and recommendation of the Offer and the Merger Agreement or approve or recommend any Acquisition Proposal, provided that the Company may recommend to its shareholders an Acquisition Proposal and in connection therewith withdraw or modify its approval or recommendation of the Offer or the Merger if (i) the Board of Directors of the Company has reasonably and in good faith determined that the Acquisition Proposal is a Superior Proposal (as defined below) and the Board of Directors has received a written opinion from independent legal counsel that failure to withdraw or modify its recommendation of the Offer and the Merger and to terminate the Merger Agreement pursuant to Section 7.1(e) of the Merger Agreement would constitute a breach of the Board's fiduciary duties, (ii) all the conditions to the Company's right to terminate the Agreement in accordance with Section 7.1(e) have been satisfied (including the payment of the amount required by Section 8.1 of the Merger Agreement), (iii) simultaneously with such withdrawal, modification or recommendation, the Merger Agreement is terminated in accordance with Section 7.1(e) and (iv) the Acquisition Proposal does not provide for any breakup fee or other inducement to the acquiror other than reimbursement of documented out-of-pocket expenses incurred in connection with such Acquisition Proposal. "SUPERIOR PROPOSAL" means a bona fide proposal made by a third party to acquire all of the outstanding shares of the Company pursuant to a tender offer or a merger, or to purchase all or substantially all of the assets of the Company on terms which a majority of the members of the Board of Directors of the Company determines in its good faith reasonable judgment (based on the advice of its financial and legal advisors) to be more favorable to the Company and its shareholders than the transactions contemplated hereby, and which does not provide for any breakup fee or other inducement to the acquiror other than reimbursement of documented out-of-pocket expenses incurred in connection with the Superior Proposal. The Company has also agreed to promptly advise Parent of any request for information or of any Acquisition Proposal, or any proposal with respect to any Acquisition Proposal, the material terms and conditions of such request or takeover proposal, and the identity of the person making any such takeover proposal or inquiry. The Company has committed to use its reasonable best efforts to keep Parent informed of the status and details (including amendments or proposed amendments) of any such request, takeover proposal or inquiry. The Company has agreed that immediately following the purchase of Shares pursuant to the Offer, the Company will request each person which has heretofore executed a confidentiality agreement in connection with its consideration of acquiring the Company or any portion thereof to return all confidential information heretofore furnished to such person by or on behalf of the Company. Directors' and Officers' Insurance and Indemnification. For two (2) years from the Effective Time, the Surviving Corporation will either (i) maintain in effect the Company's current directors' and officers' liability insurance covering those persons who are currently covered on the date of the Merger Agreement by the Company's directors' and officers' liability insurance policy (the "INDEMNIFIED PARTIES"); provided, however, that in no event will Parent be required to expend in any one year an amount in excess of 100% of the annual premiums currently paid by the Company for such insurance; and; provided further, that if the annual premiums of such insurance coverage exceed such amount, the Surviving Corporation will be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount; provided further, that the Surviving Corporation may substitute for such Company policies, policies with at least the same coverage containing terms and conditions which are no less advantageous and provided that said substitution does not result in any gaps or lapses in coverage with respect to matters occurring prior to the 20 23 Effective Time, or (ii) cause the Parent's directors' and officers' liability insurance then in effect to cover those persons who are covered on the date of the Merger Agreement by the Company's directors' and officers' liability insurance policy with respect to those matters covered by the Company's directors' and officers' liability policy. Parent has agreed to (or to cause the Surviving Corporation to) indemnify all Indemnified Parties to the fullest extent permitted by Delaware law and the Company's Restated Certificate of Incorporation and By-laws with respect to all acts and omissions arising out of such individuals' services as officers, directors, employees or agents of the Company or any of its subsidiaries, occurring prior to the Effective Time including, without limitation, the transactions contemplated by the Merger Agreement. Without limitation of the foregoing, in the event any such Indemnified Party is or becomes involved in any capacity in any action, proceeding or investigation in connection with any matter, including without limitation, the transactions contemplated by the Merger Agreement, occurring prior to, and including, the Effective Time, Parent, from and after the date of purchase of Shares pursuant to the Offer, will pay as incurred such Indemnified Party's reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. Compensation and Benefits. Parent has agreed that following the Effective Time the employees of the Company and its Subsidiaries will continue to be provided with employee benefit plans (other than stock option, employee stock ownership or other plans involving the potential issuance of securities of the Company or of Parent) which in the aggregate are substantially comparable to those currently provided by the Company and its Subsidiaries to such employees. Parent will, and will cause the Company as the surviving corporation to, honor employee (or former employee) benefit obligations and contractual rights existing as of the Effective Time and all employment, incentive and deferred compensation or severance agreements, plans or policies adopted by the Board of Directors of the Company (or any committee thereof) prior to the date hereof in accordance with their terms other than stock option, employee stock ownership or other plans involving the potential issuance of securities of the Company or of Parent. Options. Pursuant to the Merger Agreement, Parent and the Company have agreed to take all actions necessary to provide that, effective as of the Effective Time, (i) each outstanding employee stock option to purchase Shares (an "EMPLOYEE OPTION") granted under the Company's 1984 Stock Option Plan or 1993 Incentive Stock Option Plan (the "OPTION PLANS"), whether or not then exercisable or vested, shall become fully exercisable and vested, (ii) each Option that is then outstanding shall be cancelled and (iii) in consideration of such cancellation, and except to the extent that Parent or the Purchaser and the holder of any such Option otherwise agree, the Company (or, at Parent's option, the Purchaser) shall pay to such holders of Options an amount in respect thereof equal to the product of (A) the excess, if any, of the Offer Price over the exercise price thereof and (B) the number of Shares subject thereto (such payment to be net of applicable withholding taxes). In the Merger Agreement, the parties have agreed that if it is determined that compliance with any of the foregoing would cause any individual subject to Section 16 of the Exchange Act ("SECTION 16") to become subject to the profit recovery provisions thereof, any Options held by such individual will be cancelled or purchased, as the case may be, as promptly as possible so as not to subject such individual to any liability pursuant to Section 16, subject to receiving an agreement from the holder of such Option not to exercise such Option after the Effective Time, and such individual shall be entitled to receive from the Company, for each Share subject to an Option an amount equal to the excess, if any, of the Offer Price over the per Share exercise price of such Option. Notwithstanding the foregoing, any payment to the holders of Options contemplated by the foregoing provisions may be withheld in respect of any Option until any necessary consents or releases are obtained. The Merger Agreement also provides that (i) the Option Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement, providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of its subsidiaries shall be deleted as of the Effective Time and (ii) the Company shall use all reasonable efforts to ensure that following the Effective Time no holder of Options or any participant in the Option Plans or any other plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. 21 24 The Merger Agreement also provides that all Shares previously issued in the form of restricted stock under the Company's Restricted Stock Purchase Plan will become fully and freely transferable pursuant to the Offer immediately prior to the Effective Time. Representations and Warranties. In the Merger Agreement, the Company has made customary representations and warranties to Parent and the Purchaser with respect to, among other things, its organization, capitalization, financial statements, public filings, labor relations, conduct of business, employee benefit plans, insurance, compliance with laws, litigation, tax matters, real property, consent and approvals, opinions of financial advisors, vote required, undisclosed liabilities and the absence of any undisclosed material adverse changes in the Company since October 28, 1995. Termination; Fees. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval by the shareholders of the Company, (a) subject to the provisions of Section 1.3 of the Merger Agreement, by mutual consent of the Company, on the one hand, and of Parent and the Purchaser, on the other hand; (b)by either Parent, on the one hand, or the Company, on the other hand, if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable; (c) by Parent, on the one hand, or the Company, on the other hand, if the Effective Time shall not have occurred on or before June 15, 1996 unless the Effective Time shall not have occurred because of a material breach of any representation, warranty, obligation, covenant, agreement or condition set forth in the Merger Agreement on the part of the party seeking to terminate the Merger Agreement; (d) by Parent, on the one hand, or the Company, on the other hand, if the Offer is terminated or expires in accordance with its terms without the Purchaser having purchased any Common Stock thereunder due to a failure of any of the conditions set forth in Annex A to the Merger Agreement (the "TENDER OFFER CONDITIONS"; see Section 14) to be satisfied, unless such termination or expiration has been caused by or results from the failure of the party seeking to terminate the Merger Agreement to perform in any material respect any of its respective covenants or agreements contained in the Merger Agreement; (e) by either Parent, on the one hand, or the Company, on the other hand, if the Board of Directors of the Company reasonably and in good faith determines that an Acquisition Proposal is a Superior Proposal and the Board believes (and has received a written opinion from independent legal counsel) that a failure to terminate the Merger Agreement would constitute a breach of its fiduciary duties; provided, however, the Company may not terminate the Merger Agreement pursuant to this provision unless (i) the Company has notified Parent and the Purchaser in writing promptly after receipt of any Acquisition Proposal and following such notification by the Company, the Company has fully cooperated with Parent, including, without limitation, informing Parent of the terms and conditions of such Acquisition Proposal (and any modification thereto), and the identity of the Person making such Proposal, with the intent of enabling the parties hereto to agree to a modification of the terms and conditions of the Merger Agreement so that the transactions contemplated hereby may be effected, and (ii) prior to such termination, Parent has received the amount set forth in Section 8.1(b) of the Merger Agreement by wire transfer in same day funds; and (f) prior to the consummation of the Offer, by the Company, if (i) any of the representations and warranties of Parent or the Purchaser contained in the Merger Agreement were untrue or incorrect in any material respect when made or have since become, and at the time of termination remain, incorrect in any material respect, or (ii) Parent or the Purchaser shall have breached or failed to comply in any material respect with any of their respective obligations under the Merger Agreement. In accordance with the Merger Agreement, upon termination there shall be no liability on the part of Parent or the Company except (a) for fraud or for material breach of the Merger Agreement and (b) if the Merger Agreement is terminated by Parent because of the occurrence of any of the events set forth in paragraphs (iv)(e) or (iv)(h) of the Tender Offer Conditions (i.e., if the representations and warranties of the Company set forth in the Merger Agreement shall not be true and correct in any material respect as of the date of consummation of the Offer as though made on or as of such date, except (i) for changes specifically permitted by the Merger Agreement and (ii) those representations and warranties that address matters only as of a particular date as true and correct as of such date, or the Company shall have breached or failed in any material respect to perform or comply with any material obligation, agreement or covenant required by the 22 25 Merger Agreement to be performed or complied with by it, or if the Company's Board of Directors shall have withdrawn, or modified or changed in a manner adverse to Parent or the Purchaser (including by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement, or the Merger, or recommended another proposal or offer, or shall have resolved to do any of the foregoing) or if the Merger Agreement is terminated by the Company in accordance with Section 7.1(e) of the Merger Agreement (following receipt of a Superior Proposal), then the Company shall, within two business days of such termination (except as required to be earlier paid in accordance with Section 7.1(e)), pay to Parent in same day funds the sum of $3,366,575. TENDER AGREEMENT AND EXPRESSIONS OF INTENT. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE TENDER AGREEMENT AND THE EXPRESSIONS OF INTENT RECEIVED FROM CERTAIN SHAREHOLDERS. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TENDER AGREEMENT AND THE WRITTEN EXPRESSIONS OF INTENT WHICH ARE INCORPORATED HEREIN BY REFERENCE AND COPIES OF WHICH HAVE BEEN FILED WITH THE COMMISSION AS EXHIBITS TO THE SCHEDULE 14D-1. THE TENDER AGREEMENT AND THE WRITTEN EXPRESSIONS OF INTENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACE AND IN THE MANNER AS SET FORTH IN SECTION 7 OF THIS OFFER TO PURCHASE. Tender of Shares. Immediately after the execution of the Merger Agreement, the Purchaser and a tendering shareholder (the "Tendering Shareholder") entered into the Tender Agreement. Upon the terms and subject to the conditions of such agreement, the Tendering Shareholder has agreed to validly tender (and not to withdraw) pursuant to and in accordance with the terms of the Offer, not later than the fifth business day after commencement of the Offer, the number of Shares owned beneficially by it (or a total of 375,300 Shares, representing 5% of the outstanding Shares on a fully diluted basis). The Tendering Shareholder further agreed that the transfer by the Tendering Shareholder of its Shares to the Purchaser in the Offer will pass to and unconditionally vest in the Purchaser good and valid title to such Shares. Provisions Concerning the Shares. The Tendering Shareholder has agreed that during the period commencing on the date of the Tender Agreement and continuing until the first to occur of the Effective Time or termination of the Merger Agreement in accordance with its terms, at any meeting of the Company's shareholders or in connection with any written consent of the Company's shareholders, the Tendering Shareholder will vote (or cause to be voted) the Shares held of record or beneficially owned by such Tendering Shareholder, whether issued, heretofore owned or hereinafter acquired, (i) in favor of the Merger, the execution and delivery by the Company of the Merger Agreement and the approval of the terms thereof and each of the other actions contemplated by the Merger Agreement and the Tender Agreement and any actions required in furtherance thereof; (ii) against any action or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or the Tender Agreement (after giving effect to any materiality or similar qualifications contained therein); and (iii) except as otherwise agreed to in writing in advance by Parent, against the following actions (other than the Merger and the transactions contemplated by the Merger Agreement): (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its subsidiaries; (B) a sale, lease or transfer of a material amount of assets of the Company or its subsidiaries, or a reorganization, recapitalization, dissolution or liquidation of the Company or its subsidiaries; (C) (1) any change in a majority of the persons who constitute the Board of Directors of the Company; (2) any change in the present capitalization of the Company or any amendment of the Company's Restated Certificate of Incorporation or Bylaws; (3) any other material change in the Company's corporate structure or business; or (4) any other action which, in the case of each of the matters referred to in clauses (C)(1), (2) or (3), is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially adversely affect the Merger and the transactions contemplated by the Tender Agreement and the Merger Agreement. The Tendering Shareholder further agreed not to enter into any agreement or understanding with any person or entity the effect of which would be inconsistent or violative of the provisions and agreements described above. 23 26 Other Covenants, Representations, Warranties. In connection with the Tender Agreement, the Tendering Shareholder has made certain customary representations, warranties and covenants, including with respect to (i) ownership of the Shares, (ii) the Tendering Shareholder's authority to enter into and perform its obligations under the Tender Agreement, (iii) the receipt of requisite governmental consents and approvals, (iv) the absence of liens and encumbrances on and in respect of the Tendering Shareholder's Shares, (v) restrictions on the transfer of the Tendering Shareholder's Shares, and (vi) the solicitation of Acquisition proposals. Expressions of Intent. Tweedy, Browne Company L.P., TBK Partners L.P., Vanderbilt Partners, L.P., and Brinson Partners, Inc. have executed letters to Parent confirming their present intention to tender Shares pursuant to the Offer. Franklin Balance Sheet Investment Fund, The Franklin Microcap Value Fund, Babson Enterprise Fund and David L. Babson & Company, Incorporated have orally expressed their intention to tender Shares pursuant to the Offer. EMPLOYMENT AND CONSULTING AGREEMENTS. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE CAMPBELL CONSULTING AGREEMENT, THE RAMIG CONSULTING AGREEMENT, THE LOOMER EMPLOYMENT AGREEMENT, THE PRESTON EMPLOYMENT AGREEMENT AND THE ROBINSON EMPLOYMENT AGREEMENT (COLLECTIVELY, THE "EMPLOYMENT AGREEMENTS"). THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE EMPLOYMENT AGREEMENTS WHICH ARE INCORPORATED HEREIN BY REFERENCE AND COPIES OF WHICH HAVE BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE EMPLOYMENT AGREEMENTS MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACE AND MANNER AS SET FORTH IN SECTION 7 OF THIS OFFER TO PURCHASE. CAMPBELL CONSULTING AGREEMENT. The Campbell Consulting Agreement (a) replaces a severance agreement and certain other arrangements between the Company and Campbell which, among other things, would provide Campbell certain severance and other benefits following a "change of control", and (b) provides for the engagement of Campbell by Parent for two (2) months following consummation of the Offer to render certain advisory services. In consideration of Campbell's termination of the prior agreements and arrangements with the Company and the services to be rendered under the Campbell Consulting Agreement, Campbell will be paid $500,000 upon consummation of the Offer and, subject to certain conditions, an additional $137,000 on the two (2)-month anniversary of consummation of the Offer. Campbell has also agreed not to disclose confidential information of the Company and, under certain circumstances, not to compete with Parent. RAMIG CONSULTING AGREEMENT. The Ramig Consulting Agreement (a) replaces a severance agreement and certain other arrangements between the Company and Ramig which, among other things, would provide Ramig certain severance and other benefits following a "change of control", and (b) provides for the engagement of Ramig by Parent for three (3) months following consummation of the Offer to render certain advisory services. In consideration of Ramig's termination of the prior agreements and arrangements with the Company and the services to be rendered under the Ramig Consulting Agreement, Ramig will be paid $270,000 upon consummation of the Offer and, subject to certain conditions, an additional $95,500 on the three (3)-month anniversary of consummation of the Offer. Ramig has also agreed not to disclose confidential information of the Company and, under certain circumstances, not to compete with Parent. LOOMER EMPLOYMENT AGREEMENT. The Loomer Employment Agreement (a) replaces a severance agreement and certain other arrangements between the Company and Loomer which, among other things, would provide Loomer certain severance and other benefits following a "change of control", and (b) provides for the employment of Loomer by the Company for one (1) year following consummation of the Offer. In consideration of Loomer's termination of the prior agreements and arrangements with the Company and the services to be rendered under the Loomer Employment Agreement, Loomer will be paid (x) an annual salary of $125,000, and (y) a bonus of $225,000 ($175,000 of which will be paid upon consummation of the Offer and, subject to certain conditions, the $50,000 balance of which will be paid on the six (6)-month anniversary of consummation of the Offer). Loomer has also agreed not to disclose confidential information of the 24 27 Company and, under certain circumstances, not to compete with the Company. Loomer will also be entitled to a severance payment equal to $75,000 if his employment is terminated under certain circumstances. PRESTON EMPLOYMENT AGREEMENT. The Preston Employment Agreement (a) replaces a severance agreement and certain other arrangements between the Company and Preston which, among other things, would provide Preston certain severance and other benefits following a "change of control", and (b) provides for the employment of Preston by the Company for one (1) year following consummation of the Offer. In consideration of Preston's termination of the prior agreements and arrangements with the Company and the services to be rendered under the Preston Employment Agreement, Preston will be paid (x) an annual salary of $140,000, and (y) a bonus of $175,000 ($125,000 of which will be paid upon consummation of the Offer and, subject to certain conditions, the $50,000 balance of which will be paid on the six (6)-month anniversary of consummation of the Offer). Preston has also agreed not to disclose confidential information of the Company and, under certain circumstances, not to compete with the Company. Preston will also be entitled to a severance payment equal to $90,000 if his employment is terminated under certain circumstances. ROBINSON EMPLOYMENT AGREEMENT. The Robinson Employment Agreement (a) replaces a severance agreement and certain other arrangements between the Company and Robinson which, among other things, would provide Robinson certain severance and other benefits following a "change of control", and (b) provides for the employment of Robinson by the Company for one (1) year following consummation of the Offer. In consideration of Robinson's termination of the prior agreements and arrangements with the Company and the services to be rendered under the Robinson Employment Agreement, Robinson will be paid (x) an annual salary of $105,000, and (y) a bonus of $275,000 ($225,000 of which will be paid upon consummation of the Offer and, subject to certain conditions, the $50,000 balance of which will be paid on the six (6)-month anniversary of consummation of the Offer). Robinson has also agreed not to disclose confidential information of the Company. Robinson will also be entitled to a severance payment equal to $105,000 if his employment is terminated under certain circumstances. CONFIDENTIALITY AGREEMENT. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE CONFIDENTIALITY AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CONFIDENTIALITY AGREEMENT WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE CONFIDENTIALITY AGREEMENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACE AND MANNER AS SET FORTH IN SECTION 7 OF THIS OFFER TO PURCHASE. Parent entered into a Confidentiality Agreement, dated March 3, 1996 (as amended by letters dated March 7, 1996 and April 16, 1996), with the Company pursuant to which Parent has agreed, among other things, to keep confidential certain non-public confidential or proprietary information of the Company furnished to Parent by or on behalf of the Company and the Company has agreed, among other things, to keep confidential certain non-public confidential or proprietary information of the Parent furnished to the Company by or on behalf of Parent. RIGHTS AGREEMENT. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE RIGHTS AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RIGHTS AGREEMENT, A COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO THE COMPANY'S CURRENT REPORT ON FORM 8-K, DATED JUNE 19, 1989, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 8-K. THE RIGHTS AGREEMENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACE AND IN THE MANNER AS SET FORTH IN SECTION 7 OF THIS OFFER TO PURCHASE. On June 8, 1989, the Board of Directors of the Company declared a dividend distribution of one Right for each outstanding share of Common Stock to shareholders of record on June 23, 1989. The description and terms of the Rights are set forth in a Rights Agreement (the "RIGHTS AGREEMENT") between the Company and Harris Trust and Savings Bank, as Rights Agent (the "RIGHTS AGENT"). 25 28 The Rights are evidenced by a Common Stock certificate with a copy of the Summary of Rights (as set forth in an exhibit to the Rights Agreement) attached thereto. The Rights will separate from the Common Stock and a Distribution Date (as defined in the Rights Agreement) will occur upon the earlier of (i) 15 days following a public announcement that an Acquiring Person (as defined in the Rights Agreement) has acquired, or obtained the right to acquire, beneficial ownership of 25% or more of the outstanding shares of the Common Stock or (ii) 15 days following the commencement or announcement of an intention to commence a tender offer or exchange offer by any person if, upon consummation thereof, such person would be an Acquiring Person (the earlier of such dates being called the "DISTRIBUTION DATE"). The Rights Agreement provides that, until the Distribution Date, (i) the Rights will be transferred with and only with the Common Stock, (ii) new Common Stock certificates issued after June 23, 1989 upon transfer or new issuance of the Common Stock contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any of the Common Stock certificates outstanding as of June 23, 1989 will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. The Rights Agreement provides that as soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("RIGHT CERTIFICATES") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date and the Rights will expire on June 7, 1999, unless earlier redeemed by the Company as described below. The Rights Agreement provides that in the event that (i) the Company were the surviving corporation in a merger and its Common Stock were not changed or exchanged; (ii) an Acquiring Person engages in one of a number of self-dealing transactions specified in the Rights Agreement; or (iii) an Acquiring Person becomes the beneficial owner of 30% or more of the outstanding Shares, or (iv) during such time as there is an Acquiring Person, an event occurs which results in such Acquiring Person's ownership interest being increased by more than 1%, then proper provision shall be made so that each holder of a Right will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Right. In the event (i) that the Company were acquired in a merger or other business combination transaction in connection with which the Company is not the surviving corporation (other than a merger described in the preceding paragraph), or (ii) 50% or more of the Company's assets or earning power is sold or transferred, each holder of a Right shall thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the Right. Each of the events described in this paragraph and the preceding constitutes a "TRIGGERING EVENT" under the Rights Agreement. With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of a least 1% in such Purchase Price. Prior to a Triggering Event, fractional shares of the Preferred Stock will not be issued and, in lieu thereof, an adjustment in cash will be made based on the current market value of the Preferred Stock. Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock and, in lieu thereof, an adjustment in cash will be made equal to the same fraction of the current market value of one share of Common Stock. At any time until fifteen days following a Stock Acquisition Date (as defined in the Rights Agreement), the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of $.05 per Right (the "REDEMPTION PRICE"). Immediately upon the action of the Board of Directors of the Company electing to redeem the Rights, the Company shall make announcement thereof, and upon such election, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. 26 29 GENERAL. Under Delaware Law, the approval of the Board and the affirmative vote of the holders of a majority of the outstanding Shares is required to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. The Board of Directors of the Company has unanimously approved and adopted the Merger Agreement and the transactions contemplated thereby, and, unless the Merger is consummated pursuant to the short-form merger provisions under Delaware Law described below, the only remaining required corporate action of the Company is the approval and adoption of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of a majority of the Shares. Accordingly, if the Minimum Condition is satisfied, the Purchaser will have sufficient voting power to cause the approval and adoption of the Merger Agreement and the transactions contemplated thereby without the affirmative vote of any other shareholders of the Company. Under Delaware Law, if the Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding Shares, the Purchaser will be able to approve the Merger without a vote of the Company's shareholders. In such event, Parent, the Purchaser and the Company have agreed in the Merger Agreement to take, at the request of the Purchaser, all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting of the Company's shareholders. If, however, the Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise and a vote of the Company's shareholders is required under Delaware Law, a significantly longer period of time would be required to effect the Merger. Under Article IX of the Company's Restated Certificate of Incorporation (the "COMPANY'S CHARTER"), the affirmative vote of the holders of not less than 75% of the outstanding voting Shares is required to, among other things, adopt any agreement for, or to approve, the merger or consolidation of the Company or any subsidiary with or into any Related Person (defined as any individual, corporation, or other entity) if such person has or has the right to acquire beneficial owner of 5% or more of the Shares. However, the Company's Charter provides that the preceding provision is not applicable to a transaction which has been approved by the unanimous vote of all of the Directors then in office. In the Merger Agreement, the Company has represented that the Board of Directors of the Company, by resolution, has unanimously approved the Merger and the transactions contemplated thereby. Accordingly, the vote of the holders of not less than 75% of the outstanding Shares, as set forth in Article IX of the Company's Charter, is not applicable to the Offer, the Merger, or the transactions contemplated thereby. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which the Purchaser seeks to acquire the remaining Shares not held by it. The Purchaser believes, however, that Rule 13e-3 will not be applicable to the Merger because it is anticipated that the Merger will be effected within one year following consummation of the Offer. Rule 13e-3 requires, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority shareholders in such transaction, be filed with the Commission and disclosed to shareholders prior to consummation of the transaction. Except as noted in this Offer to Purchase, neither Parent nor the Purchaser has any present plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, relocation of operations, or sale or transfer of assets, involving the Company or any material changes in the Company's corporate structure or business. 12. DIVIDENDS AND DISTRIBUTIONS. As described above, the Merger Agreement provides that, prior to the Effective Time, the Company will not (a) declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock, subsidiaries of the Company and dividends paid in respect of directors' qualifying shares which dividends are the property of, and for the benefit of, the Company or its direct or indirect wholly owned subsidiaries, (b) except as explicitly permitted by the Merger Agreement, issue, sell, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, 27 30 any shares of capital stock of any class of the Company or its subsidiaries or (c) redeem, purchase or otherwise acquire directly or indirectly any of its capital stock. If, on or after the date of the Merger Agreement, the Company should (a) split, combine, redeem or reclassify any shares of its capital stock, (b) purchase or acquire, or offer to purchase or acquire, any shares of its capital stock or (c) issue or sell any shares of its capital stock (other than in connection with the exercise of the Options outstanding on the date of the Merger Agreement), or any of its other securities, or issue any securities convertible into, or rights, warrants or options to purchase or subscribe to, or enter into any arrangement or contract with respect to the issuance or sale of any shares of its capital stock or any of its other securities, or make any other changes in its capital structure, then subject to the provisions of Section 14 below, Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, on or after the date of the Merger Agreement, the Company should declare, pay, set aside or make any cash dividend or make other distributions or payments with respect to any shares of its capital stock, or issue with respect to any shares of its capital stock any additional shares, shares of any other class of capital stock, other securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to shareholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the Purchaser on the Company's stock transfer records, then, subject to the provisions of Section 14 below, (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the Tendering Shareholder will (i) be received and held by the Tendering Shareholder for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering Shareholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of each exercise will promptly be remitted to the Purchaser Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Purchaser in its sole discretion. Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the preceding paragraphs and nothing herein shall constitute a waiver by the Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. 13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. According to its published guidelines, the AMEX would consider delisting the Shares if, among other things, the number of record holders of at least 100 Shares would fall below 300, the number of publicly held Shares (exclusive of holdings of officers, directors, controlling shareholders or other family or concentrated holdings) should fall below 200,000 or the aggregate market value of publicly held Shares should fall below $1,000,000. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the guidelines of the AMEX for continued listing and the listing of the Shares is discontinued, the market for the Shares could be adversely affected. If the AMEX were to delist the Shares, it is possible that the Shares would continue to trade on another securities exchange or in the over-the-counter market and that price or other quotations would be reported by such exchange or through the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or other sources. The extent of the public market therefor and the availability of such 28 31 quotations would depend, however, upon such factors as the number of shareholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. The Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Offer Price. The Shares are currently "margin securities", as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "FEDERAL RESERVE BOARD"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application of the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders of the Shares. The termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with shareholders' meetings pursuant to Section 14(a), and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for NASDAQ reporting. It is Parent's intention to cause the Shares to be deregistered under the Exchange Act and delisted from the AMEX as soon as practicable after satisfaction of the conditions for such deregistration. 14. CONDITIONS OF THE OFFER. Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) the Purchaser's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any tendered Shares, and may terminate the Offer as to any Shares not then paid for, if: (i) any applicable waiting period under the HSR Act has not expired or terminated; (ii) the Minimum Condition has not been satisfied; (iii) the Rights Agreement shall not have been amended in a manner which renders the Rights inoperative with respect to any acquisition of Shares by Parent or the Purchaser, or (iv) at any time on or after April 20, 1996 and before the time of payment for any such Shares, any of the following events shall occur or shall be determined by the Purchaser to have occurred: (a) there shall be threatened, instituted or pending any action or proceeding by any Governmental Entity (i) challenging or seeking to, or which could reasonably be expected to make illegal, impede, delay or otherwise directly or indirectly restrain, prohibit or make materially more costly the Offer or the Merger or seeking to obtain material damages, (ii) seeking to prohibit or materially limit the ownership or operation by Parent or Purchaser of all or any material portion of the business or assets of the Company or any of its subsidiaries taken as a whole or to compel Parent or Purchaser 29 32 to dispose of or hold separately all or any material portion of the business or assets of Parent or Purchaser or the Company or any of its subsidiaries taken as a whole, or seeking to impose any material limitation on the ability of Parent or Purchaser to conduct its business or own such assets, (iii) seeking to impose material limitations on the ability of Parent or Purchaser effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by Purchaser or Parent on all matters properly presented to the Company's stockholders, (iv) seeking to require divestiture by Parent or Purchaser of any Shares, or (v) otherwise materially adversely affecting the condition of the Company and its subsidiaries taken as a whole; (b) any court shall have entered an order which is in effect and which (i) makes illegal, impedes, delays or otherwise directly or indirectly restrains, prohibits or makes materially more costly the Offer or the Merger, (ii) prohibits or materially limits the ownership or operation by Parent or Purchaser of all or any material portion of the business or assets of the Company or any of its subsidiaries taken as a whole or compels Parent or Purchaser to dispose of or hold separately all or any material portion of the business or assets of Parent or Purchaser or the Company or any of its subsidiaries taken as a whole, or imposes any material limitation on the ability of Parent or Purchaser to conduct its business or own such assets, (iii) imposes material limitations on the ability of Parent or Purchaser effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by Purchaser or Parent on all matters properly presented to the Company's stockholders, (iv) requires divestiture by Parent or Purchaser of any Shares, or (v) otherwise materially adversely affects the Company and its Subsidiaries taken as a whole; provided, however, that in the case of a preliminary injunction to the effect described in this paragraph (b), the provisions of this paragraph (b) shall not be deemed to have been triggered until the earlier of (X) the date on which such injunction becomes final or (Y) the Company ceases its efforts to have such preliminary injunction dissolved; (c) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to (i) Parent, Purchaser, the Company or any subsidiary of the Company or (ii) the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, other than the routine application of the waiting period provisions of the HSR Act to the Offer or to the Merger, which could reasonably be expected to directly or indirectly result in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (d) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the American Stock Exchange for a period in excess of three hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) a commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any foreign or United States governmental authority on the extension of credit by banks or other financial institutions, (v) any decline in either the Dow Jones Industrial Average or the Standard & Poor's Index of 500 Industrial Companies by an amount in excess of 20% measured from the close of business on April 19, 1996 or (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; (e) the representations and warranties of the Company set forth in the Merger Agreement shall not be true and correct in any material respect as of the date of consummation of the Offer as though made on or as of such date, except (i) for changes specifically permitted by the Merger Agreement and (ii) those representations and warranties that address matters only as of a particular date as true and correct as of such date, or the Company shall have breached or failed in any 30 33 material respect to perform or comply with any material obligation, agreement or covenant required by the Merger Agreement to be performed or complied with by it; (f) the Merger Agreement shall have been terminated in accordance with its terms; (g) (i) it shall have been publicly disclosed or Parent or the Purchaser shall have otherwise learned that any person, entity or "group" (as defined in Section 13(d)(3)of the Exchange Act), other than Parent or its affiliates or any group of which any of them is a member, shall have acquired beneficial ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of more than 19.9% of any class or series of capital stock of the Company (including the Shares), through the acquisition of stock, the formation of a group or otherwise, or shall have been granted an option, right or warrant, conditional or otherwise, to acquire beneficial ownership of more than 19.9% of any class or series of capital stock of the Company (including the Shares); or (ii) any person or group shall have entered into a definitive agreement or agreement in principle with the Company with respect to a merger, consolidation or other business combination with the Company; (h) the Company's Board of Directors shall have withdrawn, or modified or changed in a manner adverse to Parent or the Purchaser (including by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement, or the Merger, or recommended another proposal or offer, or shall have resolved to do any of the foregoing; (i) any change shall have occurred or been threatened (or any condition, event or development shall have occurred or been threatened involving a prospective change), that is reasonably likely to have a material adverse effect on the business, properties, assets, liabilities, operations, results of operations, conditions (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole; or (j) all consents, registrations, approvals, permits, authorizations, notices, reports or other filings required to be obtained or made by the Company, Parent or Purchaser with or from any governmental or regulatory entity in connection with the execution, delivery and performance of the Merger Agreement, the Offer and the consummation of the transactions contemplated by the Merger Agreement shall not have been made or obtained and such failure could reasonably be expected to have a material adverse effect on the Company and any of its Subsidiaries, taken as a whole, or could be reasonably likely to prevent or materially delay consummation of the transactions contemplated by the Merger Agreement. The foregoing conditions are for the sole benefit of the Purchaser and Parent and may be waived by Parent or the Purchaser, in whole or in part at any time and from time to time in the sole discretion of Parent or the Purchaser; provided that the Minimum Condition may not be waived without the written consent of the Company. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 15. REGULATORY APPROVALS; STATE TAKEOVER LAWS. GENERAL. Except as otherwise disclosed herein, based on a review of publicly available information by the Company with the Commission, neither the Purchaser nor Parent is aware of (i) any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the acquisition of Shares by the Purchaser pursuant to the Offer or the Merger or (ii) any approval or other action by any governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser currently contemplates that such approval or action would be sought. While the Purchaser does not currently intend to delay the acceptance for payment of Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or action, if needed, would be obtained or would be obtained without substantial conditions or that adverse consequences might not result to the business of the Company, the Purchaser or Parent or that certain parts of the businesses of the Company, the Purchaser or 31 34 Parent might not have to be disposed of in the event that such approvals were not obtained or any other actions were not taken. The Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See Section 14. ANTITRUST. Under the HSR Act and the rules that have been promulgated thereunder by the Federal Trade Commission ("FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "ANTITRUST DIVISION") and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares by the Purchaser pursuant to the Offer is subject to the HSR Act requirements. Under the provisions of the HSR Act applicable to the purchase of Shares pursuant to the Offer, such purchase may not be made until the expiration of a 15-calendar day waiting period following the required filing under the HSR Act by Parent, which Parent intends to make on April 23, 1996. Accordingly, if such filing is made on April 23, 1996, the waiting period under the HSR Act will expire at 11:59 P.M., New York City time, on May 8, 1996, unless early termination of the waiting period is granted or Parent receives a request for additional information of documentary material prior thereto. Pursuant to the HSR Act, Parent has requested, and the Company intends to request, early termination of the waiting period applicable to the Offer. There can be no assurances, however, that the 15-day HSR Act waiting period will be terminated early. If either the FTC or the Antitrust Division were to request additional information or documentary material from Parent, the waiting period would expire at 11:59 P.M., New York City time, on the tenth calendar day after the date of substantial compliance by the Parent with such request. Thereafter, the waiting period could be extended only by court order or by consent of Parent. If the acquisition of Shares is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the purchase of and payment for Shares pursuant to the Offer will be deferred until 10 days after the request is substantially complied with unless the waiting period is terminated sooner by the FTC or the Antitrust Division. See Section 2. Only one extension of such waiting period pursuant to a request for additional information is authorized by the rules promulgated under the HSR Act, except by court order. Although the Company is required to file certain information and documentary material with the Antitrust Division and the FTC in connection with the Offer, neither the Company's failure to make such filings nor a request to the Company from the Antitrust Division or the FTC for additional information or documentary material will extend the waiting period. No separate HSR Act requirements with respect to the Merger, the Merger Agreement and the Tender Agreement will apply if the 15-day waiting period relating to the Offer (as described above) has expired or been terminated. However, if the Offer is withdrawn or if the filing relating to the Offer is withdrawn prior to the expiration or termination of the 15-day waiting period relating to the Offer, the acquisition of Shares in the Merger pursuant to the Merger Agreement may not be consummated until 30 calendar days after receipt by the Antitrust Division and the FTC of the Notification and Report Forms of both Parent and the Company unless the 30-day period is earlier terminated by the Antitrust Division and the FTC. Within such 30-day period, the Antitrust Division or the FTC may request additional information or documentary materials from Parent and/or the Company, in which event, the acquisition of Shares pursuant to the Merger may not be consummated until 20 days after such requests are substantially complied with by both Parent and the Company. Thereafter, the waiting periods may be extended only by court order or by consent. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by the Purchaser pursuant to the Offer. At any time before or after the Purchaser's purchase of Shares, either the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or seeking divestiture of Shares acquired by the Purchaser or divestiture of substantial assets of Parent, the Company or any of their respective subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. Based upon an examination of publicly available information relating to the businesses in which Parent and its subsidiaries and the Company and its subsidiaries are involved, Parent and the Purchaser believe that the Offer will not 32 35 violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if a challenge is made, what the result will be. STATE TAKEOVER LAWS. The Company is incorporated under the laws of the State of Delaware. In general, Section 203 of Delaware Law prevents an "interested shareholder" (generally a person who owns or has the right to acquire 15% or more of a corporation's outstanding voting stock, or an affiliate or associate thereof) from engaging in a "business combination" (defined to include mergers and certain other transactions) with a Delaware corporation for a period of three years following the date such person became an interested shareholder unless, among other things, prior to such date the Board of Directors of the corporation approved either the business combination or the transaction in which the interested shareholder became an interested shareholder. On April 20, 1996, prior to the execution of the Merger Agreement, the Board of Directors of the Company, by unanimous vote of all directors present at a meeting held on such date, (i) approved the Merger, (ii) approved the Merger Agreement, the Tender Agreement and expressions of intent described in Section 11, and the transactions contemplated thereby, as well as negotiations between Parent and the Purchaser and the Tendering Shareholder with respect thereto, (iii) determined that the Merger Agreement and the transactions contemplated thereby, including each of the Offer and the Merger is fair to and in the best interests of, the Shareholders of the Company and (iv) recommended that the Shareholders of the Company accept the Offer and approve and adopt the Merger Agreement and the transactions contemplated thereby. Accordingly, Section 203 is inapplicable to the Tender Agreement, the Offer, the Merger and expressions of intent described in Section 11. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted takeover laws. The Purchaser does not know whether any of these laws will, by their terms, apply to the Offer or the Merger and has not complied with any such laws. Should any person seek to apply any state takeover law, the Purchaser will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws is applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, the Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer, and the Merger. In such case, the Purchaser may not be obligated to accept for payment any Shares tendered. See Section 14. APPRAISAL RIGHTS. No appraisal rights are available in connection with the Offer. Holders of Shares will be entitled to appraisal rights in connection with the Merger if at the record date with respect to the Merger certain requirements are satisfied. Under Section 262 of the Delaware Law, appraisal rights are not available for the shares of any class or series of stock which, at the record date fixed to determine the Shareholders entitled to receive notice of and to vote at the meeting of Shareholders to act upon the agreement of merger, were either (i) listed on a national securities exchange or designated as a national market system security on an inter-dealer quotation system by the NASD or (ii) held of record by more than 2,000 shareholders, unless the holders of such class or series of stock are required by the terms of such agreement to accept for such stock anything except (w) shares of stock of the corporation surviving or resulting from such merger, (x) shares of stock of any other corporation which at the effective date of the merger will be either listed on a national securities exchange or designated as a national market system security on an inter-dealer quotation system by the NASD or held of record by more than 2,000 shareholders, (y) cash in lieu of fractional shares of the corporations described in clauses (w) and (x) or (z) any combination of the shares of stock and cash in lieu of fractional shares described in clauses (w), (x) and (y). Shareholders of the Company may have certain rights under Section 262 of the Delaware Law to dissent and demand appraisal of, and payment in cash of the fair value of, their Shares. Such rights, if the statutory procedures were complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from the accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than, or in addition to, the price paid in the Offer and the 33 36 market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the purchase price per Share pursuant to the Offer or the consideration per Share to be paid in the Merger. The foregoing summary of the rights of objecting Shareholders does not purport to be a complete statement of the procedures to be followed by Shareholders desiring to exercise any available dissenters' rights. The preservation and exercise of dissenters' rights require strict adherence to the applicable provisions of the Delaware Law. 16. FEES AND EXPENSES. Except as set forth below, neither Parent nor the Purchaser will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. The Purchaser has retained Georgeson & Company, Inc. to act as the Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. In addition, Harris Trust Company of New York has been retained as the Depositary. The Depositary has not been retained to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering material to their customers. 17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares pursuant thereto, the Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, the Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Parent and the Purchaser have filed with the Commission the Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file amendments thereto. The Schedule 14D-1 and any amendments thereto, including exhibits, may be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in Section 7 (except that they will not be available at the regional offices of the Commission). DELAWARE ACQUISITION CO. April 22, 1996 34 37 SCHEDULE I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of Parent. Unless otherwise indicated, each person identified below is employed by Parent or serves on the Board. The principal address of Parent and, unless otherwise indicated below, the current business address for each individual listed below is 115 S. Ludlow Street, Dayton, Ohio 45402. Each such person is a citizen of the United States. Directors are identified by an asterisk.
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---------------- -------------------------------------------------- David R. Holmes* Chairman of the Board, President and Chief Executive Officer. Richard H. Grant, Jr.* Chairman of the Steering Committee. Father of Richard H. Grant, III. Richard H. Grant, III* Private Investor since October, 1994. Before that he served as Senior Vice President, International, Computer Systems Division. Son of Richard H. Grant, Jr. Joseph N. Bausman* President, Automotive Systems Division since February, 1995. Before that he served as President, Computer Systems Division. Dr. David E. Fry* President and Chief Executive Officer, Northwood University. Allan Z. Loren* Executive Vice President and Chief Information Officer of American Express Company since May, 1994; President and CEO of Galileo International (a global computer reservation system company owned by 11 airlines) from January, 1993 to May, 1994; President and CEO of Covia Partnership (computer reservation system company) from January, 1991 to January, 1993 at which time Covia and Galileo merged; prior thereto since 1987 served in two senior executive capacities at Apple Computer, Inc., most recently as President of Apple USA. Dave L. Medford* Vice President, Corporate Finance and Chief Financial Officer. Robert C. Nevin* President, Business Forms Division. Gayle B. Price, Jr* Chairman and Chief Executive Officer, Price Brothers Company, Manufacturer of Concrete Construction Materials Kenneth W. Thiele* Private Investor based in Dayton, Ohio. Martin D. Walker* Chairman and Chief Executive Officer of M.A. Hanna Company, an International Specialty Chemicals Company. H. John Proud President, Healthcare Systems Division since 1995. Before that Senior Vice President and General Manager, Automotive Computer Systems Group. Michael J. Gapinski Treasurer and Assistant Secretary. Adam M. Lutynski General Counsel and Secretary.
EX-2.A 3 EXHIBIT (A)(2) 1 EXHIBIT (a)(2) LETTER OF TRANSMITTAL To Tender Shares of Common Stock (Including the Associated Rights) of DUPLEX PRODUCTS INC. Pursuant to the Offer to Purchase Dated April 22, 1996 of DELAWARE ACQUISITION CO. A Wholly Owned Subsidiary of THE REYNOLDS AND REYNOLDS COMPANY - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 17, 1996, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- THE DEPOSITARY FOR THE OFFER IS: HARRIS TRUST COMPANY OF NEW YORK By Mail: By Overnight Courier: By Hand: Wall Street Station 77 Water Street, 4th Floor Receive Window P.0. Box 1010 New York, NY 10005 77 Water Street, 5th Floor New York, NY 10268-1010 New York, NY
By Facsimile Transmission: (For Eligible Institutions Only) (212) 701-7636 (212) 701-7637 Confirm by Telephone: (212) 701-7624 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. - ---------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ---------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARES(S) TENDERED SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) - ---------------------------------------------------------------------------------------------------------- | TOTAL NUMBER OF | | SHARES EVIDENCED | SHARE | BY | NUMBER OF CERTIFICATE | SHARE | SHARES NUMBER(S)* | CERTIFICATE(S)* | TENDERED** --------------|-------------------|--------------- --------------|-------------------|--------------- --------------|-------------------|--------------- --------------|-------------------|--------------- --------------|-------------------|--------------- Total Shares | | - ---------------------------------------------------------------------------------------------------------- * Need not be completed by Shareholders delivering Shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate delivered to the Depositary are being tendered hereby. See Instruction 4. - ----------------------------------------------------------------------------------------------------------
2 This Letter of Transmittal is to be completed by shareholders either if certificates evidencing Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Section 2 of the Offer to Purchase (as defined below)) is utilized, if delivery of Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "BOOK-ENTRY TRANSFER FACILITY" and collectively, the "BOOK-ENTRY TRANSFER FACILITIES") pursuant to the book-entry transfer procedure described in Section 3 of the Offer to Purchase. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Shareholders whose certificates evidencing Shares ("SHARE CERTIFICATES") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) or who cannot complete the procedure for delivery by book-entry transfer on a timely basis and who wish to tender their Shares must do so pursuant to the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. See Instruction 2. / / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ----------------------------------------------------------------------------- Check box of Applicable Book-Entry Transfer Facility: (CHECK ONE) / / DTC / / PDTC Account Number: --------------------------------- Transaction Code Number: --------------------------------- / / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): --------------------------------------------------------------- Window Ticket No. (if any): --------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: --------------------------------------------------------------- Name of Institution that Guaranteed Delivery: --------------------------------------------------------------- 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY LADIES AND GENTLEMEN: The undersigned hereby tenders to Delaware Acquisition Co., a Delaware corporation ("PURCHASER") and a wholly owned subsidiary of The Reynolds and Reynolds Company, an Ohio corporation, the above-described shares of common stock, par value $1.00 per share (the "COMMON STOCK"), and the associated preferred stock purchase rights issued pursuant to the Rights Agreement, dated as of June 8, 1989, between Duplex Products Inc., a Delaware corporation (the "COMPANY") and Harris Trust and Savings Bank as Rights Agent (the "RIGHTS" and, together with the Common Stock, the "SHARES"), of the Company, pursuant to Purchaser's offer to purchase all Shares at $12.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated April 22, 1996 (the "OFFER TO PURCHASE"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together constitute the "OFFER"). The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of the Shares tendered herewith, in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares that are being tendered hereby and all dividends, distributions (including, without limitation, distributions of additional Shares) and rights declared, paid or distributed in respect of such Shares on or after April 22, 1996 (collectively, "DISTRIBUTIONS"), and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver Share Certificates evidencing such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by a Book-Entry Transfer Facility, together, in either case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares and all Distributions for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints Adam M. Lutynski and Dale L. Medford, and each of them, as the attorneys and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his substitute shall, in his or her sole discretion, deem proper and otherwise act (by written consent or otherwise) with respect to all the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of such vote or other action and all Shares and other securities issued in Distributions in respect of such Shares, which the undersigned is entitled to vote at any meeting of shareholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise. This proxy and power of attorney is coupled with an interest in the Shares tendered hereby, is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke all other proxies and powers of attorney granted by the undersigned at any time with respect to such Shares (and all Shares and other securities issued in Distributions in respect of such Shares), and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by the undersigned with respect thereto. The undersigned understands that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance of such Shares for payment, Purchaser must be able to exercise full voting and other rights with respect to such Shares and all Distributions, including, without limitation, voting at any meeting of the Company's shareholders then scheduled. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions, and that when such Shares are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances, and that none of such Shares and Distributions will be subject to any adverse claim. The undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered 4 hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby, or deduct from such purchase price the amount or value of such Distribution as determined by Purchaser in its sole discretion. No authority herein conferred or agreed to be conferred shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer. Purchaser's acceptance of such Shares for payment will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please issue the check for the purchase price of all Shares purchased, and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered." Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail the check for the purchase price of all Shares purchased and all Share Certificates evidencing Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered." In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of, and mail such check and Share Certificates to, the person(s) so indicated. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not purchase any of the Shares tendered hereby. 5 - -------------------------------------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned, or if Shares tendered hereby and delivered by book-entry transfer which are not purchased are to be returned by credit to an account at one of the Book-Entry Transfer Facilities other than that designated above. Issue check and/or certificate(s) to: Name _________________________________________________________________________ (PLEASE PRINT) Address_______________________________________________________________________ ______________________________________________________________________________ (INCLUDE ZIP CODE) ______________________________________________________________________________ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) Check appropriate box: / / The Depository Trust Company / / Philadelphia Depository Trust Company ______________________________________________________________________________ (ACCOUNT NUMBER) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased or Share Certificates evidencing Shares not tendered or not purchased are to be mailed to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Shares Tendered." Mail check and/or certificate(s) to: Name__________________________________________________________________________ (PLEASE PRINT) Address_______________________________________________________________________ ______________________________________________________________________________ (INCLUDE ZIP CODE) - -------------------------------------------------------------------------------- 6 IMPORTANT SHAREHOLDERS: SIGN HERE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF HOLDER(S)) Dated: - ---------------, 1996 (Must be signed by registered holder(s) exactly as such registered holder(s) name(s) appear(s) on Share Certificates or on a security position listing or by a person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s) - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title): Address: - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No.: Taxpayer Identification or Social Security No.: (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) SPACE BELOW IS FOR USE BY FINANCIAL INSTITUTIONS ONLY FINANCIAL INSTITUTIONS: PLACE MEDALLION SIGNATURE GUARANTEE IN SPACE BELOW Authorized Signature: Name: - -------------------------------------------------------------------------------- (PLEASE PRINT) Name of Firm: Address - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No.: Dated: - ---------------, 1996 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. All signatures on this Letter of Transmittal must be medallion guaranteed by a firm that is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of the foregoing being referred to as an "ELIGIBLE INSTITUTION"), unless (i) this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered hereby and such holder(s) has (have) completed neither the box entitled "Special Payment Instructions" nor the box entitled "Special Delivery Instructions" on the reverse hereof or (ii) such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Share Certificates. This Letter of Transmittal is to be used either if Share Certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if Shares are to be delivered by book-entry transfer pursuant to the procedure set forth in Section 3 of the Offer to Purchase. Share Certificates evidencing all physically tendered Shares, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the reverse hereof prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Shareholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares pursuant to the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates evidencing all physically delivered Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer, in each case together with a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry delivery, an Agent's Message), and any other documents required by this Letter of Transmittal, must be received by the Depositary within three American Stock Exchange ("AMEX") trading days after the date of execution of such Notice of Guaranteed Delivery, all as described in Section 3 of the Offer to Purchase. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or a facsimile hereof), all tendering shareholders waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers, the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule and attached hereto. 4. Partial Tenders (not applicable to shareholders who tender by book-entry transfer). If fewer than all of the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In such cases, new Share Certificate(s) evidencing the remainder of the Shares that were evidenced by the Share Certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box 8 entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Shares evidenced by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificates evidencing such Shares without alteration, enlargement or any other change whatsoever. If any Share tendered hereby is owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of Share Certificates or separate stock powers are required, unless payment is to be made to, or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Share Certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificates evidencing the Shares tendered hereby. 7. Special Payment and Delivery Instructions. If a check for the purchase price of any Shares tendered hereby is to be issued, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such Share Certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse of this Letter of Transmittal must be completed. 8. Questions and Requests for Assistance or Additional Copies. Questions and requests for assistance may be directed to the Information Agent at its addresses or telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. 9. Substitute Form W-9. Each tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify, under penalties of perjury, that such number is correct and that such shareholder is not subject to backup withholding of federal income tax. If a tendering shareholder has been notified by the Internal Revenue Service that such shareholder is subject to backup withholding, such shareholder must cross out item (2) of the Certification box 9 of the Substitute Form W-9, unless such shareholder has since been notified by the Internal Revenue Service that such shareholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder to 31 percent federal income tax withholding on the payment of the purchase price of all Shares purchased from such shareholder. If the tendering shareholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such shareholder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31 percent on all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. 10. Lost, Destroyed or Stolen Certificates. If any certificate(s) representing Shares has been lost, destroyed or stolen, the Shareholder should promptly notify the Depositary. The Shareholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY COMPLETED AND DULY EXECUTED, OR AN AGENT'S MESSAGE IN THE CASE OF A BOOK-ENTRY DELIVERY (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS), OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). IMPORTANT TAX INFORMATION Under the federal income tax law, a shareholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payer) with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is such shareholder's social security number. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such shareholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding of 31 percent (as described below). Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit an Internal Revenue Service Form W-8, signed under penalties of perjury, attesting to such individual's exempt status. A Form W-8 may be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31 percent of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct TIN by completing the form below certifying (a) that the TIN provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN), and (b) that (i) such shareholder has not been notified by the Internal Revenue Service that such shareholder is subject to backup withholding as a result of a failure to report all interest or dividends or (ii) the Internal Revenue Service has notified such shareholder that such shareholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record holder of the Shares tendered hereby. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form 10 W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the shareholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31 percent of all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK - -------------------------------------------------------------------------------------------------------------------------------- | | | PART 1--Taxpayer Identification Number--For | | all accounts, enter taxpayer identification | | number at right. (For most individuals, this | _________________________________ | is your social security number. If you do not | Social Security Number | have a number, see "Obtaining a Number" in the | | enclosed Guidelines.) Certify by signing and | OR | dating below. Note: If the account is in more | _________________________________ | than one name, see the chart in the enclosed | Employer Identification Number | Guidelines to determine which number to give | | the payer. | | | | ---------------------------------------------------------------------------------------- SUBSTITUTE | FORM W-9 | PART 2--For Payees Exempt from Backup Withholding, see the enclosed Guidelines and Department of the Treasury | complete as instructed therein. Internal Revenue Service | | CERTIFICATION--Under penalties of perjury, I certify that: | | (1) The number shown on this form is my correct Taxpayer Identification Number (or I | am waiting for a number to be issued to me), and | Payer's Request for Taxpayer | (2) I am not subject to backup withholding either because I have not been notified by Identification Number (TIN) | the Internal Revenue Service (the "IRS") that I am subject to backup withholding | as a result of failure to report all interest or dividends, or the IRS has | notified me that I am no longer subject to backup withholding. | | ---------------------------------------------------------------------------------------- | | CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified | by the IRS that you are subject to backup withholding because of underreporting | interest or dividends on your tax return. However, if after being notified by the IRS | that you were subject to backup withholding you received another notification from the | IRS that you are no longer subject to backup withholding, do not cross out item (2). | (See also instructions in the enclosed Guidelines.) | | SIGNATURE________________________________________________ DATE____________________ | - -------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY PAYMENT MADE TO YOU PURSUANT TO THE OFFER. FOR ADDITIONAL DETAILS, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9. The Information Agent for the Offer is: (GEORGESON & COMPANY INC. LOGO) Wall Street Plaza New York, New York 10005 (212) 509-6240 (Collect) Banks and Brokers Call collect: (212) 440-9800 CALL TOLL-FREE 1-800-223-2064 EX-3.A 4 EXHIBIT (A)(3) 1 EXHIBIT (a)(3) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF DUPLEX PRODUCTS INC. This Notice of Guaranteed Delivery or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates representing shares of common stock, par value $1.00 per share (the "COMMON STOCK") of Duplex Products Inc., a Delaware corporation (the "COMPANY"), and the associated Preferred Stock Purchase Rights issued pursuant to the Rights Agreement, dated as of June 8, 1989, between the Company and Harris Trust and Savings Bank, as Rights Agent (the "RIGHTS" and together with the Common Stock, the "SHARES"), are not immediately available or time will not permit all required documents to reach Harris Trust Company of New York (the "DEPOSITARY") on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined below)), or the procedure for delivery by book-entry transfer cannot be completed on or prior to the Expiration Date. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission or by mail to the Depositary. See Section 3 of the Offer to Purchase. The Depositary for the Offer is: HARRIS TRUST COMPANY OF NEW YORK BY MAIL: BY OVERNIGHT COURIER: Wall Street Station 77 Water Street P.O. Box 1010 4th Floor New York, NY 10268-1010 New York, NY 10005 BY HAND: BY FACSIMILE: Receive Window (For eligible institutions only) 77 Water Street (212) 701-7636 5th Floor (212) 701-7637 New York, NY Confirm by Telephone: (212) 701-7624 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 2 Ladies and Gentlemen: The undersigned hereby tenders to Delaware Acquisition Co., a Delaware corporation (the "PURCHASER"), and a wholly owned subsidiary of The Reynolds and Reynolds Company, an Ohio corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated April 22, 1996 (the "OFFER TO PURCHASE"), and in the related Letter of Transmittal (which together constitute the "OFFER"), receipt of each of which is hereby acknowledged, the number of Shares indicated below pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Number of Shares:________________ Name(s) of Record Holder(s): Account Number:__________________ __________________________________ Certificate No.(s) __________________________________ (if available):__________________ _________________________________ Address(es): _________________________________ If Share(s) will be tendered by book entry transfer check one box _________________________________ [ ] The Depository Trust Company Area Code and [ ] The Philadelphia Depository Telephone Number(s): Trust Company _________________________________ Account Number:______________ Signature(s):____________________ Date:____________________________ ____________________ THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED 2 3 GUARANTEE (NOT TO BE USED AS A SIGNATURE GUARANTEE) The undersigned, a participant of the Securities Transfer Agent's Medallion Program or the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program, hereby guarantees to deliver to the Depositary, at one of its addresses set forth above, the certificates representing all tendered Shares, in proper form for transfer, or a Book-Entry Confirmation (as defined in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase)), and any other documents required by the Letter of Transmittal within three American Stock Exchange trading days after the date of execution of this Notice of Guaranteed Delivery. The Eligible Institution that completes this form must deliver the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in financial loss to such Eligible Institution. Name of Firm:___________________ ________________________________ (AUTHORIZED SIGNATURE) Title:_____________________________ Address:________________________ Name:______________________________ ________________________ Area Code and Telephone Number:_______________ Date:___________________________ NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH THE LETTER OF TRANSMITTAL. 3 EX-4.A 5 EXHIBIT (A)(4) 1 EXHIBIT (a)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF DUPLEX PRODUCTS INC. AT $12.00 NET PER SHARE BY DELAWARE ACQUISITION CO. A WHOLLY OWNED SUBSIDIARY OF THE REYNOLDS AND REYNOLDS COMPANY *************************************************************************** * * * THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT * * 12:00 MIDNIGHT, NEW YORK CITY TIME, * * ON FRIDAY, MAY 17, 1996, UNLESS EXTENDED * * * *************************************************************************** April 22, 1996 TO BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES: We are enclosing the material listed below relating to the offer by Delaware Acquisition Co., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of The Reynolds and Reynolds Company, an Ohio corporation ("Parent"), to purchase all outstanding shares of common stock, par value $1.00 (the "Shares"), of Duplex Products Inc., a Delaware corporation (the "Company"), at $12.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated April 22, 1996 (the "Offer to Purchase") and the related Letter of Transmittal (which together constitute the "Offer"). We are asking you to contact your clients for whom you hold Shares registered in your name (or in the name of your nominee) or who hold Shares registered in their own names. Please bring the Offer to their attention as promptly as possible. Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares registered in your name. For your information and for forwarding to your clients, we are enclosing the following documents: 1. Offer to Purchase; 2. A Letter of Transmittal to be used by holders of Shares pursuant to the Offer; 3. A Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form letter which may be sent to your clients for whose accounts you hold Shares registered in your name (or in the name of your nominee), with space provided for obtaining such clients' instructions with regard to the Offer; 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number of Substitute Form W-9 providing information relating to backup federal income tax withholding; 6. A return envelope addressed to Harris Trust Company of New York, the Depositary; and 7. Letter from Duplex Products Inc., with Schedule 14D-9 attached. 2 WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 17, 1996, UNLESS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER OF SHARES WHICH WILL CONSTITUTE AT LEAST 70% OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. SEE SECTION 14 OF THE OFFER TO PURCHASE. The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent and the Depositary, as described in the Offer) in connection with the solicitation of tenders of Shares pursuant to the Offer. However, the Purchaser will reimburse brokers, dealers, commercial banks, trust companies and other nominees for their reasonable and necessary costs incurred in forwarding the Offer to Purchase and the related documents to the beneficial owners of Shares held by them as nominee or in a fiduciary capacity. The Purchaser will pay any transfer taxes applicable to the purchase of Shares pursuant to the Offer, except as otherwise provided in Instruction 3 of the Letter of Transmittal. If holders of Shares wish to tender their Shares, but it is impracticable for them to tender such Shares on or prior to the Expiration Date of the Offer, such Shares may be tendered pursuant to the guaranteed delivery procedures set forth in Instruction 6 of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the Information Agent at our address and telephone number as set forth on the back cover of the enclosed Offer to Purchase. Very truly yours, GEORGESON & COMPANY, INC. ------------------------------ NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS THE AGENT OF THE PURCHASER, PARENT, THE INFORMATION AGENT, THE DEPOSITARY OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. EX-5.A 6 EXHIBIT (A)(5) 1 EXHIBIT(a)(5) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF DUPLEX PRODUCTS INC. AT $12.00 NET PER SHARE BY DELAWARE ACQUISITION CO. A WHOLLY OWNED SUBSIDIARY OF THE REYNOLDS AND REYNOLDS COMPANY *************************************************************************** * * * THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW * * YORK CITY TIME, ON FRIDAY MAY 17, 1996, UNLESS THE OFFER IS EXTENDED. * * * *************************************************************************** To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated April 22, 1996 (the "OFFER TO PURCHASE"), and a related Letter of Transmittal (which, as amended from time to time, together constitute the "OFFER") in connection with the offer by Delaware Acquisition Co., a Delaware corporation ("PURCHASER") and a wholly owned subsidiary of The Reynolds and Reynolds Company, an Ohio corporation ("PARENT"), to purchase all outstanding shares of common stock, par value $1.00 per share (the "COMMON STOCK"), and the associated Preferred Stock Purchase Rights issued pursuant to the Rights Agreement dated as of June 8, 1996 between Duplex Products Inc., a Delaware corporation (the "COMPANY") and Harris Trust and Savings Bank, as Rights Agent (the "RIGHTS" and, together with the Common Stock, the "SHARES"), of the Company, at a price of $12.00 per Share, net to the seller in cash without interest, upon the terms and subject to the conditions set forth in the Offer. We are (or our nominee is) the holder of record of Shares held by us for your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND, PURSUANT TO YOUR INSTRUCTIONS, THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $12.00 per Share, net to the seller in cash without interest. 2. The Offer is being made for all outstanding Shares. 3. The Board of Directors of the Company unanimously has determined that each of the Offer and the Merger (as defined in the Offer to Purchase) is fair to, and in the best interests of, the shareholders of the Company (other than Parent and its subsidiaries), and recommends that shareholders accept the Offer and tender their Shares pursuant to the Offer. 2 4. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Friday, May 17, 1996, unless the Offer is extended. 5. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer at least seventy percent (70%) of the then outstanding Shares on a fully diluted basis. The Offer is also conditioned upon, among other things, the expiration or termination of applicable antitrust waiting periods. 6. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. 2 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) OF DUPLEX PRODUCTS INC. BY DELAWARE ACQUISITION CO. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated April 22, 1996, and the related Letter of Transmittal (which together constitute the "OFFER"), in connection with the offer by Delaware Acquisition Co., a Delaware corporation and a wholly owned subsidiary of The Reynolds and Reynolds Company, an Ohio corporation, to purchase all outstanding shares of common stock, par value $1.00 per share (the "COMMON STOCK"), and the associated Preferred Stock Purchase Rights issued pursuant to the Rights Agreement, dated as of June 8, 1989 between the Company and Harris Trust and Savings Bank as Rights Agent (the "RIGHTS" and, together with the Common Stock, the "SHARES"), of Duplex Products Inc., a Delaware corporation. This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. SIGN HERE _______________________________________________________________________________ _______________________________________________________________________________ SIGNATURE(S) Dated: ___________ ___, 1996 Number of Shares to be Tendered: ______________________________________ Shares* _______________________________________________________________________________ _______________________________________________________________________________ PLEASE TYPE OR PRINT NAME(S) _______________________________________________________________________________ _______________________________________________________________________________ PLEASE TYPE OR PRINT ADDRESS _______________________________________________________________________________ AREA CODE AND TELEPHONE NUMBER _______________________________________________________________________________ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-6.A 7 EXHIBIT (A)(6) 1 EXHIBIT (a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER -- Social Security numbers have nine digits separated by two hyphens, E.G., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen, E.G., 00-0000000. The table below will help determine the number to give the payer. FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF: 1. An individual's account.................. The individual. 2. Two or more individuals (joint account). The actual owner of the account or, if combined funds, the first individual on the account(1). 3. Custodian account of a minor (Uniform The minor(2). Gifts to Minors Act). 4. Sole Proprietorship. The owner(3). 5. (a) The usual revocable savings trust The grantor-trustee(1). (grantor is also trustee). (b) So-called trust account that is not a The actual owner(3). legal or valid trust under state law. FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF-- 6. Sole proprietorship. The owner(3). 7. A valid trust, estate, or pension trust. The legal entity (4). 8. Corporate account. The corporation. 9. Association, club, Religious, charitable, The organization. educational, or other tax-exempt organization account. 10. Partnership account. The partnership. 11. A broker or registered nominee. The broker or nominee. 12. Account with the Department of The public entity. Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments.
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. Furnish the owner's social security number or the employer identification number of the sole proprietorship. (4) List first and circle the name of the legal trust, estate or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title). NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card (for individuals), or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), at an office of the Social Security Administration or the Internal Revenue Service. To complete Substitute Form W-9, if you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number in Part 1, sign and date the Form, and give it to the requester. Generally, you will then have 60 days to obtain a taxpayer identification number and furnish it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and will continue until you furnish your taxpayer identification number to the requester. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following:* A corporation. A financial institution. An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under section 403(b)(7). The United States or any agency or instrumentality thereof. A State, the District of Columbia, a possession of the United States, or any political subdivision or instrumentality thereof. A foreign government or a political subdivision, agency or instrumentality thereof. An international organization or any agency or instrumentality thereof. A registered dealer in securities or commodities registered in the United States or a possession of the United States. A real estate investment trust. A common trust fund operated by a bank under section 584(a). An entity registered at all times during the tax year under the Investment Company Act of 1940. A foreign central bank of issue. A futures commission merchant registered with the Commodity Futures Trading Commission. A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee list. A trust exempt from tax under section 664 or described in section 4947. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: Payments to nonresident aliens subject to withholding under section 1441. Payments to partnerships not engaged in a trade or business in the United States and which have at least one nonresident partner. Payments of patronage dividends where the amount received is not paid in money. 2 3 Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if (i) this interest is $600 or more, (ii) the interest is paid in the course of the payer's trade or business and (iii) you have not provided your correct taxpayer identification number to the payer. Payments of tax-exempt interest (including exempt-interest dividends under section 852). Payments described in section 6049(b)(5) to nonresident aliens. Payments on tax-free covenant bonds under section 1451. Payments made by certain foreign organizations. EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, 6049, 6050A and 6050N. PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--If you falsify certifications or affirmations, you are subject to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE * Unless otherwise noted herein, all references below to section numbers or to regulations are references to the Internal Revenue Code and the regulations promulgated thereunder. 3 EX-7.A 8 EXHIBIT (A)(7) 1 EXHIBIT (a)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase dated April 22, 1996, and the related Letter of Transmittal, and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdictions where the securities laws or blue sky laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Delaware Acquisition Co., if at all, by one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF DUPLEX PRODUCTS INC. AT $12.00 NET PER SHARE BY DELAWARE ACQUISITION CO. A WHOLLY OWNED SUBSIDIARY OF THE REYNOLDS AND REYNOLDS COMPANY Delaware Acquisition Co., a Delaware corporation (the "Purchaser") wholly owned by The Reynolds and Reynolds Company, an Ohio corporation ("Parent"), is offering to purchase any and all outstanding shares of common stock, par value $1.00 per share, (the "Shares"), of Duplex Products Inc., a Delaware corporation (the "Company"), at $12.00 per Share (the "Offer Price"), net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 22, 1996, (the "Offer to Purchase") and in the related Letter of Transmittal (which, together, constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MAY 17, 1996, (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED, AMONG OTHER THINGS, UPON SATISFACTION, IN PURCHASER'S SOLE DISCRETION, OF THE FOLLOWING CONDITIONS: (1) THE CONDITION (THE "MINIMUM CONDITION") THAT THERE SHALL HAVE BEEN VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN ON OR PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES REPRESENTING AT LEAST 70% OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE, AND (2) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED. CERTAIN OTHER CONDITIONS TO THE OFFER ARE DESCRIBED IN "THE TENDER OFFER -- SECTION 14. CONDITIONS OF THE OFFER" IN THE OFFER TO PURCHASE. THE PURCHASER ESTIMATES THAT APPROXIMATELY 5,236,895 SHARES WILL NEED TO BE VALIDLY TENDERED (AND NOT VALIDLY WITHDRAWN) TO SATISFY THE MINIMUM CONDITION. The Offer is being made in connection with an Agreement and Plan of Merger (the "Merger Agreement") dated as of April 20, 1996, among the Company, Purchaser and Parent. Pursuant to the Merger Agreement, and on the terms and subject to the conditions set forth therein, Purchaser will merge with and into the Company (the "Merger"), with the Company to be the surviving corporation in such Merger, and each outstanding Share of the Company (other than Shares held by Parent, Purchaser or the Company, which will be cancelled, and Shares held by stockholders who properly exercise appraisal rights under Delaware law) 2 will be converted into the right to receive an amount equal to the Offer Price. Following the consummation of the Merger, the Company will continue as the surviving corporation and will be a wholly owned subsidiary of Parent. Certain shareholders of the Company representing approximately 30% of the Shares have expressed their present intent to tender their Shares in accordance with the terms of the Offer to Purchase. The Board of Directors of the Company unanimously has determined that each of the Offer and the Merger is fair and in the best interests of the stockholders of the Company and unanimously has approved the Offer and the Merger and recommends that the stockholders of the Company accept the Offer and tender their Shares. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) tendered Shares as, if and when Purchaser gives oral or written notice to the Depositary (as defined in the Offer to Purchase) of its acceptance of such Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from the Purchaser and transmitting such payments to validly tendering stockholders. Under no circumstances will interest on the purchase price for Shares be paid by the Purchaser by reason of any delay in making such payment. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for such Shares ("Share Certificates") or timely confirmation of the book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in "The Tender Offer -- Section 3. Procedures for Tendering Shares" in the Offer to Purchase, (b) the Letter of Transmittal (or facsimile thereof) properly completed and duly executed with any required signature guarantees (or, alternatively, an Agent's Message, as set forth in the Offer to Purchase) and (c) any other documents required by the Letter of Transmittal. The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday, May 17, 1996, unless and until the Purchaser, in its sole discretion, shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, to extend the period during which the Offer is open for any reason, including the nonsatisfaction of any of the conditions specified in the Offer to Purchase, by giving oral or written notice of such extension to the Depositary, followed as promptly as practicable by public announcement no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of tendering stockholders to withdraw such stockholder's Shares. The Purchaser's acceptance for payment of Shares tendered pursuant to any one of the procedures described in the Offer to Purchase and in the Letter of Transmittal will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. Except as otherwise provided in "The Tender Offer -- Section 4. Withdrawal Rights" in the Offer to Purchase, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment as provided herein, may also be withdrawn at any time after June 20, 1996. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at its address set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, and if Share Certificates have been tendered, the name of the registered holder of the Shares as set forth in the Share Certificate, if different from that of the person who tendered such Shares. If Share Certificates have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the tendering stockholder must submit the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn and the signature on the 3 notice of withdrawal must be guaranteed by an Eligible Institution (as defined in the Offer to Purchase), except in the case of Shares tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer as set forth in "The Tender Offer -- Section 3. Procedure for Tendering Shares" in the Offer to Purchase, the notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if a written or facsimile transmission notice of withdrawal is timely received by the Depositary at its address set forth on the back cover of the Offer to Purchase. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in "The Tender Offer -- Section 3. Procedure for Tendering Shares" in the Offer to Purchase. All questions as to the form and validity (including time of receipt) of any notices of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Company's stockholder list and security position listings to the Purchaser for the purpose of disseminating the Offer to stockholders. The Offer to Purchase and the related Letter of Transmittal and, if required, other relevant materials will be mailed to stockholders whose names appear on the Company's stockholder list and will be furnished for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security listing. STOCKHOLDERS ARE URGED TO READ THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR SHARES. Questions and requests for assistance may be directed to the Information Agent at the address and telephone numbers set forth below. Requests for copies of the Offer to Purchase and the related Letter of Transmittal and other tender offer materials may be directed to the Information Agent or brokers, dealers, commercial banks and trust companies and such materials will be furnished promptly at the Purchaser's expense. The Purchaser will not pay any fees or commissions to brokers, dealers, or other persons (other than the Depositary and the Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: (LOGO) Wall Street Plaza New York, New York 10005 Banks and Brokers call collect (212) 440-9800 CALL: TOLL FREE: 1-800-223-2064 EX-8.A 9 EXHIBIT (A)(8) 1 Exhibit a(8) Reynolds [ LOGO ] & Reynolds(R) N E W S REYNOLDS AND REYNOLDS TO ACQUIRE DUPLEX PRODUCTS INC. CASH TENDER OFFER FOR ALL OUTSTANDING SHARES -------------------------------------------- DAYTON, Ohio, April 22, 1996 -- The Reynolds and Reynolds Company (NYSE:REY) and Duplex Products Inc. (AMEX:DPX) jointly announced today that the companies have signed a definitive merger agreement whereby Reynolds will acquire all of the outstanding stock of Duplex at $12 per share, or approximately $90 million. To execute the agreement, Reynolds has initiated a cash tender offer. David R. Holmes, Reynolds' chairman, president and CEO said, "Both companies agree that Duplex customers will significantly benefit from Reynolds' broader product line, our more extensive forms management services, and our comprehensive customer support systems. In addition to expanding our general business customer base with prime candidates for our value-added forms management services business, the merger will generate significant cash and earnings for Reynolds, which will allow us to continue to invest aggressively for growth in all of our businesses. "The acquisition of Duplex follows a series of similar business combinations we've directed over the past several years. As we consolidate overlapping administrative functions, production and distribution, we will better utilize capacity, increase efficiency and establish strong profitability in the business." Holmes said that completion of the merger is conditioned on the tender of at least 70 percent of the outstanding shares of Duplex. He reported that shareholders owning approximately 30 percent of the outstanding shares of Duplex have already indicated support of the transaction. The acquisition is expected to have a neutral to slightly positive impact on Reynolds' third-quarter financial results. Holmes said. Andrew A. Campbell, Duplex president, said, "While Duplex's performance has been improving steadily since the third quarter of fiscal 1995, and would be further enhanced by recently announced cost-cutting actions, the merger is in the best long-term interests of shareholders. This is especially true given the risks facing Duplex related to continued contraction and excess capacity in the business forms industry, Duplex's relative size and the continued investments required to devleop many of the technology-related offerings that already exist at Reynolds. Reynolds' reputation for innovation and its organizationwide focus on customer satisfaction will provide Duplex employees and customers with a bright future. We're very pleased that this business combination came together." Duplex, headquartered in Sycamore, Ill., reported sales of $275 million in fiscal 1995. The company provides business forms and labels, electronic printing and mailing services, forms management programs, forms automation solutions and process analysis to customers throughout the United States. Reynolds and Reynolds, headquartered in Dayton, Ohio, is a leading provider of integrated information - more - 115 South Ludlow St. P.O. Box 2608 Dayton, Ohio 45401-2608 http://www.reyrey.com 2 - 2 - management systems and related value-added services to automotive, healthcare and general business markets. The company reported fiscal 1995 revenues of $911 million. For more information on Reynolds and Reynolds, visit the company's World Wide Web site on http://www.reyrey.com. # # # CRP9608 CONTACTS: Dale Medford Paul Guthrie 513.449.4099 513.449.4216 dale_medford@reyrey.com paul_guthrie@reyrey.com George Sweeney Sweeney and Co./NY 212.213.3388 EX-1.B 10 EXHIBIT (B)(1) 1 EXHIBIT (b)(1) CREDIT AGREEMENT This Credit Agreement made this 29th day of September, 1995, at Chicago, Illinois by and between The Reynolds & Reynolds Company, an Ohio corporation, and Reyna Financial Corporation, an Ohio corporation (hereinafter collectively referred to as the "Borrowers", individually, a "Borrower", both meaning each entity, jointly and severally) and Bank of America Illinois (hereinafter referred to as the "Bank"). WITNESSETH: WHEREAS, Borrower desires to receive and the Bank is willing to extend from time to time an aggregate amount not to exceed FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) outstanding at any one time for a revolving line of credit (the "Line"), subject to the terms and conditions set forth below; NOW THEREFORE, in consideration of the agreements herein contained, the parties agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the defined meanings when used herein or in any Note, certificate, report, or other document made or delivered pursuant to this Agreement, unless otherwise defined in context: "Accounts Receivable" means all accounts, contract rights, notes, drafts, acceptances, instruments or chattel paper (including indebtedness of related or affiliated entities) and any other form of right to payment for goods sold or leased or for services rendered, now owned or thereinafter arising or acquired. "Affiliate" means any Person (other than Borrower or any Restricted Subsidiary) which, directly or indirectly, controls or is controlled by or is under common control with Borrower or a Restricted Subsidiary or which beneficially owns or holds or has the power to direct the voting power of 5% or more of any class of voting stock of the company or a Restricted Subsidiary or which has 5% or more of its voting stock (or in the case of a Person which is not a corporation, 5% or more of its equity interest) beneficially owned or held, directly or indirectly, by Borrower or a Restricted Subsidiary. For purposes of this definition, "control" means the power to direct the management and policies of a Person, directly or indirectly, -1- 2 whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Aggregate Amount", when used with respect to Restricted Investments at any time, means and shall be determined by adding together the amount of each such investment, whether or not such investment at such time is shown on the books of the company or a Restricted Subsidiary, determined with respect to each such investment at the greatest of: (i) the amount originally entered on the books of Borrower or any Restricted Subsidiary with respect thereto; (ii) the then current book amount thereof; and (iii) the original cost thereof to Borrower or a Restricted Subsidiary; minus each case any net return of capital upon such investments (through the sale or liquidation of such investments or any part thereof, or otherwise). "Agreement" means this Credit Agreement as amended, supplemented, or modified from time to time. "Board of Directors" means the board of directors of Borrower (or, when so specified or the context so indicates, a Subsidiary) or if duly authorized to exercise the power of the Board of Directors, any duly authorized committee thereof. "Business Day" means any day other than a Saturday, Sunday, or other day on which commercial banks in Illinois are authorized or required to close under the laws of the State of Illinois. "Capital Lease" means and includes at any time any lease of property, real or personal, which in accordance with generally accepted accounting principles would at such time be required to be capitalized on a balance sheet of the lessee. "Capital Lease Obligation" means at any time the capitalized amount of the rental commitment under a Capital Lease which in accordance with generally accepted accounting principles would at such time be required to be shown on a balance sheet of the lessee. "CD Rate" means with respect to each Interest Period the sum (rounded upward to the nearest 1/100 of 1%) of (A) the rate obtained by dividing (x) the Certificate of Deposit Rate for such Interest Period by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that would be applicable during such Interest Period to a negotiable certificate of deposit in excess of $100,000 and with a maturity equal to such Interest Period of any member bank of the Federal Reserve System, plus (B) the then daily net annual assessment rate as estimated by the Bank for determining the current maximum annual -2- 3 assessment payable by the Bank to the Federal Deposit Insurance Corporation for insuring such certificates of deposit. "CD Loan" means any Loan bearing interest at the rate provided for in Section 2.6(b) "Certificate of Deposit Rate" means the rate of interest per annum determined by the Agent to be the arithmetic mean (rounded upward to the next 1/100th of 1%) of the rates notified to the Bank as the rates of interest bid by two or more certificate of deposit dealers of recognized standing selected by the Bank for the purchase at face value of dollar certificates of deposit issued by major United States banks, for a maturity comparable to such Interest Period and in the approximate amount of the CD Rate Loans to be made, at the time selected by the Agent on the first day of such Interest Period. "Commitment" means $15,000,000.00, as such amount may be reduced from time to time pursuant to Section 2.11. Moreover, the Commitment shall be automatically reduced on the last Business Day of each month set forth below to an amount not to exceed the amount set forth below opposite each such date:
AMOUNT OF COMMITMENT LAST BUSINESS DAY OF: NOT TO EXCEED: --------------------- -------------------- September 1996 $14,062,500.00 December 1996 13,125,000.00 March 1997 12,187,500.00 June 1997 11,250,000.00 September 1997 10,312,500.00 December 1997 9,375,000.00 March 1998 8,437,500.00 June 1998 7,500,000.00 September 1998 6,562,500.00 December 1998 5,625,000.00 March 1999 4,687,500.00 June 1999 3,750,000.00 September 1999 2,812,500.00 December 1999 1,875,000.00 March 2000 937,500.00 June 2000 -0-
"Commitment Commission" has the meaning specified in Section 2.10. "Consolidated Current Assets" means the aggregate of all assets which in accordance with generally accepted accounting principles would be so classified and appear upon the asset side of the consolidated balance sheet of the Borrower and its Restricted Subsidiaries, after making -3- 4 any appropriate deduction for adequate reserves in each case where a reserve is proper, in accordance with generally accepted accounting principles. "Consolidated Current Liabilities" means the aggregate of all amounts which in accordance with generally accepted accounting principles would be so classified and appear upon the liability side of the consolidated balance sheet of the Borrower and its Restricted Subsidiaries. "Consolidated Earnings Available for Fixed Charges" means the consolidated income of the Borrower and its Restricted Subsidiaries before income taxes, computed in accordance with generally accepted accounting principles, plus Fixed Charges. "Consolidated Indebtedness" means the aggregate of all Indebtedness of the Borrower and its Restricted Subsidiaries. "Consolidated Tangible Capitalization" means, as of any particular time, the sum of (without duplication): (i) the par value of all of the outstanding capital stock of Borrower; (ii) the capital and earned surplus of Borrower and its Restricted Subsidiaries appearing on a consolidated balance sheet of Borrower and its Restricted Subsidiaries prepared in accordance with generally accepted accounting principles; and (iii) Consolidated Indebtedness; less the sum of (without duplication): (a) the cost of any treasury shares included on such balance sheet; and (b) the aggregate of all amounts that appear on the asset side of such balance sheet and are attributable to assets which would be treated as intangibles under generally accepted accounting principles, including, without limitation, all such items as goodwill, trademarks, trade names, brand names, copyrights, patents, patent applications, licenses, franchises, permits and rights with respect to the foregoing, and unamortized debt discount and expense but excluding from the operation of this clause (b) software and software licenses. "Consolidated Tangible Net Worth" shall mean, as of the date of determination thereof, the aggregate amount of stockholders' equity of a corporation and its subsidiaries appearing on a consolidated balance sheet of such corporation and its subsidiaries prepared in accordance with generally accepted accounting principles less the sum of (without duplication) (i) the cost of any treasury shares included on such balance sheet and (ii) the aggregate of all amounts that appear -4- 5 on the asset side of such balance sheet and are attributable to assets which would be treated as intangibles under generally accepted accounting principles, including, without limitation, all such items as goodwill, trademarks, trade names, brand names, copyrights, patents, patent applications, licenses, franchises, permits and rights with respect to the foregoing, and unamortized debt discount and expenses, but excluding from the operation of this clause (ii) software and software licenses. "Consolidated Total Liabilities" shall mean all liabilities shown on a consolidated balance sheet of the Borrower Reyna Financial Corporation and its Subsidiaries prepared in accordance with generally accepted accounting principles. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereof. "Eurodollar Loan" means any Loan bearing interest at the rate provided for in Section 2.6(c). "Event of Default" means any of the events specified in Section 8.1 herein, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Fixed Charges" means the sum of interest expense (including without limitation capitalized interest and the interest component of any Capital Lease Obligation) and rental expense of Borrower and its Restricted Subsidiaries, all computed in accordance with generally accepted accounting principles. "Fixed Rate Loan" means a Eurodollar Loan or a CD Loan. "GAAP" means generally accepted accounting principles in the United States. "Indebtedness" means and includes: (i) all indebtedness or obligations for money borrowed or for the purchase price of property and any notes payable and drafts accepted representing extensions of credit, whether or not representing indebtedness or obligations for money borrowed or for the purchase price of property; (ii) indebtedness or obligations secured by or constituting any Lien existing on property owned by the Person whose Indebtedness is being determined, whether or not the indebtedness or obligations secured thereby shall have been assumed; (iii) Capital Lease Obligations; -5- 6 (iv) guarantees and endorsements of (other than endorsements for purposes of collection in the ordinary course of business), and obligations to purchase goods or services for the purpose of supplying funds for the purchase or payment of, or measured by, indebtedness, liabilities or obligations of others (whether or not representing money borrowed) and other contingent obligations in respect of, or to purchase or otherwise acquire or service, indebtedness, liabilities or obligation of others (whether or not representing money borrowed); and (v) all indebtedness, liabilities or obligations (whether or not representing money borrowed) in effect guaranteed by an agreement, contingent or otherwise, to make a loan, advance or capital contribution to or other investment in the debtor for the purpose of assuring or maintaining a minimum equity, asset base, working capital or other balance sheet condition for any date, or to provide funds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in the debtor for such purpose. Anything contained in clauses (iv) and (v) of the preceding paragraph to the contrary notwithstanding: (1) contingent obligations of Borrower to maintain the net earnings or net worth of Reyna pursuant to an operating or similar agreement shall not be deemed to be Indebtedness of Borrower; and (2) contingent obligations in connection with sales of lease and other accounts receivable shall be included as Indebtedness to the extent of any reserve which is maintained or required to be maintained in accordance with generally accepted accounting principles. In case any corporation shall become a Restricted Subsidiary, such corporation shall be deemed to have incurred at the time it becomes a Restricted Subsidiary all Indebtedness of such corporation outstanding immediately thereafter. "Interest Period" has the meaning specified in Section 2.7. "Lease" means any lease (other than a Capital Lease) of real or personal property under which the company or a Restricted Subsidiary is lessee (or guarantor of the lessee's obligations), other than leases between Borrowers and their Restricted Subsidiaries or between Restricted Subsidiaries of Borrowers. "Lien" means any mortgage, lien, pledge, security interest, encumbrance or charge of any kind, any conditional sale or other title retention agreement or any Capital Lease. "Liquid Assets" shall mean the sum of, without duplication, the following assets owned by the Borrower, Reyna Financial Corporation or a Subsidiary: (i) cash, (ii) direct obligations -6- 7 of the United States of America or obligations of any instrumentality or agency thereof backed by the full faith and credit of the United States, in each case maturing within one year, (iii) commercial paper maturing within 180 days rated A-1 or A-2 by Standard & Poor's Corporation or P-1 or P-2 by Moody's Investors Service, Inc. (so long as such ratings shall be the two highest ratings given by such rating services), (iv) certificates of deposit issued by, or bankers acceptances of, or repurchase agreements involving governmental securities of the type specified above issued by, any bank or trust company organized under the laws of the United States of America, any state thereof or the District of Columbia having total capital and surplus in excess of $100,000,000.00, in each case maturing within one year, and (v) Receivables, less reserves. "Loan Documents" means this Agreement and any Note. "Loan" when used in the singular and "Loans" when used in the plural means any and all lines of credit executed in favor of the Bank pursuant to Section II herein. "Make-Whole Amount" means, in connection with any prepayment of the Notes pursuant to Section 2.1 hereof or Section 6 of the Agreement, or paid as a result of the existence of an Event of Default, the greater of: (i) par; or (ii) the sum of the present values of each remaining mandatory prepayment and payment at maturity payable in respect of the Notes (in the event the Notes are being prepaid in full), or the present values of the payment at maturity and each mandatory prepayment or portion thereof being prepaid (in the event the Notes are being partially prepaid), (each such mandatory prepayment or portion thereof and payment at maturity being herein referred to as a "Payment"); all determined by discounting (based on semi-annual compounding), at a rate equal to the applicable Treasury Yield, such Payments and the portion of the scheduled interest payments on the Notes which relate thereto from the respective scheduled due dates of such Payment and interest payments to the Redemption Date or the date of prepayment, as the case may be. "Net Equity Investment," when used in connection with Non-Recourse Receivables, means, at the date as of which the amount thereof is to be determined, the result of the following calculation: (i) all rental receivables by the Borrower, Reyna Financial Corporation from Non-Recourse Receivables of the Borrower, Reyna Financial Corporation less the aggregate amount of rentals receivable necessary to fully amortize related Non-Recourse Debt (including, without limitation, principal, interest and other related costs of such Non-Recourse Debt), plus (ii) the residual value of the property financed at the end of the initial term of all Non-Recourse Receivables of the Borrower, Reyna Financial Corporation, less the sum of unearned income with respect to such Non-Recourse Receivables. -7- 8 Net income means, with respect to any Person for any period, the net income (or the deficit, if expenses and charges exceed revenues and other proper income credits) of such Person for such period determined in accordance with generally accepted accounting principles as in effect from time to time; provided, however, that Net Income of Borrower or any Restricted Subsidiary shall not include: (i) the Net Income of any Person (other than a Restricted Subsidiary) in which Borrower or any Restricted Subsidiary has an ownership interest unless such Net Income shall have been actually received by Borrower or such Restricted Subsidiary in the form of cash dividends or similar cash distributions; (ii) any portion of the Net Income of any Restricted Subsidiary which for any reason shall not be available for payment of dividends to Borrower and the Net Income of any Restricted Subsidiary prior to the date it became a Restricted Subsidiary; (iii) the Net Income of any Person, any of the stock or other equity interests or assets of which have been acquired by Borrower or any Restricted Subsidiary, realized by such Person prior to the date of such acquisition; (iv) any gain or loss arising from the sale or other disposition, write-up or write-down of capital assets and of capital stock; and (v) any extraordinary item. "Non-Recourse Debt" shall mean Indebtedness of the Borrower Reyna Financial Corporation incurred to finance the acquisition of property which is subject to a chattel mortgage, lease or security agreement under which a Person other than an Affiliate is the lessee or debtor providing for rentals or other payments sufficient to pay the entire principal of and interest on such Indebtedness on or before the date or dates for payment thereof and which Indebtedness does not constitute a general obligation of the Borrower Reyna Financial Corporation but is repayable solely out of rentals or other sums payable under the chattel mortgage, lease or security agreement and/or the property subject thereto; provided, however, that the holder of such Indebtedness (hereinafter called the "Holder") shall have agreed in writing with the Borrower Reyna Financial Corporation at or prior to the time such Indebtedness is incurred by the Borrower Reyna Financial Corporation that; (x) the Borrower Reyna Financial Corporation shall not have any personal liability whatsoever, either in its capacity as owner of the property or in any other capacity, to the Holder for any amounts payable with respect to such Indebtedness and such Indebtedness shall not constitute a general obligation of the Borrower Reyna Financial Corporation, (y) the Holder shall look for repayment of such Indebtedness and payment of interest thereon and all other payments with respect to such Indebtedness solely to rentals or other sums payable under the chattel mortgage, lease or security agreement and/or the proceeds from the sale of the property subject thereto, and (z) in the case of all such Indebtedness incurred subsequent to September 24, 1990, to the extent the Holder may legally do so, the Holder waives any and all right it may have to make the election provided under 11 -8- 9 U.S.C. Section 1111(b)(1)(A) or any other similar or successor provision against the Borrower Reyna Financial Corporation. "Non-Recourse Receivables" shall mean and include any chattel mortgage, lease or security agreement owing or guaranteed by a Person under which the Borrower Reyna Financial Corporation supplies a portion of the purchase price for the property subject to the chattel mortgage, lease or security agreement, and has an equity interest or an interest in the rentals or other payments receivable, which interest may be subordinated to Non-Recourse Debt incurred in connection with the purchase of such property; provided, however, that any lease constituting a Non-Recourse Receivable shall be one in which, at the inception of such lease, it shall appear that the lessor will receive from (a) rentals to become due under the lease during the initial term, (b) estimated residual value at the end of such term, (c) investment tax credit and/or (d) estimated tax benefits due to tax deferrals such as that from interest expense and accelerated depreciation (based upon an estimated reinvestment return of not to exceed 7% per annum on a "sinking fund" basis), an aggregate amount at least sufficient to return to the lessor (i) estimated tax, insurance and maintenance costs and expenses (to the extent not payable by the lessee), (ii) the Net Equity Investment of the lessor in the leased property, and (iii) the aggregate amount necessary to fully amortize the related Non-Recourse Debt; provided, however, that any lease constituting a Non-Recourse Receivable must be non-cancelable by the lessee unless upon such cancellation the lessee is required to pay to the lessor a premium or penalty which will (1) return any outstanding equity investment of the lessor, (2) fully compensate the lessor for the recapture of any tax benefits previously gained, (3) permit the lessor to fully amortize the related Non-Recourse Debt, including any accrued interest and any premium required thereon, and (4) reimburse the lessor for any taxes, insurance and maintenance costs to the extent not theretofore paid by the lessee. "Note" when used in the singular and "Notes" when used in the plural means any and all note or notes executed in favor of the Bank pursuant to Section II herein. "Notice of Borrowing" has the meaning specified in Section 2.3(a). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature. "Plan" means any employee pension benefit plan or other plan subject to Title IV of ERISA, as amended, established, maintained, or to which contributions have been made by the Borrower or any ERISA affiliate. "Prime Rate" refers to the Bank's "reference rate" which is the rate of interest in effect from time to time as publicly announced for any such day by the Bank of America in Chicago, -9- 10 Illinois its "reference rate" . (The "reference rate" is a rate set by the Bank based upon various factors including the Bank's cost and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by the Bank shall take effect at the opening of business on the day specified in the public announcement of such change. "Prime Loan" means any Loan bearing interest at the rate provided in Section 2.6(a). "Principal Office" means the principal office of Bank of America Illinois presently located at 231 South LaSalle Street, Chicago, Illinois 60201. "Priority Indebtedness" means the sum (without duplicating any such amount) of the amounts described in the following clauses (i) and (ii) incurred by Borrower or a Restricted Subsidiary and outstanding at the time of computation: (i) the aggregate principal of all Indebtedness of Borrower and its Restricted Subsidiaries secured or evidenced by Liens permitted by clauses (1), (2) and all subparts thereto, (3) and all subparts thereto, (4) and (5) and all subparts thereto and of Section 6.2; and (ii) the aggregate principal amount of unsecured Indebtedness of all Restricted Subsidiaries, other than Indebtedness owned by Borrower or any wholly-owned Restricted Subsidiary. "Prohibited Transaction" means any transaction set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from time to time. "Quarterly Payment Date" means the last Business Day of each March, June, September and December of each year commencing with the last Business Day of September, 1996. "Quarterly Principal Payment Date" means the Termination Date, and each Quarterly Payment Date occurring thereafter. "Quoted Rate" means with respect to each Interest Period the rate obtained (rounded upward to the nearest 1/100 of 1%) by dividing (a) the per annum rate of interest determined by the Bank at which U.S. dollar deposits of amounts (in immediately available funds) comparable to the outstanding principal amount of the Eurodollar Loan as to which a Quoted Rate determined with reference to such rate will apply with maturities comparable to the Interest Period for which such Quoted Rate will apply are offered to the Bank by first class banks in the interbank Eurodollar market as of approximately 10:00 a.m. (Chicago, Illinois time) two Business Days prior to the commencement of such Interest Period, by (b) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D -10- 11 (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that would be applicable during such Interest Period to such Eurodollar Loan. "Receivable" shall mean any account receivable whether represented by an open account, note, security agreement, installment sale agreement, mortgage, factor receivable, direct loan receivable, trade account receivable, lease obligation or otherwise. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect or any successor to all or a portion thereof establishing reserve requirements. "Reportable Event" means any of the events set forth in Section 4043 of ERISA, as amended from time to time, except actions of general applicability by the Secretary of Labor under Section 110 of ERISA. "Restricted Investment" means any investment by Borrower or any Restricted Subsidiary in any other Person, whether by acquisition of stock or Indebtedness, or by loan, advance, guarantee, transfer of property out of the ordinary course of business, capital contribution, extension of credit on terms other than those normal in the business of the company or such Subsidiary, or otherwise; provided, however, that the term "Restricted Investment" shall not include: (i) marketable obligations issued or guaranteed by the United States of America or by any agency of the United States of America or by a state or municipal government within the United States of America, maturing not later than 12 months from the date of acquisition thereof and, in the case of such state or municipal obligations, which have a rating of at least AA or Aa by Standard & Poor's Corporation or Moody's Investors Service, Inc., respectively; (ii) commercial paper which has a rating of at least A-1 or P-1 by Standard & Poor's Corporation or Moody's Investors Service, Inc., respectively, and maturing not later than 270 days from the date of acquisition thereof; (iii) negotiable certificates of deposit (including Eurodollar deposits) or bankers' acceptances issued by or drawn on, a United States commercial bank or trust company or a bank or trust company chartered or organized under the laws of Canada, which has capital and surplus of at least $500,000,000, and maturing not later than 12 months from the date of acquisition thereof; and (iv) any investment in any Restricted Subsidiary or in any corporation which by reason thereof will become a Restricted Subsidiary. "Restricted Subsidiary" means: -11- 12 (i) Reynolds & Reynolds S.A., a company organized under the laws of France; and (ii) any Subsidiary (a) organized and existing under the laws of the United States of America, any State thereof, Canada or any province thereof; (b) having substantially all of its assets located in the United States or Canada; (c) at least 51% of the outstanding voting shares of which shall at the time be owned by the company and/or one or more Restricted Subsidiaries; and (d) which has been designated as a Restricted Subsidiary by Borrower or by the Board of Directors. "Reyna" means Reyna Financial Corporation, an Ohio corporation, which is a finance company and wholly-owned subsidiary. "Reyna Consolidated Indebtedness" shall mean the Indebtedness of the Borrower Reyna Financial Corporation and its Subsidiaries, after eliminating inter-company items, all as consolidated and determined in accordance with generally accepted accounting principles. "Reyna Indebtedness" shall mean and include (i) all indebtedness or obligations for money borrowed or for the purchase price of property (whether or not recourse) and any notes payable and drafts accepted representing extensions of credit, whether or not representing indebtedness or obligations for money borrowed or for the purchase price of property, (ii) Non-Recourse Debt and other indebtedness or obligations secured by or constituting any Lien existing on property owned by the Person whose indebtedness is being determined, whether or not the indebtedness or obligations secured thereby shall have been assumed, (iii) Capital Lease Obligations, (iv) guarantees and endorsements of (other than endorsements for purposes of collection in the ordinary course of business), and obligations to purchase goods or services for the purpose of supplying funds for the purchase or payment of, or measured by, indebtedness, liabilities or obligations of others for money borrowed and other contingent obligations in respect of, or to purchase or otherwise acquire or service, indebtedness, liabilities or obligations of others for money borrowed and (v) all indebtedness, liabilities or obligations for money borrowed in effect guaranteed by an agreement, contingent or otherwise, to make a loan, advance or capital contribution to or other investment in the debtor for the purpose of assuring or maintaining a minimum equity, asset base, working capital or other balance sheet condition for any date, or to provide funds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in the debtor for such purpose. In case any corporation shall become a Subsidiary, such corporation shall be deemed to have incurred at the time it becomes a Subsidiary all Indebtedness of such corporation outstanding immediately thereafter. -12- 13 "Reyna Leasing" shall mean Reyna Leasing Corporation, an Ohio corporation. "Subordinated Indebtedness" shall mean all unsecured Indebtedness of the Borrower Reyna Financial Corporation which, as of the date of determination thereof, (i) by its terms has a required final payment not earlier than September 24, 1997, and (ii) is issued under an indenture or other instrument containing provisions for the subordination of such Indebtedness (to which appropriate reference shall be made in the instruments evidencing such Indebtedness) not less favorable to the Bank than the following provisions (the term "Debentures" being, for convenience, used in the provisions set forth below to designate the instruments issued to evidence Subordinated Indebtedness and the term "this Indenture" to designate the indenture or other instrument under which the Debentures are issued and the term "Company" to designate the corporation liable in respect of any Subordinated Indebtedness): "All Debentures issued under this Indenture shall be issued subject to the following provisions and each person holding any Debenture whether upon original issue or upon transfer or assignment thereof accepts and agrees to be bound by such provisions. "All Debentures issued hereunder and any coupons thereto appertaining shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right to the prior payment in full of Superior Indebtedness as defined in this Section. For the purposes of this Section the term 'Superior Indebtedness' shall mean (a) all obligations and indebtedness of Reyna Financial Corporation under or in connection with that certain Term Loan Agreement dated as of August 20, 1993 between Reyna Financial Corporation and Credit Lyonnais Chicago Branch, and the note issued thereunder, as said Term Loan Agreement or Note may have been or may hereafter be amended, modified or supplemented, with or without notice to the holders of the Debentures (b) all other indebtedness incurred or to be incurred by the Company for money borrowed unless by its term it is provided that such indebtedness is not Superior Indebtedness, and (c) any deferrals, renewals or extension of any such Superior Indebtedness, or debentures, notes or other evidences of indebtedness issued in exchange for such Superior Indebtedness. "No payment on account of principal, premium, if any, sinking funds, or interest on the Debentures shall be made unless full payment of amounts then due for principal, premium, if any, sinking funds, and interest on Superior Indebtedness has been made or duly provided for in money or money's worth in accordance with its terms. No payment on account of principal, premium, if any, sinking funds, or interest on the Debentures shall be made if, at the time of such payment or immediately after giving effect thereto, there shall have occurred a default with respect to any Superior Indebtedness, as defined therein or in the instrument under which the same is outstanding. "Upon (i) any acceleration of the principal amount due on the Debentures or (ii) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if any, and -13- 14 interest due or to become due (including interest accruing after the commencement of any such proceedings) upon all Superior Indebtedness shall first be paid in full, or payment thereof provided for in money or money's worth in accordance with its terms, before any payment is made on account of the principal of, premium, if any, or interest on the indebtedness evidenced by the Debentures, and upon any such dissolution or winding-up or liquidation or reorganization any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Debentures or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the holders of the Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Superior Indebtedness (pro rata to each such holder on the basis of the respective amounts of Superior Indebtedness held by such holder) or their representatives, to the extent necessary to pay all Superior Indebtedness (including interest thereon accruing after the commencement of any such proceedings) in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of Superior Indebtedness, before any payment or distribution is made to the holders of the indebtedness evidenced by the Debentures or to the Trustee under this Indenture. In the event that any payment or distribution of assets of the Company of any kind or character not permitted by the foregoing provisions, whether in cash, property or securities, shall be received by the Trustee or the holders of the Debentures before all Superior Indebtedness is paid in full, or provision made for such payment, in accordance with its terms, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of such Superior Indebtedness or their representative or representatives, or to the trustee or trustees under an indenture pursuant to which any instruments evidencing any such Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Superior Indebtedness remaining unpaid to the extent necessary to pay all such Superior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to the holders of such Superior Indebtedness. "Subsidiary" means any corporation at least a majority of whose outstanding stock having ordinary voting power for the election of a majority of the members of the board of directors (or other governing body) of such corporation (other than stock having such power only by reason of the happening of a contingency) shall at the time be owned by Borrower and/or one or more Subsidiaries of Borrower. "Termination Date" means September 30, 1996 (or, if such date is not a Business Day, the immediately preceding Business Day) or such earlier date upon which the Commitment is reduced to zero pursuant to Section 2.11 or is terminated pursuant to Article VIII or the Loans become due and payable pursuant to Article VIII. "Total Assets" shall mean, as of the date of determination thereof, the sum of all assets of the Borrower Reyna Financial Corporation (other than intangibles), determined in accordance -14- 15 with generally accepted accounting principles, which would properly appear on a balance sheet of the Borrower Reyna Financial Corporation as an asset at and as of such date. "Treasury Yield" means with respect to any prepayment hereunder: (i) .50%, plus (ii) the yield reported, as of 10:00 a.m. (New York City time) on the display designated as "Page 500" on the Telerate Service (or such other display as may replace Page 500 on the Telerate Service) for actively traded "On the Run" U.S. Treasury securities having maturities equal to the maturity, rounded to the nearest month, of the applicable scheduled payment date of the Payment. If no maturity exactly corresponding to such maturity of the Payment shall appear therein, yields for the next longer and the next shorter published "On the Run" maturities shall be calculated pursuant to the foregoing sentence, and the Treasury Yield shall be interpolated from such yields on a straight-line basis (rounding, in each of such relevant periods to the nearest month). "Wholly-owned Restricted Subsidiary" means any Restricted Subsidiary all of the capital stock (other than directors' qualifying shares) of which shall be owned by the Borrower and/or one or more "Wholly-owned" Restricted Subsidiaries. All accounting terms used herein and not expressly defined in this Note shall have the meanings respectively given to them in accordance with generally accepted accounting principles in the United States consistent with those applied in the preparation of the financial statements referred to in Section 3.7 herein, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles. The aforestated definitions shall be applicable to the singular and plurals of the foregoing defined terms. ARTICLE II AMOUNT AND TERMS OF THE LOAN SECTION 2.1 COMMITMENT. Subject to and upon the terms and conditions herein set forth, the Bank agrees, at any time and from time to time prior to the Termination Date, to make loans (each a "Loan") to either of the Borrowers, which Loans (i) shall, at the opinion of a Borrower, be either Prime Loans, CD Loans, Eurodollar Loans or, in the Bank's sole discretion if a Borrower requests, Special Facility Loans and (ii) may be repaid and reborrowed in accordance with the provisions hereof. The Loans made to both of the Borrowers shall not exceed in aggregate principal amount at any time outstanding the Commitment. -15- 16 SECTION 2.2 MINIMUM AMOUNT OF EACH BORROWING. (a) The principal amount of each Loan shall: (i) in the case of Fixed Rate Loans, be not less than $1,000,000 or, if greater, in integral multiples of $1,000,000 or (ii) in the case of Prime Loans, be not less than $100,000 or, if greater, in integral multiples of $100,000. (b) The Borrowers shall not be entitled to have more than ten Loans in the aggregate outstanding at any one time. SECTION 2.3 NOTICES OF BORROWING. (a) Whenever either of the Borrowers desires to borrow a Loan (other than a Special Facility Loan), it shall give the Bank at its Principal Office written notice or telephonic notice (confirmed promptly in writing) of such borrowing (x) in the case of a CD Loan or a Eurodollar Loan, by no later than 10:00 a.m. (Chicago, Illinois time) on the date of borrowing and (y) in the case of a Prime Loan, by no later than 10:00 a.m. (Chicago, Illinois time) on the date of borrowing. Each such notice (each, together with any notice electing to incur a Special Facility Loan given in accordance with Section 2.3(b), a "Notice of Borrowing") shall specify (i) the principal amount which such Borrower desires to borrow, (ii) the date of borrowing (which shall be a Business Day), (iii) whether such Loan is to be maintained as a Prime Loan, CD Loan or Eurodollar Loan and (iv) the Interest Period to be applicable thereto. SECTION 2.4 DISBURSEMENT OF FUNDS. No later than 12:00 Noon (Chicago, Illinois time) on the date specified in each Notice of Borrowing, the Bank shall make available to the Borrower incurring the same the proceeds of the Loan to be made on such date in U.S. dollars and in immediately available funds by the Bank crediting an account of such Borrower designated by it and maintained with the Bank at its Principal Office. To the extent that a Loan made to such Borrower matures on such date, the Bank shall apply the proceeds of the Loan to be made on such date, to the extent thereof, to the repayment of such maturing Loan. SECTION 2.5 THE NOTES. The obligation of each Borrower to pay the principal of, and interest on, all Loans made to it shall be evidenced by promissory notes substantially in the form of Exhibits A and B (each a "Note") payable to the order of the Bank duly executed and delivered by Borrowers with blanks appropriately completed in conformity herewith. Each Note shall: (i) be dated the Effective Date; (ii) be in the original principal amount of the Commitment and be payable in the principal amount of the Loans evidenced thereby; (iii) mature in the case of each Loan evidenced thereby on the expiration of the Interest Period applicable thereto; (iv) bear interest as provided in the appropriate clause of Section 2.6 in respect of the Prime Loans, CD Loans and Eurodollar Loans, as the case may be, evidenced thereby; and (v) be entitled to the benefits of this -16- 17 Agreement. The Bank shall maintain internal records showing each Loan made hereunder and each principal and interest payment thereon, which records shall, absent manifest error, be final, conclusive and binding. Although each Note shall be dated the Effective Date, interest in respect thereof shall be payable only for the periods during which Loans are evidenced thereby and although the stated principal amount of each Note shall be equal to the Commitment, each note shall be enforceable with respect to the obligation of a Borrower to pay the principal thereof only to the extent of the unpaid principal amount of the Loans evidenced thereby. SECTION 2.6 INTEREST. (a) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Prime Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be 1/4 of 1% in excess of the Prime Rate. (b) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each CD Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be 3/4 of 1% in excess of the relevant CD Rate. (c) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be 1/2 of 1% in excess of the relevant Quoted Rate. (d) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall bear interest at a rate per annum equal to 3% in excess of the Prime Rate in effect from time to time; provided, however, that no Loan shall bear interest after maturity at a rate per annum less than the rate of interest applicable thereto at maturity. (e) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Prime Loan, quarterly in arrears on each Quarterly Payment Date and (ii) in respect of each Fixed Rate Loan, on the last day of each Interest Period applicable to such Loan and on any prepayment (on the amount prepaid), and, in the case of all Loans, on the Termination Date, and, after maturity, upon demand. SECTION 2.7 INTEREST PERIODS. At the time it gives any Notice of Borrowing, a Borrower shall have the right to elect by giving the Bank written notice (or telephonic notice promptly confirmed in writing) the interest period (each an "Interest Period") applicable to such Loan, which Interest Period shall (w) in the case of Prime Loans, be a period of from 7 to 90 days, (x) in the case of CD Loans, be either a 30, 60 or 90 days period, and (y) in the case of Eurodollar Loans, be either -17- 18 a one, two or three month period, the determination of Interest Periods shall be subject to the following provisions: (i) The Interest Period for any Loan shall commence on the date of such Loan; (ii) If any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period in respect of a Eurodollar Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) No Interest Period shall extend beyond the Termination Date; and (iv) No Interest Period shall extend beyond any date upon which the Loans (or any portion thereof) are required to be prepaid pursuant to Section 2.14, unless the aggregate principal amount of Loans which are Prime Loans or which have Interest Periods which will expire on or before such date is equal to or in excess of the amount of such prepayment. SECTION 2.8 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that the Bank shall have determined (which determination shall, absent manifest error, be final, conclusive and binding) at any time: (i) that by reason of: (x) the requirements of Regulation D (excluding all reserves required under Regulation D to the extent included in the computation of the Quoted Rate or the CD Rate), (y) any change since the date of this Agreement in any applicable law or governmental rule, regulation, guideline, order or request (whether or not having the force of law) or any interpretation or administration thereof by any governmental authority, central bank or comparable agency (including the introduction of any new law or governmental rule, regulation, guideline, order or request) and/or (z) in the case of Eurodollar Loans, other circumstances affecting the Bank or the interbank Eurodollar market or the position of the Bank in such market (such as for example but not limited to a change in the official reserve requirements to the extent not provided for in clause (i)(x) above), the Quoted Rate or the CD Rate, as the case may be, shall not represent the effective pricing to the Bank for making, funding or maintaining the affected Fixed Rate Loan; or (ii) that the making or continuance of any Eurodollar Loan has become unlawful by compliance by the Bank in good faith with any law or any governmental rule, regulation, guideline, order or request, or has become impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, the Bank shall on such date give notice (by telephone confirmed in writing) of -18- 19 such determination to the Borrower which has requested or which has incurred such affected Fixed Rate Loan. Thereafter (x) in the case of clause (i), such Borrower shall pay to the Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Bank in its reasonable discretion shall determine) as shall be required to compensate or reimburse the Bank for the increased costs resulting from the circumstances described in such clause (i); provided, however, that the liability of the Borrowers to compensate or reimburse the Bank for increased costs resulting from a circumstance described in such clause (i) prior to the first demand by the Bank for such compensation or reimbursement shall be limited to those increased costs incurred in the one year period preceding the date of such demand (a written notice as to additional amounts owed the Bank pursuant to this clause (x), showing the basis for the calculation thereof, submitted to such Borrower by the Bank shall, absent manifest error, be final, conclusive and binding); and (y) in the case of clause (ii), take one of the actions specified in Section 2.8(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Fixed Rate Loan is affected by the circumstances described in Section 2.8(a), the Borrower which has requested or which has incurred such Fixed Rate Loan may (and, in the case of a Fixed Rate Loan affected by the circumstances described in Section 2.8(a)(ii) shall) either (x) if the affected Fixed Rate Loan is then being made pursuant to a Notice of Borrowing by giving the Bank telephonic notice (confirmed promptly in writing) thereof on the same date that such Borrower was notified by the Bank pursuant to Section 2.8(a) either (i) cancel such borrowing or (ii) require the Bank to make the requested Fixed Rate Loan as a Prime Loan or (y) if the affected Fixed Rate Loan is then outstanding, upon at least three Business Days' written notice to the Bank, require the Bank to convert the Fixed Rate Loan so affected into a Prime Loan. (c) In the event that the Bank shall have determined (which determination shall, absent manifest error, be final, conclusive and binding) on any date for determining the Quoted Rate for any Interest Period that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the applicable interest rate on the basis provided for in the definition of Quoted Rate, then the bank shall on such date give notice (by telephone confirmed in writing) of such determination to the Borrower which has requested such affected Eurodollar Loan and, notwithstanding any other provision of this Agreement, the Bank shall have no obligation to make, and shall not make, the requested Eurodollar Loan unless the Borrower requesting such Eurodollar Loan agrees in writing on the date it is notified of such determination by the Bank to pay to the Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Bank in its reasonable discretion shall determine) as shall be required to cause the Bank to receive interest with respect to such affected Eurodollar Loan -19- 20 at a rate per annum which shall equal the effective pricing to the Bank to make such Eurodollar Loan plus the applicable percentage in excess of the Quoted Rate referred to in Section 2.6(c). (d) If the Bank determines at any time that any applicable law or governmental rule, regulation, guideline, order or request (whether or not having the force of law) concerning capital adequacy or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency (including the introduction of any new law or governmental rule, regulation, guideline, order or request), will have the effect of increasing the amount of capital required to be maintained by the Bank based on the existence of the Commitment or its obligations hereunder, then the Borrowers jointly and severally agree to pay to the Bank, upon its written demand therefor, such additional amounts as shall be required to compensate the Bank for the increased cost or reduced rate of return to the Bank as a result of such increase of capital; provided, however, that the liability of the Borrowers to compensate the Bank under this Section 2.8(d) prior to the first demand by the Bank for such compensation shall be limited to compensation for the increased cost or reduced rate of return incurred in the one year period preceding the date of such demand. In determining such additional amounts, the Bank will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that the Bank's determination of compensation owing under this Section 2.8(d) shall, absent manifest error, be final, conclusive and binding. SECTION 2.9 COMPENSATION. Each Borrower shall compensate the Bank with respect to any Fixed Rate Loan made or to be made to it, upon the Bank's written request (which request shall set forth the basis in reasonable detail for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by the Bank to lenders of funds borrowed by it to make or carry a Fixed Rate Loan to the extent not recovered by the Bank in connection with the re-employment of such funds), which the Bank may sustain: (i) if for any reason (other than a default by the Bank) a borrowing of a Fixed Rate Loan does not occur on a date specified therefor in a Notice of Borrowing, (ii) if any prepayment of a Fixed Rate Loan occurs on a date which is not the last day of an Interest Period applicable thereto, (iii) if any prepayment of a Fixed Rate Loan is not made on the date specified in a notice of prepayment given pursuant to Section 2.13 or (iv) as a consequence of (x) without duplication of any amounts paid pursuant to Section 2.6(e), any other default by such Borrower to repay a Fixed Rate Loan when required by the terms of this Agreement or (y) an election made by such Borrower pursuant to Section 2.8(b). For purposes of this Section 2.9, the rate of interest which the Bank shall be deemed to earn from the re-employment of funds shall be a rate of interest per annum, determined by the Bank in good faith, equal to the rate found at that point of the United States Treasury securities yield curve (determined with such interpolation as is necessary) for securities (if they were to be issued) with a term to maturity comparable to the Fixed Rate Loan in question, such yield curve to be constructed by the Bank using then current asking prices by dealers in United States Treasury securities for the offering for sale of current issues (most recently auctioned) of Treasury Bills and converting such prices into yield rates. -20- 21 SECTION 2.10 COMMITMENT COMMISSION. The Borrowers jointly and severally agree to pay to the Bank a commitment commission (the "Commitment Commission") for the period from the date hereof until the Termination Date computed at the rate of 1/4 of 1% per annum on the daily average unutilized portion of the Commitment; payable quarterly in arrears on each Quarterly Payment Date and on the Termination Date. SECTION 2.11 REDUCTION IN COMMITMENT. The Borrowers shall jointly have the right, at any time and from time to time, upon at least 30 Business Days' prior written notice to the Bank, to irrevocably reduce the unutilized portion of the Commitment, in whole or in part, provided that partial reductions shall be in the amount of $1,000,000 or an integral multiple thereof. SECTION 2.12 PAYMENTS ON NONBUSINESS DAYS. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, if a payment of principal has been so extended, interest shall be payable on such principal at the applicable rate during such extension; provided, however, in the event that the day on which any such payment relating to a Eurodollar Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day. SECTION 2.13 VOLUNTARY PREPAYMENTS. The Borrowers shall have the right to prepay the Loans in whole or in part, without premium or penalty, from time to time pursuant to this Section 2.13 on the following terms and conditions: (i) the Borrower prepaying a Loan shall give the Bank at its Principal Office at least three Business Days', in the case of a prepayment of Fixed Rate Loans, or one Business Day's, in the case of a prepayment of Prime Loans prior written notice or telephonic notice (confirmed promptly in writing) of its intent to prepay, the amount of such prepayment and which Loans are to be prepaid; (ii) each prepayment shall be in a principal amount of $1,000,000 (or an integral multiple thereof) in the case of Fixed Rate Loans or $100,000 (or an integral multiple thereof) in the case of Prime Loans; and (iii) at the time of any prepayment of Fixed Rate Loans, such Borrower shall pay all interest accrued on the principal amount of such prepayment. It is understood that each prepayment of Fixed Rate Loans shall be subject to the provisions of Section 2.9. SECTION 2.14 MANDATORY PREPAYMENTS. The Borrowers agree to make a mandatory prepayment with respect to the Loans outstanding on each Quarterly Principal Payment Date, each such prepayment to be in a -21- 22 principal amount equal to the excess of (i) the aggregate principal amount of the Loans then outstanding over (ii) the then Commitment (as calculated after giving effect to any reduction to the Commitment made on such Quarterly Principal Payment Date). SECTION 2.15 MANDATORY PREPAYMENT IN CERTAIN EVENTS. In the event that any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) at any time hereafter becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of capital shares of Reynolds entitled at the time of voting power in the election of directors of 50% or more, then the Bank, by written notice to the Borrowers, may at any time within 90 days after the occurrence of such event: (i) declare the principal of and accrued interest in respect of the Notes to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind and/or (ii) declare the Commitment terminated, whereupon the Commitment and the obligation of the Bank to make Loans shall terminate immediately and any accrued Commitment Commission shall forthwith become due and payable without any other notice of any kind. SECTION 2.16 METHOD AND PLACE OF PAYMENT. All payments under this Agreement and the Notes shall be made to the Bank at its principal office not later than 12:00 Noon (Chicago, Illinois time) on the date when due in U.S. dollars and in immediately available funds. SECTION 2.17 NET PAYMENTS. All payments under this Agreement and the Notes shall be made without set-off or counterclaim and in such amounts as may be necessary so that all such payments (after deduction or withholding for or on account of any present or future Taxes) shall not be less than the amounts otherwise specified to be paid under this Agreement and the Notes. A certificate as to any additional amounts payable to the Bank under this Section 2.17 submitted to either of the Borrowers by the Bank shall show in reasonable detail the amount payable and the calculations used to determine in good faith such amount and shall, absent manifest error, be final, conclusive and binding. With respect to each deduction or withholding for or on account of any Taxes, each Borrower shall promptly furnish to the Bank such certificates, receipts and other documents as may be required (in the judgment of the Bank) to establish any tax credit to which the Bank may be entitled. SECTION 2.18 PLACE OF LOANS. All Loans made hereunder shall be disbursed from and be payable at the Bank's principal office, 231 South LaSalle Street, Chicago, Illinois 60697. -22- 23 SECTION 2.19 IMMEDIATELY AVAILABLE DOLLARS. All borrowing and payments hereunder shall be in United States dollars and in immediately available funds. SECTION 2.20 FAILURE TO CHARGE NOT SUBSEQUENT WAIVER. The Borrower explicitly agrees that any decision by the Bank not to require payment of any fees and/or compensation for costs, or to reduce the amount of such fees and/or compensation for costs, for any Loan shall in no way limit the Bank's right to require full payment of any fees and/or compensation for costs for any Loan. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrowers make the following representations and warranties to the Bank, all of which shall survive the execution of this Agreement: SECTION 3.1 LEGAL STATUS. The Borrowers are corporations duly organized and incorporated, validly existing and in good standing under the laws of the State of Ohio; have the corporate power and authority to own their own assets and transact the business in which they are now engaged in or proposed to be engaged in, and are duly qualified to do business as foreign corporation, and are in good standing under the laws of each other jurisdiction in which such qualification is required. The Borrowers have no subsidiaries or affiliates except as otherwise disclosed herein. SECTION 3.2 CORPORATE POWER AND AUTHORITY. The execution, delivery, and performance by Borrowers of all of the Loan Documents have been duly authorized by all necessary corporate action and will not require any consent or approval of the stockholders of such corporations; do not contravene such corporations charters or by-laws; and, will not cause such corporations to be in default under any law, rule, regulation, order, writ, judgment, injunction, decree, determination, award, or any other indenture, agreement, lease or instrument. SECTION 3.3 NO VIOLATION. The making and performance by Borrowers of any of the Loan Documents does not violate any provision of law, statute or ordinance, or any rule or regulation promulgated pursuant thereto. -23- 24 SECTION 3.4 LEGALLY ENFORCEABLE AGREEMENT. This Agreement, and each of the other Loan Documents when delivered under this Agreement, have been duly authorized, executed and delivered; will be legal, valid and binding obligations of the Borrowers; and any Note created or to be issued hereunder by the Bank upon advances being made in accordance with the provisions of this Agreement, will be a valid and binding obligation of the Borrowers in accordance with its respective terms except to the extent that such obligation may be limited by the applicable bankruptcy, insolvency, and other similar laws affecting creditor's rights generally. SECTION 3.5 NO CONFLICT WITH REQUIREMENTS OF OTHER INSTRUMENTS. The Borrowers are not parties to any indenture, loan, credit agreement, or to any lease or other agreement or instrument, or subject to any charter or resolution which could (a) have a material adverse effect on the business, properties, assets, operations, or conditions, financial or otherwise, of the Borrowers, (b) affect the ability of the Borrowers to carry out their obligations under the Loan Documents to which they are parties or (c) result in the breach of or constitute a default under any such indenture, loan, credit agreement, lease or other agreement or instrument, The Borrowers are not in default in any respect in the performance, observance or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument to which it is a party. SECTION 3.6 LITIGATION. There is no pending or threatened action or proceeding against or affecting the Borrower before any court, governmental agency, arbitrator or administrative agency which may in any one case, or in the aggregate could, materially adversely affect the financial condition, properties, business or operations of the Borrower or the ability of the Borrowers to perform their obligations under any of the Loan Documents, other than those heretofore disclosed by the Borrowers to the Bank in writing. SECTION 3.7 CORRECTNESS OF FINANCIAL STATEMENTS. The financial statement(s) dated September 30, 1994 and related documents heretofore delivered and furnished by the Borrowers to the Bank fairly present the financial condition of the Borrowers, and have been prepared in accordance with GAAP consistently applied. As of the date of such financial statement(s), and since such date, there has been no material adverse change in the condition (financial or otherwise), business, or operations of the Borrowers, nor have the Borrowers mortgaged, pledged or granted a security interest in or encumbered any of the Borrower's assets or properties since such date, except as otherwise disclosed to the Bank in writing. There are no liabilities of the Borrowers, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising or incurred during the course of business since the date of such financial statement(s). No information, exhibit, or report furnished by the Borrowers to the Bank in connection with the -24- 25 negotiation of this Agreement contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statement contained therein not materially misleading. SECTION 3.8 TITLE TO PROPERTY AND ASSETS. The Borrowers have good and marketable title to all of their property and assets, real and personal, including the properties and assets and leasehold interests reflected in the financial statement referred to in Section 5.8 herein, subject only to the existing liens, mortgages, pledges, encumbrances or charges as described in the financial statements delivered pursuant to Section 5.8 herein, as otherwise disclosed by the Borrowers to the Bank in writing, or which may be permitted pursuant to Section 6.2 herein. The Borrowers have no liabilities, contingent or otherwise, except as disclosed on such financial statement(s) (including borrowing with other banks) or as otherwise disclosed by the Borrowers to the Bank in writing. Excepted here from are liens for taxes not yet due and payable and minor liens of an immaterial nature. SECTION 3.9 DEBT. Borrowers shall, upon reasonable request of Bank, provide to Bank, a complete and correct list of all credit agreement, indentures, purchase agreements, guarantees, capital leases, and other investments, agreements and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which the Borrowers are in any manner directly or contingently obligated; and the maximum principal or face amounts of the credits in question, which are outstanding and which can be outstanding, are correctly stated, and all mortgages, deed of trusts, pledges, Liens, security interests or other charges or encumbrances of any nature given or agreed to be given as security therefore shall be correctly described or indicated in said list provided to Bank. SECTION 3.10 TAXES. The Borrowers have filed all Federal, State and local tax returns required to be filed and have paid all taxes, assessments and governmental charges and levies thereon shown to be due on such returns, and have made provisions for all liabilities not so paid or accrued under returns not yet due. The Borrowers have no knowledge of any pending assessments or adjustments of any tax payable with respect to any year, except those which are being contested in good faith or where there is a bona fide dispute. The Borrowers have paid all premiums due under all applicable workers compensation and unemployment compensation laws. Excepted herefrom are such taxes, as are being contested in good faith and by proper proceedings and as to which adequate reserves have been maintained. -25- 26 SECTION 3.11 NAME RIGHTS, LICENSES, FRANCHISES, ETC. The Borrowers possess, and so long as any amount of credit pursuant hereto remains unpaid or available, will continue to possess all permits, trade memberships, franchises, contracts, licenses, trademarks, trademarks hereafter obtained, permits, memberships, franchises, contracts, and licenses required and all trademark rights, trade names, trade name rights, patents, patent rights, and fictitious name rights necessary to enable them to conduct the business in all material respects in which they are now engaged and as presently proposed to be conducted, without conflict or violation of any valid rights of others with respect to the foregoing. Nothing in this Section, however, shall prevent the Borrowers from failing to renew or from entering into additional permits, trade memberships, franchises, contracts, licenses, trade marks, trade mark rights, trade names, trade name rights, patents, patent rights and fictitious name rights if in the judgment of the Borrower reasonably exercised such action is advisable for business purposes and will not materially and adversely affect the business in which they are engaged. SECTION 3.12 USE OF LOAN PROCEEDS WILL NOT VIOLATE FEDERAL RESERVE BOARD REGULATIONS. The Borrowers will not use any portion of the proceeds of any Loan for the purpose of purchasing or carrying any margin stock within the meaning of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System (herein called "Margin Stock"), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of Regulation U or X, or in any manner which might involve any Bank in a violation of Regulation U or Regulation X, or cause this Agreement or any transaction contemplated hereby to violate Regulation U, Regulation X or any other regulation of the Board of Governors of the Federal Reserve System, or under the Securities Exchange Act of 1934, each as now in effect or as the same may hereafter be in effect. SECTION 3.13 NO GOVERNMENT APPROVAL REQUIRED. The Borrower's execution and performance of the Loan Documents does not require the approval, filing or notice to any government, governmental agency, administrative authority or instrumentality, as a condition to the validity of any of the Loan Documents. SECTION 3.14 CONSIDERATION OF TRANSACTION. The Loan Documents executed pursuant hereto are all entered into for valuable consideration received to the full satisfaction of the Borrowers. -26- 27 SECTION 3.15 LABOR RELATIONS. The Borrower's labor relations are satisfactory and no dispute, lockout, labor dispute or litigation presently exists or is contemplated or anticipated which would materially and adversely affect the Borrower's operation. SECTION 3.16 ERISA. The Borrowers are in compliance in all material respects with all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred and is continuing with respect to any Plan; no notice of intent to terminate a Plan has been filed nor has any Plan been terminated for which there are any unfunded outstanding liabilities; no circumstances exist which constitute grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administrate, a Plan, nor has the PBGC instituted any such proceedings; neither the Borrowers nor any ERISA affiliate have completely or partially withdrawn under Sections 4201 or 4204 of ERISA from a multiemployer Plan; the Borrowers, and each ERISA affiliate, have met its minimum funding requirement under ERISA with respect to all of its Plans and the present fair market value of all Plan assets exceeds the present value of all vested benefits under each Plan, as determined on the most recent valuation of the Plan assets and in accordance with the provisions of ERISA and the regulations thereunder for calculating the potential liability of the Borrowers or any ERISA affiliate to the PBGC or the Plan under Title IV of ERISA; and neither the Borrowers nor any ERISA affiliate has incurred any liability to the PBGC under ERISA. SECTION 3.17 ACTS OF GOD. Neither the business nor the properties of the Borrowers are affected by any fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of God or other casualty (whether or not covered by insurance) which materially or adversely affects such business or property or operation of the Borrowers. SECTION 3.18 NO SUBORDINATION. The obligations of the Borrowers pursuant to any of the Loan Documents are not subordinated in any manner to any other obligation of the Borrowers. SECTION 3.19 REPRESENTATIONS AND COVENANTS RELATING TO ENVIRONMENTAL LAWS AND REGULATIONS. (a) To the Borrower's knowledge, the Borrowers are in material compliance with all state and federal laws and regulations pertaining to environmental protection, the violation of which would have a material effect on the Borrower's business. The Borrowers have not received any written or oral communication or notice from any court or governmental agency -27- 28 nor are they aware of any investigation by any agency for any material violation of any environmental protection law or regulation. (c) The Borrowers agree to comply with all applicable requirements in effect from time to time of all federal, state, local and other governmental authorities with respect to environmental protection. (d) The Borrowers further agree promptly to notify the Bank of any environmental proceedings brought or threatened by any state or federal agency against the Borrower, and the Borrowers hereby agree to indemnify and hold the Bank harmless from and against any claim which may be brought against the Bank by any state or federal agency by reason of the Bank being a lender to the Borrower. (e) The Borrowers agree further that, in view of recent environmental litigation involving bank lenders, the Borrowers waive any right and agree to assert no claim against the Bank which might otherwise arise or be claimed by the Borrowers, should the Bank elect to forego its rights to seek satisfaction of Borrower's obligations to Bank from any of Borrower's real estate for the reason that enforcement of such rights might expose the Bank to liability for Hazardous Materials upon such real estate under federal or state environmental laws or regulations. (f) For purposes of this paragraph, "Hazardous Materials" includes, without limit, any flammable explosives, radioactive materials, hazardous materials defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 9601 et seq.), and in the regulations adopted and publications promulgated pursuant thereto, or any other federal, state or local environmental law, ordinance, rule, or regulation. The provisions of this Section shall be in addition to any and all other obligations and liabilities the Borrower may have to the Bank at common law, and shall survive the transactions contemplated herein. ARTICLE IV CONDITIONS PRECEDENT The obligation of the Bank to make any Loan to Borrowers and to enter into this Agreement is conditioned upon the Borrowers delivery of each of the following conditions precedent on or before the day of each Loan or advance hereunder, in form and substance satisfactory to the Bank: -28- 29 SECTION 4.1 COMPLIANCE. The representations and warranties contained herein shall be true on and as of the date of the closing of this Agreement and at the time of any advance hereunder with the same effect as though such representations and warranties had been made on and as of such date, and on such date no Event of Default, and no condition, event or act which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default, shall have occurred and be continuing or shall exist. SECTION 4.2 DOCUMENTATION. The Borrowers shall deliver to the Bank on or before the date of this Agreement the following, in form and substance satisfactory to the Bank and Bank's counsel: (a) Properly executed Note in accordance with the provisions of Article II herein; (b) Certified (as of the date of this Agreement) copies of all corporate action taken by the Borrowers, including resolution of their Board of Directors, authorizing the execution, delivery and performance of the Loan Documents and every other document to be delivered pursuant to this Agreement; (c) Incumbency certificate (dated as of the date of this Agreement) signed by Secretary of the Borrowers for each person executing on behalf of the Borrowers of any of the Loan Documents required hereby; (d) A favorable opinion of Counsel for the Borrowers as to the matters referred to in this Agreement, in form and substance satisfactory to the Bank. SECTION 4.3 OTHER DOCUMENTATION. Such other approvals, opinions and documents as the Bank may reasonably request in order to effect fully the purposes of this Agreement. ARTICLE V AFFIRMATIVE COVENANTS The Borrower covenants that so long as any Note shall remain unpaid or the Bank could have any obligation to lend hereunder: SECTION 5.1 TO PAY NOTES. Borrower will punctually pay or cause to be paid the principal and interest (and Make-Whole Amount, if any) to become due in respect of the Notes according to the terms thereof. -29- 30 SECTION 5.2 MAINTENANCE OF BORROWER OFFICE. Borrower will maintain an office or agency at 115 S. Ludlow St., Dayton, OH 45402 (or such other place in the United States of America as the Borrower may designate in writing to the holder hereof) where notices, presentations and demands to or upon the company in respect of the Notes may be given or made. SECTION 5.3 TO KEEP BOOKS. Borrower will, and will cause each of its Restricted Subsidiaries to, keep proper books of record and account in accordance with generally accepted accounting principles. Section 5.4 PAYMENT OF TAXES; CORPORATE EXISTENCE: Borrower will, and will cause each of its Restricted Subsidiaries to: A. Pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it, its income or profit or its property before the same shall become in default, as well as all lawful claims and liabilities of any kind (including claims and liabilities for labor, materials and supplies) which, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Borrower nor any Restricted Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or any such Restricted Subsidiary shall have set aside on its books reserves in respect thereof (segregated to the extent required by generally accepted accounting principles) deemed adequate in the opinion of the Chief Financial Office or Treasurer of the Borrower; and B. Subject to Section 6.5 and Section 6.6, do all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that neither the Borrower nor any Restricted Subsidiary shall be required to preserve any right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in its conduct of business. SECTION 5.5 TO INSURE. Borrower will, and will cause each of its Restricted Subsidiaries to: A. Keep all of its insurable properties owned by it insured against all risks usually insured against by persons operating like properties in the localities where the properties are located, all in amounts sufficient to prevent the Borrower or such Restricted Subsidiary, as the case may be, from becoming a coinsurer within the terms of the policies in question, but in any event in amounts not less than 80% of the then full replacement value thereof; -30- 31 B. Maintain public liability insurance against claims for personal injury, death or property damage suffered by others upon or in or about any premises occupied by it or occurring as a result of its maintenance or operation of any airplanes, automobiles, trucks or other vehicles or other facilities (including, but not limited to, any machinery used therein or thereon) or as the result of the use of products sold by it or services rendered by it; C. Maintain such other types of insurance with respect to its business as is usually carried by persons of comparable size engaged in the same or a similar business and similarly situated; and D. Maintain all such workers' compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business. All insurance for which provision has been made in Section 5.5B and Section 5.5C shall be maintained in at least such amounts as such insurance is usually carried by persons of comparable size engaged in the same or a similar business and similarly situated; and all insurance herein provided for shall be effected under a valid and enforceable policy or policies issued by insurers of recognized responsibility, except that the Borrower or any such Restricted Subsidiary may effect (i) workers' compensation or other similar insurance in respect of operations in any state or other jurisdiction either through an insurance fund operated by such state or other jurisdiction or by causing to be maintained a system or systems of self-insurance which are in accord with applicable laws, and (ii) all other insurance required by Sections 5.5B and 5.5C through a system of self-insurance maintained in accordance with the Borrowers' current practices. SECTION 5.6 CONDUCT OF BUSINESS. Continue to engage in an efficient and economical manner in the business of the same general type as now conducted by the Borrower. Provided, however, that nothing contained in this Section shall prevent the Borrower from discontinuing any part of the business of the Borrower if the discontinuance would not result in a material adverse change to the business of Borrower. SECTION 5.7 MAINTENANCE OF PROPERTIES. Maintain, keep and preserve all of their properties (tangible and intangible) real, chattel and otherwise, in good order and working condition and from time to time make necessary repairs, renewals and replacements thereto in order that such properties are fully and efficiently preserved and maintained. -31- 32 SECTION 5.8 FINANCIAL STATEMENTS. From and after the date hereof and so long as you (or a nominee designated by you) shall hold any of the Notes, Borrower will deliver to Bank in duplicate: (a) as soon as practicable, and in any event within 60 days after the end of each quarterly period (excluding the last quarterly period) in each fiscal year of the company: (1) each Borrower's Quarterly Report on Form 10-Q filed with the S.E.C. with respect to such quarterly period; (2) the consolidated statements of earnings, stockholders' equity and changes in financial position of Borrower and its Restricted Subsidiaries for such period and for that part of the fiscal year ended with such quarterly period and the consolidated balance sheet of Borrower and its Restricted Subsidiaries as at the end of such period; and (3) the statements of earnings, stockholders' equity and changes in financial position of Reyna for such period and for that part of the fiscal year ended with such quarterly period and the balance sheet of Reyna as at the end of such period; setting forth in each case in comparative form the corresponding figures as at the end of and for the corresponding period of the preceding fiscal year, all in reasonable detail, prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of previous years (except as otherwise stated therein or in the notes thereto and except that footnotes shall not be required) and certified by the Chief Financial Officer, the Chief Accounting Officer or the Treasurer of the company as presenting fairly the financial condition and results of operations of Borrower and its Restricted Subsidiaries as at the end of and for the fiscal periods to which they relate, subject to Borrower's or Reyna's year-end adjustments; (b) as soon as practicable, and in any event within 90 days after the end of each fiscal year: (1) Borrower's Annual Report on Form 10-K filed with the S.E.C. with respect to such fiscal year; (2) the consolidated balance sheet and related consolidated statements of earnings, stockholders' equity and changes in financial position of the company and its Subsidiaries; (3) the balance sheet and related statements of earnings, stockholders' equity and changes in financial position of Reyna; and -32- 33 (4) the consolidated balance sheet and related consolidated statements of earnings, stockholders' equity and changes in financial position of Borrower and its Restricted Subsidiaries; each as at the end of and for such year, setting forth in each case in comparative form the corresponding figures of the previous fiscal year, all in reasonable detail, prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of previous years (except otherwise stated therein or in the notes thereto) and certified by the Chief Financial Officer, the Chief Accounting Officer or the Treasurer of Borrower as presenting fairly the financial condition and results of operations and changes in financial position of Borrower and its Subsidiaries and Reyna, respectively, as at the end of and for the fiscal year to which they relate, and, with respect to the reports delivered pursuant to clauses (2) and (3) above, accompanied by a report or opinion of independent certified public accountants of recognized national standing selected by Borrower stating that such financial statements present fairly the consolidated financial condition and results of operations and changes in financial position of Borrower and its Subsidiaries and Reyna, respectively, in accordance with generally accepted accounting principles consistently applied (except for changes with which such accountants concur) and that the examinations of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards; (c) concurrently with the financial statements delivered pursuant to Section 5.8 (b) (2) and (3), the written statement of said accountants that in making the examination necessary for their report or opinion on said financial statements they have obtained no knowledge of any Event of Default or default by any Borrower in the fulfillment of any of the terms, covenants, provisions or conditions of the Notes or, if such accountants shall have obtained knowledge of any such default or Event of Default, they shall disclose in such statement the default or defaults or Event or Events of Default and the nature and status thereof, but such accountants shall not be liable, directly or indirectly, to anyone for any failure to obtain knowledge of any such default or Event of Default; (d) concurrently with the financial statements delivered pursuant to Section 5.8 (b), a certificate of the Chief Financial Officer, the Chief Accounting Officer or Treasurer of Borrower: (1) setting forth, as of the end of the preceding fiscal year, the extent to which the Borrower and its Restricted Subsidiaries have completed with the requirements of Section 6.01 and 6.09, inclusive, of the Notes, including in each case a brief description, together with all necessary computations, of the manner in which such compliance was determined; (2) stating that a review of the activities of Borrower and its Subsidiaries during the preceding fiscal year has been made under his supervision to -33- 34 determine whether Borrower has fulfilled all of its obligations under this Agreement and the Notes; and (3) stating that, to the best of his knowledge, Borrower is not and has not been in default in the fulfillment of any of the terms, covenants, provisions or conditions hereof and thereof and no Event of Default exists or existed or, if any such default or Event of Default exists or existed, specifying such default or Event of Default and the nature and status thereof; (e) promptly after the formation or acquisition of a Subsidiary, written notice thereof, including the name of such Subsidiary, its jurisdiction or incorporation, a brief description of its business, and whether it has been designated as a Restricted Subsidiary and, if so designated, a certificate of a principal financial officer of the Borrower showing compliance with Section 6.4C of the Notes; (f) as soon as practicable, copies of all such financial statements, proxy statements and reports as the Borrower or any of its Subsidiaries shall send or make available generally to its security holders and all registration statements (other than on Form S-8) and regular periodic reports, if any, which it or any of its Subsidiaries may file with the Securities and Exchange Commission or any governmental agency or agencies substituted thereof or with any national securities exchange; (g) immediately after the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller or any Executive Vice President, Assistant Treasurer or Assistant Controller of Borrower becomes aware of the existence of a condition, event or act which constitutes an Event of Default or an event of default under any other evidence of Indebtedness of Borrower or any Restricted Subsidiary, or which, with notice or lapse of time or both, would constitute such an Event of Default or event of default, a written notice specifying the nature and period of existence thereof and what action Borrower or such Restricted Subsidiary, as the case may be, is taking or proposes to take with respect thereto; (h) immediately after the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller or any Executive Vice President, Assistant Treasurer or Assistant Controller of Borrower becomes aware of the occurrence of any (1) "reportable event," as defined in Section 4043 or ERISA, or (2) nonexempted "prohibited transaction," as defined in Sections 406 and 408 or ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended, in connection with any "employee pension benefit plan," as defined in Section 3 of ERISA, or any trust created thereunder, a written notice specifying the nature thereof, what action Borrower is taking or proposes to take with respect thereto and, when known, any -34- 35 action taken by the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect thereto; and (i) such other information as to the business and properties of Borrower and its Subsidiaries, including consolidating financial statements of Borrower and its Restricted Subsidiaries, and financial statements and other reports filed with any governmental department, bureau, commission or agency, as you may from time to time reasonably request. SECTION 5.9 COMPLIANCE WITH LAWS. Comply in all respects with all applicable laws, rules, regulations and orders. SECTION 5.10 NOTICE OF LITIGATION. Promptly after the commencement thereof, give notice to the Bank of any actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Borrower, which, if determined adversely to the Borrower, could have a material adverse effect on the financial condition. SECTION 5.11 NOTICE TO THE BANK. Promptly give notice in writing to the Bank of: (a) Any change in the name, trade name, address, identity or corporate structure of the Borrower; (b) Any uninsured or partially uninsured loss through fire, theft, liability or property damage to the property of the Borrower which has a material adverse effect on the business of Borrower; (c) Any condition, event or act which constitutes an Event of Default, or which, with the giving of notice of lapse of time, or both could or would constitute an Event of Default, by delivering to the Bank the certificate of the Treasurer or Chief Financial Officer of the Borrower specifying such condition, event or act, the period of existence thereof, and what action the Borrower proposes to take with respect thereto; (d) The filing or receiving thereof, along with copies of all reports, including annual reports, and notices, which the Borrowers file with or receive from the PBGC or the U.S. Department of Labor under ERISA, as soon as possible and in any event with thirty (30) days after the Borrowers or have reason to know that any Reportable Event or Prohibited Transaction has occurred with respect to any Plan or the PBGC or the Borrowers have instituted or will institute proceedings under -35- 36 Title IV of ERISA to terminate any Plan, along with a certificate of the Chief Financial Officer or Treasurer of the Borrower setting forth details as to such Reportable Event or Prohibited Transaction or Plan termination and the action the Borrower proposes to take with respect thereto; (e) The sending or filing thereof, along with copies of all proxy statements, financial statements, and reports which the Borrowers send to their stockholders, and copies of all regular, periodic, and special reports, and all registration statements which the Borrowers file with the Securities and Exchange Commission or any governmental authority which may be substituted therefore, or with any national securities exchange; (f) Any other event or fact which materially and adversely may affect the financial or operating conditions, the Borrower or the Collateral pledged as security hereunder; or (g) Such other information respecting the condition or operations, financial or otherwise, of the Borrower as the Bank may from time to time reasonably request. SECTION 5.12 RIGHT OF INSPECTION. At any reasonable time and from time to time, permit the Bank or any agent or representative thereof to examine and make copies of and abstracts from the records and books of the account of, and visit the properties of the Borrower, and to discuss affairs, finances and accounts of the Borrower with any of their respective officers and directors and the Borrower's independent accountants. The Bank agrees to comply with the security regulations of the Borrower, as the case may be. The Bank shall notify the Borrower in advance of any discussion between the Bank and the Borrower's independent accountants, and the Borrower shall have the right to be present during such discussions. The Bank agrees to use its best efforts to maintain the confidentiality of the information obtained by the Bank or its agents, except as otherwise required by the Bank's examining authorities or by legal process and except as necessary for the enforcement of its rights under this Agreement. -36- 37 SECTION 5.13 COMPLIANCE WITH LAWS AND REGULATIONS. Comply with all laws and regulations of any applicable jurisdiction with which the Borrowers are required to comply including, without limitation, worker's compensation laws, the Occupation Safety and Health Act of 1970, as amended, and the Environmental Protection Act, as amended. In addition, the Borrower shall maintain material compliance with all state and federal laws and regulations pertaining to environmental protection. ARTICLE VI NEGATIVE COVENANTS OF THE REYNOLDS AND REYNOLDS COMPANY Borrower The Reynolds and Reynolds Company ("Reynolds") further covenants that so long as any Note remains unpaid or the Bank may have an obligation to lend hereunder: SECTION 6.1 INDEBTEDNESS. Neither Reynolds nor any Restricted Subsidiary will create, assume or incur, or in any manner become liable, contingently or otherwise, in respect of, any indebtedness other than: A. Indebtedness represented by the Notes; and B. Indebtedness in an amount such that, at the time of the creation, assumption or incurrence thereof and immediately after giving effect thereto Consolidated Indebtedness shall not exceed 60% of Consolidated Tangible Capitalization. SECTION 6.2 LIENS Neither Reynolds nor any Restricted Subsidiary will: A. Create, assume, incur or suffer to exist any Lien upon (or, whether by transfer to any Subsidiary or Affiliate or otherwise, subject, or permit any Subsidiary or Affiliate to subject, to the prior payment of any Indebtedness other than that represented by the Notes) any property or assets (real or personal, tangible or intangible, including, without limitation, any stock or other securities of a Restricted Subsidiary) of Reynolds or any Restricted Subsidiary, whether now owned or hereafter acquired, or any income or profits therefrom; B Own or acquire or agree to acquire any property or assets (real or personal, tangible or intangible) subject to or upon any Lien; or C. Suffer to exist any Indebtedness of Reynolds or any Restricted Subsidiary (except as and to the extent permitted by Section 5.4A or claims or demands against Reynolds or any Restricted Subsidiary, which, Indebtedness, claims or demands, -37- 38 if unpaid, might (in the hands of the holder or anyone who shall have guaranteed the same or who has any right or obligation to purchase the same), by law or upon bankruptcy or insolvency or otherwise, be given any priority whatsoever over its general creditors; provided, however, that the foregoing restrictions shall not prevent: (1) Reynolds or any Restricted Subsidiary from suffering to exist the Liens existing on __________________ which are listed on Exhibit C to the Agreement; and extensions or renewals thereof upon the same property theretofore subject thereto without increasing the principal amount of Indebtedness then secured thereby; or (2) Reynolds or any Restricted Subsidiary: (i) from making pledges or deposits under workmen's compensation laws, unemployment insurance laws or similar legislation or good faith deposits in connection with bids, tenders, contracts (other than for the repayment of money borrowed) or under leases to which Reynolds or such Restricted Subsidiary is a party; (ii) from making deposits to secure public or statutory obligations of Reynolds or such Restricted Subsidiary or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which Reynolds or such Restricted Subsidiary is a party, or deposits in lieu of such bonds; (iii) from incurring Liens or priorities imposed by law, such as laborers', other employees', carriers', warehousemen's, mechanics', materialmen's and vendors' liens or priorities, and Liens arising out of judgments or awards against Reynolds or such Restricted Subsidiary with respect to which Reynolds or such Restricted Subsidiary at the time shall be prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review; or (iv) from entering into leases and from incurring landlords' liens on fixtures and movable property located on premises leased in the ordinary course of business so long as the rent secured thereby is not in default; or (3) Reynolds or any Restricted Subsidiary from creating or incurring or suffering to exist -38- 39 (i) Liens for taxes or import duties not yet subject to penalties for nonpayment or the nonpayment of which shall be permitted by the provision to Section 5.4A; or (ii) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraphs and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties, which Liens, exceptions, encumbrances, easements, reservations, rights and restrictions do not, in the opinion of Reynolds, in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of Reynolds and its Subsidiaries; or (4) any Restricted Subsidiary from creating, incurring, assuming or suffering to exist any Lien solely to secure Indebtedness owing to Reynolds or any Wholly-owned Restricted Subsidiary; or (5) Reynolds or any Restricted Subsidiary from creating, incurring, assuming or suffering to exist Liens not otherwise permitted by the foregoing clauses 1 through 4, inclusive, of this Section 6.2; provided, however, that at the time of the creation, incurrence or assumption thereof, and immediately after giving effect thereto and to the Indebtedness secured or evidenced thereby, (i) the then outstanding aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidated Tangible Capitalization; and (ii) Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B. SECTION 6.3 RESTRICTED PAYMENTS. Reynolds will not, directly or indirectly: A. Declare or pay any dividend or make any other distribution (whether by reduction of capital or otherwise) on any shares of any class of its capital stock (other than a dividend or distribution payable in shares of common stock of Reynolds); or B. Purchase, redeem, retire or otherwise acquire, or cause or permit any Subsidiary to purchase, otherwise acquire or make any payment in respect of, any such shares; or C. Make, or permit any Restricted Subsidiary to make, any Restricted Investment; -39- 40 unless immediately after giving effect to any such action, Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B and the sum of: (1) The aggregate amount of all such dividends and distributions (other than dividends or distributions payable in shares of common stock of Reynolds) declared, paid or made subsequent to September 30, 1993; (2) the excess, if any, of (i) the aggregate amount of all such purchases, redemptions, retirements, acquisitions and payments made subsequent to September 30, 1993 over (ii) the net cash proceeds received after September 30, 1993 from the sales (other than to a Subsidiary) of shares of capital stock of Reynolds; and (3) the Aggregate Amount of Restricted Investments made subsequent to September 30, 1993; does not exceed $40,000,000 plus 60% (or minus 100% in the case of a deficit) of Consolidated Net Income accrued subsequent to September 30, 1993. All dividends, distributions, purchases, redemptions, retirements, acquisitions and payments (other than Restricted Investments) made pursuant to this Section 6.3 in property other than cash shall be included for purposes of calculations pursuant to this Section 6.3 at the fair market value thereof (as determined in good faith by the Board of Directors) at the time of declaration of such dividend or at the time of making such distribution, purchase, redemption, retirement, acquisition or payment. SECTION 6.4 RESTRICTIONS ON RESTRICTED SUBSIDIARIES. A. Reynolds will not cause, suffer or permit any Restricted Subsidiary to: (1) issue or dispose of any shares of such Restricted Subsidiary's capital stock to any Person other than Reynolds or a Wholly-owned Restricted Subsidiary, except to the extent that any such shares are required to qualify directors under any applicable law or required to be issued to other stockholders of such Subsidiary by virtue of their exercise of preemptive rights or as their pro rata share of any stock dividend; or (2) sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of another Restricted Subsidiary, or any Indebtedness owing to such Subsidiary from another Restricted Subsidiary, to any Person other than Reynolds or a Wholly-owned Restricted Subsidiary, except in connection with a transaction which complies with Section 6.4B; or (3) sell, assign, lease, transfer or otherwise dispose of any of such Restricted Subsidiary's properties and assets to any Person or consolidate with or merge into any other Person or permit any other Person to merge into it; -40- 41 provided, however, that: (i) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any of its properties and assets if such sale, lease, transfer or disposition is not prohibited by the provisions of Section 6.5B, except that a Restricted Subsidiary may not sell all or substantially all of its properties and assets unless such sale is for cash in an amount not less than the fair market value of such properties and assets and unless: (a) such sale will not materially and adversely affect the conduct of the business of Reynolds or any of its other Restricted Subsidiaries; (b) such Restricted Subsidiary does not own any Indebtedness of Reynolds or capital stock or any Indebtedness of any other Restricted Subsidiary not simultaneously being disposed of in compliance with Section 6.4B; and (c) at the time of such transaction and immediately after giving effect thereto (x) no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing, and (y) Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B, and (z) the aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidated Tangible Capitalization; (ii) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of all or any part of its properties and assets to, or consolidate with or merge into, Reynolds (subject to the provisions of Section 6.5) or a Wholly-owned Restricted Subsidiary; and (iii) any Restricted Subsidiary may permit another person to merge into it provided that the requirements of clause (i) (c) of this Section 6.4A are complied with and immediately after such merger said Restricted Subsidiary is a Wholly-owned Restricted Subsidiary. B. Reynolds will not sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of any Restricted Subsidiary or any Indebtedness owning from any Restricted Subsidiary to Reynolds, except, in the case of shares of capital stock, to the extent, if any, required to qualify directors of such Restricted Subsidiary under any applicable law; provided, however, that all shares of capital stock of all classes, together with all Indebtedness, of any Restricted Subsidiary owned by Reynolds and/or one or more Restricted Subsidiaries may be sold as an entirety if such sale, if treated as a sale of such Subsidiary's assets made by such Subsidiary, would not be prohibited by the provisions of Section 6.4A(i). -41- 42 C. Reynolds will not designate any Subsidiary as a Restricted Subsidiary unless it is so designated by resolution of the Board of Directors and: (1) such corporation shall have outstanding only such Indebtedness and Liens as it would then have been permitted to create, incur or assume in compliance with Section 6.1 and Section 6.2; (2) Reynolds and/or one or more Wholly-owned Restricted Subsidiaries shall own, directly or indirectly, all outstanding capital stock of such corporation having any preference as to dividends or upon liquidation, and all rights, options and warrants to acquire any such preference stock; and (3) immediately after such designation, no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing. Any subsidiary so designated as a Restricted Subsidiary may not thereafter cease to be a Restricted Subsidiary. SECTION 6.5 MERGER, CONSOLIDATION, SALE OR LEASE. A. Reynolds will not consolidate with or merge into any Person, or permit any Person to merge into it, or sell, lease, transfer or otherwise dispose of all or substantially all of its properties and assets, unless: (1) the successor formed by or resulting from such consolidation or merger (if other than the Company) or the transferee to which such sale, lease, transfer or other disposition shall be made shall be solvent corporation duly organized and existing under the laws of the United States of America or any State thereof; (2) the due and punctual performance and observance of all the obligations, terms, covenants, agreements and conditions of the Agreement and the Notes to be performed or observed by Reynolds shall, by written instrument furnished to each holder of the Notes, be expressly assumed by such successor (if other than Reynolds) or transferee; (3) at the time of such transaction and assumption, and immediately after giving effect thereto: (i) no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing; -42- 43 (ii) Reynolds or such successor or transferee, as the case may be, could incur at least $1 of additional Indebtedness in compliance with Section 6.1B; and (iii) the aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidate Tangible Capitalization. B. Except as permitted in Section 6.5A above, Reynolds will not, directly or indirectly through one or more Subsidiaries, sell, assign, lease, transfer or otherwise dispose of (other than in the ordinary course of business) any of its properties and assets to any Person: (1) if the book value (net of related depreciation) of such asset, together with the book value (net of related depreciation) of all other assets of Reynolds and its Restricted Subsidiaries so disposed of in any fiscal year of Reynolds would constitute 10% or more of the book value (net of related depreciation) of all the assets of Reynolds and its Restricted Subsidiaries as of the last day of the fiscal year then most recently ended; or (2) if the sum of the Net Income (excluding a net deficit) for the three fiscal years of Reynolds most recently ended contributed by such asset and all other assets of the borrower and its Restricted Subsidiaries so disposed of during any fiscal year of Reynolds would exceed 10% of Consolidated Net Income for such period of three fiscal years; or (3) if, with respect to any sale of accounts receivable, the proceeds of any such sale are not simultaneously applied to repay the senior debt on a pro rata basis or reinvested in operating assets of Reynolds within 12 months of the receipt thereof. SECTION 6.6 PURCHASE OF NOTES. Except as provided in Article II, the Company will not, and will not permit any Subsidiary or Affiliate to, acquire directly or indirectly, by repurchase or otherwise, any of the outstanding Notes. SECTION 6.7 MAINTENANCE OF CONSOLIDATED EARNINGS RATIO. Reynolds shall not at any time permit Consolidated Earnings Available for Fixed Charges to be less than 175% of Fixed Charges. SECTION 6.8 MAINTENANCE OF CURRENT RATIO. Reynolds will not at any time permit Consolidated Current Assets to be less than 150% of Consolidated Current Liabilities. -43- 44 SECTION 6.9 TRANSACTIONS WITH AFFILIATES. Reynolds will not, and will not permit any Restricted Subsidiary to, engage in any transaction with an Affiliate (other than Reynolds or a Restricted Subsidiary) on terms more favorable to the Affiliate than would have been obtainable in arm's length dealing in the ordinary course of business with a Person not an Affiliate, provided that Reynolds or any Restricted Subsidiary may sell inventory to any Affiliate in the ordinary course of business at not less than book value. SECTION 6.10 REGULATIONS G, T, U AND X. Use the proceeds of any Loan hereunder, directly or indirectly, to purchase or carry any margin stock (within the meaning of Regulations G, T, U and X of the Board of Governors of the Federal Reserve System) or extend credit to others for the purpose of purchasing or carrying, directly or indirectly, any margin stock. ARTICLE VII NEGATIVE COVENANTS OF REYNA FINANCIAL CORPORATION Borrower Reyna Financial Corporation ("Reyna") further covenants that so long as any Note remains unpaid or the Bank may have an obligation to lend hereunder: SECTION 7.1 REYNA INDEBTEDNESS. A. Reyna will not at any time permit Reyna Consolidated Indebtedness to be greater than 700% of Reyna's Consolidated Tangible Net Worth. B. Reyna will not create, issue or otherwise become liable, directly or indirectly, in respect of any Indebtedness owing to the Parent, other than Subordinated Indebtedness. SECTION 7.2 LIENS. Neither Reyna nor any Subsidiary will (i) create, assume, incur or suffer to exist any Lien upon, or, whether by transfer to any Subsidiary or Affiliate or otherwise, subject, or permit any Subsidiary or Affiliate to subject, to the prior payment of any Indebtedness other than that represented by the Note any property or assets (real or personal, tangible or intangible, including, without limitation, any stock or other securities of a Subsidiary or any Receivables) of Reyna or any Subsidiary, whether now owned or hereafter acquired, or any income or profits therefrom, (ii) own or acquire or agree to acquire any property or assets (real or personal, tangible or intangible) subject to or upon any Lien or (iii) suffer to exist any Indebtedness of Reyna or any Subsidiary (except as and to the extent permitted by Section 5.4A hereof) or claims or demands against Reyna or any Subsidiary, which Indebtedness, claims or demands, if unpaid, might (in the hands of the holder or anyone who shall have guaranteed the same or -44- 45 who has any right or obligation to purchase the same), by law or upon bankruptcy or insolvency or otherwise, be given any priority whatsoever over its general creditors; provided, however, that the foregoing restrictions shall not prevent: A. Reyna or any Subsidiary (i) from making pledges or deposits under workmen's compensation laws, unemployment insurance laws or similar legislation or good faith deposits in connection with bids, tenders, contracts (other than for the repayment of money borrowed) or under leases to which Reyna or such Subsidiary is a party, (ii) from making deposits to secure public or statutory obligations of Reyna or such Subsidiary or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which Reyna or such Subsidiary is a party or deposits in lieu of such bonds, (iii) from incurring Liens or priorities imposed by law, such as laborers' or other employees', carriers', warehousemen's, mechanics', materialmen's and vendors' liens or priorities, and Liens arising out of judgments or awards against Reyna or such Subsidiary with respect to which Reyna or such Subsidiary at the time shall be prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review or (iv) from entering into leases and from incurring landlords' liens on fixtures and movable property located on premises leased in the ordinary course of business so long as the rent secured thereby is not in default; or B. Reyna or any Subsidiary from creating or incurring or suffering to exist (i) Liens for taxes not yet subject to penalties for nonpayment or the nonpayment of which shall be permitted by the proviso to Section 5.4A hereof or (ii) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraphs and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties, which Liens, exceptions, encumbrances, easements, reservations, rights and restrictions do not, in the opinion of Reyna, in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of Reyna and its Subsidiaries; or C. Any Subsidiary from creating, incurring, assuming or suffering to exist any Lien solely to secure Indebtedness owing to Reyna or any Wholly-owned Subsidiary; or D. Reyna from creating, incurring, assuming or suffering to exist any Lien securing Nonrecourse Debt; provided, however, that (i) such Lien shall be limited to the property financed by such Nonrecourse Debt and the lease or security agreement to which such property is subject and (ii) Reyna's Net Equity Investment in the Nonrecourse Receivable with respect to which such Nonrecourse Debt is incurred is in compliance with the provisions of Section 7.8 hereof; or E. Reyna from creating, incurring, assuming or suffering to exist any Lien securing Receivables to the extent such Receivables are required to be secured by the terms of any receivables transfer agreements to which Reyna is a party; provided, however, that the aggregate amount of Receivables secured by all such Liens shall not exceed $40,000,000. -45- 46 SECTION 7.3 RESTRICTIONS WITH RESPECT TO SUBSIDIARIES; AND MERGERS AND ASSET SALES BY BORROWER. A. Reyna will not cause, suffer or permit any Subsidiary to: (i) Issue or dispose of any shares of such Subsidiary's capital stock to any Person other than Reyna or a Wholly-owned Subsidiary, except to the extent that any such shares are required to qualify directors under any applicable law or required to be directors under any applicable law or required to be issued to other stockholders of such Subsidiary by virtue of their exercise of preemptive rights or as their pro rata share of any stock dividend; or (ii) Sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of another Subsidiary, or any Indebtedness owing to such Subsidiary from another Subsidiary or from Reyna, to any Person other than Reyna or a Wholly-owned Subsidiary, except in connection with a transaction which complies with Section 7.3B hereof; or (iii) Sell, assign, lease, transfer or otherwise dispose of any of such Subsidiary's properties and assets to any Person or consolidate with or merge into any other Person or permit any other Person to merge into it; provided, however, that (a) Any Subsidiary may sell, lease, transfer or otherwise dispose of any of its properties and assets if such sale, lease, transfer or disposition is for cash in an amount not less than the fair market value of such properties and assets and if (x) such sale will not materially and adversely affect the conduct of the business of Reyna or any of its Subsidiaries, (y) such Subsidiary does not own any Indebtedness of Reyna or capital stock or any Indebtedness of any other Subsidiary not simultaneously being disposed of in compliance with Section 7.3B hereof, and (z) at the time of such transaction and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing; and (b) Any Subsidiary may sell, lease, transfer or otherwise dispose of all or any part of its properties and assets to, or consolidate with or merge into, Reyna or a Wholly-owned Subsidiary. B. Reyna will not sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of any Subsidiary or any Indebtedness owing from the Subsidiary to Reyna, except, in the case of shares of capital stock to the extent, if any, required to qualify directors of such Subsidiary under any applicable law; provided, however, that all shares of -46- 47 capital stock of all classes, together with all Indebtedness, or any Subsidiary owned by Reyna and/or one or more Subsidiaries may be sold as an entirety if such sale, if treated as a sale of such Subsidiary's assets made by such Subsidiary, would not be prohibited by the provisions of Section 7. 3A(iii) (a) hereof. C. Reyna will not consolidate with or merge into any Person, or permit any Person to merge into it, or sell, lease, transfer, or otherwise dispose of a substantial part of its properties and assets. SECTION 7.4 MAINTENANCE OF LIQUID ASSETS. Reyna will at all times maintain its Liquid Assets in an amount greater than 100% of Consolidated Total Liabilities. SECTION 7.5 MAINTENANCE OF CONSOLIDATED TANGIBLE NET WORTH. Reyna will at all times maintain its Consolidated Tangible Net Worth in an amount not less than $15,000,000. SECTION 7.6 MAINTENANCE OF SEPARATE EXISTENCE. Reyna and the Parent will at all times maintain their separate existence as independent entities and in furtherance thereof: A. Neither Reyna nor any Subsidiary will enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate except in the ordinary course of and pursuant to the reasonable requirements of Reyna's or such Subsidiary's business and upon terms at least as favorable to Reyna or such Subsidiary as would be obtainable from a third party not an Affiliate. B. Reyna and the Parent will maintain separate and identifiable offices (except that Reyna may maintain offices within the Parent's offices) . C. Reyna will hold meetings of its shareholders and Board of Directors (or otherwise arrange for action by its shareholders and Board of Directors to be taken in accordance with appropriate procedures authorized by law) and maintain appropriate corporate books and records separate and apart from those of the Parent; Reyna will not suffer any limitation on the authority of its own directors and officers to conduct its business and affairs in accordance with their own business judgment, and will not authorize or suffer any Person other than its officers (or authorized agents) and directors to act on its behalf with respect to matters for which a corporation's own officers and directors would customarily be responsible. D. In all business dealings with third parties, Reyna shall refer to itself and to the extent possible , shall cause others to refer to it, as distinct entity from the Parent, and will not -47- 48 treat itself or hold itself out, or, to the extent possible, permit others to treat it, as a department, division or similar unit of the Parent. E. Reyna and the Parent will maintain separate physical possession, in its separate records maintained in accordance with Section 7.6C hereof (or in such other manner as counsel to Reyna shall advise is sufficient to perfect the holder's security interest therein) , of all chattel paper and other title retention or lien-creating instruments held by it from time to time. F. Reyna and its Subsidiaries will maintain capitalization adequate, in the judgment of their respective Boards of Directors, for the conduct of their respective businesses. G. Reyna will maintain bank accounts which are separate from the bank accounts of any Affiliate. SECTION 7.7 MAINTENANCE OF PRESENT BUSINESS. Reyna will not, and will not permit Reyna Leasing to, engage in any business other than the business in which it is engaged in on the date hereof. SECTION 7.8 LIMIT ON NET EQUITY INVESTMENTS. Reyna will not allow the aggregate amount of Reyna's Net Equity Investments in Non-Recourse Receivables at any time to exceed 5 % of Total Assets as of such time. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 EVENTS OF DEFAULT. This Note shall become and be due and payable upon written demand of the holder hereof if one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or be 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), and be continuing at the time of such demand or at the time of a similar demand from the holder of any other Note; A. Default in the payment of any interest upon any Note when such interest becomes due and payable and continuance of such default for a period of five days; B. Default in the payment of principal of (or premium, if any, on) any Note when and as the same shall become due and payable, whether at maturity or at a date fixed for prepayment, or by acceleration or otherwise; or -48- 49 capital stock of all classes, together with all Indebtedness, or any Subsidiary owned by Reyna and/or one or more Subsidiaries may be sold as an entirety if such sale, if treated as a sale of such Subsidiary's assets made by such Subsidiary, would not be prohibited by the provisions of Section 7.3A(iii)(a) hereof. C. Reyna will not consolidate with or merge into any Person, or permit any Person to merge into it, or sell, lease, transfer, or otherwise dispose of a substantial part of its properties and assets. SECTION 7.4 MAINTENANCE OF LIQUID ASSETS. Reyna will at all times maintain its Liquid Assets in an amount greater than 100% of Consolidated Total Liabilities. SECTION 7.5 MAINTENANCE OF CONSOLIDATED TANGIBLE NET WORTH. Reyna will at all times maintain its Consolidated Tangible Net Worth in an amount not less than $15,000,000. SECTION 7.6 MAINTENANCE OF SEPARATE EXISTENCE. Reyna and the Parent will at all times maintain their separate existence as independent entities and in furtherance thereof: A. Neither Reyna nor any Subsidiary will enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any affiliate except in the ordinary course of and pursuant to the reasonable requirements of Reyna's or such Subsidiary's business and upon terms at least as favorable to Reyna or such Subsidiary as would be obtainable from a third party not an Affiliate. B. Reyna and the Parent will maintain separate and identifiable offices (except that Reyna may maintain offices within the Parent's offices). C. Reyna will hold meetings of its shareholders and Board of Directors (or otherwise arrange for action by its shareholders and Board of Directors to be taken in accordance with appropriate procedures authorized by law) and maintain appropriate corporate books and records separate and apart from those of the Parent; Reyna will not suffer any limitation on the authority of its own directors and officers to conduct its business and affairs in accordance with their own business judgment, and will not authorize or suffer any Person other than its officers (or authorized agents) and directors to act on its behalf with respect to matters for which a corporation's own officers and directors would customarily be responsible. D. In all business dealings with third parties, Reyna shall refer to itself and to the extent possible, shall cause others to refer to it, as distinct entity from the Parent, and will not -47- 50 treat itself or hold itself out, or, to the extent possible, permit others to treat it, as a department, division or similar unit of the Parent. E. Reyna and the Parent will maintain separate physical possession, in its separate records maintained in accordance with Section 7.6C hereof (or in such other manner as counsel to Reyna shall advise is sufficient to perfect the holder's security interest therein), of all chattel paper and other title retention or lien-creating instruments held by it from time to time. F. Reyna and its Subsidiaries will maintain capitalization adequate, in the judgment of their respective Boards of Directors, for the conduct of their respective businesses. G. Reyna will maintain bank accounts which are separate from the bank accounts of any Affiliate. SECTION 7.7 MAINTENANCE OF PRESENT BUSINESS. Reyna will not, and will not permit Reyna Leasing to, engage in any business other than the business in which it is engaged in on the date hereof. SECTION 7.8 LIMIT ON NET EQUITY INVESTMENTS. Reyna will not allow the aggregate amount of Reyna's Net Equity Investments in Non-Recourse Receivables at any time to exceed 5% of Total Assets as of such time. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 EVENTS OF DEFAULT. This Note shall become and be due and payable upon written demand of the holder hereof if one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or be 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), and be continuing at the time of such demand or at the time of a similar demand from the holder of any other Note; A. Default in the payment of any interest upon any Note when such interest becomes due and payable and continuance of such default for a period of five days; B. Default in the payment of principal of (or premium, if any, on) any Note when and as the same shall become due and payable, whether at maturity or at a date fixed for prepayment, or by acceleration or otherwise; or -48- 51 C. Default in the performance or observance of any covenant, agreement or condition contained in Section 6.1 to Section 6.10, or Section 7.1 to 7.8, inclusive and, in the case of such default under: (i) Section 6.2, the aggregate amount of Priority Indebtedness in excess of the amount of Priority Indebtedness permitted to be incurred in compliance with said Section 6.2 (5) does not exceed $500,000 for more than 30 days; and (ii) Section 6.8, or Section 7.4, continuance of such default for a period of 30 days; or D. Default in the performance or observance of any other covenant, agreement or condition contained in this Note or in the Agreement and continuance of such default for a period of 30 days after written notice thereof, specifying such default and requiring it to be remedied, shall have been given to the Borrower by the holder of any Note; or E. The Borrower or a Restricted Subsidiary (i) shall not pay when due, whether by acceleration or otherwise, any evidence of indebtedness of the Borrower or such Restricted Subsidiary (other than the Notes), or (ii) (a) any condition or default shall exist under any such evidence of indebtedness or under any agreement under which the same may have been issued and (b) such evidence of indebtedness shall have been declared due prior to the stated maturity thereof; F. The Borrower or any Restricted Subsidiary shall file a petition seeking relief for itself under Title 11 of the United States Code, as now constituted or hereafter amended, or an answer consenting to, admitting the material allegations of or otherwise not controverting, or shall fail to timely controvert, a petition filed against the Borrower or such Restricted Subsidiary seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended; or the Borrower or any Restricted Subsidiary shall file such a petition or answer with respect to relief under the provisions of any other now existing or future bankruptcy, insolvency or other similar law of the United States of America or any State thereof or of any other country or jurisdiction providing for the reorganization, winding-up or liquidation of corporations or an arrangement, composition, extension or adjustment with creditors; or G. A court of competent jurisdiction shall enter an order for relief which is not stayed within 60 days from the date of entry thereof against the Borrower or any Restricted Subsidiary under Title 11 of the United States Code, as now constituted or hereafter amended; or there shall be entered an order, judgment or decree by operation of law or by a court having jurisdiction in the premises which is not stayed within 60 days from the date of entry thereof adjudging the Borrower or any Restricted Subsidiary a bankrupt or insolvent, or ordering relief against the Borrower or any Restricted Subsidiary, or approving as properly filed a petition settling? relief against the Borrower or any Restricted Subsidiary, under the provisions of any other now existing or future bankruptcy, insolvency or other similar law of the United States of America or any State thereof or of any other country or jurisdiction providing for the reorganization, -49- 52 winding-up or liquidation of corporations or an arrangement, composition, extension or adjustment with creditors, or appointing a receiver, liquidator, assignee, sequestrator, trustee, custodian or similar official of the Borrower or any Restricted Subsidiary or of any substantial part of its property, or ordering the reorganization, winding-up or liquidation of its affairs; or any involuntary petition against the Borrower or any Restricted Subsidiary seeking any of the relief specified in this clause shall not be dismissed within 60 days of its filing; or H. The Borrower or any Restricted Subsidiary shall make a general assignment for the benefit of its creditors; or the Borrower or any Restricted Subsidiary shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, sequestrator, trustee, custodian or similar official of the Borrower or such Restricted Subsidiary or of all or any substantial part of its property; or the Borrower or any Restricted Subsidiaries shall have admitted to its insolvency or inability to pay, or shall have failed to pay, its debts generally as such debts become due; or the Borrower or any Restricted Subsidiary or its directors or majority stockholders shall take any action looking to the dissolution or liquidation of the Borrower or such Restricted Subsidiary (other than as contemplated by Sections 6.4, 6.5 and 7.3); or I. The rendering against the Borrower or a Restricted Subsidiary of a final judgment, decree or order for the payment of money in excess of $1,000,000 and the continuance of such judgment, decree or order unsatisfied and in effect for any period of 60 consecutive days without a stay of execution; or J. The Borrower or any Restricted Subsidiary shall: (1) engage in any nonexempted "prohibited transaction" , as defined in Sections 406 and 408 of ERISA and Section 4975 of the Internal Revenue Code of 1954, as amended; (2) incur any "accumulated funding deficiency", as defined in Section 302 of ERISA, whether or not waived; or (3) terminate or permit the termination of any "employee pension benefit plan" , as defined in Section 3 of ERISA, in a manner which could result in the imposition of a Lien on the property of the Borrower or such Restricted Subsidiary pursuant to Section 4068 of ERISA which Lien would secure obligations in excess of $500,000; or K. Any representation by or on behalf of the Borrower in the Agreement or any certificate or instrument furnished in connection therewith or with the Notes proves to have been false or misleading in any material respect as of the date given or made; provided that in the case of any default which directly or indirectly relates to the performance or observance of any covenant, agreement or condition contained in Sections 6 or 7 of the Agreement, there shall become due and payable with respect to any Notes then held by -50- 53 any holder of the Notes entitled to the benefits of said Sections 6 or 7, to the extent permitted by applicable law, the Make-Whole Amount of such Notes plus accrued interest thereon. SECTION 8.2 SUITS FOR ENFORCEMENT. In case an Event of Default shall occur and be continuing, the holder of this Note may proceed to protect and enforce its rights by Suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant contained in this Note or in aid of the exercise of any power granted in this Note, or may proceed to enforce the payment of this Note or to enforce any other legal or equitable right of the holder of this Note. If any holder of a Note shall demand payment thereof or take any other action in respect of an Event of Default, the Borrower will forthwith given written notice, as in Section 9. 3 provided, to other holders of Notes specifying such action and the nature and status of the Event of Default. SECTION 8.3 REMEDIES NOT WAIVED. No course of dealing between the holder hereof and the Borrower or any delay or failure on the part of the holder hereof in exercising any rights hereunder shall operate as a waiver of any rights of the holder hereof. SECTION 8.4 REMEDIES CUMULATIVE. No remedy herein conferred upon the holder hereof is intended to be exclusive of any other remedy and each and every remedy shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. SECTION 8.5 ACCELERATION OF INDEBTEDNESS. If an Event of Default has occurred, then the Bank may, at its option, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower, declare its obligation to make loans and advances hereunder to be terminated, whereupon the same shall forthwith terminate, and declare any Note, all interest thereon, and all other amounts payable under this Agreement or upon any other promissory note, indebtedness, or loan agreement to the Bank to be forthwith due and payable in full, and accelerate the maturity of the obligations evidenced thereby, which obligations shall become and be forthwith immediately due and payable without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower. In the Event of Default, the remedies provided to Bank herein shall be cumulative and shall be in addition to every other remedy provided herein or otherwise provided by law. -51- 54 ARTICLE IX MISCELLANEOUS SECTION 9.1 AMENDMENT, MODIFICATION AND WAIVER. No amendment, modification, termination, waiver, consent to departure or alteration of the terms hereof or of any provision of any of the Loan Documents shall be binding or effective unless the same be in writing, dated subsequent to the date hereof, and duly executed by all parties hereto, and then such amendment, modification or waiver shall be effective only in the specific instance and for the specific purpose for which given. SECTION 9.2 SURVIVAL OF WARRANTIES. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of any Loan hereunder and the execution and delivery of any of the Loan Documents. SECTION 9.3 NOTICE, ETC. All notices and other communications provided for under this Agreement and under any of the Loan Documents to which the Borrowers are parties shall be delivered, mailed registered or certified mail, return receipt requested, or telegraphed to the Borrower, at: The Reynolds & Reynolds Company 115 S. Ludlow St. Dayton, OH 45402 ATTN: Treasurer and to: Reyna Financial Corporation 115 S. Ludlow St. Dayton, OH 45402 ATTN: Assistant Treasurer and if to the Bank: Bank of America Illinois 231 South LaSalle, 9J Chicago, Illinois 60697 ATTN: Paul Higdon, Managing Director or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section. All such notices and communications shall, when mailed or telegraphed, be effective upon receipt or delivery. -52- 55 SECTION 9.4 NO WAIVER-REMEDIES. No delay or failure of the Bank in exercising any right, power, remedy or privilege hereunder or under any of the Loan Documents on any occasion shall affect such right, power or privilege or be construed as a waiver of any requirement of this Agreement or a waiver of the Bank's right to take advantage of any subsequent or continued breach by the Borrower of any covenant contained herein; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or privilege be prejudicial to any subsequent exercise of such right, power or privilege. The rights and remedies of the Bank hereunder are cumulative and not exclusive. All remedies herein provided shall be in addition to and not in substitution for any remedies otherwise available to the Bank. Any waiver, permit, consent or approval of any kind by the Bank of any breach or default hereunder, or such waiver of any provision or condition hereof, must be in writing and shall be effective only to the extent set forth in such writing. SECTION 9.5 SUCCESSORS AND ASSIGNS. The Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Bank and their respective successors and assigns, except that the Borrower may not assign or transfer any of the Loan Documents or any of their rights under any of the Loan Documents to which the Borrowers are parties without the prior written consent of the Bank. SECTION 9.6 COSTS, EXPENSES AND TAXES. The Borrowers agree to pay on demand all reasonable costs and expenses in connection with the negotiation, preparation, execution, delivery, filing, recording, administration, enforcement, litigation, collection, or filing of any legal action on or for any of the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Bank, and counsel who may be retained by said counsel, with respect thereto and with respect to advising the Bank as to its rights and responsibilities under any of the Loan Documents. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of any of the Loan Documents and other documents to be delivered under any such Loan Documents, and agree to save the Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such taxes and fees or against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution, delivery and performance of this Agreement, any Loan and security therefore, if applicable. The obligations of the Borrower under this Section shall survive payment of all Loans. -53- 56 SECTION 9.7 INDEMNIFICATION. The Borrowers agree to indemnify, save, and hold harmless the Bank and its directors, officers, agents and employees (collectively the "Indemnitees") from and against: (a) Any and all writs, subpoenas, claim, demand, actions or causes of action that are served on or asserted against any Indemnitee by any Person, and (b) Any and all liabilities, losses, costs or expenses (including reasonable attorneys fees) that any Indemnitee suffers or incurs as a result of any other matter specified in this Section. The obligations of the Borrower under this Section shall survive payment of all Loans, SECTION 9.8 RIGHT OF SETOFF. Upon the occurrence and during the continuance of any Event of Default the Bank is hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), 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 the Bank to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement, any Note or any of the Loan Documents, irrespective of whether or not the Bank shall have made any demand under this Agreement, any Note or any of the Loan Documents and although such obligations may be unmatured. The Bank agrees promptly to notify the Borrower after any such setoff and application, provided that the failure to give to such notice shall not affect the validity of such setoff and application. The rights of the Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Bank may have. In addition, any and all instruments, documents, monies, securities, goods, chooses in action, chattel paper and any other property of the Borrower, or in which the Borrowers have any interest, tangible or intangible, and the proceeds thereof, which now or hereafter are at any time in the custody or possession of the Bank or any third party acting in the Bank's behalf, without regard to whether the Bank received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether the Bank has conditionally released the same, shall constitute additional security for any Note and may be applied at any time to the liability represented thereby which is then due, whether by acceleration or otherwise. SECTION 9.9 PAYMENT. Whenever any payment to be made hereunder or on any Loan shall become due and payable on a Saturday, Sunday or a legal holiday under the laws of the State of Ohio, such payment may be made in the next succeeding business day and such extension of time shall in such case be included in computing interest on such payment. -54- 57 SECTION 9.10 BANK'S DUTIES UPON PAYMENT IN FULL BY BORROWER. Upon payment in full of all obligations hereunder and the termination of the Bank's obligations to make further loans to the Borrower, the Bank shall reassign to the Borrower any collateral that the Borrower may have previously assigned or delivered to the Bank and not yet fully collected. At the Borrower's written request, the Bank will cause to be cancelled of record, all financing statements or other documents which may have previously been filed and recorded in public offices by or on behalf of the Bank evidencing the Borrower's obligation hereunder to the Bank and the security therefore and will deliver to the Borrower any Note paid in full marked "Paid-in-Full". SECTION 9.11 CONSTRUCTION. This Agreement, the Loan Documents, including but not limited to any Security Documents and the Notes, shall be governed and construed in accordance with the laws of the State of Ohio, or to the extent such laws are superseded because the Bank is a national banking association, by the banking laws of the United States. SECTION 9.12 SEVERABILITY OF PROVISIONS. Any provision contained in any of the Loan Documents 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 of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 9.13 COVENANTS IN OTHER INDEBTEDNESS. In the event the Borrower or any Subsidiary thereof shall execute, make or otherwise enter into any instrument, document or agreement relating to the incurrence or maintenance of any Indebtedness, or any amendment, waiver, restatement, re-evidencing or other modification of any documentation relating to any of its existing Indebtedness (collectively, "Other Loan Documents"), the effect of which in any such case is to implement or subject, the Borrower or such Subsidiary to any affirmative, negative, financial or other covenants, or to any events of default (collectively, "Restrictive Covenants"), which Restrictive Covenants are in any respect materially different from the Restrictive Covenants set forth in this Agreement, the Borrower shall promptly so advise the Bank. Thereafter, the Borrower shall provide the Bank such information, in such reasonable detail, as the Bank may reasonably request in respect of the applicable Restrictive Covenants and the Other Loan Documents. The Bank shall have the right, at any time, in its sole discretion, to elect to amend in the manner hereinafter described, this Agreement and the Note to incorporate any such Restrictive Covenant, other than any Restrictive Covenant which would effect an amendment of Section 2.6 or 2.14 of this Agreement. If the Bank shall elect to incorporate any such Restrictive Covenant, it shall so notify the Borrower in a written notice and, upon the giving of such notice, this Agreement shall be deemed amended to incorporate such Restrictive Covenant. Any amendment effected in accordance with the terms -55- 58 of this Section 9.13 shall remain in effect during the entire term of this Agreement, notwithstanding the subsequent termination, rescission, avoidance, waiver, release, amendment or other modification of all or any term or provision of the Other Loan Document from which a Restrictive Covenant shall have originated (including, without limitation, any modification to such Restrictive Covenant in such Other Loan Document), unless the Bank and the Borrower shall otherwise agree in accordance with the procedures set forth in Article VIII hereof. SECTION 9.14 HEADINGS. Article and section numbers in this Agreement are for convenience of reference only and shall not constitute a part of the Agreement for any other purpose. SECTION 9.15 EXECUTION IN COUNTERPARTS. This Agreement 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 and all of which taken together shall constitute but one and the same Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers/authorized partners, effective as of the date first above appearing. WITNESS: THE REYNOLDS and REYNOLDS COMPANY, an Ohio corporation - ------------------------------ By: ------------------------------- Title: TREASURER ---------------------------- REYNA FINANCIAL CORPORATION, an Ohio corporation - ------------------------------ By: ------------------------------- Title: ASST. TREASURER ---------------------------- BANK OF AMERICA ILLINOIS - ------------------------------ By: PAUL B. HIGDON ------------------------------- Title: MANAGING DIRECTOR ---------------------------- -56- EX-2.B 11 EXHIBIT (B)(2) 1 EXHIBIT (b)(2) AMENDED AND RESTATED CREDIT AGREEMENT This Amended and Restated Credit Agreement made this 1st day of April, 1995, at Dayton, Ohio by and between The Reynolds and Reynolds Company, an Ohio corporation ("Reynolds"), and Reyna Financial Corporation, an Ohio corporation ("Reyna")(Reynolds and Reyna are hereinafter collectively referred to as the "Borrowers", individually, a "Borrower", both meaning each entity, jointly and severally) and NBD Bank, a Michigan banking corporation (hereinafter referred to as the "Bank"). RECITALS A. The Borrowers and the Bank entered into a Credit Agreement dated as of June 1, 1989, as amended by a First Amendment to Credit Agreement dated as of April 1, 1990, a Second Amendment to Credit Agreement dated as of September 28, 1990, a Third Amendment to Amended and Restated Credit Agreement dated as of April 1, 1991, a Fourth Amendment to Amended and Restated Credit Agreement and a Fifth Amendment to Amended and Restated Credit Agreement dated as of April 1, 1993 (as amended, the "Prior Credit Agreement"). B. The Borrowers desire to receive and the Bank is willing to extend from time to time an aggregate amount not to exceed FIFTEEN MILLION AND NO/l0O DOLLARS ($15,000,000.00) outstanding at any one time for a revolving line of credit (the "Line"), subject to the terms and conditions set forth below, and the Borrowers and the Bank desire to amend and restate the Prior Credit Agreement in its entirety as herein provided. AGREEMENT In consideration of the agreements herein contained, the Prior Credit Agreement is hereby amended and restated in its entirety as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the defined meanings when used herein or in any Note, certificate, report, or other document made or delivered pursuant to this Agreement, unless otherwise defined in context: "Accounts Receivable" means all accounts, contract rights, notes, drafts, acceptances, instruments or chattel paper (including indebtedness of related or affiliated entities) and any other 2 form of right to payment for goods sold or leased or for services rendered, now owned or hereinafter arising or acquired. "Adjusted CD Rate" shall mean the per annum rate specified in Section 2.6(b). "Adjusted Prime Rate" shall mean the per annum rate specified in Section 2.6(a). "Adjusted Quoted Rate" shall mean the per annum rate specified in Section 2.6(c). "Advance" shall mean one of the loans made by the Bank to a Borrower pursuant to Section 2.1(a) hereof. "Affiliate" means any Person (other than a Borrower or any Restricted Subsidiary) which, directly or indirectly, controls or is controlled by or is under common control with a Borrower or a Restricted Subsidiary or which beneficially owns or holds or has the power to direct the voting power of 5% or more of any class of voting stock of a Borrower or a Restricted Subsidiary or which has 5% or more of its voting stock (or in the case of a Person which is not a corporation, 5% or more of its equity interest) beneficially owned or held, directly or indirectly, by a Borrower or a Restricted Subsidiary. For purposes of this definition, "control" means the power to direct the management and policies of a 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. "Aggregate Amount", when used with respect to Restricted Investments at any time, means and shall be determined by adding together the amount of each such investment, whether or not such investment at such time is shown on the books of Reynolds or a Restricted Subsidiary, determined with respect to each such investment at the greatest of: (i) the amount originally entered on the books of Reynolds or any Restricted Subsidiary with respect thereto; (ii) the then current book amount thereof; and (iii) the original cost thereof to Reynolds or a Restricted Subsidiary; minus in each case any net return of capital upon such investments (through the sale or liquidation of such investments or any part thereof, or otherwise). "Agreement" means this Credit Agreement as amended, supplemented, or modified from time to time. -2- 3 "Board of Directors" means the board of directors of a Borrower (or, when so specified or the context so indicates, a Subsidiary) or if duly authorized to exercise the power of the Board of Directors, any duly authorized committee thereof. "Business Day" means any day other than a Saturday, Sunday, or other day on which commercial banks in Michigan are authorized or required to close under the laws of the State of Michigan and, if such day relates (for notice purposes or otherwise) to a Eurodollar Loan, a day on which dealings in U.S. Dollar deposits are carried out in the London interbank market. "Capital Lease" means and includes at any time any lease of property, real or personal, which in accordance with GAAP would at such time be required to be capitalized on a balance sheet of the lessee. "Capital Lease Obligation" means at any time the capitalized amount of the rental commitment under a Capital Lease which in accordance with GAAP would at such time be required to be shown on a balance sheet of the lessee. "CD Rate" means with respect to each Interest Period the sum (rounded upward to the nearest 1/100 of 1%) of (A) the rate obtained by dividing (x) the Certificate of Deposit Rate for such Interest Period by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that would be applicable during such Interest Period to a negotiable certificate of deposit in excess of $100,000 and with a maturity equal to such Interest Period of any member bank of the Federal Reserve System, plus (B) the then daily net annual assessment rate as estimated by the Bank for determining the current maximum annual assessment payable by the Bank to the Federal Deposit Insurance Corporation for insuring such certificates of deposit. "CD Loan" means any Loan bearing interest at the rate provided for in Section 2.6(b). "Certificate of Deposit Rate" means the consensus bid rate determined by the Bank for the bid rates per annum, at approximately 10:00 a.m. (Detroit, Michigan time) on the first day of the Interest Period for which such Certificate of Deposit Rate is to be applicable of two or more New York or Chicago certificate of deposit dealers of recognized standing selected by the Bank for the purchase at face value from the Bank of certificates of deposit in an aggregate amount approximately comparable to the CD Loan for which such Certificates of Deposit Rate is to be applicable and with a maturity equal to such Interest Period. "Comfort Letter" shall mean the letter agreement of Reynolds to the Bank dated on or about the date hereof and in the form of Exhibit A hereto. -3- 4 "Commitment" means $15,000,000.00, as such amount may be reduced from time to time pursuant to Section 2.11. "Commitment Commission" has the meaning specified in Section 2.10. "Consolidated Current Assets" means the aggregate of all assets which in accordance with GAAP would be so classified and appear upon the asset side of the consolidated balance sheet of Reynolds and its Restricted Subsidiaries, after making any appropriate deduction for adequate reserves in each case where a reserve is proper, in accordance with GAAP. "Consolidated Current Liabilities" means the aggregate of all amounts which in accordance with GAAP would be so classified and appear upon the liability side of the consolidated balance sheet of Reynolds and its Restricted Subsidiaries. "Consolidated Earnings Available for Fixed Charges" means the consolidated income of Reynolds and its Restricted Subsidiaries before income taxes, computed in accordance with GAAP, plus Fixed Charges. "Consolidated Indebtedness" means the aggregate of all Indebtedness of a Borrower and its Restricted Subsidiaries. "Consolidated Tangible Capitalization" means, as of any particular time, the sum of (without duplication): (i) the par value of all of the outstanding capital stock of Reynolds; (ii) the capital and earned surplus of Reynolds and its Restricted Subsidiaries appearing on a consolidated balance sheet of Reynolds and its Restricted Subsidiaries prepared in accordance with GAAP; and (iii) Consolidated Indebtedness of Reynolds and its Restricted Subsidiaries; less the sum of (without duplication): (a) the cost of any treasury shares included on such balance sheet; and (b) the aggregate of all amounts that appear on the asset side of such balance sheet and are attributable to assets which would be treated as intangibles under GAAP, including, without limitation, all such items as goodwill, trademarks, trade names, brand names, copyrights, patents, patent applications, licenses, franchises, permits and rights with respect to the foregoing, and unamortized debt discount and -4- 5 expense but excluding from the operation of this clause (b) software and software licenses. "Consolidated Tangible Net Worth" shall mean, as of the date of determination thereof; the aggregate amount of stockholders' equity of a corporation and its subsidiaries appearing on a consolidated balance sheet of such corporation and its subsidiaries prepared in accordance with GAAP less the sum of (without duplication) (i) the cost of any treasury shares included on such balance sheet and (ii) the aggregate of all amounts that appear on the asset side of such balance sheet and are attributable to assets which would be treated as intangibles under GAAP, including, without limitation, all such items as goodwill, trademarks, trade names, brand names, copyrights, patents, patent applications, licenses, franchises, permits and rights with respect to the foregoing, and unamortized debt discount and expenses, but excluding from the operation of this clause (ii) software and software licenses. "Consolidated Total Liabilities" shall mean all liabilities shown on a consolidated balance sheet of Reyna and its Subsidiaries prepared in accordance with GAAP. "Conversion Date" shall mean the date on which the Borrowers request disbursement of the Term Loan pursuant to Section 2. 1(b) which in no event shall be later than April 1,1997. "Credit" shall mean the revolving bank credit established under Section 2.1(a) hereof in the amount of the Commitment. "Credit Notes" shall mean the promissory notes of each of the Borrowers in the form annexed hereto as Exhibit B, evidencing the Advances under Section 2. 1(a). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereof. "Eurodollar Loan" means any Loan bearing interest at the rate provided for in Section 2.6(c). "Event of Default" means any of the events specified in Section 8.1 herein, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Fixed Charges" means the sum of interest expense (including without limitation capitalized interest and the interest component of any Capital Lease Obligation) and rental expense of Reynolds and its Restricted Subsidiaries, all computed in accordance with GAAP. "Fixed Rate Loan" means a Eurodollar Loan, a CD Loan or a Special Facility Loan. -5- 6 "GAAP" means GAAP in the United States. "Indebtedness" means and includes: (i) all indebtedness or obligations for money borrowed or for the purchase price of property and any notes payable and drafts accepted representing extensions of credit, whether or not representing indebtedness or obligations for money borrowed or for the purchase price of property; (ii) indebtedness or obligations secured by or constituting any Lien existing on property owned by the Person whose Indebtedness is being determined, whether or not the indebtedness or obligations secured thereby shall have been assumed; (iii) Capital Lease Obligations; (iv) guarantees and endorsements of (other than endorsements for purposes of collection in the ordinary course of business), and obligations to purchase goods or services for the purpose of supplying funds for the purchase or payment of; or measured by, indebtedness, liabilities or obligations of others (whether or not representing money borrowed) and other contingent obligations in respect of, or to purchase or otherwise acquire or service, indebtedness, liabilities or obligation of others (whether or not representing money borrowed); and (v) all indebtedness, liabilities or obligations (whether or not representing money borrowed) in effect guaranteed by an agreement, contingent or otherwise, to make a loan, advance or capital contribution to or other investment in the debtor for the purpose of assuring or maintaining a minimum equity, asset base, working capital or other balance sheet condition for any date, or to provide funds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in the debtor for such purpose. Anything contained in clauses (iv) and (v) of the preceding paragraph to the contrary notwithstanding: (1) contingent obligations of Reynolds to maintain the net earnings or net worth of Reyna pursuant to an operating or similar agreement shall not be deemed to be Indebtedness of Reynolds; and (2) contingent obligations in connection with sales of lease and other accounts receivable shall be included as Indebtedness to the extent of any reserve which is maintained or required to be maintained in accordance with GAAP. -6- 7 In case any corporation shall become a Restricted Subsidiary, such corporation shall be deemed to have incurred at the time it becomes a Restricted Subsidiary all Indebtedness of such corporation outstanding immediately thereafter. "Interest Period" has the meaning specified in Section 2.7. "Lease" means any lease (other than a Capital Lease) of real or personal property under which a Borrower or a Restricted Subsidiary is the lessee (or guarantor of the lessee's obligations), other than leases between the Borrowers and their Restricted Subsidiaries or between Restricted Subsidiaries of Borrowers. "Lien" means any mortgage, lien, pledge, security interest, encumbrance or charge of any kind, any conditional sale or other title retention agreement or any Capital Lease. "Liquid Assets" shall mean the sum of, without duplication, the following assets owned by Reyna or one of its Subsidiaries: (i) cash, (ii) direct obligations of the United States of America or obligations of any instrumentality or agency thereof backed by the full faith and credit of the United States, in each case maturing within one year), (iii) commercial paper maturing within 180 days rated A-1 or A-2 by Standard & Poor's Corporation or P-l or P-2 by Moody's Investors Service, Inc. (so long as such ratings shall be the two highest ratings given by such rating services), (iv) certificates of deposit issued by, or bankers acceptances of, or repurchase agreements involving governmental securities of the type specified above issued by, any bank or trust company organized under the laws of the United States of America, any state thereof or the District of Columbia having total capital and surplus in excess of $ 100,000,000.00, in each case maturing within one year, and (v) Receivables, less reserves. "Loan Documents" means this Agreement and any Note. "Loan" shall mean an Advance or the Term Loan, as the context shall require. "Maturity Date" shall mean the third anniversary of the Conversion Date. "Net Equity Investment", when used in connection with Non-Recourse Receivables, means, at the date as of which the amount thereof is to be determined, the result of the following calculation: (i) all rental receivables of Reyna from Non-Recourse Receivables of Reyna less the aggregate amount of rentals receivable necessary to fully amortize related Non-Recourse Debt (including, without limitation, principal, interest and other related costs of such Non-Recourse Debt), plus (ii) the residual value of the property financed at the end of the initial term of all Non-Recourse Receivables of Reyna less the sum of unearned income with respect to such Non-Recourse Receivables. -7- 8 "Net Income" means, with respect to any Person for any period, the net income (or the deficit, if expenses and charges exceed revenues and other proper income credits) of such Person for such period determined in accordance with GAAP as in effect from time to time; provided, however, that Net Income of a Borrower or any Restricted Subsidiary shall not include: (i) the Net Income of any Person (other than a Restricted Subsidiary) in which a Borrower or any Restricted Subsidiary has an ownership interest unless such Net Income shall have been actually received by a Borrower or such Restricted Subsidiary in the form of cash dividends or similar cash distributions; (ii) any portion of the Net Income of any Restricted Subsidiary which for any reason shall not be available for payment of dividends to a Borrower and the Net Income of any Restricted Subsidiary prior to the date it became a Restricted Subsidiary; (iii) the Net Income of any Person, any of the stock or other equity interests or assets of which have been acquired by a Borrower or any Restricted Subsidiary, realized by such Person prior to the date of such acquisition; (iv) any gain or loss arising from the sale or other disposition, write-up or write-down of capital assets and of capital stock; and (v) any extraordinary item. "Non-Recourse Debt" shall mean Indebtedness of Reyna incurred to finance the acquisition of property which is subject to a chattel mortgage, lease or security agreement under which a Person other than an Affiliate is the lessee or debtor providing for rentals or other payments sufficient to pay the entire principal of and interest on such Indebtedness on or before the date or dates for payment thereof and which Indebtedness does not constitute a general obligation of Reyna but is repayable solely out of rentals or other sums payable under the chattel mortgage, lease or security agreement and/or the property subject thereto; provided, however, that the holder of such Indebtedness (hereinafter call the "Holder") shall have agreed in writing with Reyna at or prior to the time such Indebtedness is incurred by Reyna that: (x) Reyna shall not have any personal liability whatsoever, either in its capacity as owner of the property or in any other capacity, to the Holder for any amounts payable with respect to such Indebtedness and such Indebtedness shall not constitute a general obligation of Reyna, (y) the Holder shall look for repayment of such Indebtedness and payment of interest thereon and all other payments with respect to such Indebtedness solely to rentals or other sums payable under the chattel mortgage, lease or security agreement and/or the proceeds from the sale of the property subject thereto, and (z) in the case of all such Indebtedness incurred subsequent to September 24, 1990, to the extent the Holder may legally do so, the Holder waives any and all right it may have to make the election provided under 11 U. S. C. Section 1111 (b)(1)(A) or any other similar or successor provision against Reyna -8- 9 "Non-Recourse Receivables" shall mean and include any chattel mortgage, lease or security agreement owing or guaranteed by a Person under which Reyna supplies a portion of the purchase price for the property subject to the chattel mortgage, lease or security agreement, and has an equity interest or an interest in the rentals or other payments receivable, which interest may be subordinated to Non-Recourse Debt incurred in connection with the purchase of such property; provided, however, that any lease constituting a Non-Recourse Receivable shall be one in which, at the inception of such lease, it shall appear that the lessor will receive from (a) rentals to become due under the lease during the initial term, (b) estimated residual value at the end of such term, (c) investment tax credit and/or (d) estimated tax benefits due to tax deferrals such as that from interest expense and accelerated depreciation (based upon an estimated reinvestment return of not to exceed 7% per annum on a "sinking fund" basis), an aggregate amount at least sufficient to return to the lessor (i) estimated tax, insurance and maintenance costs and expenses (to the extent not payable by the lessee), (ii) the Net Equity Investment of the lessor in the leased property, and (iii) the aggregate amount necessary to fully amortize the related Non-Recourse Debt; provided further, however, that any lease constituting a Non-Recourse Receivable must be non-cancelable by the lessee unless upon such cancellation the lessee is required to pay to the lessor a premium or penalty which will (1) return any outstanding equity investment of the lessor, (2) fully compensate the lessor for the recapture of any tax benefits previously gained, (3) permit the lessor to fully amortize the related Non-Recourse Debt, including any accrued interest and any premium required thereon, and (4) reimburse the lessor for any taxes, insurance and maintenance costs to the extent not theretofore paid by the lessee. "Note" shall mean, alternatively and successively, the Credit Notes and the Term Notes, "Notice of Borrowing" has the meaning specified in Section 2.3(a). "Overdue Interest Rate" means (a) in respect of any Prime Rate Loans, a rate that is equal to the sum of three percent (3%) per annum plus the Adjusted Prime Rate, (b) in respect of any Fixed Rate Loan, a rate that is equal to the sum of three percent (3%) per annum plus the per annum rate in effect thereon until the end of the then current Interest Period and, thereafter, a rate per annum that is equal to the sum of three percent (3%) per annum plus the Adjusted Prime Rate, and (c) in respect of other amounts payable by the Borrowers hereunder (other than interest), a rate per annum that is equal to the sum of three percent (3%) per annum plus the Adjusted Prime Rate. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature. -9- 10 "Plan" means any employee pension benefit plan or other plan subject to Title IV of ERISA, as amended, established, maintained, or to which contributions have been made by the Borrower or any ERISA affiliate. "Prime Rate" means the prime commercial lending rate as announced by the Bank at its principal office in Detroit, Michigan as in effect from time to time. The Prime Lending Rate established by the Bank is based on its consideration of economic, money market, business and competitive factors, and is not necessarily the Bank's most favored rate. "Prime Loan" means any Loan bearing interest at the rate provided in Section 2.6(a). "Principal Office" means the principal office of NBD Bank, presently located at 611 Woodward Avenue, Detroit, Michigan 48226. "Priority Indebtedness" means the sum (without duplicating any such amount) of the amounts described in the following clauses (i) and (ii) incurred by Reynolds or a Restricted Subsidiary and outstanding at the time of computation: (i) the aggregate principal of all Indebtedness of Reynolds and its Restricted Subsidiaries secured or evidenced by Liens permitted by clauses (1), (2) and all subparts thereto, (3) and all subparts thereto, (4) and (5) and all subparts thereto and of Section 6.2; and (ii) the aggregate principal amount of unsecured Indebtedness of all Restricted Subsidiaries, other than Indebtedness owned by Reynolds or any wholly-owned Restricted Subsidiary. "Prohibited Transaction" means any transaction set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from time to time. "Quarterly Payment Date" means the last Business Day of each March, June, September and December of each year commencing with the last Business Day of June, 1995. "Quarterly Principal Payment Date" means the first Quarterly Payment Date following the Conversion Date, and each Quarterly Payment Date occurring thereafter. "Quoted Rate" means with respect to each Interest Period the rate obtained (rounded upward to the nearest 1/100 of 1%) by dividing (a) the per annum rate of interest determined by the Bank at which U.S. dollar deposits of amounts (in immediately available funds) comparable to the outstanding principal amount of the Eurodollar Loan as to which a Quoted Rate determined with reference to such rate will apply with maturities comparable to the Interest Period for which such Quoted Rate will apply are offered to the Bank by first class banks in the interbank -10- 11 Eurodollar market as of approximately 10:00 a.m. (Detroit, Michigan time) two Business Days prior to the commencement of such Interest Period, by (b) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that would be applicable during such Interest Period to such Eurodollar Loan. "Receivable" shall mean any account receivable whether represented by an open account, note, security agreement, installment sale agreement, mortgage, factor receivable, direct loan receivable, trade account receivable, lease obligation or otherwise. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect or any successor to all or a portion thereof establishing reserve requirements. "Reportable Event" means any of the events set forth in Section 4043 of ERISA, as amended from time to time, except actions of general applicability by the Secretary of Labor under Section 110 of ERISA. "Restricted Investment" means any investment by Reynolds or any Restricted Subsidiary in any other Person, whether by acquisition of stock or Indebtedness, or by loan, advance, guarantee, transfer of property out of the ordinary course of business, capital contribution, extension of credit on terms other than those normal in the business of the company or such Subsidiary, or otherwise; provided, however, that the term "Restricted Investment" shall not include: (i) marketable obligations issued or guaranteed by the United States of America or by any agency of the United States of America or by a state or municipal government within the United States of America, maturing not later than 12 months from the date of acquisition thereof and, in the case of such state or municipal obligations, which have a rating of at least AA or Aa by Standard & Poor's Corporation or Moody's Investors Service, Inc., respectively; (ii) commercial paper which has a rating of at least A-1 or P-1 by Standard & Poor's Corporation or Moody's Investors Service, Inc., respectively, and maturing not later than 270 days from the date of acquisition thereof; (iii) negotiable certificates of deposit (including Eurodollar deposits) or bankers' acceptances issued by or drawn on, a United States commercial bank or trust company or a bank or trust company chartered or organized under the laws of Canada, which has capital and surplus of at least $500,000,000, and maturing not later than 12 months from the date of acquisition thereof; and -11- 12 (iv) any investment in any Restricted Subsidiary or in any corporation which by reason thereof will become a Restricted Subsidiary. "Restricted Subsidiary" means any Subsidiary (i) organized and existing under the laws of the United States of America, any State thereof, Canada or any province thereof; (ii) having substantially all of its assets located in the United States or Canada; (iii) at least 51% of the outstanding voting shares of which shall at the time be owned by Reynolds and/or one or more Restricted Subsidiaries; and (iv) which has been designated as a Restricted Subsidiary by Reynolds or by the Board of Directors of Reynolds. "Reyna" means Reyna Financial Corporation, an Ohio corporation, which is a finance company and wholly-owned subsidiary of Reynolds and has been specifically not designated as a Restricted Subsidiary. "Reyna Consolidated Indebtedness" shall mean the Indebtedness of Reyna and its Subsidiaries, after eliminating inter-company items, all as consolidated and determined in accordance with GAAP. "Reyna Indebtedness" shall mean and include (i) all indebtedness or obligations for money borrowed or for the purchase price of property (whether or not recourse) and any notes payable and drafts accepted representing extensions of credit, whether or not representing indebtedness or obligations for money borrowed or for the purchase price of property, (ii) Non-Recourse Debt and other indebtedness or obligations secured by or constituting any Lien existing on property owned by the Person whose indebtedness is being determined, whether or not the indebtedness or obligations secured thereby shall have been assumed, (iii) Capital Lease Obligations, (iv) guarantees and endorsements of (other than endorsements for purposes of collection in the ordinary course of business), and obligations to purchase goods or services for the purpose of supplying funds for the purchase or payment of, or measured by, indebtedness, liabilities or obligations of others for money borrowed and other contingent obligations in respect of, or to purchase or otherwise acquire or service, indebtedness, liabilities or obligations of others for money borrowed and (v) all indebtedness, liabilities or obligations for money borrowed in effect guaranteed by an agreement, contingent or otherwise, to make a loan, advance or capital contribution to or other investment in the debtor for the purpose of assuring or maintaining a minimum equity, asset base, working capital or other balance sheet condition for any date, or to provide funds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in the debtor for such purpose, In case any -12- 13 corporation shall become a Subsidiary, such corporation shall be deemed to have incurred at the time it becomes a Subsidiary all Indebtedness of such corporation outstanding immediately thereafter. "Reyna Leasing" shall mean Reyna Leasing Corporation, an Ohio corporation. "Special Facility Loan" means any Loan bearing interest at the rate provided for in Section 2.6(d). "Special Rate" means the rate of interest determined by the Bank in its sole discretion to be applicable to a Special Facility Loan for a specified Interest Period. "Subordinated Indebtedness" shall mean all unsecured Indebtedness of Reyna which, as of the date of determination thereof, (i) by its terms has a required final payment not earlier than April 1, 2000, and (ii) is issued under an indenture or other instrument containing provisions for the subordination of such Indebtedness (to which appropriate reference shall be made in the instruments evidencing such Indebtedness) not less favorable to the Bank than the following provisions (the term "Debentures" being, for convenience, used in the provisions set forth below to designate the instruments issued to evidence Subordinated Indebtedness and the term "this Indenture" to designate the indenture or other instrument under which the Debentures are issued and the term "Company" to designate the corporation liable in respect of any Subordinated Indebtedness): "All Debentures issued under this Indenture shall be issued subject to the following provisions and each person holding any Debenture whether upon original issue or upon transfer or assignment thereof accepts and agrees to be bound by such provisions. "All Debentures issued hereunder and any coupons thereto appertaining shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right to the prior payment in full of Superior Indebtedness as defined in this Section. For the purposes of this Section the term 'Superior Indebtedness' shall mean (a) all indebtedness incurred or to be incurred by Reyna for money borrowed unless by its term it is provided that such indebtedness is not Superior Indebtedness, and (b) any deferrals, renewals or extension of any such Superior Indebtedness, or debentures, notes or other evidences of indebtedness issued in exchange for such Superior Indebtedness. "No payment on account of principal, premium, if any, sinking funds, or interest on the Debentures shall be made unless full payment of amounts then due for principal, premium, if any, sinking funds, and interest on Superior Indebtedness has been made or duly provided for in money or money's worth in accordance with its terms. No payment on account of principal, premium, if any, sinking funds, or interest on the Debentures shall be made if, at the time of such payment or immediately after giving effect thereto, there shall have occurred a default with -13- 14 respect to any Superior Indebtedness, as defined therein or in the instrument under which the same is outstanding. "Upon (i) any acceleration of the principal amount due on the Debentures or (ii) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if any, and interest due or to become due (including interest accruing after the commencement of any such proceedings) upon all Superior Indebtedness shall first be paid in full, or payment thereof provided for in money or money's worth in accordance with its terms, before any payment is made on account of the principal of, premium, if any, or interest on the indebtedness evidenced by the Debentures, and upon any such dissolution or winding-up or liquidation or reorganization any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Debentures or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the holders of the Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Superior Indebtedness (pro rata to each such holder on the basis of the respective amounts of Superior Indebtedness held by such holder) or their representatives, to the extent necessary to pay all Superior Indebtedness (including interest thereon accruing after the commencement of any such proceedings) in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of Superior Indebtedness, before any payment or distribution is made to the holders of the indebtedness evidenced by the Debentures or to the Trustee under this Indenture. In the event that any payment or distribution of assets of the Company of any kind or character not permitted by the foregoing provisions, whether in cash, property or securities, shall be received by the Trustee or the holders of the Debentures before all Superior Indebtedness is paid in full, or provision made for such payment, in accordance with its terms, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of such Superior Indebtedness or their representative or representatives, or to the trustee or trustees under an indenture pursuant to which any instruments evidencing any such Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Superior Indebtedness remaining unpaid to the extent necessary to pay all such Superior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to the holders of such Superior Indebtedness. "Subsidiary" means any corporation at least a majority of whose outstanding stock having ordinary voting power for the election of a majority of the members of the board of directors (or other governing body) of such corporation (other than stock having such power only by reason -14- 15 of the happening of a contingency) shall at the time be owned by a Borrower and/or one of more Subsidiaries of a Borrower. "Termination Date" means April 1, 1997 (or, if such date is not a Business Day, the immediately preceding Business Day) or such earlier date upon which the Commitment is reduced to zero pursuant to Section 2.11 or is terminated pursuant to Article VIII or the Loans become due and payable pursuant to Article VIII. "Term Loan" shall mean the loan made by the Bank to the Borrowers pursuant to Section 2.1(b). "Term Notes" shall mean the promissory notes of each of the Borrowers in the form annexed hereto as Exhibit C hereof evidencing the Term Loan under Section 2.2 hereof. "Total Assets" shall mean, as of the date of determination thereof, the sum of all assets of Reyna (other than intangibles), determined in accordance with GAAP, which would properly appear on a balance sheet of Reyna as an asset at and as of such date. "Treasury Yield" means with respect to any prepayment hereunder: (i) .50%, plus (ii) the yield reported, as of 10:00 a.m. (New York City time) on the display designated as "Page 500" on the Telerate Service (or such other display as may replace Page 500 on the Telerate Service) for actively traded "On the Run" U.S. Treasury securities having maturities equal to the maturity, rounded to the nearest month, of the applicable scheduled payment date of the Payment. If no maturity exactly corresponding to such maturity of the Payment shall appear therein, yields for the next longer and the next shorter published "On the Run" maturities shall be calculated pursuant to the foregoing sentence, and the Treasury Yield shall be interpolated from such yields on a straight-line basis (rounding, in each of such relevant periods to the nearest month). "Wholly-owned Restricted Subsidiary" means any Restricted Subsidiary all of the capital stock (other than directors' qualifying shares) of which shall be owned by Reynolds and/or one or more "Wholly-owned" Restricted Subsidiaries. All accounting terms used herein and not expressly defined in this Note shall have the meanings respectively given to them in accordance with GAAP in the United States consistent with those applied in the preparation of the financial statements referred to in Section 3.7 herein, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles. The aforestated definitions shall be applicable to the singular and plurals of the foregoing defined terms. -15- 16 ARTICLE II AMOUNT AND TERMS OF THE LOAN SECTION 2.1 COMMITMENT. (a) Subject to and upon the terms and conditions herein set forth, the Bank agrees, at any time and from time to time prior to the Conversion Date, to make Advances to either of the Borrowers, (i) which Advances and the Term Loan shall, at the option of a Borrower, be either Prime Loans, CD Loans, Eurodollar Loans or, in the Bank's sole discretion if a Borrower requests, Special Facility Loans and (ii) which Advances may be repaid and reborrowed in accordance with the provisions hereof. The Advances made to both of the Borrowers shall not exceed in aggregate principal amount at any time outstanding the Commitment. (b) The Bank further agrees, subject to the terms and conditions hereinafter set forth, to make the Term Loan to the Borrowers on or before the Termination Date in original principal amount not exceeding the lesser of (i) the Commitment and (ii) the aggregate principal balance of the Credit Notes then outstanding; in a minimum amount of $1,000,000 and in integral multiples thereof. The Term Loan shall be evidenced by the Term Notes of the Borrowers, appropriately completed and dated the date such Loan is made. The Bank shall, and is hereby authorized by the Borrowers to, note on the grids annexed to the Term Notes, or elsewhere on the Bank's books and records, the amount of the Term Loan and of each principal payment and/or interest with respect thereto, the applicable Interest Period, if any, and the other information provided for thereon, which shall constitute prima facie evidence of the information so noted, provided that the failure of the Bank to make any such notation shall not relieve the Borrowers of any of the obligations hereunder or under the Term Notes. When the Term Loan is funded, the Credit shall be terminated and the unpaid principal balance (if any) of the Credit Notes and all interest accrued thereon shall thereupon mature and shall be paid (if not otherwise paid) from and out of the proceeds of the Term Loan. SECTION 2.2 MINIMUM AMOUNT OF EACH BORROWING. (a) The principal amount of each Loan shall: (i) in the case of Fixed Rate Loans, be not less than $1,000,000 or, if greater, in integral multiples of $ 1,000,000 or (ii) in the case of Prime Loans, be not less than $100,000 or, if greater, in integral multiples of $100,000. (b) The Borrowers shall not be entitled to have more than ten Loans in the aggregate outstanding at any one time. SECTION 2.3 NOTICES OF BORROWING. -16- 17 (a) Whenever either of the Borrowers desires to borrow a Loan (other than a Special Facility Loan), it shall give the Bank at its Principal Office written notice or telephonic notice (confirmed promptly in writing) of such borrowing (x) in the case of a CD Loan or a Eurodollar Loan, by no later than 10:00 a.m. (Detroit, Michigan time) three Business Days prior to the requested date of borrowing and (y) in the case of a Prime Loan, by no later than 10:00 a.m. (Detroit, Michigan time) on the date of borrowing. Each such notice (each, together with any notice electing to incur a Special Facility Loan given in accordance with Section 2.3(b), a "Notice of Borrowing") shall specify (i) the principal amount which such Borrower desires to borrow, (ii) the date of borrowing (which shall be a Business Day), (iii) whether such Loan is to be maintained as a Prime Loan, CD Loan or Eurodollar Loan and (iv) the Interest Period to be applicable thereto. (b) Whenever either of the Borrowers desires to incur a Special Facility Loan, it shall have the right to contact the Bank to determine the Special Rate which would be applicable to a Special Facility Loan made by the Bank for the principal amount and the Interest Period (which period shall be a period of from 7 to 90 days) requested by such Borrower and the Bank may, in its sole discretion, provide a quote of a Special Rate for such Interest Period. Each notice requesting a quote of a Special Rate shall specify that such request is being made pursuant to the terms of this Agreement. The Bank shall agree with each Borrower from time to time on any additional procedures to be utilized in making a request for a Special Facility Loan (including, without limitation, the applicable notice period and the time period during which the Special Rate, if any, quoted by the Bank shall remain available). Upon electing to incur a Special Facility Loan, the Borrower electing to incur the same shall notify the Bank in accordance with the aforesaid procedures established from time to time with the Bank. Subject to availability, the Bank agrees to use its best efforts to make Special Facility Loans available to the Borrowers; provided that the Bank shall not be obligated to make Special Facility Loans hereunder. SECTION 2.4 DISBURSEMENT OF FUNDS. No later than 12:00 Noon (Detroit, Michigan time) on the date specified in each Notice of Borrowing, the Bank shall make available to the Borrower incurring the same the proceeds of the Loan to be made on such date in U.S. dollars and in immediately available funds by the Bank crediting an account of such Borrower designated by it and maintained with the Bank at its Principal Office. To the extent that a Loan made to such Borrower matures on such date, the Bank shall apply the proceeds of the Loan to be made on such date, to the extent thereof, to the repayment of such maturing Loan. SECTION 2.5 THE NOTES. The obligation of each Borrower to pay the principal of, and interest on, all Loans made to it shall be evidenced by promissory notes substantially in the form of Exhibits A and B (each a "Note") payable to the order of the Bank duly executed and delivered by Borrowers with blanks -17- 18 appropriately completed in conformity herewith. Each Note shall: (i) be dated the Effective Date; (ii) be in the original principal amount of the Commitment and be payable in the principal amount of the Loans evidenced thereby; (iii) mature in the case of each Loan evidenced thereby on the expiration of the Interest Period applicable thereto; (iv) bear interest as provided in the appropriate clause of Section 2.6 in respect of the Prime Loans, CD Loans, Eurodollar Loans and Bid Loans, as the case may be, evidenced thereby; and (v) be entitled to the benefits of this Agreement. The Bank shall maintain internal records showing each Loan made hereunder and each principal and interest payment thereon, which records shall, absent manifest error, be final, conclusive and binding. Although each Note shall be dated the Effective Date, interest in respect thereof shall be payable only for the periods during which Loans are evidenced thereby and although the stated principal amount of each Note shall be equal to the Commitment, each Note shall be enforceable with respect to the obligation of a Borrower to pay the principal thereof only to the extent of the unpaid principal amount of the Loans evidenced thereby. SECTION 2.6 INTEREST. (a) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Prime Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be equal to the Prime Rate. (b) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each CD Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be 3/4 of 1% in excess of the relevant CD Rate. (c) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be 5/8 of 1% in excess of the relevant Quoted Rate. (d) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Bid Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be the Bid Rate applicable to such Bid Loan. (e) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall bear interest at a rate per annum equal to 3% in excess of the Prime Rate in effect from time to time; provided, however, that no Loan shall bear interest after maturity at a rate per annum less than the rate of interest applicable thereto at maturity. -18- 19 (f) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Prime Loan, quarterly in arrears on each Quarterly Payment Date and (ii) in respect of each Fixed Rate Loan, on the last day of each Interest Period applicable to such Loan and, in the case of any Interest Period exceeding three months, those days that occur during such Interest Period at intervals of three months after the first day of such Interest Period and on any prepayment (on the amount prepaid), and, in the case of all Loans, on the Maturity Date, and, after maturity, upon demand. SECTION 2.7 INTEREST PERIODS. At the time it gives any Notice of Borrowing, a Borrower shall have the right to elect by giving the Bank written notice (or telephonic notice promptly confirmed in writing) the interest period (each an "Interest Period") applicable to such Loan, which Interest Period shall (w) in the case of Prime Loans, be a period of from 7 days 90 days, (x) in the case of CD Loans, be either a 30, 60 or 90 days period, (y) in the case of Eurodollar Loans, be either a one, two, three or six month period, and (z) in the case of Special Facility Loans, be the same period as requested by such Borrower at the time it contacts the Bank for a quote of a Special Rate pursuant to the first sentence of Section 2.3(b). The determination of Interest Periods shall be subject to the following provisions: (i) The Interest Period for any Loan shall commence on the date of such Loan; (ii) If any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period in respect of a Eurodollar Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) No Interest Period shall extend beyond the Maturity Date; and (iv) No Interest Period shall extend beyond any date upon which the Loans (or any portion thereof) are required to be prepaid pursuant to Section 2.14, unless the aggregate principal amount of Loans which are Prime Loans or which have Interest Periods which will expire on or before such date is equal to or in excess of the amount of such prepayment. SECTION 2.8 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that the Bank shall have determined (which determination shall, absent manifest error, be final, conclusive and binding) at any time: (i) that by reason of: (x) the requirements of Regulation D (excluding all reserves required under Regulation D to the extent included in the computation of the -19- 20 Quoted Rate or the CD Rate), (y) any change since the date of this Agreement in any applicable law or governmental rule, regulation, guideline, order or request (whether or not having the force of law) or any interpretation or administration thereof by any governmental authority, central bank or comparable agency (including the introduction of any new law or governmental rule, regulation, guideline, order or request) and/or (z) in the case of Eurodollar Loans, other circumstances affecting the Bank or the interbank Eurodollar market or the position of the Bank in such market (such as for example but not limited to a change in the official reserve requirements to the extent not provided for in clause (i)(x) above), the Quoted Rate, the CD Rate or the Special Rate, as the case may be, shall not represent the effective pricing to the Bank for making, funding or maintaining the affected Fixed Rate Loan; or (ii) that the making or continuance of any Eurodollar Loan has become unlawful by compliance by the Bank in good faith with any law or any governmental rule, regulation, guideline, order or request, or has become impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, the Bank shall on such date give notice (by telephone confirmed in writing) of such determination to the Borrower which has requested or which has incurred such affected Fixed Rate Loan. Thereafter (x) in the case of clause (i), such Borrower shall pay to the Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Bank in its reasonable discretion shall determine) as shall be required to compensate or reimburse the Bank for the increased costs resulting from the circumstances described in such clause (i); provided, however, that the liability of the Borrowers to compensate or reimburse the Bank for increased costs resulting from a circumstance described in such clause (i) prior to the first demand by the Bank for such compensation or reimbursement shall be limited to those increased costs incurred in the one year period preceding the date of such demand (a written notice as to additional amounts owed the Bank pursuant to this clause (x), showing the basis for the calculation thereof, submitted to such Borrower by the Bank shall, absent manifest error, be final, conclusive and binding); and (y) in the case of clause (ii), take one of the actions specified in Section 2.8(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Fixed Rate Loan is affected by the circumstances described in Section 2.8(a), the Borrower which has requested or which has incurred such Fixed Rate Loan may (and, in the case of a Fixed Rate Loan affected by the circumstances described in Section 2.8(a)(ii) shall) either (x) if the affected Fixed Rate Loan is then being made pursuant to a Notice of Borrowing by giving the Bank telephonic notice (confirmed promptly in writing) thereof on the same date that such Borrower was notified by the Bank pursuant to Section 2.8(a) either (i) -20- 21 cancel such borrowing or (ii) require the Bank to make the requested Fixed Rate Loan as a Prime Loan or (y) if the affected Fixed Rate Loan is then outstanding, upon at least three Business Days' written notice to the Bank, require the Bank to convert the Fixed Rate Loan so affected into a Prime Loan. (c) In the event that the Bank shall have determined (which determination shall, absent manifest error, be final, conclusive and binding) on any date for determining the Quoted Rate for any Interest Period that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Quoted Rate, then the Bank shall on such date give notice (by telephone confirmed in writing) of such determination to the Borrower which has requested such affected Eurodollar Loan and, notwithstanding any other provision of this Agreement, the Bank shall have no obligation to make, and shall not make, the requested Eurodollar Loan unless the Borrower requesting such Eurodollar Loan agrees in writing on the date it is notified of such determination by the Bank to pay to the Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Bank in its reasonable discretion shall determine) as shall be required to cause the Bank to receive interest with respect to such affected Eurodollar Loan at a rate per annum which shall equal the effective pricing to the Bank to make such Eurodollar Loan plus the applicable percentage in excess of the Quoted Rate referred to in Section 2.6(c). (d) If the Bank determines at any time that any applicable law or governmental rule, regulation, guideline, order or request (whether or not having the force of law) concerning capital adequacy or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency (including the introduction of any new law or governmental rule, regulation, guideline, order or request), will have the effect of increasing the amount of capital required to be maintained by the Bank based on the existence of the Commitment or its obligations hereunder, then the Borrowers jointly and severally agree to pay to the Bank, upon its written demand therefor, such additional amounts as shall be required to compensate the Bank for the increased cost or reduced rate of return to the Bank as a result of such increase of capital; provided, however, that the liability of the Borrowers to compensate the Bank under this Section 2.8(d) prior to the first demand by the Bank for such compensation shall be limited to compensation for the increased cost or reduced rate of return incurred in the one year period preceding the date of such demand. In determining such additional amounts, the Bank will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that the Bank's determination of compensation owing under this Section 2.8(d) shall, absent manifest error, be final, conclusive and binding. -21- 22 SECTION 2.9 COMPENSATION. Each Borrower shall compensate the Bank with respect to any Fixed Rate Loan made or to be made to it, upon the Bank's written request (which request shall set forth the basis in reasonable detail for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by the Bank to lenders of funds borrowed by it to make or carry a Fixed Rate Loan to the extent not recovered by the Bank in connection with the re-employment of such funds), which the Bank may sustain: (i) if for any reason (other than a default by the Bank) a borrowing of a Fixed Rate Loan does not occur on a date specified therefor in a Notice of Borrowing, (ii) if any prepayment of a Fixed Rate Loan occurs on a date which is not the last day of an Interest Period applicable thereto, (iii) if any prepayment of a Fixed Rate Loan is not made on the date specified in a notice of prepayment given pursuant to Section 2.13 or (iv) as a consequence of (x) without duplication of any amounts paid pursuant to Section 2.6(e), any other default by such Borrower to repay a Fixed Rate Loan when required by the terms of this Agreement or (y) an election made by such Borrower pursuant to Section 2.8(b). A statement as to the amount of such loss or expense, prepared in good faith and in reasonable detail by the Bank and submitted by the Bank to the Borrowers, shall be conclusive and binding for all purposes absent manifest error in computation. Calculation of all amounts payable to the Bank under this Section 2.9 shall be made as though the Bank shall have actually funded or committed to fund the relevant Fixed Rate Loan through the purchase of an underlying deposit in an amount equal to the amount of such Loan in the relevant market and having a maturity comparable to the related Interest Period and, through the transfer of such deposit to a domestic office of the Bank in the United States; provided, however, that the Bank may fund any Fixed Rate Loan in any manner it sees fit and the foregoing assumption shall be utilized only for the purpose of calculation of amounts payable under this Section 2.9. SECTION 2.10 COMMITMENT COMMISSION. The Borrowers jointly and severally agree to pay to the Bank a commitment commission (the "Commitment Commission") for the period from the date hereof until the Termination Date computed at the rate of 1/4 of 1% per annum on the daily average unutilized portion of the Commitment; payable quarterly in arrears on each Quarterly Payment Date and on the Termination Date. SECTION 2.11 REDUCTION IN COMMITMENT. The Borrowers shall jointly have the right, at any time and from time to time, upon at least 30 Business Days' prior written notice to the Bank, to irrevocably reduce the unutilized portion of the Commitment, in whole or in part, provided that partial reductions shall be in the amount of $1,000,000 or an integral multiple thereof. -22- 23 SECTION 2.12 PAYMENTS ON NONBUSINESS DAYS. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, if a payment of principal has been so extended, interest shall be payable on such principal at the applicable rate during such extension; provided, however, in the event that the day on which any such payment relating to a Eurodollar Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day. SECTION 2.13 VOLUNTARY PREPAYMENTS. The Borrowers shall have the right to prepay the Loans in whole or in part, without premium or penalty, from time to time pursuant to this Section 2.13 on the following terms and conditions: (i) the Borrower prepaying a Loan shall give the Bank prior written notice or telephone notice (confirmed promptly in writing) at its Principal Office at least three Business Days', in the case of a prepayment of Fixed Rate Loans, or on the same Business Day, in the case of a prepayment of Prime Loans, of its intent to prepay, the amount of such prepayment and which Loans are to be prepaid; (ii) each prepayment shall be in a principal amount of $ 1,000,000 (or an integral multiple thereof) in the case of Fixed Rate Loans or $ 100,000 (or an integral multiple thereof) in the case of Prime Loans; and (iii) at the time of any prepayment of Fixed Rate Loans, such Borrower shall pay all interest accrued on the principal amount of such prepayment. It is understood that each prepayment of Fixed Rate Loans shall be subject to the provisions of Section 2.9. SECTION 2.14 MANDATORY PAYMENTS. (a) Advances. Unless earlier payment is required under this Agreement, the Borrowers shall pay to the Bank on the Termination Date the entire outstanding principal amount of the Advances, which payment may be effected through a request for a Term Loan pursuant to Section 2.1(b). (b) Term Loans. Unless earlier payment is required under this Agreement, the Borrowers shall pay to the Bank the outstanding principal amount of the Term Loan in twelve equal quarterly installments payable on each Quarterly Principal Payment Date to and including the Maturity Date, when the entire outstanding principal amount of the Term Loan shall be due and payable. SECTION 2.15 MANDATORY PREPAYMENT IN CERTAIN EVENTS. In the event that any "person " or "group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) at any time hereafter becomes the -23- 24 "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of capital shares of Reynolds entitled at the time of voting power in the election of directors of 50% or more, then the Bank, by written notice to the Borrowers, may at any time within 90 days after the occurrence of such event: (i) declare the principal of and accrued interest in respect of the Notes to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind and/or (ii) declare the Commitment terminated, whereupon the Commitment and the obligation of the Bank to make Loans shall terminate immediately and any accrued Commitment Commission shall forthwith become due and payable without any other notice of any kind. SECTION 2.16 METHOD AND PLACE OF PAYMENT. All payments under this Agreement and the Notes shall be made to the Bank at its Principal Office not later than 12:00 Noon (Detroit, Michigan time) on the date when due in U.S. dollars and in immediately available funds. SECTION 2.17 NET PAYMENTS. All payments under this Agreement and the Notes shall be made without set-off or counterclaim and in such amounts as may be necessary so that all such payments (after deduction or withholding for or on account of any present or future Taxes) shall not be less than the amounts otherwise specified to be paid under this Agreement and the Notes. A certificate as to any additional amounts payable to the Bank under this Section 2.17 submitted to either of the Borrowers by the Bank shall show in reasonable detail the amount payable and the calculations used to determine in good faith such amount and shall, absent manifest error, be final, conclusive and binding. With respect to each deduction or withholding for or on account of any Taxes, each Borrower shall promptly furnish to the Bank such certificates, receipts and other documents as may be required (in the judgment of the Bank) to establish any tax credit to which the Bank may be entitled, SECTION 2.18 PLACE OF LOANS. All Loans made hereunder shall be disbursed from and be payable at the Bank's principal office, 611 Woodward Avenue, Detroit, Michigan 48226. SECTION 2.19 IMMEDIATELY AVAILABLE DOLLARS. All borrowings and payments hereunder shall be in United States dollars and in immediately available funds. -24- 25 SECTION 2.20 FAILURE TO CHARGE NOT SUBSEQUENT WAIVER. Each Borrower explicitly agrees that any decision by the Bank not to require payment of any fees and/or compensation for costs, or to reduce the amount of such fees and/or compensation for costs, for any Loan shall in no way limit the Bank's right to require full payment of any fees and/or compensation for costs for any Loan. ARTICLE III REPRESENTATlONS AND WARRANTIES The Borrowers make the following representations and warranties to the Bank, all of which shall survive the execution of this Agreement: SECTION 3.1 LEGAL STATUS. The Borrowers are corporations duly organized and incorporated, validly existing and in good standing under the laws of the State of Ohio; have the corporate power and authority to own their own assets and transact the business in which they are now engaged in or proposed to be engaged in, and are duly qualified to do business as foreign corporations and are in good standing under the laws of each other jurisdiction in which such qualification is required. The Borrowers have no subsidiaries or affiliates except as otherwise disclosed herein. SECTION 3.2 CORPORATE POWER AND AUTHORITY. The execution, delivery, and performance by the Borrowers of all of the Loan Documents have been duly authorized by all necessary corporate action and will not require any consent or approval of the stockholders of such corporations; do not contravene such corporations charters or by-laws; and, will not cause such corporations to be in default under any law, rule, regulation, order, writ, judgment, injunction, decree, determination, award, or any other indenture, agreement, lease or instrument. SECTION 3.3 NO VIOLATION. The making and performance by the Borrowers of any of the Loan Documents does not violate any provision of law, statute or ordinance, or any rule or regulation promulgated pursuant thereto. SECTION 3.4 LEGALLY ENFORCEABLE AGREEMENT. This Agreement, and each of the other Loan Documents when delivered under this Agreement, have been duly authorized, executed and delivered; will be legal, valid and binding -25- 26 obligations of the Borrowers; and any Note created or to be issued hereunder by the Bank upon advances being made in accordance with the provisions of this Agreement, will be a valid and binding obligation of the Borrowers in accordance with its respective terms except to the extent that such obligation may be limited by the applicable bankruptcy, insolvency, and other similar laws affecting creditor's rights generally. SECTION 3.5 NO CONFLICT WITH REQUIREMENTS OF OTHER INSTRUMENTS. The Borrowers are not parties to any indenture, loan, credit agreement, or to any lease or other agreement or instrument, or subject to any charter or resolution which could (a) have a material adverse affect on the business, properties, assets, operations, or conditions, financial or otherwise, of the Borrowers, (b) affect the ability of the Borrowers to carry out their obligations under the Loan Documents to which they are parties or (c) result in the breach of or constitute a default under any such indenture, loan, credit agreement, lease or other agreement or instrument. The Borrowers are not in default in any respect in the performance, observance or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument to which it is a party. SECTION 3.6 LITIGATION. There is no pending or threatened action or proceeding against or affecting the Borrower before any court, governmental agency, arbitrator or administrative agency which may in any one case, or in the aggregate could, materially adversely affect the financial condition, properties, business or operations of the Borrowers or the ability of the Borrowers to perform their obligations under any of the Loan Documents, other than those heretofore disclosed by the Borrowers to the Bank in writing. SECTION 3.7 CORRECTNESS OF FINANCIAL STATEMENTS. The financial statement(s) dated September 30, 1994 and related documents heretofore delivered and furnished by the Borrowers to the Bank fairly present the financial condition of the Borrowers, and have been prepared in accordance with GAAP consistently applied. As of the date of such financial statement(s), and since such date, there has been no material adverse change in the condition (financial or otherwise), business, or operations of the Borrowers, nor have the Borrowers mortgaged, pledged or granted a security interest in or encumbered any of the Borrower's assets or properties since such date, except as otherwise disclosed to the Bank in writing. There are no liabilities of the Borrowers, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising or incurred during the course of business since the date of such financial statement(s). No information, exhibit, or report furnished by the Borrowers to the Bank in connection with the negotiation of this Agreement contained any material misstatement of fact or omitted to state a -26- 27 material fact or any fact necessary to make the statement contained therein not materially misleading. SECTION 3.8 TITLE TO PROPERTY AND ASSETS. The Borrowers have good and marketable title to all of their property and assets, real and personal, including the properties and assets and leasehold interests reflected in the financial statement referred to in Section 5.8 herein, subject only to the existing liens, mortgages, pledges, encumbrances or charges as described in the financial statements delivered pursuant to Section 5.8 herein, as otherwise disclosed by the Borrowers to the Bank in writing, or which may be permitted pursuant to Section 6.2 herein. The Borrowers have no liabilities, contingent or otherwise, except as disclosed on such financial statement(s) (including borrowings with other banks) or as otherwise disclosed by the Borrowers to the Bank in writing. Excepted here from are liens for taxes not yet due and payable and minor liens of an immaterial nature. SECTION 3.9 DEBT. The Borrowers shall, upon reasonable request of Bank, provide to Bank, a complete and correct list of all credit agreement, indentures, purchase agreements, guarantees, capital leases, and other investments, agreements and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which the Borrowers are in any manner directly or contingently obligated; and the maximum principal or face amounts of the credits in question, which are outstanding and which can be outstanding, are correctly stated, and all mortgages, deed of trusts, pledges, Liens, security interests or other charges or encumbrances of any nature given or agreed to be given as security therefore shall be correctly described or indicated in said list provided to Bank. SECTION 3.10 TAXES. The Borrowers have filed all Federal, State and local tax returns required to be filed and have paid all taxes, assessments and governmental charges and levies thereon shown to be due on such returns, and have made provisions for all liabilities not so paid or accrued under returns not yet due. The Borrowers have no knowledge of any pending assessments or adjustments of any tax payable with respect to any year, except those which are being contested in good faith or where there is a bona fide dispute. The Borrowers have paid all premiums due under all applicable workers compensation and unemployment compensation laws. Excepted herefrom are such taxes, as are being contested in good faith and by proper proceedings and as to which adequate reserves have been maintained, -27- 28 SECTION 3.11 NAME RIGHTS, LICENSES, FRANCHISES, ETC. The Borrowers possess, and so long as any amount of credit pursuant hereto remains unpaid or available, will continue to possess all permits, trade memberships, franchises, contracts, licenses, trademarks, trademarks hereafter obtained, permits, memberships, franchises, contracts, and licenses required and all trademark rights, trade names, trade name rights, patents, patent rights, and fictitious name rights necessary to enable them to conduct the business in all material respects in which they are now engaged and as presently proposed to be conducted, without conflict or violation of any valid rights of others with respect to the foregoing. Nothing in this Section, however, shall prevent the Borrowers from failing to renew or from entering into additional permits, trade memberships, franchises, contracts, licenses, trade marks, trade mark rights, trade names, trade name rights, patents, patent rights and fictitious name rights if in the judgment of the Borrowers reasonably exercised such action is advisable for business purposes and will not materially and adversely effect the business in which they are engaged, SECTION 3.12 USE OF LOAN PROCEEDS WILL NOT VIOLATE FEDERAL RESERVE BOARD REGULATIONS. The Borrowers will not use any portion of the proceeds of any Loan for the purpose of purchasing or carrying any margin stock within the meaning of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System (herein called "Margin Stock"), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of Regulation U or X, or in any manner which might involve any Bank in a violation of Regulation U or Regulation X, or cause this Agreement or any transaction contemplated hereby to violate Regulation U, Regulation X or any other regulation of the Board of Governors of the Federal Reserve System, or under the Securities Exchange Act of 1934, each as now in effect or as the same may hereafter be in effect. SECTION 3.13 NO GOVERNMENT APPROVAL REQUIRED. Each Borrower's execution and performance of the Loan Documents does not require the approval, filing or notice to any government, governmental agency, administrative authority or instrumentality, as a condition to the validity of any of the Loan Documents. SECTION 3.14 CONSIDERATION OF TRANSACTION. The Loan Documents executed pursuant hereto are all entered into for valuable consideration received to the full satisfaction of the Borrowers. -28- 29 SECTION 3.15 LABOR RELATIONS: Each Borrower's labor relations are satisfactory and no dispute, lockout, labor dispute or litigation presently exists or is contemplated or anticipated which would materially and adversely affect such Borrower's operation. SECTION 3.16 ERISA. The Borrowers are in compliance in all material respects with all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred and is continuing with respect to any Plan; no notice of intent to terminate a Plan has been filed nor has any Plan been terminated for which there are any unfunded outstanding liabilities; no circumstances exist which constitute grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administrate, a Plan, nor has the PBGC instituted any such proceedings; neither the Borrowers nor any ERISA affiliate have completely or partially withdrawn under Sections 4201 or 4204 of ERISA from a multiemployer Plan; the Borrowers, and each ERISA affiliate, have met its minimum funding requirement under ERISA with respect to all of its Plans and the present fair market value of all Plan assets exceeds the present value of all vested benefits under each Plan, as determined on the most recent valuation of the Plan assets and in accordance with the provisions of ERISA and the regulations thereunder for calculating the potential liability of the Borrowers or any ERISA affiliate to the PBGC or the Plan under Title IV of ERISA; and neither the Borrowers nor any ERISA affiliate has incurred any liability to the PBGC under ERISA. SECTION 3.17 ACTS OF GOD. Neither the business nor the properties of the Borrowers are affected by any fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of God or other casualty (whether or not covered by insurance) which materially or adversely affects such business or property or operation of the Borrowers. SECTION 3.18 NO SUBORDINATION. The obligations of the Borrowers pursuant to any of the Loan Documents are not subordinated in any manner to any other obligation of the Borrowers. SECTION 3.19 REPRESENTATIONS AND COVENANTS RELATING TO ENVIRONMENTAL LAWS AND REGULATIONS. (a) To each Borrower's knowledge, the Borrowers are in material compliance with all state and federal laws and regulations pertaining to environmental protection, the violation of which would have a material effect on the Borrowers' business. The Borrowers have not -29- 30 received any written or oral communication or notice from any court or governmental agency nor are they aware of any investigation by any agency for any material violation of any environmental protection law or regulation. (c) The Borrowers agree to comply with all applicable requirements in effect from time to time of all federal, state, local and other governmental authorities with respect to environmental protection. (d) The Borrowers further agree promptly to notify the Bank of any environmental proceedings brought or threatened by any state or federal agency against the Borrowers, and the Borrowers hereby agree to indemnify and hold the Bank harmless from and against any claim which may be brought against the Bank by any state or federal agency by reason of the Bank being a lender to the Borrowers. (e) The Borrowers agree further that, in view of recent environmental litigation involving bank lenders, the Borrowers waive any right and agree to assert no claim against the Bank which might otherwise arise or be claimed by the Borrowers, should the Bank elect to forego its rights to seek satisfaction of each Borrower's obligations to Bank from any of such Borrower's real estate for the reason that enforcement of such rights might expose the Bank to liability for Hazardous Materials upon such real estate under federal or state environmental laws or regulations. (f) For purposes of this paragraph, "Hazardous Materials" includes, without limit, any flammable explosives, radioactive materials, hazardous materials defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 9601 et seq.), and in the regulations adopted and publications promulgated pursuant thereto, or any other federal, state or local environmental law, ordinance, rule, or regulation. The provisions of this Section shall be in addition to any and all other obligations and liabilities the Borrower may have to the Bank at common law, and shall survive the transactions contemplated herein. ARTICLE IV CONDITIONS PRECEDENT The obligation of the Bank to make any Loan to Borrowers and to enter into this Agreement is conditioned upon the Borrowers delivery of each of the following conditions precedent on or before the day of each Loan or advance hereunder, in form and substance satisfactory to the Bank: -30- 31 SECTION 4.1 COMPLIANCE. The representations and warranties contained herein shall be true on and as of the date of the closing of this Agreement and at the time of any advance hereunder with the same effect as though such representations and warranties had been made on and as of such date, and on such date no Event of Default, and no condition, event or act which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default, shall have occurred and be continuing or shall exist. SECTION 4.2 DOCUMENTATION. The Borrowers shall deliver to the Bank on or before the date of this Agreement the following, in form and substance satisfactory to the Bank and Bank's counsel: (a) Properly executed Note in accordance with the provisions of Article II herein; (b) Certified (as of the date of this Agreement) copies of all corporate action taken by the Borrowers, including resolution of their Boards of Directors, authorizing the execution, delivery and performance of the Loan Documents and every other document to be delivered pursuant to this Agreement; (c) Incumbency certificate (dated as of the date of this Agreement) signed by Secretary of the Borrowers for each person executing on behalf of the Borrowers of any of the Loan Documents required hereby; (d) A favorable opinion of Counsel for the Borrowers as to the matters referred to in this Agreement, in form and substance satisfactory to the Bank;. (e) The Comfort Letter of Reynolds shall have been duly executed and delivered to the Bank. SECTION 4.3 OTHER DOCUMENTATION. Such other approvals, opinions and documents as the Bank may reasonably request in order to effect fully the purposes of this Agreement. -31- 32 ARTICLE V AFFIRMATIVE COVENANTS Each Borrower covenants that so long as any Note shall remain unpaid or the Bank could have any obligation to lend hereunder: SECTION 5.1 TO PAY NOTES. The Borrower will punctually pay or cause to be paid the principal and interest (and Make-Whole Amount, if any) to become due in respect of the Notes according to the terms thereof. SECTION 5.2 MAINTENANCE OF BORROWER OFFICE. The Borrower will maintain an office or agency at 115 S. Ludlow St., Dayton, OH 45402 (or such other place in the United States of America as the Borrower may designate in writing to the holder hereof) where notices, presentations and demands to or upon the company in respect of the Notes may be given or made. SECTION 5.3 TO KEEP BOOKS. The Borrower will, and will cause each of its Restricted Subsidiaries to, keep proper books of record and account in accordance with GAAP. SECTION 5.4 PAYMENT OF TAXES; CORPORATE EXISTENCE: The Borrower will, and will cause each of its Restricted Subsidiaries to: A. Pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it, its income or profit or its property before the same shall become in default, as well as all lawful claims and liabilities of any kind (including claims and liabilities for labor, materials and supplies) which, if unpaid, might by law become a Lien upon its property; provided, however. that neither the Borrower nor any Restricted Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or any such Restricted Subsidiary shall have set aside on its books reserves in respect thereof (segregated to the extent required by GAAP) deemed adequate in the opinion of the Chief Financial Office or Treasurer of the Borrower; B. Subject to Section 6.5 and Section 6.6, do all things necessary to preserve and keep in full force and effect its corporate existence rights (charter and statutory) and franchises; provided, however, that neither the Borrower nor any Restricted Subsidiary shall be required to -32- 33 preserve any right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in its conduct of business; and SECTION 5.5 TO INSURE. The Borrower will, and will cause each of its Restricted Subsidiaries to: A. Keep all of its insurable properties owned by it insured against all risks usually insured against by persons operating like properties in the localities where the properties are located, all in amounts sufficient to prevent the Borrower or such Restricted Subsidiary, as the case may be, from becoming a coinsurer within the terms of the policies in question, but in any event in amounts not less than 80% of the then full replacement value thereof; B. Maintain public liability insurance against claims for personal injury, death or property damage suffered by others upon or in or about any premises occupied by it or occurring as a result of its maintenance or operation of any airplanes, automobiles, trucks or other vehicles or other facilities (including, but not limited to, any machinery used therein or thereon) or as the result of the use of products sold by it or services rendered by it; C. Maintain such other types of insurance with respect to its business as is usually carried by persons of comparable size engaged in the same or a similar business and similarly situated; and D. Maintain all such workers' compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business. All insurance for which provision has been made in Section 5.5B and Section 5.5C shall be maintained in at least such amounts as such insurance is usually carried by persons of comparable size engaged in the same or a similar business and similarly situated; and all insurance herein provided for shall be effected under a valid and enforceable policy or policies issued by insurers of recognized responsibility, except that the Borrower or any such Restricted Subsidiary may effect (i) workers' compensation or other similar insurance in respect of operations in any state or other jurisdiction either through an insurance fund operated by such state or other jurisdiction or by causing to be maintained a system or systems of self-insurance which are in accord with applicable laws, and (ii) all other insurance required by Sections 5.5B and 5.5C through a system of self-insurance maintained in accordance with the Borrower's current practices. SECTION 5.6 CONDUCT OF BUSINESS. Continue to engage in an efficient and economical manner in the business of the same general type as now conducted by the Borrower. -33- 34 Provided, however, that nothing contained in this Section shall prevent the Borrower from discontinuing any part of the business of the Borrower if the discontinuance would not result in a material adverse change to the business of Borrower. SECTION 5.7 MAINTENANCE OF PROPERTIES. Maintain, keep and preserve all of their properties (tangible and intangible) real, chattel and otherwise, in good order and working condition and from time to time make necessary repairs, renewals and replacements thereto in order that such properties are fully and efficiently preserved and maintained. Section 5.8 Financial Statements. From and after the date hereof and so long as the Bank (or a nominee designated by the Bank) shall hold any of the Notes, Reynolds will deliver to Bank in duplicate: (a) as soon as practicable, and in any event within 60 days after the end of each quarterly period (excluding the last quarterly period) in each fiscal year of the company: (1) Reynolds' Quarterly Report on Form l0-Q filed with the S.E.C. with respect to such quarterly period; (2) the consolidated statements of earnings, stockholders' equity and changes in financial position of Reynolds and its Restricted Subsidiaries for such period and for that part of the fiscal year ended with such quarterly period and the consolidated balance sheet of Borrower and its Restricted Subsidiaries as at the end of such period; and (3) the statements of earnings, stockholders' equity and changes in financial position of Reyna for such period and for that part of the fiscal year ended with such quarterly period and the balance sheet of Reyna as at the end of such period; setting forth in each case in comparative form the corresponding figures as at the end of and for the corresponding period of the preceding fiscal year, all in reasonable detail, prepared in conformity with GAAP applied on a basis consistent with that of previous years (except as otherwise stated therein or in the notes thereto and except that footnotes shall not be required) and certified by the Chief Financial Officer, the Chief Accounting Officer or the Treasurer of the company as presenting fairly the financial condition and results of operations of Reynolds and its Restricted Subsidiaries and Reyna as at the end of and for the fiscal periods to which they relate, subject to Reynolds' or Reyna's year-end adjustments; -34- 35 (b) as soon as practicable, and in any event within 90 days after the end of each fiscal year: (1) Reynolds' Annual Report on Form 10K filed with the S.E.C. with respect to such fiscal year; (2) the consolidated balance sheet and related consolidated statements of earnings, stockholders' equity and changes in financial position of Reynolds and its Subsidiaries; (3) the balance sheet and related statements of earnings, stockholders' equity and changes in financial position of Reyna; and (4) the consolidated balance sheet and related consolidated statements of earnings, stockholders' equity and changes in financial position of Reynolds and its Restricted Subsidiaries; each as at the end of and for such year, setting forth in each case in comparative form the corresponding figures of the previous fiscal year, all in reasonable detail, prepared in conformity with GAAP applied on a basis consistent with that of previous years (except otherwise stated therein or in the notes thereto) and certified by the Chief Financial Officer, the Chief Accounting Officer or the Treasurer of Borrower as presenting fairly the financial condition and results of operations and changes in financial position of Reynolds and its Subsidiaries and Reyna, respectively, as at the end of and for the fiscal year to which they relate, and, with respect to the reports delivered pursuant to clauses (2) and (3) above, accompanied by a report or opinion of independent certified public accountants of recognized national standing selected by Borrower stating that such financial statements present fairly the consolidated financial condition and results of operations and changes in financial position of Reynolds and its Subsidiaries and Reyna, respectively, in accordance with GAAP consistently applied (except for changes with which such accountants concur) and that the examinations of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards; (c) concurrently with the financial statements delivered pursuant to Section 5.8 (b) (2) and (3), the written statement of said accountants that in making the examination necessary for their report or opinion on said financial statements they have obtained no knowledge of any Event of Default or default by any Borrower in the fulfillment of any of the terms, covenants, provisions or conditions of the Notes or, if such accountants shall have obtained knowledge of any such default or Event of Default, they shall disclose in such statement the default or defaults or Event or Events of Default and the nature and status thereof, but such accountants shall not be liable, directly or indirectly, to anyone for any failure to obtain knowledge of any such default or Event of Default; -35- 36 (d) concurrently with the financial statements delivered pursuant to Sections 5.8 (a) and 5.8 (b), a certificate of the Chief Financial Officer, the Chief Accounting Officer or Treasurer of Borrower: (1) setting forth, as of the end of the preceding fiscal year, the extent to which Reynolds and its Restricted Subsidiaries and Reyna have complied with the requirements of Sections 6.01 through 6.10, inclusive, and Sections 7.01 through 7.8, inclusive, of this Agreement, including in each case a brief description, together with all necessary computations, of the manner in which such compliance was determined; (2) stating that a review of the activities of Reynolds and its Subsidiaries and Reyna during the preceding fiscal year has been made under his supervision to determine whether the Borrowers have fulfilled all of their obligations under this Agreement and the Notes; and (3) stating that, to the best of his knowledge, the Borrowers are not and have not been in default in the fulfillment of any of the terms, covenants, provisions or conditions hereof and thereof and no Event of Default exists or existed or, if any such default or Event of Default exists or existed, specifying such default or Event of Default and the nature and status thereof; (e) promptly after the formation or acquisition of a Subsidiary, written notice thereof, including the name of such Subsidiary, its jurisdiction or incorporation, a brief description of its business, and whether is has been designated as a Restricted Subsidiary and, if so designated, a certificate of a principal financial officer of the Borrower showing compliance with Section 6.4C of the Notes; (f) as soon as practicable, copies of all such financial statements, proxy statements and reports as each Borrower or any of its Subsidiaries shall send or make available generally to its security holders and all registration statements (other than on Form S-8) and regular periodic reports, if any, which it or any of its Subsidiaries may file with the Securities and Exchange Commission or any governmental agency or agencies substituted thereof or with any national securities exchange; (g) immediately after the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller or any Executive Vice President, Assistant Treasurer or Assistant Controller of the Borrower becomes aware of the existence of a condition, event or act which constitutes an Event of Default or an event of default under any other evidence of Indebtedness of the Borrower or any Restricted Subsidiary, or which, -36- 37 With notice or lapse of time or both, would constitute such an Event of Default or event of default, a written notice specifying the nature and period of existence thereof and what action the Borrower or such Restricted Subsidiary, as the case may be, is taking or proposes to take with respect thereto; (h) immediately after the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller or any Executive Vice President, Assistant Treasurer or Assistant Controller of the Borrower becomes aware of the occurrence of any (1) "reportable event, as defined in Section 4043 or ERISA, or (2) nonexempted "prohibited transaction," as defined in Sections 406 and 408 or ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended, in connection with any "employee pension benefit plan," as defined in Section 3 of ERISA, or any trust created thereunder, a written notice specifying the nature thereof, what action the Borrower is taking or proposes to take with respect thereto and, when known, any action taken by the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect thereto; and (i) such other information as to the business and properties of the Borrower and its Subsidiaries, including consolidating financial statements of the Borrower and its Restricted Subsidiaries, and financial statements and other reports filed with any governmental department, bureau, commission or agency, as you may from time to time reasonably request. SECTION 5.9 COMPLIANCE WITH LAWS. Comply in all respects with all applicable laws, rules, regulations and orders. SECTION 5.10 NOTICE OF LITIGATION. Promptly after the commencement thereof give notice to the Bank of any actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Borrower, which, if determined adversely to the Borrower, could have a material adverse affect on the financial condition. SECTION 5.11 NOTICE TO THE BANK. Promptly give notice in writing to the Bank of: (a) Any change in the name, trade name, address, identity or corporate structure of the Borrower; -37- 38 (b) Any uninsured or partially uninsured loss through fire, theft, liability or property damage to the property of the Borrower which has a material adverse affect on the business of Borrower; (c) Any condition, event or act which constitutes an Event of Default, or which, with the giving of notice of lapse of time, or both could or would constitute an Event of Default, by delivering to the Bank the certificate of the Treasurer or Chief Financial Officer of the Borrower specifying such condition, event or act, the period of existence thereof, and what action the Borrower proposes to take with respect thereto; (d) The filing or receiving thereof, along with copies of all reports, including annual reports, and notices, which the Borrower files with or receive from the PBGC or the U.S. Department of Labor under ERISA, as soon as possible and in any event with thirty (30) days after the Borrower knows or has reason to know that any Reportable Event or Prohibited Transaction has occurred with respect to any Plan or the PBGC or the Borrower has instituted or will institute proceedings under Title IV of ERISA to terminate any Plan, along with a certificate of the Chief Financial Officer or Treasurer of the Borrower setting forth details as to such Reportable Event or Prohibited Transaction or Plan termination and the action the Borrower proposes to take with respect thereto; (e) The sending or filing thereof, along with copies of all proxy statements, financial statements, and reports which the Borrower sends to its stockholders, and copies of all regular, periodic, and special reports, and all registration statements which the Borrower files with the Securities and Exchange Commission or any governmental authority which may be substituted therefore, or with any national securities exchange; (f) Any other event or fact which materially and adversely may affect the financial or operating conditions, the Borrower or the Collateral pledged as security hereunder; or (g) Such other information respecting the condition or operations, financial or otherwise, of the Borrower as the Bank may from time to time reasonably request. SECTION 5.12 RIGHT OF INSPECTION. At any reasonable time and from time to time, permit the Bank or any agent or representative thereof to examine and make copies of and abstracts from the records and books of the account of, and visit the properties of the Borrower, and to discuss affairs, finances and -38- 39 accounts of the Borrower with any of their respective officers and directors and the Borrower's independent accountants. The Bank agrees to comply with the security regulations of the Borrower, as the case may be. The Bank shall notify the Borrower in advance of any discussion between the Bank and the Borrower's independent accountants, and the Borrower shall have the right to be present during such discussions. The Bank agrees to use its best efforts to maintain the confidentiality of the information obtained by the Bank or its agents, except as otherwise required by the Bank's examining authorities or by legal process and except as necessary for the enforcement of its rights under this Agreement. SECTION 5.13 COMPLIANCE WITH LAWS AND REGULATIONS. Comply with all laws and regulations of any applicable jurisdiction with which the Borrower is required to comply including, without limitation, worker's compensation laws, the Occupation Safety and Health Act of 1970, as amended, and the Environmental Protection Act, as amended. In addition, the Borrower shall maintain material compliance with all state and federal laws and regulations pertaining to environmental protection. ARTICLE VI NEGATIVE COVENANTS OF THE REYNOLDS AND REYNOLDS COMPANY Reynolds further covenants that so long as any Note remains unpaid or the Bank may have an obligation to lend hereunder: SECTION 6.1 INDEBTEDNESS. Neither Reynolds nor any Restricted Subsidiary will create, assume or incur, or in any manner become liable, contingently or otherwise, in respect of, any indebtedness other than: A. Indebtedness represented by the Notes; and B. Indebtedness in an amount such that, at the time of the creation, assumption or incurrence thereof and immediately after giving effect thereto Consolidated Indebtedness of Reynolds and its Restricted Subsidiaries shall not exceed 60% of Consolidated Tangible Capitalization. -39- 40 SECTION 6.2 LIENS Neither Reynolds nor any Restricted Subsidiary will: A. Create, assume, incur or suffer to exist any Lien upon (or, whether by transfer to any Subsidiary or Affiliate or otherwise, subject, or permit any Subsidiary or Affiliate to subject, to the prior payment of any Indebtedness other than that represented by the Notes) any property or assets (real or personal, tangible or intangible, including, without limitation, any stock or other securities of a Restricted Subsidiary) of Reynolds or any Restricted Subsidiary, whether now owned or hereafter acquired, or any income or profits therefrom; B. Own or acquire or agree to acquire any property or assets (real or personal, tangible or intangible) subject to or upon any Lien; or C. Suffer to exist any Indebtedness of Reynolds or any Restricted Subsidiary (except as and to the extent permitted by Section 5.4A or claims or demands against Reynolds or any Restricted Subsidiary, which, Indebtedness, claims or demands, if unpaid, might (in the hands of the holder or anyone who shall have guaranteed the same or who has any right or obligation to purchase the same), by law or upon bankruptcy or insolvency or otherwise, be given any priority whatsoever over its general creditors; provided, however, that the foregoing restrictions shall not prevent: (1) Reynolds or any Restricted Subsidiary from suffering to exist the Liens existing on September 30, 1994 which are listed on Exhibit D to the Agreement; and extensions or renewals thereof upon the same property theretofore subject thereto without increasing the principal amount of Indebtedness then secured thereby; or (2) Reynolds or any Restricted Subsidiary: (i) from making pledges or deposits under workers' compensation laws, unemployment insurance laws or similar legislation or good faith deposits in connection with bids, tenders, contracts (other than for the repayment of money borrowed) or under leases to which Reynolds or such Restricted Subsidiary is a party; (ii) from making deposits to secure public or statutory obligations of Reynolds or such Restricted Subsidiary or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which -40- 41 Reynolds or such Restricted Subsidiary is a party, or deposits in lieu of such bonds; (iii) from incurring Liens or priorities imposed by law, such as laborers' other employees, carriers', warehousemen's, mechanics', materialmen's and vendors' liens or priorities, and Liens arising out of judgments or awards against Reynolds or such Restricted Subsidiary with respect to which Reynolds or such Restricted Subsidiary at the time shall be prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review; or (iv) from entering into leases and from incurring landlords' liens on fixtures and movable property located on premises leased in the ordinary course of business so long as the rent secured thereby is not in default; or (3) Reynolds or any Restricted Subsidiary from creating or incurring or suffering to exist (i) Liens for taxes or import duties not yet subject to penalties for nonpayment or the nonpayment of which shall be permitted by the provision to Section 5.4A; or (ii) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraphs and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties, which Liens, exceptions, encumbrances, easements, reservations, rights and restrictions do not, in the opinion of Reynolds, in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of Reynolds and its Subsidiaries; or (4) any Restricted Subsidiary from creating, incurring, assuming or suffering to exist any Lien solely to secure Indebtedness owing to Reynolds or any Wholly-owned Restricted Subsidiary; or (5) Reynolds or any Restricted Subsidiary from creating, incurring, assuming or suffering to exist Liens not otherwise permitted by the foregoing clauses 1 through 4, inclusive, of this Section 6.2; provided, however, that at the time of the creation, incurrence or assumption thereof, and immediately after giving effect thereto and to the Indebtedness secured or evidenced thereby, -41- 42 (i) the then outstanding aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidated Tangible Capitalization; and (ii) Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B. 6.3 RESTRICTED PAYMENTS. Reynolds will not, directly or indirectly: A. Declare or pay any dividend or make any other distribution (whether by reduction of capital or otherwise) on any shares of any class of its capital stock (other than a dividend or distribution payable in shares of common stock of Reynolds); or B. Purchase, redeem, retire or otherwise acquire, or cause or permit any Subsidiary to purchase, otherwise acquire or make any payment in respect of, any such shares; or C. Make, or permit any Restricted Subsidiary to make, any Restricted Investment; unless immediately after giving effect to any such action, Reynolds could incur at lease $1 of additional Indebtedness in compliance with Section 6.1B and the sum of: (1) The aggregate amount of all such dividends and distributions (other than dividends or distributions payable in shares of common stock of Reynolds) declared, paid or made subsequent to September 30, 1993; (2) the excess, if any, of (i) the aggregate amount of all such purchases, redemptions, retirements, acquisitions and payments made subsequent to September 30, 1993 over (ii) the net cash proceeds received after September 30, 1993 from the sales (other than to a Subsidiary) of shares of capital stock of Reynolds; and (3) the Aggregate Amount of Restricted Investments made subsequent to September 30, 1993; does not exceed $40,000,000 plus 60% (or minus 100% in the case of a deficit) of Consolidated Net Income of Reynolds and its Restricted Subsidiaries accrued subsequent to September 30, 1993. All dividends, distributions, purchases, redemptions, retirements, acquisitions and payments (other than Restricted Investments) made pursuant to this Section 6.3 in property other than cash shall be included for purposes of calculations pursuant to this Section 6.3 at the fair market value thereof (as determined in good faith by the Board of Directors) at the -42- 43 time of declaration of such dividend or at the time of making such distribution, purchase, redemption, retirement, acquisition or payment. 6.4 RESTRICTIONS ON RESTRICTED SUBSIDIARIES. A. Reynolds will not cause, suffer or permit any Restricted Subsidiary to: (1) issue or dispose of any shares of such Restricted Subsidiary's capital stock to any Person other than Reynolds or a Wholly-owned Restricted Subsidiary, except to the extent that any such shares are required to qualify directors under any applicable law or required to be issued to other stockholders of such Subsidiary by virtue of their exercise of preemptive rights or as their pro rata share of any stock dividend; or (2) sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of another Restricted Subsidiary, or any Indebtedness owing to such Subsidiary from another Restricted Subsidiary, to any Person other than Reynolds or a Wholly-owned Restricted Subsidiary, except in connection with a transaction which complies with Section 6.4B; or (3) sell, assign, lease, transfer or otherwise dispose of any of such Restricted Subsidiary's properties and assets to any Person or consolidate with or merge into any other Person or permit any other Person to merge into it; provided, however, that: (i) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any of its properties and assets if such sale, lease, transfer or disposition is not prohibited by the provisions of Section 6.5B, except that a Restricted Subsidiary may not sell all or substantially all of its properties and assets unless such sale is for cash in an amount not less than the fair market value of such properties and assets and unless: (a) such sale will not materially and adversely affect the conduct of the business of Reynolds or any of its other Restricted Subsidiaries; (b) such Restricted Subsidiary does not own any Indebtedness of Reynolds or capital stock or any Indebtedness of any other Restricted Subsidiary not simultaneously being disposed of in compliance with Section 6.4B; and (c) at the time of such transaction and immediately after giving effect thereto (x) no Event of Default or event which, with notice or lapse of time or -43- 44 both, would constitute an Event of Default shall have occurred and be continuing, and (y) Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B, and (z) the aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidated Tangible Capitalization; (ii) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of all or any part of its properties and assets to, or consolidate with or merge into, Reynolds (subject to the provisions of Section 6.5) or a Wholly-owned Restricted Subsidiary; and (iii) any Restricted Subsidiary may permit another person to merge into it provided that the requirements of clause (i)(c) of this Section 6.4A are complied with and immediately after such merger said Restricted Subsidiary is a Wholly-owned Restricted Subsidiary. B. Reynolds will not sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of any Restricted Subsidiary or any Indebtedness owing from any Restricted Subsidiary to Reynolds, except, in the case of share of capital stock, to the extent, if any, required to qualify directors of such Restricted Subsidiary under any applicable law; provided, however, that all shares of capital stock of all classes, together with all Indebtedness, of any Restricted Subsidiary owned by Reynolds and/or one or more Restricted Subsidiaries may be sold as an entirety if such sale, if treated as a sale of such Subsidiary's assets made by such Subsidiary, would not be prohibited by the provisions of Section 6.4A(i). C. Reynolds will not designate any Subsidiary as a Restricted Subsidiary unless it is so designated by resolution of the Board of Directors and: (1) such corporation shall have outstanding only such Indebtedness and Liens as it would then have been permitted to create, incur or assume in compliance with Section 6.1 and Section 6.2; (2) Reynolds and/or one or more Wholly-owned Restricted Subsidiaries shall own, directly or indirectly, all outstanding capital stock of such corporation having any preference as to dividends or upon liquidation, and all rights, options and warrants to acquire any such preference stock; and (3) immediately after such designation, no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing. -44- 45 Any subsidiary so designated as a Restricted Subsidiary may not thereafter cease to be a Restricted Subsidiary. 6.5 MERGER, CONSOLIDATION, SALE OR LEASE. A. Reynolds will not consolidate with or merge into any Person, or permit any Person to merge into it, or sell, lease, transfer or otherwise dispose of all or substantially all of its properties and assets, unless: (1) the successor formed by or resulting from such consolidation or merger (if other than the Company) or the transferee to which such sale, lease, transfer or other disposition shall be made shall be solvent corporation duly organized and existing under the laws of the United States of America or any State thereof; (2) the due and punctual performance and observance of all the obligations, terms, covenants, agreements and conditions of the Agreement and the Notes to be performed or observed by Reynolds shall, by written instrument furnished to each holder of the Notes, be expressly assumed by such successor (if other than Reynolds) or transferee; (3) at the time of such transaction and assumption, and immediately after giving effect thereto: (i) no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing; (ii) Reynolds or such successor or transferee, as the case may be, could incur at least $1 of additional Indebtedness in compliance with Section 6.1B; and (iii) the aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidate Tangible Capitalization. B. Except as permitted in Section 6.5A above, Reynolds will not, directly or indirectly through one or more Subsidiaries, sell, assign, lease, transfer or otherwise dispose of (other than in the ordinary course of business) any of its properties and assets to any Person: (1) if the book value (net of related depreciation) of such asset, together with the book value (net of related depreciation) of all other assets of Reynolds and its Restricted Subsidiaries so disposed of in any fiscal year of Reynolds would constitute 10% or more of the book value (net of related depreciation) of all the assets of -45- 46 Reynolds and its Restricted Subsidiaries as of the last day of the fiscal year then most recently ended; or (2) if the sum of the Net Income (excluding a net deficit) for the three fiscal years of Reynolds most recently ended contributed by such asset and all other assets of the borrower and its Restricted Subsidiaries so disposed of during any fiscal year of Reynolds would exceed 10% of Consolidated Net Income for such period of three fiscal years; or (3) if, with respect to any sale of accounts receivable, the proceeds of any such sale are not simultaneously applied to repay the senior debt on a pro rata basis or reinvested in operating assets of Reynolds within 12 months of the receipt thereof. 6.6 PURCHASE OF NOTES. Except as provided in Article II, Reynolds will not, and will not permit any Subsidiary or Affiliate to, acquire directly or indirectly, by repurchase or otherwise, any of the outstanding Notes. 6.7 MAINTENANCE OF CONSOLIDATED EARNINGS RATIO. Reynolds shall not at any time permit Consolidated Earnings Available for Fixed Charges to be less than 175% of Fixed Charges. 6.8 MAINTENANCE OF CURRENT RATIO. Reynolds will not at any time permit Consolidated Current Assets to be less than 150% of Consolidated Current Liabilities. 6.9 TRANSACTIONS WITH AFFILIATES. Reynolds will not, and will not permit any Restricted Subsidiary to, engage in any transaction with an Affiliate (other than Reynolds or a Restricted Subsidiary) on terms more favorable to the Affiliate than would have been obtainable in arm's length dealing in the ordinary course of business with a Person not an Affiliate, provided that Reynolds or any Restricted Subsidiary may sell inventory to any Affiliate in the ordinary course of business at not less than book value. SECTION 6.10 REGULATIONS G, T, U AND X. Use the proceeds of any Loan hereunder, directly or indirectly, to purchase or carry any margin stock (within the meeting of Regulations G, T, U and X of the Board of Governors of -46- 47 the Federal Reserve System) or extend credit to others for the purpose of purchasing or carrying, directly or indirectly, any margin stock. ARTICLE VII NEGATIVE COVENANTS OF REYNA FINANCIAL CORPORATION Reyna further covenants that so long as any Note remains unpaid or the Bank may have an obligation to lend hereunder: SECTION 7.1 REYNA INDEBTEDNESS. A. Reyna will not at any time permit Reyna Consolidated Indebtedness to be greater than 700% of Reyna's Consolidated Tangible Net Worth. B. Reyna will not create, issue or otherwise become liable, directly or indirectly, in respect of any Indebtedness owing to Reynolds other than Subordinated Indebtedness. SECTION 7.2 LIENS. Neither Reyna nor any Subsidiary will (i) create, assume, incur or suffer to exist any Lien upon, or, whether by transfer to any Subsidiary or Affiliate or otherwise, subject, or permit any Subsidiary or Affiliate to subject, to the prior payment of any Indebtedness other than that represented by the Note any property or assets (real or personal, tangible or intangible, including, without limitation, any stock or other securities of a Subsidiary or any Receivables) of Reyna or any Subsidiary, whether now owned or hereafter acquired, or any income or profits therefrom, (ii) own or acquire or agree to acquire any property or assets (real or personal, tangible or intangible) subject to or upon any Lien or (iii) suffer to exist any Indebtedness of Reyna or any Subsidiary (except as and to the extent permitted by Section 5.4A hereof) or claims or demands against Reyna or any Subsidiary, which Indebtedness, claims or demands, if unpaid, might (in the hands of the holder or anyone who shall have guaranteed the same or who has any right or obligation to purchase the same), by law or upon bankruptcy or insolvency or otherwise, be given any priority whatsoever over its general creditors; provided, however, that the foregoing restrictions shall not prevent: A. Reyna or any Subsidiary (i) from making pledges or deposits under workmen's compensation laws, unemployment insurance laws or similar legislation or good faith deposits in connection with bids, tenders, contracts (other than for the repayment of money borrowed) or under leases to which Reyna or such Subsidiary is a party, (ii) from making deposits to secure public or statutory obligations of Reyna or such Subsidiary or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which Reyna or such Subsidiary is a party or deposits in lieu of such bonds, (iii) from incurring Liens or priorities -47- 48 imposed by law, such as laborers' or other employees', carriers', warehousemen's, mechanics', materialmen's and vendors' liens or priorities, and Liens arising out of judgments or awards against Reyna or such Subsidiary with respect to which Reyna or such Subsidiary at the time shall be prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review or (iv) from entering into leases and from incurring landlords' liens on fixtures and movable property located on premises leased in the ordinary course of business so long as the rent secured thereby is not in default; or B. Reyna or any Subsidiary from creating or incurring or suffering to exist (i) Liens for taxes not yet subject to penalties for nonpayment or the nonpayment of which shall be permitted by the proviso to Section 5.4A hereof or (ii) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraphs and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties, which Liens, exceptions, encumbrances, easements, reservations, rights and restrictions do not, in the opinion of Reyna, in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of Reyna and its Subsidiaries; or C. Any Subsidiary from creating, incurring, assuming or suffering to exist any Lien solely to secure Indebtedness owing to Reyna or any Wholly-owned Subsidiary; or D. Reyna from creating, incurring, assuming or suffering to exist any Lien securing Nonrecourse Debt; provided, however, that (i) such Lien shall be limited to the property financed by such Nonrecourse Debt and the lease or security agreement to which such property is subject and (ii) Reyna's Net Equity Investment in the Nonrecourse Receivable with respect to which such Nonrecourse Debt is incurred is in compliance with the provisions of Section 7.8 hereof; or E. Reyna from creating, incurring, assuming or suffering to exist any Lien securing Receivables to the extent such Receivables are required to be secured by the terms of any receivables transfer agreements to which Reyna is a party; provided, however, that the aggregate amount of Receivables secured by all such Liens shall not exceed $40,000,000. SECTION 7.3 RESTRICTIONS WITH RESPECT TO SUBSIDIARIES; AND MERGERS AND ASSET SALES BY BORROWER. A. Reyna will not cause, suffer or permit any Subsidiary to; (i) Issue or dispose of any shares of such Subsidiary's capital stock to any Person other than Reyna or a Wholly-owned Subsidiary, except to the extent that any such shares are required to qualify directors under any applicable law or required to be directors under any applicable law or -48- 49 required to be issued to other stockholders of such Subsidiary by virtue of their exercise of preemptive rights or as their pro rata share of any stock dividend; or (ii) Sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of another Subsidiary, or any Indebtedness owing to such Subsidiary from another Subsidiary or from Reyna, to any Person other than Reyna or a Wholly-owned Subsidiary, except in connection with a transaction which complies with Section 7.3B hereof; or (iii) Sell, assign, lease, transfer or otherwise dispose of any of such Subsidiary's properties and assets to any Person or consolidate with or merge into any other Person or permit any other Person to merge into it; provided, however, that (a) Any Subsidiary may sell, lease, transfer or otherwise dispose of any of its properties and assets if such sale, lease, transfer or disposition is for cash in an amount not less than the fair market value of such properties and assets and if (x) such sale will not materially and adversely affect the conduct of the business of Reyna or any of its Subsidiaries, (y) such Subsidiary does not own any Indebtedness of Reyna or capital stock or any Indebtedness of any other Subsidiary not simultaneously being disposed of in compliance with Section 7.3B hereof, and (z) at the time of such transaction and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing; and (b) Any Subsidiary may sell, lease, transfer or otherwise dispose of all or any part of its properties and assets to, or consolidate with or merge into, Reyna or a Wholly-owned Subsidiary. B. Reyna will not sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of any Subsidiary or any Indebtedness owing from the Subsidiary to Reyna, except, in the case of shares of capital stock to the extent, if any, required to qualify directors of such Subsidiary under any applicable law; provided, however, that all shares of capital stock of all classes, together with all Indebtedness, or any Subsidiary owned by Reyna and/or one or more Subsidiaries may be sold as an entirety if such sale, if treated as a sale of such Subsidiary's assets made by such Subsidiary, would not be prohibited by the provisions of Section 7.3A(iii)(a) hereof. -49- 50 C. Reyna will not consolidate with or merge into any Person, or permit any Person to merge into it, or sell, lease, transfer, or otherwise dispose of a substantial part of its properties and assets. SECTION 7.4 MAINTENANCE OF LIQUID ASSETS. Reyna will at all times maintain its Liquid Assets in an amount greater than 100% of Consolidated Total Liabilities. SECTION 7.5 MAINTENANCE OF CONSOLIDATED TANGIBLE NET WORTH. Reyna will at all times maintain its Consolidated Tangible Net Worth of Reyna and its Subsidiaries in an amount not less than $15,000,000. SECTION 7.6 MAINTENANCE OF SEPARATE EXISTENCE. Reyna and Reynolds will at all times maintain their separate existence as independent entities and in furtherance thereof; A. Neither Reyna nor any Subsidiary will enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate except in the ordinary course of and pursuant to the reasonable requirements of Reyna's or such Subsidiary's business and upon terms at least as favorable to Reyna or such Subsidiary as would be obtainable from a third party not an Affiliate. B. Reyna and Reynolds will maintain separate and identifiable offices (except that Reyna may maintain offices within Reynolds' offices). C. Reyna will hold meetings of its shareholders and Board of Directors (or otherwise arrange for action by its shareholders and Board of Directors to be taken in accordance with appropriate procedures authorized by law) and maintain appropriate corporate books and records separate and apart from those of Reynolds; Reyna will not suffer any limitation on the authority of its own directors and officers to conduct its business and affairs in accordance with their own business judgment, and will not authorize or suffer any Person other than its officers (or authorized agents) and directors to act on its behalf with respect to matters for which a corporation's own officers and directors would customarily be responsible. D. In all business dealings with third parties, Reyna shall refer to itself and to the extent possible, shall cause others to refer to it, as distinct entity from Reynolds, and will not treat itself or hold itself out, or, to the extent possible, permit others to treat it, as a department, division or similar unit of Reynolds. -50- 51 E. Reyna and Reynolds will maintain separate physical possession, in its separate records maintained in accordance with Section 7.6C hereof (or in such other manner as counsel to Reyna shall advise is sufficient to perfect the holder's security interest therein), of all chattel paper and other title retention or lien-creating instruments held by it from time to time. F. Reyna and its Subsidiaries will maintain capitalization adequate, in the judgment of their respective Boards of Directors, for the conduct of their respective businesses. G. Reyna will maintain bank accounts which are separate from the bank accounts of any Affiliate. SECTION 7.7 MAINTENANCE OF PRESENT BUSINESS. Reyna will not, and will not permit Reyna Leasing to, engage in any business other than the business in which it is engaged in on the date hereof. SECTION 7.8 LIMIT ON NET EQUITY INVESTMENTS. Reyna will not allow the aggregate amount of Reyna's Net Equity Investments in Non-Recourse Receivables at any time to exceed 5% of Total Assets as of such time. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 EVENTS OF DEFAULT. This Note shall become and be due and payable upon written demand of the holder hereof if one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgement, decree or order of any court or any order, rule or regulation of any administrative or governmental body), and be continuing at the time of such demand or at the time of a similar demand from the holder of any other Note; A. Default in the payment of any interest upon any Note when such interest becomes due and payable and continuance of such default for a period of five days; B. Default in the payment of principal of (or premium, if any, on) any Note when and as the same shall become due and payable, whether at maturity or at a date fixed for prepayment, or by acceleration or otherwise; or -51- 52 C. Default in the performance or observance of any covenant, agreement or condition contained in Section 6.1 to Section 6.10, or Section 7.1 to 7.8, inclusive and, in the case of such default under: (i) Section 6.2, the aggregate amount of Priority Indebtedness in excess of the amount of Priority Indebtedness permitted to be incurred in compliance with said Section 6.2(5) does not exceed $500,000 for more than 30 days; and (ii) Section 6.8, or Section 7.4, continuance of such default for a period of 30 days; or D. Default in the performance or observance of any other covenant, agreement or condition contained in this Note or in the Agreement and continuance of such default for a period of 30 days after written notice thereof, specifying such default and requiring it to be remedied, shall have been given to any Borrower by the holder of any Note; or E. Any Borrower or a Restricted Subsidiary (i) shall not pay when due, whether by acceleration or otherwise, any evidence of indebtedness of such Borrower or such Restricted Subsidiary (other than the Notes), or (ii) (a) any condition or default shall exist under any such evidence of indebtedness or under any agreement under which the same may have been issued and (b) such evidence of indebtedness shall have been declared due prior to the stated maturity thereof; F. Any Borrower or any Restricted Subsidiary shall file a petition seeking relief for itself under Title 11 of the United Slates Code, as now constituted or hereafter amended, or an answer consenting to, admitting the material allegations of or otherwise not controverting, or shall fail to timely controvert, a petition filed against such Borrower or such Restricted Subsidiary seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended; or any Borrower or any Restricted Subsidiary shall file such a petition or answer with respect to relief under the provisions of any other now existing or future bankruptcy, insolvency or other similar law of the United States of America or any State thereof or of any other country or jurisdiction providing for the reorganization, winding-up or liquidation of corporations or an arrangement, composition, extension or adjustment with creditors; or G. A court of competent jurisdiction shall enter an order for relief which is not stayed within 60 days from the date of entry thereof against any Borrower or any Restricted Subsidiary under Title 11 of the United States Code, as now constituted or hereafter amended; or there shall be entered an order, judgment or decree by operation of law or by a court having jurisdiction in the premises which is not stayed within 60 days from the date of entry thereof adjudging any Borrower or any Restricted Subsidiary a bankrupt or insolvent, or ordering relief against any Borrower or any Restricted Subsidiary, or approving as properly filed a petition seeking relief against any Borrower or any Restricted Subsidiary, under the provisions of any other now -52- 53 existing or future bankruptcy, insolvency or other similar law of the United States of America or any State thereof or of any other country or jurisdiction providing for the reorganization, winding-up or liquidation of corporations or an arrangement, composition, extension or adjustment with creditors, or appointing a receiver) liquidator, assignee, sequestrator, trustee, custodian or similar official of any Borrower or any Restricted Subsidiary or of any substantial part of its property, or ordering the reorganization, winding-up or liquidation of its affairs; or any involuntary petition against any Borrower or any Restricted Subsidiary seeking any of the relief specified in this clause shall not be dismissed within 60 days of its filing; or H. Any Borrower or any Restricted Subsidiary shall make a general assignment for the benefit of its creditors; or any Borrower or any Restricted Subsidiary shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, sequestrator, trustee, custodian or similar official of such Borrower or such Restricted Subsidiary or of all or any substantial part of its property; or any Borrower or any Restricted Subsidiaries shall have admitted to its insolvency or inability to pay, or shall have failed to pay, its debts generally as such debts become due; or any Borrower or any Restricted Subsidiary or its directors or majority stockholders shall take any action looking to the dissolution or liquidation of any Borrower or such Restricted Subsidiary (other than as contemplated by Sections 6.4, 6.5 and 7.3); or I. The rendering against any Borrower or any Restricted Subsidiary of a final judgment, decree or order for the payment of money in excess of $1,000,000 and the continuance of such judgment, decree or order unsatisfied and in effect for any period of 60 consecutive days without a stay of execution; or J. Any Borrower or any Restricted Subsidiary shall: (1) engage in any nonexempted "prohibited transaction", as defined in Sections 406 and 408 of ERISA and Section 4975 of the Internal Revenue Code of 1954, as amended; (2) incur any "accumulated funding deficiency", as defined in Section 302 of ERISA, whether or not waived; or (3) terminate or permit the termination of any "employee pension benefit plan", as defined in Section 3 of ERISA, in a manner which could result in the imposition of a Lien on the property of such Borrower or such Restricted Subsidiary pursuant to Section 4068 of ERISA which Lien would secure obligations in excess of $500,000; or K. Any representation by or on behalf of any Borrower in the Agreement or any certificate or instrument furnished in connection therewith or with the Notes proves to have been false or misleading in any material respect as of the date given or made; -53- 54 provided that in the case of any default which directly or indirectly relates to the performance or observance of any covenant, agreement or condition contained in Sections 6 or 7 of the Agreement, there shall become due and payable with respect to any Notes then held by any holder of the Notes entitled to the benefits of said Sections 6 or 7, to the extent permitted by applicable law, the Make-Whole Amount of such Notes plus accrued interest thereon. SECTION 8.2 SUITS FOR ENFORCEMENT. In case an Event of Default shall occur and be continuing, the holder of this Note may proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant contained in this Note or in aid of the exercise of any power granted in this Note, or may proceed to enforce the payment of this Note or to enforce any other legal or equitable right of the holder of this Note. If any holder of a Note shall demand payment thereof or take any other action in respect of an Event of Default, the Borrowers will forthwith given written notice, as in Section 9.3 provided, to other holders of Notes specifying such action and the nature and status of the Event of Default. SECTION 8.3 REMEDIES NOT WAIVED. No course of dealing between the holder hereof and any Borrower or any delay or failure on the part of the holder hereof in exercising any rights hereunder shall operate as a waiver of any rights of the holder hereof. SECTION 8.4 REMEDIES CUMULATIVE. No remedy herein conferred upon the holder hereof is intended to be exclusive of any other remedy and each and every remedy shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. SECTION 8.5 ACCELERATION OF INDEBTEDNESS. If an Event of Default has occurred, then the Bank may, at its option, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrowers, declare its obligation to make loans and advances hereunder to be terminated, whereupon the same shall forthwith terminate, and declare any Note, all interest thereon, and all other amounts payable under this Agreement or upon any other promissory note, indebtedness, or loan agreement to the Bank to be forthwith due and payable in full, and accelerate the maturity of the obligations evidenced thereby, which obligations shall become and be forthwith immediately due and payable without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrowers. -54- 55 In the Event of Default, the remedies provided to Bank herein shall be cumulative and shall be in addition to every other remedy provided herein or otherwise provided by law. ARTICLE IX MISCELLANEOUS SECTION 9.1 AMENDMENT, MODIFICATION AND WAIVER. No amendment, modification, termination, waiver, consent to departure or alteration of the terms hereof or of any provision of any of the Loan Documents shall be binding or effective unless the same be in writing, dated subsequent to the date hereof, and duly executed by all parties hereto, and then such amendment, modification or waiver shall be effective only in the specific instance and for the specific purpose for which given. SECTION 9.2 SURVIVAL OF WARRANTIES. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of any Loan hereunder and the execution and delivery of any of the Loan Documents. SECTION 9.3 NOTICE, ETC. All notices and other communications provided for under this Agreement and under any of the Loan Documents to which the Borrowers are parties shall be delivered, mailed registered or certified mail, return receipt requested, or telegraphed to the Borrower, at: The Reynolds & Reynolds Company 115 S. Ludlow St. Dayton, OH 45402 ATTN : Treasurer and to: Reyna Financial Corporation 115 S. Ludlow St. Dayton, OH 45402 ATTN: Assistant Treasurer -55- 56 and if to the Bank: NBD Bank One Indiana Square, Suite 308 Indianapolis, Indiana 46266 ATTN: Patrick D. Lease or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section. All such notices and communications shall, when mailed or telegraphed, be effective upon receipt or delivery, SECTION 9.4 NO WAIVER-REMEDIES. No delay or failure of the Bank in exercising any right, power, remedy or privilege hereunder or under any of the Loan Documents on any occasion shall affect such right, power or privilege or be construed as a waiver of any requirement of this Agreement or a waiver of the Bank's right to take advantage of any subsequent or continued breach by any Borrower of any covenant contained herein; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or privilege be prejudicial to any subsequent exercise of such right, power or privilege. The rights and remedies of the Bank hereunder are cumulative and not exclusive. All remedies herein provided shall be in addition to and not in substitution for any remedies otherwise available to the Bank. Any waiver, permit, consent or approval of any kind by the Bank of any breach or default hereunder, or such waiver of any provision or condition hereof, must be in writing and shall be effective only to the extent set forth in such writing. SECTION 9.5 SUCCESSORS AND ASSIGNS. The Loan Documents shall be binding upon and inure to the benefit of the Borrowers and the Bank and their respective successors and assigns, except that no Borrower may not assign or transfer any of the Loan Documents or any of its rights under any of the Loan Documents to which the Borrowers are parties without the prior written consent of the Bank. SECTION 9.6 COSTS, EXPENSES AND TAXES. The Borrowers agree to pay on demand all reasonable costs and expenses in connection with the negotiation, preparation, execution, delivery, filing, recording, administration, enforcement, litigation, collection, or filing of any legal action on or for any of the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Bank, and counsel who may be retained by said counsel, with respect thereto and with respect to advising the Bank as to its rights and responsibilities under any of the Loan Documents. -56- 57 In addition, the Borrowers shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of any of the Loan Documents and other documents to be delivered under any such Loan Documents, and agree to save the Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such taxes and fees or against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution, delivery and performance of this Agreement, any Loan and security therefore, if applicable. The obligations of the Borrowers under this Section shall survive payment of all Loans, SECTION 9.7 INDEMNIFICATION. The Borrowers agree to indemnify, save, and hold harmless the Bank and its directors, officers, agents and employees (collectively the "Indemnitees") from and against: (a) Any and all writs, subpoenas, claims, demand, actions or causes of action that are served on or asserted against any Indemnitee by any Person, and (b) Any and all liabilities, losses, costs or expenses (including reasonable attorneys fees) that any Indemnitee suffers or incurs as a result of any other matter specified in this Section. The obligations of the Borrowers under this Section shall survive payment of all Loans. SECTION 9.8 RIGHT OF SETOFF. Upon the occurrence and during the continuance of any Event of Default the Bank is hereby authorized at any time and from time to time, without notice to the Borrowers (any such notice being expressly waived by the Borrowers), 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 the Bank to or for the credit or the account of any Borrower against any and all of the obligations of the Borrowers now or hereafter existing under this Agreement, any Note or any of the Loan Documents, irrespective of whether or not the Bank shall have made any demand under this Agreement, any Note or any of the Loan Documents and although such obligations may be unmatured. The Bank agrees promptly to notify the Borrowers after any such setoff and application, provided that the failure to give to such notice shall not affect the validity of such setoff and application. The rights of the Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Bank may have. In addition, any and all instruments, documents, monies, securities, goods, chooses in action, chattel paper and any other property of any Borrower, or in which any Borrower has any interest, tangible or intangible, and the proceeds thereof, which now or hereafter are at any time -57- 58 in the custody or possession of the Bank or any third party acting in the Bank's behalf, without regard to whether the Bank received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether the Bank has conditionally released the same, shall constitute additional security for any Note and may be applied at any time to the liability represented thereby which is then due, whether by acceleration or otherwise. SECTION 9.9 PAYMENT. Whenever any payment to be made hereunder or on any Loan shall become due and payable on a Saturday, Sunday or a legal holiday under the laws of the State of Michigan, such payment may be made in the next succeeding business day and such extension of time shall in such case be included in computing interest on such payment. SECTION 9.10 BANK'S DUTIES UPON PAYMENT IN FULL BY BORROWERS. Upon payment in full of all obligations hereunder and the termination of the Bank's obligations to make further loans to any Borrower, the Bank shall reassign to the Borrowers any collateral that the Borrowers may have previously assigned or delivered to the Bank and not yet fully collected. At the Borrowers' written request, the Bank will cause to be cancelled of record, all financing statements or other documents which may have previously been filed and recorded in public offices by or on behalf of the Bank evidencing the Borrowers' obligation hereunder to the Bank and the security therefore and will deliver to the Borrowers any Note paid in full marked "Paid-in-Full". SECTION 9.11 CONSTRUCTION. This Agreement, the Loan Documents, including but not limited to any Security Documents and the Notes, shall be governed and construed in accordance with the laws of the State of Michigan. SECTION 9.12 SEVERABILITY OF PROVISIONS. Any provision contained in any of the Loan Documents 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 of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 9.13 COVENANTS IN OTHER INDEBTEDNESS. In the event any Borrower or any Subsidiary thereof shall execute, make or otherwise enter into any instrument, document or agreement relating to the incurrence or maintenance of any Indebtedness, or any amendment, waiver, restatement, reevidencing or other modification of any -58- 59 documentation relating to any of its existing Indebtedness (collectively, "Other Loan Documents"), the effect of which in any such case is to implement or subject, such Borrower or such Subsidiary to any affirmative, negative, financial or other covenants, or to any events of default (collectively, "Restrictive Covenants"), which Restrictive Covenants are in any respect materially different from the Restrictive Covenants set forth in this Agreement, the Borrowers shall promptly so advise the Bank. Thereafter, the Borrowers shall provide the Bank such information, in such reasonable detail, as the Bank may reasonably request in respect of the applicable Restrictive Covenants and the Other Loan Documents. The Bank shall have the right, at any time, in its sole discretion, to elect to amend in the manner hereinafter described, this Agreement and the Note to incorporate any such Restrictive Covenant, other than any Restrictive Covenant which would effect an amendment of Section 2.6 or 2.14 of this Agreement. If the Bank shall elect to incorporate any such Restrictive Covenant, it shall so notify the Borrowers in a written notice and, upon the giving of such notice, this Agreement shall be deemed amended to incorporate such Restrictive Covenant. Any amendment effected in accordance with the terms of this Section 9.13 shall remain in effect during the entire term of this Agreement, notwithstanding the subsequent termination, rescission, avoidance, waiver, release, amendment or other modification of all or any term or provision of the Other Loan Document from which a Restrictive Covenant shall have originated (including, without limitation, any modification to such Restrictive Covenant in such Other Loan Document), unless the Bank and the Borrowers shall otherwise agree in accordance with the procedures set forth in Article VIII hereof. SECTION 9.14 HEADINGS. Article and section numbers in this Agreement are for convenience of reference only and shall not constitute a part of the Agreement for any other purpose. SECTION 9.15 EXECUTION IN COUNTERPARTS. This Agreement 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 and all of which taken together shall constitute but one and the same Agreement. -59- 60 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers/authorized partners, effective as of the date first above appearing. THE REYNOLDS and REYNOLDS COMPANY, an Ohio corporation By: --------------------------- Title: Treasurer ------------------------ REYNA FINANCIAL CORPORATION, an Ohio corporation By: --------------------------- Title: Assistant Treasurer ------------------------ NBD BANK By: --------------------------- Title: ------------------------ -60- 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers/authorized partners, effective as of the date first above appearing. THE REYNOLDS and REYNOLDS COMPANY, an Ohio corporation By: --------------------------- Title: ------------------------ REYNA FINANCIAL CORPORATION, an Ohio corporation By: --------------------------- Title: Vice President ----------------------- NBD BANK By: --------------------------- Title: ------------------------ -60- 62 EXHIBIT A [Letterhead of The Reynolds and Reynolds Company] June 2, 1995 NBD Bank One Indiana Square Suite 308 lndianapolis, Indiana 46266 Attention: Patrick D. Lease Ladies and Gentlemen: In consideration of your entering into the Loan Agreement dated as of June 2, 1995 (the "Loan Agreement"), between you and Reyna Financial Corporation ("Reyna"), and to induce you to make the term loan thereunder (the "Loan") to Reyna, The Reynolds & Reynolds Company has agreed that, until payment in full of the principal of and all accrued interest on the Loan and the performance of all other obligations of Reyna under the Loan Agreement, it will: 1. Maintain 100% ownership of Reyna. 2. Assure that Reyna's earnings before interest expense and taxes are not less than 1.25 x interest expense. 3. Assure that Reyna's tangible net worth is not less than $1,000,000. Sincerely, THE REYNOLDS AND REYNOLDS COMPANY By: -------------------------- Its: ------------------------- -61- 63 EXHIBIT B CREDIT NOTE $15,000,000 April 1, 1995 Detroit, Michigan FOR VALUE RECEIVED, ____________________, an Ohio corporation (the "Borrower"), hereby promises to pay to the order of NBD Bank, a Michigan banking corporation (the "Bank"), at the principal banking office of the Bank in lawful money of the United States of America and in immediately available funds, the principal sum of Fifteen Million Dollars ($15,000,000), or such lesser amount as is recorded on the schedule attached hereto, or in the books and records of the Bank, on the Termination Date; and to pay interest on the unpaid principal balance hereof from time to time outstanding, in like money and funds, for the period from the date hereof until the Advances evidenced hereby shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement referred to below. The Bank is hereby authorized by the Borrower to record on its books and records, the date, amount and type of each Advance, the duration of the related Interest Period (if applicable), the amount of each payment or prepayment of principal thereon and the other information provided for on such books and records which books and records shall constitute prima facie evidence of the information so recorded, provided, however, that any failure by the Bank to record any such information shall not relieve the Borrower of its obligation to repay the outstanding principal amount of such Advances, all accrued interest thereon and any amount payable with respect thereto in accordance with the terms of this Credit Note and the Credit Agreement. The Borrower and each endorser or guarantor hereof waives demand, presentment, protest, diligence, notice of dishonor and any other formality in connection with this Credit Note. Should the indebtedness evidenced by this Credit Note or any part thereof be collected in any proceeding or be placed in the hands of attorneys for collection, the Borrower agrees to pay, in addition to the principal, interest and other sums due and payable hereon, all costs of collecting this Credit Note, including attorneys' fees and expenses. This Credit Note evidences one or more Advances made under an Amended and Restated Credit Agreement, dated as of April 1, 1995 (as amended or modified from time to time, the "Credit Agreement"), by and among the Borrower, a certain other Borrower named therein and the Bank to which reference is hereby made for a statement of the circumstances under which this Credit Note is subject to prepayment and under which its due date may be accelerated and for a description of the collateral and security securing this Credit Note. Capitalized terms used but not defined in this Credit Note shall have the respective meanings assigned to them in the Credit Agreement. 64 This Credit Note is made under, and shall be governed by and construed in accordance with, the laws of the State of Michigan in the same manner applicable to contracts made and to be performed entirely within such State and without giving effect to choice of law principles of such State. By: --------------------------- Its: -------------------------- CREDIT NOTE -2- 65 EXHIBIT C TERM NOTE $ , 19 ------------------- --------- -- Detroit, Michigan FOR VALUE RECEIVED, _______________ an Ohio corporation (the "Borrower"), hereby promises to pay to the order of NBD Bank, a Michigan banking corporation (the "Bank"), at the principal banking office of the Bank in lawful money of the United States of America and in immediately available funds, the principal sum of ____________________________ Dollars ($_________), or such lesser amount as is recorded in the books and records of the Bank in 12 equal quarterly installments on each Quarterly Principal Payment Date commencing on the first Quarterly Payment Date following the Conversion Date and on each Quarterly Payment Date occurring thereafter to and including the Maturity Date when the entire outstanding principal amount of the Term Loan evidenced hereby, and all accrued interest thereon, shall be due and payable; and to pay interest on the unpaid principal balance hereof from time to time outstanding, in like money and funds, for the period from the date hereof until the Term Loan evidenced hereby shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement referred to below. The Bank is hereby authorized by the Borrower to record on its books and records, the date and the amount of the Term Loan, the applicable interest rate and type and the duration of the related Interest Period (if applicable), the amount of each payment or prepayment of principal thereon, and the other information provided for on such books and records, which such books and records shall constitute prime facie evidence of the information so recorded, provided, however, that any failure by the Bank to record any such notation shall not relieve the Borrower of its obligation to repay the outstanding principal amount of this Term Loan, all accrued interest hereon and any amount payable with respect hereto in accordance with the terms of this Term Note and the Credit Agreement. The Borrower and each endorser or guarantor hereof waives presentment, protest, notice of dishonor and any other formality in connection with this Term Note. Should the indebtedness evidenced by this Term Note or any part thereof be collected in any proceeding or be placed in the hands of attorneys for collection, the Borrower agrees to pay, in addition to the principal, interest and other sums due and payable hereon, all costs of collection this Term Note, including attorneys' fees and expenses. This Term Note evidences a Term Loan made under an Amended and Restated Credit Agreement. dated as of April 1, 1995 (as amended or modified from time to time, the "Credit Agreement"), by and among the Borrower, a certain other Borrower named therein and 66 the Bank, to which reference is hereby made for a statement of the circumstances under which this Term Note is subject to prepayment and under which its due date may be accelerated and a description of the collateral and security securing this Term Note. Capitalized terms used but not defined in this Term Note shall have the respective meanings assigned to them in the Credit Agreement. This Term Note is made under, and shall be governed by and construed in accordance with, the laws of the State of Michigan in the same manner applicable to contracts made and to be performed entirely within such State and without giving effect to choice of law principles of such State. By: --------------------------- Its: -------------------------- TERM NOTE -2- EX-3.B 12 EXHIBIT (B)(3) 1 EXHIBIT (b)(3) [NBD Letterhead] NBD Bank, N.A. One Indiana Square, Suite 308 Indianapolis, Indiana 46266-0308 Michael C. Mahoney Second Vice President 317-266-7371 317-266-6042 (Fax) April 16, 1996 Mr. Michael J. Gapinski Treasurer The Reynolds & Reynolds Company 115 South Ludlow Dayton, OH 45402 Dear Mike: We are pleased to inform you that NBD Bank has approved an increase to its existing revolving credit agreement with Reynolds & Reynolds to assist in financing the purchase of "Project Washington", a publicly traded company the identity of which has been disclosed to us already. The increased revolving credit is subject to all the terms and conditions of the existing revolver, with the following changes/additions: BORROWERS: Reynolds & Reynolds Company Reyna Financial Corporation AMOUNT AND TERM: The existing $15 million revolver is increased to $65 million, effective upon completion of the required documentation, until December 1, 1996 (approximately a six month period), at which time the revolver amount will decrease to $30 million. Additionally, the revolver's conversion date (to a three year term loan) has been extended from April 1, 1997 to April 1, 1998. Loans to Reyna Financial under this revolver may not exceed $15 million at any one time outstanding. The $50 million increase is available to Reynolds & Reynolds for the purpose above. CONDITIONS PRECEDENT: Prior to the effectiveness of the commitment, NBD shall have received the previously agreed upon fee of $40,000. The fee shall be deemed earned in full upon delivery of this commitment letter, and shall not be subject to the completion of the purchase transaction contemplated above. OTHER TERMS: Except as indicated above, this revolving credit will be subject to the completion of satisfactory documentation and all of the same terms and conditions in the existing revolving credit. The Borrower agrees to reimburse NBD for its reasonable attorney's fees in conjunction with the preparation of the required documents. Subsidiary of First Chicago NBD Corporation 2 [NBD Bank Letterhead] Mr. Michael J. Gapinski April 16, 1996 Page 2 We are very pleased to be of service to Reynolds in providing you the additional money you need in a short timeframe and in a manner that is consistent with your other existing credit agreements. We look forward to a subsequent conversation with you regarding longer term financing options. Mike, if you are in agreement with the terms and conditions as detailed above, please indicate your acceptance by signing below and faxing a signed copy back to me at (317) 266-6042. Upon receipt, I will initiate the documentation process and will debit your account at NBD in Detroit for the $40,000 fee. This commitment will expire at 5 p.m. (Indianapolis time) April 18, 1996 if not accepted by that time. Very truly yours, /s/ Michael C. Mahoney Micheal C. Mahoney Vice President Accepted and Agreed: The Reynolds & Reynolds Company By: /s/ M.J. Gapinski ----------------------------- Its: Treasurer --------------------------- 3
PROJECT WASHINGTON FINANCING NBD $65,000,000 PNC 15,000,000 B OF A 15,000,000 BANK ONE 15,000,000 ------------- TOTAL CREDIT AGREEMENTS $110,000,000 PURCHASE PRICE (90,000,000) EXECUTIVE AGREEMENTS & OTHER COSTS (2,000,000) ------------- AVAILABLE CREDIT AGREEMENTS $18,000,000 WASHINGTON CASH (NET OF DEBT) 10,000,000 ------------- AVAILABLE CREDIT AGREEMENTS $28,000,000 UNCOMMITTED FACILITIES 25,000,000 ------------- TOTAL FACILITIES $53,000,000 ============= NOTE: THE NBD FACILITY WILL REDUCE BY $35 MILLION 6 MONTHS AFTER THE TENDER OFFER CLOSES. REYNA WILL BE ENTIRELY FUNDED WITH TERM LOANS AS OF THE TENDER OFFER CLOSING
EX-4.B 13 EXHIBIT (B)(4) 1 EXHIBIT (b)(4) CREDIT AGREEMENT The Credit Agreement made as of the 30th day of September, 1994, at Cincinnati, Ohio by and between THE REYNOLDS & REYNOLDS COMPANY, an Ohio corporation, and REYNA FINANCIAL CORPORATION, an Ohio corporation (hereinafter collectively referred to as the "Borrowers", individually, a "Borrower", both meaning each entity, jointly and severally) and PNC BANK, OHIO, NATIONAL ASSOCIATION, a national banking association, located at 201 East Fifth Street, Cincinnati, Ohio 45202 (hereinafter referred to as the "Bank"). WITNESSETH: WHEREAS, Borrower desires to receive and the Bank is willing to extend from time to time an aggregate amount not to exceed FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) outstanding at any one time for a revolving line of credit (the "Line"), subject to the terms and conditions set forth below; NOW THEREFORE, in consideration of the agreements herein contained, the parties agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the defined meanings when used herein or in any Note, certificate, report, or other document made or delivered pursuant to this Agreement, unless otherwise defined in context: "Accounts Receivable" means all accounts, contract rights, notes, drafts, acceptances, instruments or chattel paper (including indebtedness of related or affiliated entities) and any other form of right to payment for goods sold or leased or for services rendered, now owned or hereafter arising or acquired. "Affiliate" means any Person (other than Borrower or any Restricted Subsidiary) which, directly or indirectly, controls or is controlled by or is under common control with Borrower or a Restricted Subsidiary or which beneficially owns or holds or has the power to direct the voting power of 5% or more of any class of voting stock of Borrower or a Restricted Subsidiary or which has 5 % or more of its voting stock (or in the case of a Person which is not a corporation, 5% or more of its equity interest) beneficially owned or held, directly or indirectly, by Borrower or a Restricted Subsidiary. For purposes of this definition, "control" means the power to direct the management and policies of a 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. 2 "Aggregate Amount", when used with respect to Restricted Investments at any time, means and shall be determined by adding together the amount of each such investment, whether or not such investment at such time is shown on the books of Borrower or a Restricted Subsidiary, determined with respect to each such investment at the greatest of: (i) the amount originally entered on the books of Borrower or any Restricted Subsidiary with respect thereto; (ii) the then current book amount thereof; and (iii) the original cost thereof to Borrower or a Restricted Subsidiary; minus in each case any net return of capital upon such investments (through the sale or liquidation of such investments or any part thereof, or otherwise). "Agreement" means this Credit Agreement as amended, supplemented, or modified from time to time. "Bid Loan" means any Loan bearing interest at the rate provided for in Section 2.6(d). "Bid Rate" means the rate of interest determined by the Bank in its sole discretion to be applicable to a Bid Loan for a specified Interest Period. "Board of Directors" means the board of directors of Borrower (or, when so specified or the context so indicates, a Subsidiary) or if duly authorized to exercise the power of the Board of Directors, any duly authorized committee thereof. "Business Day" means any day other than a Saturday, Sunday, or other day on which commercial banks in Ohio are authorized or required to close under the laws of the State of Ohio. "Capital Lease" means and includes at any time any lease of property, real or personal, which in accordance with generally accepted accounting principles would at such time be required to be capitalized on a balance sheet of the lessee. "Capital Lease Obligation" means at any time the capitalized amount of the rental commitment under a Capital Lease which in accordance with generally accepted accounting principles would at such time be required to be shown on a balance sheet of the lessee. "CD Rate" means, with respect to any CD Loan and its related Interest Period, the per annum rate that is equal to the sum of: (i) the rate per annum obtained by dividing (i) the secondary market bid rates per annum (expressed as a percentage) selected by the Bank as set forth on publicly available information sources, including but not limited to Tellerate, as quoted at the time the Bank -2- 3 receives the Notice of Borrowing (or as soon thereafter as practicable) in the term comparable to the related Interest Period in an aggregate amount comparable to the related CD Loan, by (ii) an amount equal to one minus the stated maximum rate (expressed as a decimal) of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) under any regulations of the Board of Governors of the Federal Reserve System (or any successor agency thereto), applicable on the first day of the related Interest Period to a negotiable certificate of deposit in excess of $100,000 with a term comparable to such Interest Period; plus (ii) the daily net annual assessment rate (expressed as a percentage) estimated by the Bank on the first day of the related Interest Period to be payable by the Bank to the Federal Deposit Insurance Corporation (or any successor agency thereto) for deposit insurance; all as conclusively determined by the Bank which sum is to be rounded up, if necessary, to the nearest whole multiple of one one-hundredth of one percent (1/100 of 1%). "CD Loan" means any Loan bearing interest at the rate provided for in Section 2.6(b). "Commitment" means $15,000,000.00, as such amount may be reduced from time to time pursuant to Section 2.11. Moreover, the Commitment shall be automatically reduced on the last Business Day of each month set forth below to an amount not to exceed the amount set forth below opposite each such date:
Amount of Commitment Last Business Day of Not to Exceed: December, 1996 $13,750,000 March, 1997 12,500,000 June, 1997 11,250,000 September, 1997 10,000,000 December, 1997 8,750,000 March, 1998 7,500,000 June, 1998 6,250,000 September, 1998 5,000,000 December, 1998 3,750,000 March, 1999 2,500,000 June, 1999 1,250,000 September, 1999 -0-
"Commitment Commission" has the meaning specified in Section 2.10. "Company Notes" means the Senior Notes issued by the Borrower with an interest rate of 6.71% per annum maturing through 2003. -3- 4 "Consolidated Current Assets" means the aggregate of all assets which in accordance with generally accepted accounting principles would be so classified and appear upon the asset side of the consolidated balance sheet of the Borrower and its Restricted Subsidiaries, after making any appropriate deduction for adequate reserves in each case where a reserve in proper, in accordance with generally accepted accounting principles. "Consolidated Current Liabilities" means the aggregate of all amounts which in accordance with generally accepted accounting principles would be so classified and appear upon the liability side of the consolidated balance sheet of the Borrower and its Restricted Subsidiaries. "Consolidated Earnings Available for Fixed Charges" means the consolidated income of the Borrower and its Restricted Subsidiaries before income taxes, computed in accordance with generally accepted accounting principles, plus Fixed Charges. "Consolidated Indebtedness" means the aggregate of all Indebtedness of the Borrower and its Restricted Subsidiaries. "Consolidated Tangible Capitalization" means, as of any particular time, the sum of (without duplication): (i) the par value of all of the outstanding capital stock of Borrower; (ii) the capital and earned surplus of Borrower and its Restricted Subsidiaries appearing on a consolidated balance sheet of Borrower and its Restricted Subsidiaries prepared in accordance with generally accepted accounting principles; and (iii) Consolidated Indebtedness; less the sum of (without duplication): (a) the cost of any treasury shares included on such balance sheet; and (b) the aggregate of all amounts that appear on the asset side of such balance sheet and are attributable to assets which would be treated as intangibles under generally accepted accounting principles, including, without limitation, all such items as goodwill, trademarks, trade names, brand names, copyrights, patents, patent applications, licenses, franchises, permits and rights with respect to the foregoing, and unamortized debt discount and expense but excluding from the operation of this clause (b) software and software licenses. "Consolidated Tangible Net Worth" shall mean, as of the date of determination thereof, the aggregate amount of stockholders' equity of a corporation and its subsidiaries appearing on -4- 5 a consolidated balance sheet of such corporation and its subsidiaries prepared in accordance with generally accepted accounting principles less the sum of (without duplication) (i) the cost of any treasury shares included on such balance sheet and (ii) the aggregate of all amounts that appear on the asset side of such balance sheet and are attributable to assets which would be treated as intangibles under generally accepted accounting principles, including, without limitation, all such items as goodwill, trademarks, trade names, brand names, copyrights, patents, patent applications, licenses, franchises, permits and rights with respect to the foregoing, and unamortized debt discount and expenses, but excluding from the operation of this clause (ii) software and software licenses. "Consolidated Total Liabilities" shall mean all liabilities shown on a consolidated balance sheet of Reyna Financial Corporation and its Subsidiaries prepared in accordance with generally accepted accounting principles. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereof. "Eurodollar Loan" means any Loan bearing interest at the rate provided for in Section 2.6(c). "Eurodollar Rate Reserve Percentage" of the Bank for the Interest Period for any Eurodollar Loan means the reserve percentage applicable, if any, during such interest Period (or, if more than one such percentage will be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage are applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for the Bank with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (as defined in Regulation D) having a term equal to such Interest Period, "Event of Default" means any of the events specified in Section 8.1 herein, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Fixed Charges" means the sum of interest expense (including without limitation capitalized interest and the interest component of any Capital Lease Obligation) and rental expense of Borrower and its Restricted Subsidiaries, all computed in accordance with generally accepted accounting principles. "Fixed Rate Loan" means a Eurodollar Loan, a CD Loan or a Bid Loan. "GAAP" means generally accepted accounting principles in the United States. -5- 6 "Indebtedness" means and includes; (i) all indebtedness or obligations for money borrowed or for the purchase price of property and any notes payable and drafts accepted representing extensions of credit, whether or not representing indebtedness or obligations for money borrowed or for the purchase price of property; (ii) indebtedness or obligations secured by or constituting any Lien existing on property owned by the person whose Indebtedness is being determined, whether or not the indebtedness or obligations secured thereby shall have been assumed; (iii) Capital Lease Obligations; (iv) guarantees and endorsements of (other than endorsements for purposes of collection in the ordinary course of business), and obligations to purchase goods or services for the purpose of supplying funds for the purchase or payment of, or measured by, indebtedness, liabilities or obligations of others (whether or not representing money borrowed) and other contingent obligations in respect of, or to purchase or otherwise acquire or service, indebtedness, liabilities or obligations of others (whether or not representing money borrowed); and (v) all indebtedness, liabilities or obligations (whether or not representing money borrowed) in effect guaranteed by an agreement, contingent or otherwise, to make a loan, advance or capital contribution to or other investment in the debtor for the purpose of assuring or maintaining a minimum equity, asset base, working capital or other balance sheet condition for any date, or to provide funds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in the debtor for such purpose. Anything contained in clauses (iv) and (v) of the preceding paragraph to the contrary notwithstanding: (1) contingent obligations of Borrower to maintain the net earnings or net worth of Reyna Financial Corporation pursuant to an operating or similar agreement shall not be deemed to be Indebtedness of Borrower; and (2) contingent obligations in connection with sales of lease and other accounts receivable shall be included as Indebtedness to the extent of any reserve which is maintained or required to be maintained in accordance with generally accepted accounting principles. In case any corporation shall become a Restricted Subsidiary, such corporation shall be deemed to have incurred at the time it becomes a Restricted Subsidiary all Indebtedness of such corporation outstanding immediately thereafter. -6- 7 "Interest Period" has the meaning specified in Section 2.7. "Lease" means any lease (other than a Capital Lease) of real or personal property under which Borrower or a Restricted Subsidiary is lessee (or guarantor of the lessee's obligations), other than leases between Borrowers and their Restricted Subsidiaries or between Restricted Subsidiaries of Borrowers. "Lien" means any mortgage, lien, pledge, security interest, encumbrance or charge of any kind, any conditional sale or other title retention agreement or any Capital Lease. "Liquid Assets" shall mean the sum of, without duplication, the following assets owned by the Borrower, Reyna Financial Corporation or a Subsidiary: (i) cash, (ii) direct obligations of the United States of America or obligations of any instrumentality or agency thereof backed by the full faith and credit of the United States, in each case maturing within one year, (iii) commercial paper maturing within 180 days rated A-1 or A-2 by Standard & Poor's Corporation or P-1 or P-2 by Moody's Investors Service, Inc. (so long as such ratings shall be the two highest ratings given by such rating services), (iv) certificates of deposit issued by, or bankers acceptances of, or repurchase agreements involving governmental securities of the type specified above issued by, any bank or trust company organized under the laws of the United States of America, any state thereof or the District of Columbia having total capital and surplus in excess of $100,000,000.00, in each case maturing within one year, and (v) Receivables, less reserves. "Loan" when used in the singular and "Loans" when used in the plural means any and all lines of credit executed in favor of the Bank pursuant to Section II herein. "Loan Documents" means this Agreement, the Support Letter and any Note. "Make-Whole Amount" means, in connection with any prepayment of the Notes pursuant to Section 2.1 hereof or Section 6 of the Agreement, or paid as a result of the existence of an Event of Default, the greater of: (i) par; or (ii) the sum of the present values of each remaining mandatory prepayment and payment at maturity payable in respect of the Notes (in the event the Notes are being prepaid in full), or the present values of the payment at maturity and each mandatory prepayment or portion thereof being prepaid (in the event the Notes are being partially prepaid), (each such mandatory prepayment or portion thereof and payment at maturity being herein referred to as a "Payment"); all determined by discounting (based on semi-annual compounding), at a rate equal to the applicable Treasury Yield, such Payments and the portion of the scheduled interest payments on the Notes which relate thereto from the respective scheduled due dates of such Payment and interest payments to the Redemption Date or the date of prepayment, as the case may be. -7- 8 "Overdue Interest Rate" [intentionally omitted]. "Net Equity Investment", when used in connection with Non-Recourse Receivables, means, at the date as of which the amount thereof is to be determined, the result of the following calculation: (i) all rental receivables by Reyna Financial Corporation from Non-Recourse Receivables of Reyna Financial Corporation less the aggregate amount of rentals receivable necessary to fully amortize related Non-Recourse Debt (including, without limitation, principal, interest and other related costs of such Non-Recourse Debt), plus (ii) the residual value of the property financed at the end of the initial term of all Non-Recourse Receivables of Reyna Financial Corporation, less the sum of unearned income with respect to such Non-Recourse Receivables. "Net Income" means, with respect to any Person for any period, the net income (or.the deficit, if expenses and charges exceed revenues and other proper income credits) of such Person for such period determined in accordance with generally accepted accounting principles as in effect from time to time; provided, however, that Net Income of Borrower or any Restricted Subsidiary shall not include: (i) the Net Income of any Person (other than a Restricted Subsidiary) in which Borrower or any Restricted Subsidiary has an ownership interest unless such Net Income shall have been actually received by Borrower or such Restricted Subsidiary in the form of cash dividends or similar cash distributions; (ii) any portion of the Net Income of any Restricted Subsidiary which for any reason shall not be available for payment of dividends to Borrower and the Net Income of any Restricted Subsidiary prior to the date it became a Restricted Subsidiary; (iii) the Net Income of any Person, any of the stock or other equity interests or assets of which have been acquired by Borrower or any Restricted Subsidiary, realized by such Person prior to the date of such acquisition; (iv) any gain or loss arising from the sale or other disposition, write-up or write-down of capital assets and of capital stock; and (v) any extraordinary item. "Non-Recourse Debt" shall mean Indebtedness of Reyna Financial Corporation incurred to finance the acquisition of property which is subject to a chattel mortgage, lease or security agreement under which a Person other than an Affiliate is the lessee or debtor providing for rentals or other payments sufficient to pay the entire principal of and interest on such indebtedness on or before the date or dates for payment thereof and which Indebtedness does not constitute a general obligation of Reyna Financial Corporation but is repayable solely out of rentals and other sums payable under the chattel mortgage, lease or security agreement and/or the property subject thereto; provided, however, that the holder of such Indebtedness (hereinafter -8- 9 call the "Holder") shall have agreed in writing with Reyna Financial Corporation at or prior to the time such Indebtedness is incurred by Reyna Financial Corporation that: (x) Reyna Financial Corporation shall not have any personal liability whatsoever, either in its capacity as owner of the property or in any other capacity, to the Holder for any amounts payable with respect to such Indebtedness and such Indebtedness shall not constitute a general obligation of Reyna Financial Corporation, (y) the Holder shall look for repayment of such Indebtedness and payment of interest thereon and all other payments with respect to such Indebtedness solely to rentals or other sums payable under the chattel mortgage, lease or security agreement and/or the proceeds from the sale of the property subject thereto, and (z) in the case of all such Indebtedness incurred subsequent to September 24, 1990, to the extent the Holder may legally do so, the Holder waives any and all right it may have to make the election provided under 11 U.S.C. Section 1111(b)(1)(A) or any other similar or successor provision against Reyna Financial Corporation. "Non-Recourse Receivables" shall mean and include any chattel mortgage, lease or security agreement owing or guaranteed by a Person under which Reyna Financial Corporation supplies a portion of the purchase price for the property subject to the chattel mortgage, lease or security agreement, and has an equity interest or an interest in the rentals or other payments receivable, which interest may be subordinated to Non-Recourse Debt incurred in connection with the purchase of such property; provided, however, that any lease constituting a Non-Recourse Receivable shall be one in which, at the inception of such lease, it shall appear that the lessor will receive from (a) rentals to become due under the lease during the initial term, (b) estimated residual value at the end of such term, (c) investment tax credit and/or (d) estimated tax benefits due to tax deferrals such as that from interest expense and accelerated depreciation (based upon an estimated reinvestment return of not to exceed 7% per annum on a "sinking fund" basis), an aggregate amount at least sufficient to return to the lessor (i) estimated tax, insurance and maintenance costs and expenses (to the extent not payable by the lessee) (ii) the Net Equity Investment of the lessor in the leased property, and (iii) the aggregate amount necessary to fully amortize the related Non-Recourse Debt; provided further, however, that any lease constituting a Non-Recourse Receivable must be non-cancelable by the lessee unless upon such cancellation the lessee is required to pay to the lessor a premium or penalty which will (1) return any outstanding equity investment of the lessor, (2) fully compensate the lessor for the recapture of any tax benefits previously gained, (3) permit the lessor to fully amortize the related Non-Recourse Debt, including any accrued interest and any premium required thereon, and (4) reimburse the lessor for any taxes, insurance and maintenance costs to the extent not theretofore paid by the lessee. "Note" when used in the singular and "Notes" when used in the plural means any and all note or notes executed in favor of the Bank pursuant to Article II herein. "Notice of Borrowing" has the meaning specified in Section 2.3(a). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. -9- 10 "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature. "Plan" means any employee pension benefit plan or other plan subject to Title IV of ERISA, as amended, established, maintained, or to which contributions have been made by the Borrower or any ERISA affiliate. "Prime Loan" means any Loan bearing interest at the rate provided in Section 2.6(a). "Prime Rate" means the prime commercial lending rate as announced by the Bank at its Principal Office, 201 East Fifth Street Cincinnati, Ohio, as in effect from time to time, The Prime Lending Rate established by the Bank is based on its consideration of economic, money market, business and competitive factors, and is not necessarily the Bank's most favored rate. "Principal Office" means the principal office of PNC Bank, Ohio, National Association, presently located at 201 East Fifth Street, Cincinnati, Ohio 45202. "Priority Indebtedness" means the sum (without duplicating any such amount) of the amounts described in the following clauses (i) and (ii) incurred by Borrower or a Restricted Subsidiary and outstanding at the time of computation: (i) the aggregate principal of all Indebtedness of Borrower and its Restricted Subsidiaries secured or evidenced by Liens permitted by clauses (1), (2) and all subparts thereto, (3) and all subparts thereto, (4) and (5) and all subparts thereto and of Section 6.2; and (ii) the aggregate principal amount of unsecured Indebtedness of all Restricted Subsidiaries, other than indebtedness owned by Borrower or any wholly-owned Restricted Subsidiary. "Prohibited Transaction" means any transaction set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from time to time. "Quarterly Payment Date" means the last Business Day of each March, June, September and December of each year commencing with the last Business Day of December, 1994. "Quarterly Principal Payment Date" means the last Business Day of each September following the Termination Date, and each Quarterly Payment Date occurring thereafter. "Quoted Rate" means, with respect to any Eurodollar Loan and its related Interest Period, the per annum rate that is equal to the sum of: -10- 11 (i) the rate per annum obtained by dividing (i) the rate per annum at which deposits in U.S. dollars are offered to the Bank by prime banks in the London interbank market at approximately 11:00 A.M. (London time) on the first day of such Interest Period in an amount substantially equal to the Eurodollar Loan requested and for a period approximately equal to such Interest Period by (ii) an amount equal to one minus the Eurodollar Rate Reserve Percentage, all as conclusively determined by the Bank which amount is to be rounded up, if necessary, to the nearest whole multiple of one one-hundredth of one percent (1/100 of 1%); plus (ii) the daily net annual assessment rate (expressed as a percentage) estimated by the Bank on the first day of the related Interest Period to be payable by the Bank to the Federal Deposit Insurance Corporation (or any successor agency thereto) for deposit insurance. "Receivable" shall mean any account receivable whether represented by an open account, note, security agreement, installment sale agreement, mortgage, factor receivable, direct loan receivable, trade account receivable, lease obligation or otherwise. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect or any successor to all or a portion thereof establishing reserve requirements. "Reportable Event" means any of the events set forth in Section 4043 of ERISA, as amended from time to time, except actions of general applicability by the Secretary of Labor under Section 110 of ERISA. "Restricted Investment" means any investment by Borrower or any Restricted Subsidiary in any other Person, whether by acquisition of stock or Indebtedness, or by loan, advance, guarantee, transfer of property out of the ordinary course of business, capital contribution, extension of credit on terms other than those normal in the business of Borrower or such Subsidiary, or otherwise; provided, however, that the term "Restricted Investment" shall not include: (i) marketable obligations issued or guaranteed by the United States of America or by any agency of the United States of America or by a state or municipal government within the United States of America, maturing not later than 12 months from the date of acquisition thereof and, in the case of such state or municipal obligations, which have a rating of at least AA of Aa by Standard & Poor's Corporation or Moody's Investors Service, Inc, respectively; (ii) commercial paper which has a rating of at least A-1 or P-1 by Standard & Poor's Corporation or Moody's Investors Service, Inc. respectively, and maturing not later than 270 days from the date of acquisition thereof; -11- 12 (iii) negotiable certificates of deposit (including Eurodollar deposits) or bankers' acceptances issued by or drawn on, a United States Commercial bank or trust company or a bank or trust company chartered or organized under the laws of Canada, which has capital and surplus of at least $500,000,000, and maturing not later than 12 months from the date of acquisition thereof; and (iv) any investment in any Restricted Subsidiary or in any corporation which by reason thereof will become a Restricted Subsidiary. "Restricted Subsidiary" means: (i) [intentionally omitted] (ii) any Subsidiary: (a) organized and existing under the laws of the United States of America, any State thereof, Canada or any province thereof; (b) having substantially all of its assets located in the United States or Canada; (c) at least 51 % of the outstanding voting shares of which shall at the time be owned by Borrower and/or one or more Restricted Subsidiaries; and (d) which has been designated as a Restricted Subsidiary by Borrower or by the Board of Directors. "Reyna" means Reyna Financial Corporation, an Ohio corporation, which is a finance company and wholly-owned subsidiary of The Reynolds and Reynolds Company. "Reyna Consolidated Indebtedness" shall mean the Indebtedness of Reyna Financial Corporation and its Subsidiaries, after eliminating inter-company items, all as consolidated and determined in accordance with generally accepted accounting principles. "Reyna Indebtedness" shall mean and include (i) all indebtedness or obligations for money borrowed or for the purchase price of property (whether or not recourse) and any notes payable and drafts accepted representing extensions of credit, whether or not representing indebtedness or obligations for money borrowed or for the purchase price of property, (ii) Non-Recourse Debt and other indebtedness or obligations secured by or constituting any Lien existing on property owned by the Person whose indebtedness is being determined, whether or not the indebtedness or obligations secured thereby shall have been assumed, (iii) Capital Lease Obligations, (iv) guarantees and endorsements of (other than endorsements for purposes of collection in the ordinary course of business), and obligations to purchase goods or services for the purpose of supplying funds for the purchase or payment of, or measured by, indebtedness, -12- 13 liabilities or obligations of others for money borrowed and other contingent obligations in respect of, or to purchase or otherwise acquire or service, indebtedness, liabilities or obligations of others for money borrowed and (v) all indebtedness, liabilities or obligations for money borrowed in effect guaranteed by an agreement, contingent or otherwise, to make a loan, advance or capital contribution to or other investment in the debtor for the purpose of assuring or maintaining a minimum equity, asset base, working capital or other balance sheet condition for any date, or to provide funds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in the debtor for such purpose. In case any corporation shall become a Subsidiary, such corporation shall be deemed to have incurred at the time it becomes a Subsidiary all Indebtedness of such corporation outstanding immediately thereafter. "Reyna Leasing" shall mean Reyna Leasing Corporation, an Ohio corporation. "Subordinated Indebtedness" (intentionally omitted] "Subsidiary" means any corporation at least a majority of whose outstanding stock having ordinary voting power for the election of a majority of the members of the board of directors (or other governing body) of such corporation (other than stock having such power only by reason of the happening of a contingency) shall at the time be owned by Borrower and/or one of more Subsidiaries of Borrower. "Termination Date" means September 30, 1996 (or, if such date is not a Business Day, the immediately preceding Business Day) or such earlier date upon which the Commitment is reduced to zero pursuant to Section 2.11 or is terminated pursuant to Article VIII or the Loans become due and payable pursuant to Article VIII. "Total Assets" shall mean, as of the date of determination thereof, the sum of all assets of Reyna Financial Corporation (other than intangibles), determined in accordance with generally accepted accounting principles, which would properly appear on a balance sheet of Reyna Financial Corporation as an asset at and as of such date. "Treasury Yield" means with respect to any prepayment hereunder: (i) .50%, plus (ii) the yield reported, as of 10:00 a.m. (New York City time) on the display designated as "Page 500") on the Telerate Service (or such other display as may replace Page 500 on the Telerate Service) for actively traded "On the Run" U.S. Treasury securities having maturities equal to the maturity, rounded to the nearest month, of the applicable scheduled payment date of the Payment. If no maturity exactly corresponding to such maturity of the Payment shall appear therein, yields for the next longer and the next shorter published "On the Run" maturities shall be calculated pursuant to the foregoing sentence, and the Treasury Yield shall be interpolated from such yields on a straight-line basis (rounding, in each of such relevant periods to the nearest month). -13- 14 "Wholly-owned Restricted Subsidiary" means any Restricted Subsidiary all of the capital stock (other than directors' qualifying shares) of which shall be owned by the Borrower and/or one or more "Wholly-owned" Restricted Subsidiaries. All accounting terms used herein and not expressly defined in this Agreement shall have the meanings respectively given to them in accordance with generally accepted accounting principles in the United States consistent with those applied in the preparation of the financial statements referred to in Section 3.7 herein, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles. The above definitions shall be applicable to the singular and plurals of the foregoing defined terms. ARTICLE II AMOUNT AND TERMS OF THE LOAN SECTION 2.1 COMMITMENT. Subject to and upon the terms and conditions herein set forth, the Bank agrees, at any time and from time to time prior to the Termination Date, to make loans (each a "Loan") to either of the Borrowers, which Loans (i) shall, at the option of the Borrower, be either Prime Loans, CD Loans, Eurodollar Loans or, in the Bank's sole discretion if a Borrower requests, Bid Loans and (ii) may be repaid and reborrowed in accordance with the provisions hereof. The Loans made to both of the Borrowers shall not exceed in aggregate principal amount at any time outstanding the Commitment. SECTION 2.2 MINIMUM AMOUNT OF EACH BORROWING. (a) The principal amount of each Loan shall: (i) in the case of Fixed Rate Loans, be not less than $1,000,000 or, if greater, in integral multiples of $1,000,000 or (ii) in the case of Prime Loans, be not less than $100,000 or, if greater, in integral multiples of $100,000. (b) The Borrowers shall not be entitled to have more than ten loans in the aggregate outstanding at any one time. SECTION 2.3 NOTICES OF BORROWING. (a) Whenever either of the Borrowers desires to borrow a Loan (other than a Bid Loan), it shall give the Bank at its Principal Office written notice or telephonic notice (confirmed promptly in writing) of such borrowing (x) in the case of a CD Loan or a Eurodollar Loan, by no later than 12:00 p.m. (Cincinnati, Ohio time) on the Business Day that is at least two (2) Business Days prior to the proposed date of borrowing and (y) in the case of a Prime Loan, by -14- 15 no later than 10:00 a.m. (Cincinnati, Ohio time) on the date of borrowing. Each such notice (each, together with any notice electing to incur a Bid Loan given in accordance with Section 2.3(b), a "Notice of Borrowing") shall specify (i) the principal amount which such Borrower desires to borrow, (ii) the date of borrowing (which shall be a Business Day), (iii) whether such Loan is to be maintained as a Prime Loan, CD Loan or Eurodollar Loan and (iv) the Interest Period to be applicable thereto. (b) Whenever either of the Borrowers desires to incur a Bid Loan, it shall have the right to contact the Bank to determine the Bid Rate which would be applicable to a Bid Loan made by the Bank for the principal amount and the Interest Period (which period shall be a period of from 1 to 90 days) requested by such Borrower and the Bank may, in its sole discretion, provide a quote of a Bid Rate for such Interest Period. Each notice requesting a quote of a Bid Rate shall specify that such request is being made pursuant to the terms of this Agreement. The Bank shall agree with each Borrower from time to time on any additional procedures to be utilized in making a request for a Bid Loan (including, without limitation, the applicable notice period and the time period during which the Bid Rate, if any, quoted by the Bank shall remain available). Upon electing to incur a Bid Loan, the Borrower electing to incur the same shall notify the Bank in accordance with the aforesaid procedures established from time to time with the Bank. Subject to availability, the Bank agrees to use its best efforts to make Bid Loans available to the Borrowers; provided that the Bank shall not be obligated to make Bid Loans hereunder. SECTION 2.4 DISBURSEMENT OF FUNDS. No later than 2:00 p.m. (Cincinnati, Ohio time) on the date specified in each Notice of Borrowing, the Bank shall make available to the Borrower incurring the same the proceeds of the Loan to be made on such date in U.S. dollars and in immediately available funds by the Bank crediting an account of such Borrower designated by it and maintained with the Bank at its Principal Office. To the extent that a Loan made to such Borrower matures on such date, the Bank shall apply the proceeds of the Loan to be made on such date, to the extent thereof, to the repayment of such maturing Loan. SECTION 2.5 THE NOTES. The obligation of each Borrower to pay the principal of, and interest on, all Loans made to it shall be evidenced by promissory notes substantially in the form of Exhibits A and B (each " a Note") payable to the order of the Bank duly executed and delivered by Borrowers with blanks appropriately completed in conformity herewith. Each Note shall: (i) be dated the Effective Date; (ii) be in the original principal amount of the Commitment and be payable in the principal amount of the Loans evidenced thereby; (iii) mature in the case of each Loan evidenced thereby on the expiration of the Interest Period applicable thereto; (iv) bear interest as provided in the appropriate clause of Section 2.6 in respect of the Prime Loans, CD Loans, Eurodollar Loans and Bid Loans, as the case may be, evidenced thereby; and (v) be entitled to the benefits of this Agreement. The Bank shall maintain internal records showing each Loan made hereunder -15- 16 and each principal and interest payment thereon, which records shall, absent manifest error, be final, conclusive and binding. Although each Note shall be dated the Effective Date, interest in respect thereof shall be payable only for the pc . T Loans are evidenced thereby and although dictated principal amount of Commitment, each Note shall be enforceable with respect to the principal thereof only to the extent of the unpaid principal a' i thereby. SECTION 2.6 INTEREST. (a) Each Borrower agrees to pay interest in-principal amount of each Prime Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be equal to the Prime Rate. (b) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each CD Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be 3/4 of 1 % in excess of the relevant CD Rate. (c) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be 5/8 of 1 % in excess of the relevant Quoted Rate. (d) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Bid Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be the Bid Rate applicable to such Bid Loan. (e) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall bear interest at a rate per annum equal to 3 % in excess of the Prime Rate in effect from time to time; provided, however, that no Loan shall bear interest after maturity at a rate per annum less than the rate of interest applicable thereto at maturity. (f) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Prime Loan, quarterly in arrears on each Quarterly Payment Date and (ii) in respect of each Fixed Rate Loan, on the last day of each Interest Period applicable to such Loan and on any prepayment (on the amount prepaid), and, in the case of all Loans, on the Termination Date, and, after maturity, upon demand. -16- 17 SECTION 2.7 INTEREST PERIODS. At the time it gives any Notice of Borrowing, a Borrower shall have the right to elect by giving the Bank written notice (or telephonic notice promptly confirmed in writing) the interest period (each an "Interest Period") applicable to such Loan, which Interest Period shall (w) in the case of Prime Loans, be a period of from 1 day to 90 days, (x) in the case of CD Loans, be either a 30, 60 or 90 day period, (y) in the case of Eurodollar Loans, be either a one, two or three month period, and (z) in the case of Bid Loans; be the same period as requested by such Borrower at the time it contacts the Bank for a quote of a Bid Rate pursuant to the first sentence of Section 2.3(b). The determination of Interest Periods shall be subject to the following provisions: (i) The Interest Period for any Loan shall commence on the date of such Loan; (ii) If any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period in respect of a Eurodollar Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) No Interest Period shall extend beyond the Termination Date; and (iv) No Interest Period shall extend beyond any date upon which the Loans (or any portion thereof) are required to be prepaid pursuant to Section 2.14, unless the aggregate principal amount of Loans which are Prime Loans or which have Interest Periods which will expire on or before such date is equal to or in excess of the amount of such prepayment. SECTION 2.8 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that the Bank shall have determined (which determination shall, absent manifest error, be final, conclusive and binding) at any time: (i) that by reason of: (x) the requirements of Regulation D (excluding all reserves required under Regulation D to the extent included in the computation of the Quoted Rate or the CD Rate), (y) any change since the date of this Agreement in any applicable law or governmental rule, regulation, guideline, order or request (whether or not having the force of law) or any interpretation or administration thereof by any governmental authority, central bank or comparable agency (including the introduction of any new law or governmental rule, regulation, guideline, order or request) and/or (z) in the case of Eurodollar Loans, other circumstances affecting the Bank or the interbank Eurodollar market or the position of the Bank in such market (such as for example but not limited to a change in the official reserve requirements to the extent not provided for in clause (i) (x) above), the Quoted Rate, the CD Rate or the Bid Rate, as the case -17- 18 may be, shall not represent the effective pricing to the Bank for making, funding or maintaining the affected Fixed Rate Loan; or (ii) that the making or continuance of any Eurodollar Loan has become unlawful by compliance by the Bank in good faith with any law or any governmental rule, regulation, guideline, order or request, or has become impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, the Bank shall on such date give notice (by telephone confirmed in writing) of such determination to the Borrower which has requested or which has incurred such affected Fixed Rate Loan. Thereafter (x) in the case of clause (i), such Borrower shall pay to the Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Bank in its reasonable discretion shall determine) as shall be required to compensate or reimburse the Bank for the increased costs resulting from the circumstances described in such clause (i); provided, however, that the liability of the Borrowers to compensate or reimburse the Bank for increased costs resulting from a circumstance described in such clause (i) prior to the first demand by the Bank for such compensation or reimbursement shall be limited to those increased costs incurred in the one year period preceding the date of such demand (a written notice as to additional amounts owed the Bank pursuant to this clause (x), showing the basis for the calculation thereof, submitted to such Borrower by the Bank shall, absent manifest error, be final, conclusive and binding); and (y) in the case of clause (ii), take one of the actions specified in Section 2.8(b) as promptly as possible and, in any event, within the time period required by law, (b) At any time that any Fixed Rate Loan is affected by the circumstances described in Section 2.8(a), the Borrower which has requested or which has incurred such Fixed Rate Loan may (and, in the case of a Fixed Rate Loan affected by the circumstances described in Section 2.8(a)(ii) shall) either (x) if the affected Fixed Rate Loan is then being made pursuant to a Notice of Borrowing by giving the Bank telephonic notice (confirmed promptly in writing) thereof on the same date that such Borrower was notified by the Bank pursuant to Section 2.8(a) either (i) cancel such borrowing or (ii) require the Bank to make the requested Fixed Rate Loan as a Prime Loan or (y) if the affected Fixed Rate Loan is then outstanding, upon at least three Business Days' written notice to the Bank, require the Bank to convert the Fixed Rate Loan so affected into a Prime Loan. (c) In the event that the Bank shall have determined (which determination shall, absent manifest error, be final, conclusive and binding) on any date for determining the Quoted Rate for any Interest Period that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the applicable interest rate on the basis provided for in the definition of Quoted Rate, then the Bank shall on such date give -18- 19 notice (by telephone confirmed in writing) of such determination to the Borrower which has requested such affected Eurodollar Loan and, notwithstanding any other provision of this Agreement, the Bank shall have no obligation to make, and shall not make, the requested Eurodollar Loan unless the Borrower requesting such Eurodollar Loan agrees in writing on the date it is notified of such determination by the Bank to pay to the Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Bank in its reasonable discretion shall determine) as shall be required to cause the Bank to receive interest with respect to such affected Eurodollar Loan at a rate per annum which shall equal the effective pricing to the Bank to make such Eurodollar Loan plus the applicable percentage in excess of the Quoted Rate referred to in Section 2.6(c). (d) If the Bank determines at any time that any applicable law or governmental rule, regulation, guideline, order or request (whether or not having the force of law) concerning capital adequacy or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency (including the introduction of any new law or governmental rule, regulation, guideline, order or request), will have the effect of increasing the amount of capital required to be maintained by the Bank based on the existence of the Commitment or its obligations hereunder, then the Borrowers jointly and severally agree to pay to the Bank, upon its written demand therefor, such additional amounts as shall be required to compensate the Bank for the increased cost or reduced rate of return to the Bank as a result of such increase of capital; provided, however, that the liability of the Borrowers to compensate the Bank under this Section 2.8(d) prior to the first demand by the Bank for such compensation shall be limited to compensation for the increased cost or reduced rate of return incurred in the one year period preceding the date of such demand. In determining such amounts, the Bank will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that the Bank's determination of compensation owing under this Section 2.8(d) shall, absent manifest error, be final, conclusive and binding. SECTION 2.9 COMPENSATION. Each Borrower shall compensate the Bank with respect to any Fixed Rate Loan made or to be made to it, upon the Bank's written request (which request shall set forth the basis in reasonable detail for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by the Bank to lenders of funds borrowed by it to make or carry a Fixed Rate Loan to the extent not recovered by the Bank in connection with the re-employment of such funds), which the Bank may sustain: (i) if for any reason (other than a default by the Bank) a borrowing of a Fixed Rate Loan does not occur on a date specified therefor in a Notice of Borrowing, (ii) if any prepayment of a Fixed Rate Loan occurs on a date which is not the last day of an Interest Period applicable thereto, (iii) if any prepayment of a Fixed Rate Loan is not made on the date specified in a notice of prepayment given pursuant to Section 2.13 or (iv) as a consequence of (x) without duplication of any amounts paid pursuant to Section 2.6(e), any other default by such Borrower to repay a Fixed Rate Loan when required by the terms of this Agreement or (y) an election made by such Borrower pursuant to Section 2.8(b). For purposes of this Section 2.9, the rate of interest which the Bank shall be deemed -19- 20 to earn from the re-employment of funds shall be a rate of interest per annum, determined by the Bank in good faith, equal to the rate found at that point of the United States Treasury securities yield curve (determined with such interpolation as is necessary) for securities (if they were to be issued) with a term to maturity comparable to the Fixed Rate Loan in question, such yield curve to be constructed by the Bank using then current asking prices by dealers in United States treasury securities for the offering for sale of current issues (most recently auctioned) of Treasury Bills and converting such prices into yield rates. SECTION 2.10 COMMITMENT COMMISSION. The Borrowers jointly and severally agree to pay to the Bank a commitment commission (the "Commitment Commission") for the period from the date hereof until the Termination Date computed at the rate of 1/4 of 1 % per annum on the daily average unutilized portion of the Commitment; payable quarterly in arrears on each Quarterly Payment Date and on the Termination Date. SECTION 2.11 REDUCTION IN COMMITMENT. The Borrowers shall jointly have the right, at any time and from time to time, upon at least 30 Business Days' prior written notice to the Bank, to irrevocably reduce the unutilized portion of the Commitment, in whole or in part, provided that partial reductions shall be in the amount of $1,000,000 or an integral multiple thereof. SECTION 2.12 PAYMENTS ON NONBUSINESS DAYS. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, if a payment of principal has been so extended, interest shall be payable on such principal at the applicable rate during such extension; provided, however, in the event that the day on which any such payment relating to a Eurodollar Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day. SECTION 2.13 VOLUNTARY PREPAYMENTS. The Borrowers shall have the right to prepay the Loans in whole or in part, without premium or penalty, from time to time pursuant to this Section 2.13 on the following terms and conditions: (i) the Borrower prepaying a Loan shall give the Bank at its Principal Office at least three Business Days', in the case of a prepayment of Fixed Rate Loans, or one Business Day's, in the case of a prepayment of Prime Loans, prior written notice or telephonic notice (confirmed promptly in writing) of its intent to prepay, the amount of such prepayment and which Loans are to be prepaid; (ii) each prepayment shall be in a principal amount of $1,000,000 (or an integral multiple thereof) in the case of Fixed Rate Loans or $100,000 (or an integral multiple thereof) in the case of Prime Loans; and (iii) at the time of any prepayment of Fixed Rate -20- 21 Loans' such Borrower shall pay all interest accrued on the principal amount of such prepayment. It is understood that each prepayment of Fixed Rate Loans shall be subject to the provisions of Section 2.9. SECTION 2.14 MANDATORY PREPAYMENTS. The Borrowers agree to make a mandatory prepayment with respect to the Loans outstanding on each Quarterly Principal Payment Date, each such prepayment to be in a principal amount equal to the excess of (i) the aggregate principal amount of the Loans then outstanding (ii) the then Commitment (as calculated after giving effect to any reduction to the Commitment made on such Quarterly Principal Payment Date). SECTION 2.15 MANDATORY PREPAYMENT IN CERTAIN EVENTS. In the event that any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) at any time hereafter becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of capital shares of Reynolds entitled at the time of voting power in the election of directors of 50% or more, then the Bank, by written notice to the Borrowers, may at any time within 90 days after the occurrence of such event: (j) declare the principal of and accrued interest in respect of the Notes to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind and/or (ii) declare the Commitment terminated, whereupon the Commitment and the obligation of the Bank to make Loans shall terminate immediately and any accrued Commitment Commission shall forthwith become due and payable without any other notice of any kind. SECTION 2.16 METHOD AND PLACE OF PAYMENT. All payments under this Agreement and the Notes must be received by the Bank at its Principal Office not later than 2:00 p.m. (Cincinnati, Ohio time) on a Business Day in U.S. dollars and in immediately available funds in order to be credited on such date. If the Borrower fails to make any payment of principal, interest or other amount becoming due pursuant to the provisions of this Agreement or the Notes within 15 calendar days of the date due and payable, the Borrower also shall pay to the Bank a late charge equal to the lesser of five percent (5%) of the amount of such payment or $50. Such 15-day period shall not be construed in any way to extend the due date of any such payment. The late charge is imposed for the purpose of defraying the Bank's expenses incident to the handling of delinquent payments and is in addition to, and not in lieu of, the exercise by the Bank of any rights and remedies hereunder or under applicable laws and any fees and expenses of any agents or attorneys which the Bank may employ upon default. -21- 22 SECTION 2.17 NET PAYMENTS. All payments under this Agreement and the Notes shall be made without set-off or counterclaim and in such amounts as may be necessary so that all such payments (after deduction or withholding for or on account of any present or future taxes, levies, imposts, deductions, charges or withholdings (collectively, "Taxes")) shall not be less than the amounts otherwise specified to be paid under this Agreement and the Notes. A certificate as to any additional amounts payable to the Bank under Section 2.8 submitted to either of the Borrowers by the Bank shall show in reasonable detail the amount payable and the calculations used to determine in good faith such amount and shall, absent manifest error, be final, conclusive and binding. With respect to each deduction or withholding for or on account of any Taxes, each Borrower shall promptly furnish to the Bank such certificates, receipts and other documents as may be required (in the judgment of the Bank) to establish any tax credit to which the Bank may be entitled. SECTION 2.18 PLACE OF LOANS. All Loans made hereunder shall be disbursed from and be payable at the Bank's Principal Office, 201 East Fifth Street, Cincinnati, Ohio 45202. SECTION 2.19 IMMEDIATELY AVAILABLE DOLLARS. All borrowings and payments hereunder shall be in United States dollars and in immediately available funds. SECTION 2.20 FAILURE TO CHARGE NOT SUBSEQUENT WAIVER. The Borrower explicitly agrees that any decision by the Bank not to require payment of any fees and/or compensation for costs, or to reduce the amount of such fees and/or compensation for costs, for any Loan shall in no way limit the Bank's right to require full payment of any fees and/or compensation for costs for any Loan. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrowers make the following representations and warranties to the Bank, all of which shall survive the execution of this Agreement: SECTION 3.1 LEGAL STATUS. The Borrowers are corporations duly organized and incorporated, validly existing and in good standing under the laws of the State of Ohio; have the corporate power and authority to own their own assets and transact the business in which they are now engaged in or proposed -22- 23 to be engaged in, and are duly qualified to do business as foreign corporations and are in good standing under the laws of each other jurisdiction in which such qualification is required. The Borrowers have no subsidiaries or affiliates except as otherwise disclosed herein. SECTION 3.2 CORPORATE POWER AND AUTHORITY. The execution delivery, and performance by Borrowers of all of the Loan Documents have been duly authorized by all necessary corporate action and will not require any consent or approval of the stockholders of such corporations; do not contravene such corporations charters or by-laws; and, will not cause such corporations to be in default under any law, rule, regulation, order, writ, judgment, injunction, decree, determination, award, or any other indenture, agreement, lease or instrument. SECTION 3.3 NO VIOLATION. The making and performance by Borrowers of any of the Loan Documents does not violate any provision of law, statute or ordinance, or any rule or regulation promulgated pursuant thereto. SECTION 3.4 LEGALLY ENFORCEABLE AGREEMENT. This Agreement, and each of the other Loan Documents when delivered under this Agreement, have been duly authorized, executed and delivered; will be legal, valid and binding obligations of the Borrowers; and any Note created or to be issued hereunder by the Bank upon advances being made in accordance with the provisions of this Agreement, will be a valid and binding obligation of the Borrowers in accordance with its respective terms except to the extent that such obligation may be limited by the applicable bankruptcy, insolvency, and other similar laws affecting creditor's rights generally. SECTION 3.5 NO CONFLICT WITH REQUIREMENTS OF OTHER INSTRUMENTS. The Borrowers are not parties to any indenture, loan, credit agreement, or to any lease or other agreement or instrument, or subject to any charter or resolution which could (a) have a material adverse affect on the business, properties, assets, operations, or conditions, financial or otherwise, of the Borrowers, (b) affect the ability of the Borrowers to carry out their obligations under the Loan Documents to which they are parties or (c) result in the breach of or constitute a default under any such indenture, loan, credit agreement, lease or other agreement or instrument. The Borrowers are not in default in any respect in the performance, observance of fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument to which it is a party. -23- 24 SECTION 3.6 LITIGATION. There is no pending or threatened action or proceeding against or affecting the Borrowers before any court, governmental agency, arbitrator or administrative agency which may in any one case, or in the aggregate could, materially adversely affect the financial condition, properties, business or operations of the Borrowers or the ability of the Borrowers to perform their obligations under any of the Loan Documents, other than those heretofore disclosed by the Borrowers to the Bank in writing. SECTION 3.7 CORRECTNESS OF FINANCIAL STATEMENTS. The audited financial statements dated as of September 30, 1993, and the interim financial statements for the 9-month period ending June 30, 1994, and related documents heretofore delivered and furnished by the Borrowers to the Bank fairly present the financial condition of the Borrowers, and have been prepared in accordance with GAAP consistently applied. As of the date of such financial statement(s), and since such date, there has been no material adverse change in the condition (financial or otherwise), business, or operations of the Borrowers, nor have the Borrowers mortgaged, pledged or granted a security interest in or encumbered any of the Borrower's assets or properties since such date, except as otherwise disclosed to the Bank in writing. There are no liabilities of the Borrowers, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising or incurred during the course of business since the date of such financial statement(s). No information, exhibit, or report furnished by the Borrowers to the Bank in connection with the negotiation of this Agreement contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statement contained therein not materially misleading. SECTION 3.8 TITLE TO PROPERTY AND ASSETS. The Borrowers have good and marketable title to all of their property and assets, real and personal, including the properties and assets and leasehold interests reflected in the financial statement referred to in Section 5.8 herein, subject only to the existing liens, mortgages, pledges, encumbrances or charges as described in the financial statements delivered pursuant to Section 5.8 herein, as otherwise disclosed by the Borrowers to the Bank in writing, or which may be permitted pursuant to Section 6.2 herein. The Borrowers have no liabilities, contingent or otherwise, except as disclosed on such financial statement(s) (including borrowings with other banks) or as otherwise disclosed by the Borrowers to the Bank in writing. Excepted herefrom are liens for taxes not yet due and.payable and minor liens of an immaterial nature. -24- 25 SECTION 3.9 DEBT. Borrowers shall, upon reasonable request of Bank, provide to Bank, a complete and correct list of all credit agreements, indentures, purchase agreements, guarantees, capital leases, and other investments, agreements and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which the Borrowers are in any manner directly or contingently obligated; and the maximum principal or face amounts of the credits in question, which are outstanding and which can be outstanding, are correctly stated, and all mortgages, deed of trusts, pledges, Liens, security interests or other charges or encumbrances of any nature given or agreed to be given as security therefore shall be correctly described or indicated in said list provided to Bank. SECTION 3.10 TAXES. The Borrowers have filed all Federal, State and local tax returns required to be filed and have paid all taxes, assessments and governmental charges and levies thereon shown to be due on such returns, and have made provisions for all liabilities not so paid or accrued under returns not yet due. The Borrowers have no knowledge of any pending assessments or adjustments of any tax payable with respect to any year, except those which are being contested in good faith or where there is a bona fide dispute. The Borrowers have paid all premiums due under all applicable workers compensation and unemployment compensation laws. Excepted herefrom are such taxes, as are being contested in good faith and by proper proceedings and as to which adequate reserves have been maintained. SECTION 3.11 NAME RIGHTS, LICENSES, FRANCHISES, ETC. The Borrowers possess, and so long as any amount of credit pursuant hereto remains unpaid or available, will continue to possess all permits, trade memberships, franchises, contracts, licenses, trademarks, trademarks hereafter obtained and all trademark rights, trade names, trade name rights, patents, patent rights, and fictitious name rights necessary to enable them to conduct the business in all material respects in which they are now engaged and as presently proposed to be conducted, without conflict or violation of any valid rights of others with respect to the foregoing. Nothing in this Section, however, shall prevent the Borrowers from failing to renew or from entering into additional permits, trade memberships, franchises, contracts, licenses, trade marks, trade mark rights, trade names, trade name rights, patents, patent rights and fictitious names rights if in the judgment of the Borrower reasonably exercised such action is advisable for business purposes and will not materially and adversely effect the business in which they are engaged. -25- 26 SECTION 3.12 USE OF LOAN PROCEEDS WILL NOT VIOLATE FEDERAL RESERVE BOARD REGULATIONS. The Borrowers will not use any portion of the proceeds of any Loan for the purpose of purchasing or carrying any margin stock within the meaning the Regulation G, T, U or X of the Board of Governors of the Federal Reserve System (herein called "Margin Stock"), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of Regulation U or X, or in any manner which might involve any Bank in a violation of Regulation U or Regulation X, or cause this Agreement or any transaction contemplated hereby to violate Regulation U, Regulation X or any other regulation of the Board of Governors of the Federal Reserve System, or under the Securities Exchange Act of 1934, each as now in effect or as the same may hereafter be in effect. SECTION 3.13 NO GOVERNMENT APPROVAL REQUIRED. The Borrowers' execution and performance of the Loan Documents does not require the approval, filing or notice to any government, governmental agency, administrative authority or instrumentality, as a condition to the validity of any of the Loan Documents. SECTION 3.14 CONSIDERATION OF TRANSACTION. The Loan Documents executed pursuant hereto are all entered into for valuable consideration received to the full satisfaction of the Borrowers. SECTION 3.15 LABOR RELATIONS. The Borrowers' labor relations are satisfactory and no dispute, lockout, labor dispute or litigation presently exists or is contemplated or anticipated which would materially and adversely affect the Borrowers' operations. SECTION 3.16 ERISA. The Borrowers are in compliance in all material respects with all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred and is continuing with respect to any Plan; no notice of intent to terminate a Plan has been filed nor has any Plan been terminated for which there are any unfunded outstanding liabilities; no circumstances exists which constitute grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administrate, a Plan, nor has the PBGC instituted any such proceedings; neither the Borrowers nor any ERISA affiliate have completely or partially withdrawn under Section 4201 or 4204 of ERISA from a multiemployer Plan; the Borrowers, and each ERISA affiliate, have met its minimum funding requirement under ERISA with respect to all of its Plans and the present fair market value of all Plan assets exceeds the present value of all vested benefits under each Plan, as determined on the most recent valuation of the Plan assets and in accordance with the provisions of ERISA and the -26- 27 regulations thereunder for calculating the potential liability of the Borrowers or any ERISA affiliate to the PBGC or the Plan under Title IV of ERISA; and neither the Borrowers nor any ERISA affiliate has incurred any liability to the PBGC under ERISA. SECTION 3.17 ACTS OF GOD. Neither the business nor the properties of the Borrowers are affected by any fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of God or other casualty (whether or not covered by insurance) which materially or adversely affects such business or property or operation of the Borrowers. SECTION 3.18 NO SUBORDINATION. The obligations of the Borrowers to the Bank pursuant to this Agreement or any of the Loan Documents are not subordinated in any manner to any other obligation of the Borrowers. SECTION 3.19 REPRESENTATIONS AND COVENANTS RELATING TO ENVIRONMENTAL LAWS AND REGULATIONS. (a) To the Borrowers knowledge, the Borrowers are in material compliance with all state and federal laws and regulations pertaining to environmental protection, the violation of which would have a material effect on the Borrower's business. The Borrowers have not received any written or oral communication or notice from any court or governmental agency nor are they aware of any investigation by any agency for any material violation of any environmental protection law or regulation. (b) The Borrowers agree to comply with all applicable requirements in effect from time to time of all federal, state, local and other governmental authorities with respect to environmental protection. (c) The Borrowers further agree promptly to notify the Bank of any environmental proceedings brought or threatened by any state or federal agency against the Borrower, and the Borrowers hereby agree to indemnify and hold the Bank harmless from and against any claim which may be brought against the Bank by any state or federal agency by reason of the Bank being a lender to the Borrower. (d) The Borrowers agree further that, in view of recent environmental litigation involving bank lenders, the Borrowers waive any right and agree to assert no claim against the Bank which might otherwise arise or be claimed by the Borrowers, should the Bank elect to forego its rights to seek satisfaction of Borrower's obligations to Bank from any of Borrower's real estate for the reason that enforcement of such rights might expose the Bank to liability for Hazardous Materials upon such real estate under federal or state environmental laws or regulations. -27- 28 (e) For purposes of this paragraph, "Hazardous Materials" includes, without limit, any flammable explosives, radioactive materials, hazardous materials defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 9601 et seq.), and in the regulations adopted and publications promulgated pursuant thereto, or any other federal, state or local environmental law, ordinance, rule, or regulation. The provisions of this Section shall be in addition to any and all other obligations and liabilities the Borrower may have to the Bank at common law, and shall survive the transactions contemplated herein. ARTICLE IV CONDITIONS PRECEDENT The obligation of the Bank to make any Loan to Borrowers and to enter into this Agreement is conditioned upon the satisfaction of each of the following conditions precedent on or before the day of each Loan or advance hereunder, in form and substance satisfactory to the Bank: SECTION 4.1 COMPLIANCE. The representations and warranties contained herein shall be true on and as of the date of the closing of this Agreement and at the time of any advance hereunder with the same effect as though such representations and warranties had been made on and as of such date, and on such date no Event of Default, and no condition, event or act which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default, shall have occurred and be continuing or shall exist. SECTION 4.2 DOCUMENTATION. The Borrowers shall deliver to the Bank on or before the date of this Agreement the following, in form and substance satisfactory to the Bank and Bank's counsel: (a) Properly executed Notes in accordance with the provisions of Article II herein; (b) Certified (as of the date of this Agreement) copies of all corporate action taken by the Borrowers, including resolution of their Board of Directors, authorizing the execution, delivery and performance of the Loan Documents and every other document to be delivered pursuant to this Agreement; (c) Incumbency certificate (dated as of the date of this Agreement) signed by Secretary of the Borrowers for each person executing on behalf of the Borrowers any of the Loan Documents required hereby; -28- 29 (d) Certified copies of the Borrowers current Articles and Regulations; (e) A favorable opinion of counsel for the Borrowers as to the matters referred to in this Agreement, in form and substance satisfactory to the Bank; and (f) A support letter (the "Support Letter") from Reynolds in favor of the Bank regarding its ownership and capitalization of Reyna. SECTION 4.3 OTHER DOCUMENTATION. Such other approvals, opinions and documents as the Bank may reasonably request in order to effect fully the purposes of this Agreement. ARTICLE V AFFIRMATIVE COVENANTS The Borrower covenants that so long as any Note shall remain unpaid or the Bank could have any obligation to lend hereunder: SECTION 5.1 TO PAY NOTES. Borrower will punctually pay or cause to be paid the principal and interest (and Make-Whole Amount, if any) to become due in respect of the Notes according to the terms thereof. SECTION 5.2 MAINTENANCE OF BORROWER OFFICE. Borrower will maintain an office or agency at 115 S. Ludlow St., Dayton, OH 45402 (or such other place in the United States of America as the Borrower may designate in writing to the holder hereof) where notices, presentations and demands to or upon Borrowers may be given or made. SECTION 5.3 TO KEEP BOOKS. Borrower will, and will cause each of its Restricted Subsidiaries to, keep proper books of record and account in accordance with generally accepted accounting principles. SECTION 5.4 PAYMENT OF TAXES; CORPORATE EXISTENCE: Borrower will, and will cause each of its Restricted Subsidiaries to: A. Pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it, its income or profit or its property before the same shall become in -29- 30 default, as well as all lawful claims and liabilities of any kind (including claims and liabilities for labor, materials and supplies) which, if unpaid, might by law become a Lien upon its property; provided, however. that neither the Borrower nor any Restricted Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or any such Restricted Subsidiary shall have set aside on its books reserves in respect thereof (segregated to the extent required by generally accepted accounting principles) deemed adequate in the opinion of the Chief Financial Office or Treasurer of the Borrower; and B. Subject to Section 6.5, do all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that neither the Borrower nor any Restricted Subsidiary shall be required to preserve any right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in its conduct of business. SECTION 5.5 TO INSURE. Borrower will, and will cause each of its Restricted Subsidiaries to: A. Keep all of its insurable properties owned by it insured against all risks usually insured against by persons operating like properties in the localities where the properties are located, all in amount sufficient to prevent the Borrower or such Restricted Subsidiary, as the case may be, from becoming a coinsurer within the terms of the policies in question, but in any event in amounts not less than 80% of the then full replacement value thereof; B. Maintain public liability insurance against claims for personal injury, death or property damage suffered by others upon or in or about any premises occupied by it or occurring as a result of its maintenance or operation of any airplanes, automobiles, trucks or other vehicles or other facilities (including, but not limited to, any machinery used therein or thereon) or as the result of the use of products sold by it or services rendered by it; C. Maintain such other types of insurance with respect to its business as is usually carried by persons of comparable size engaged in the same or a similar business and similarly situated; and D. Maintain all such workers' compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business. All insurance for which provision has been made in Section 5.5B and Section 5.5C shall be maintained in at least such amounts as such insurance is usually carried by persons of comparable size engaged in the same or a similar business and similarly situated; and all insurance herein provided for shall be effected under a valid and enforceable policy or policies issued by insurers of recognized responsibility, except that the Borrower or any such Restricted Subsidiary may effect (i) workers' compensation or other similar insurance in respect of -30- 31 operations in any state or other jurisdiction either through an insurance fund operated by such state or other jurisdiction or by causing to be maintained a system or systems of self-insurance which are in accordance with applicable laws, and (ii) all other insurance required by Section 5.5B and 5.5C through a system of self-insurance maintained in accordance with the Borrowers' current practices. SECTION 5.6 CONDUCT OF BUSINESS. Continue to engage in an efficient and economical manner in the business of the same general type as now conducted by the Borrower. Provided, however, that nothing contained in this Section shall prevent the Borrower from discontinuing any part of the business of the Borrower if the discontinuance would not result in a material adverse change to the business of Borrower. SECTION 5.7 MAINTENANCE OF PROPERTIES. Maintain, keep and preserve all of their properties (tangible and intangible) real, chattel and otherwise, in good order and working condition and from time to time make necessary repairs, renewals and replacements thereto in order that such properties are fully and efficiently preserved and maintained. SECTION 5.8 FINANCIAL STATEMENTS. Borrowers will deliver to the Bank in duplicate: (a) as soon as practicable, and in any event within 60 days after the end of each quarterly period (excluding the last quarterly period) in each fiscal year of Borrower: (1) each Borrower's Quarterly Report on Form 10-Q filed with the S.E.C. with respect to such quarterly period; (2) the consolidated statements of earnings, stockholders' equity and changes in financial position of Borrower and its Restricted Subsidiaries for such period and for that part of the fiscal year ended with such quarterly period and the consolidated balance sheet of Borrower and its Restricted Subsidiaries as at the end of such period; and (3) the statements of earnings, stockholders' equity and changes in financial position of Reyna for such period and for that part of the fiscal year ended with such quarterly period and the balance sheet of Reyna as at the end of such period; -31- 32 setting forth in each case in comparative form the corresponding figures as at the end of and for the corresponding period of the preceding fiscal year, all in reasonable detail, prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of previous years (except as otherwise stated therein or in the notes thereto and except that footnotes shall not be required) and certified by the Chief Financial Officer, the Chief Accounting Officer or the Treasurer of Borrower as presenting fairly the financial condition and results of operations of Borrower and its Restricted Subsidiaries as at the end of and for the fiscal periods to which they relate, subject to Borrowers' year-end adjustments; (b) as soon as practicable, and in any event within 90 days after the end of each fiscal year: (1) Borrower's Annual Report on Form 10K filed with the S.E.C. with respect to such fiscal year; (2) the consolidated balance sheet and related consolidated statements of earnings, stockholders' equity and changes in financial position of Borrower and its Subsidiaries; (3) the balance sheet and related statements of earnings, stockholders' equity and changes in financial position of Reyna; and (4) the consolidated balance sheet and related consolidated statements of earnings, stockholders' equity and changes in financial position of Borrower and its Restricted Subsidiaries; each as at the end of and for such year, setting forth in each case in comparative form the corresponding figures of the previous fiscal year, all in reasonable detail, prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of previous years (except otherwise stated therein or in the notes thereto) and certified by the Chief Financial Officer, the Chief Accounting Officer or the Treasurer of Borrower as presenting fairly the financial condition and results of operations and changes in financial position of Borrower and its Subsidiaries and Reyna, respectively, as at the end of and for the fiscal year to which they relate, and, with respect to the reports delivered pursuant to clauses (2) and (3) above, accompanied by a report or opinion of independent certified public accountants of recognized national standing selected by Borrower stating that such financial statements present fairly the consolidated financial condition and results of operations and changes in financial position of Borrower and its Subsidiaries and Reyna, respectively, in accordance with generally accepted accounting principles consistently applied (except for changes with which such accountants concur) and that the examinations of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards; -32- 33 (c) concurrently with the financial statements delivered pursuant to Section 5.8(b)(2) and (3), the written statement of said accountants that in making the examination necessary for their report or opinion on said financial statements they have obtained no knowledge of any Event of Default or default by any Borrower in the fulfillment of any of the terms, covenants, provisions or conditions of this Agreement or the Loan Documents or, if such accountants shall have obtained knowledge of any such default or Event of Default, they shall disclose in such statement the default or defaults or Event or Events of Default and the nature and status thereof, but such accountants shall not be liable, directly or indirectly, to anyone for any failure to obtain knowledge of any such default or Event of Default; (d) concurrently with the financial statements delivered pursuant to Section 5.8(b), a certificate of the Chief Financial Officer, the Chief Accounting Officer or Treasurer of Borrower; (1) [intentionally omitted] (2) stating that a review of the activities of Borrower and its Subsidiaries during the preceding fiscal year has been made under his supervision to determine whether Borrowers have fulfilled all of their obligations under this Agreement and the Loan Documents; and (3) stating that, to the best of his knowledge, Borrower is not and has not been in default in the fulfillment of any of the terms, covenants, provisions or conditions of this Agreement or the Loan Documents and no Event of Default exists or existed or, if any such default or Event of Default exists or existed, specifying such default or Event of Default and the nature and status thereof; (e) promptly after the formation or acquisition of a Subsidiary, written notice thereof, including the name of such Subsidiary, its jurisdiction of incorporation, a brief description of its business, and whether it has been designated as a Restricted Subsidiary and, if so designated, a certificate of a principal financial officer of the Borrower showing compliance with Section 6.4C hereof; (f) as soon as practicable, copies of all such financial statements, proxy statements and reports as the Borrower or any of its Subsidiaries shall send or make available generally to its security holders and all registration statements (other than on Form S-8) and regular periodic reports, if any, which it or any of its Subsidiaries may file with the Securities and Exchange Commission or any governmental agency or agencies substituted thereof or with any national securities exchange; -33- 34 (g) immediately after the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller or any Executive Vice President, Assistant Treasurer or Assistant Controller of Borrower becomes aware of the existence of a condition, event or act which constitutes an Event of Default or an event of default under any other evidence of Indebtedness of Borrower or any Restricted Subsidiary, or which, with notice or lapse of time or both, would constitute such an Event of Default or event of default, a written notice specifying the nature and period of existence thereof and what action Borrower or such Restricted Subsidiary, as the case may be, is taking or proposes to take with respect thereto; (h) immediately after the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller or any Executive Vice President, Assistant Treasurer or Assistant Controller of Borrower becomes aware of the occurrence of any (1) "reportable event, as defined in Section 4043 of ERISA, or (2) nonexempted "prohibited transaction," as defined in Sections 406 and 408 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended, in connection with any "employee pension benefit plan," as defined in Section 3 of ERISA, or any trust created thereunder, a written notice specifying the nature thereof, what action Borrower is taking or proposes to take with respect thereto and, when known, any action taken by the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect thereto; and (i) such other information as to the business and properties of Borrower and its Subsidiaries, including consolidating financial statements of Borrower and its Restricted Subsidiaries, and financial statements and other reports filed with any governmental department, bureau, commission or agency, as the Bank may from time to time reasonably request. SECTION 5.9 COMPLIANCE WITH LAWS. Comply in all respects with all applicable laws, rules, regulations and orders. SECTION 5.1O NOTICE OF LITIGATION. Promptly after the commencement thereof, give notice to the Bank of any actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Borrower, which, if determined adversely to the Borrower, could have a material adverse affect on the financial condition of Borrower. SECTION 5.11 NOTICE TO THE BANK. Promptly give notice in writing to the Bank of: -34- 35 (a) Any change in the name, trade name, address, identity or corporate structure of the Borrower; (b) Any uninsured or partially uninsured loss through fire, theft, liability or property damage to the property of the Borrower which has a material adverse affect on the business of Borrower; (c) Any condition, event or act which constitutes an Event of Default, or which, with the giving of notice or lapse of time, or both could or would constitute an Event of Default, by delivering to the Bank the certificate of the Treasurer or Chief Financial Officer of the Borrower specifying such condition, event or act, the period of existence thereof, and what action the Borrower proposes to take with respect thereto; (d) The filing or receiving thereof, along with copies of all reports, including annual reports, and notices, which the Borrowers file with or receive from the PBGC or the U.S. Department of Labor under ERISA, as soon as possible and in any event with thirty (30) days after the Borrowers know or have reason to know that any Reportable Event or Prohibited Transaction has occurred with respect to any Plan or the PBGC or the Borrowers have instituted or will institute proceedings under Title IV of ERISA to terminate any Plan, along with a certificate of the Chief Financial Officer or Treasurer of the Borrower setting forth details as to such Reportable Event of Prohibited Transaction or Plan termination and the action the Borrower proposes to take with respect thereto. (e) The sending or filing thereof, along with copies of all proxy statements, financial statements, and reports which the Borrowers send to their stockholders, and copies of all regular, periodic, and special reports, and all registration statements which the Borrowers file with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange; (f) Any other event or fact which materially and adversely may affect the financial or operating conditions of the Borrower or the condition of any collateral pledged as security hereunder; or (g) Such other information respecting the condition or operations, financial or otherwise, of the Borrower as the Bank may from time to time reasonably request. SECTION 5.12 RIGHT OF INSPECTION. At any reasonable time and from time to time, permit the Bank or any agent or representative thereof to examine and make copies of and abstracts from the records and books -35- 36 of account of, and visit the properties of the Borrower, and to discuss affairs, finances and accounts of the Borrower with any of their respective officers and directors and the Borrower's independent accountants. The Bank agrees to comply with any reasonable security regulations of the Borrowers. The Bank shall notify the Borrower in advance of any discussion between the Bank and the Borrower's independent accountants, and the Borrower shall have the right to be present during such discussions. The Bank agrees to use its best efforts to maintain the confidentiality of the information obtained by the Bank or its agents, except as otherwise required by the Bank's examining authorities or by legal process and except as necessary for the enforcement of its rights under this Agreement. SECTION 5.13 COMPLIANCE WITH LAWS AND REGULATIONS. Comply with all laws and regulations of any applicable jurisdiction with which the Borrowers are required to comply including, without limitation, worker's compensation laws, the Occupational Safety and Health Act of 1970, as amended, and the Environmental Protection Act, as amended. In addition, the Borrower shall maintain material compliance with all state and federal laws and regulations pertaining to environmental protection. ARTICLE VI NEGATIVE COVENANTS OF THE REYNOLDS AND REYNOLDS COMPANY The Reynolds and Reynolds Company ("Reynolds") further covenants that so long as any Note remains unpaid or the Bank may have an obligation to lend hereunder: SECTION 6.1 INDEBTEDNESS. Neither Reynolds nor any Restricted Subsidiary will create, assume or incur, or in any manner become liable, contingently or otherwise, in respect of, any indebtedness other than: A. Indebtedness represented by the Notes; and B. Indebtedness in an amount such that, at the time of the creation, assumption or incurrence thereof and immediately after giving effect thereto Consolidated Indebtedness shall not exceed 60% of Consolidated Tangible Capitalization. -36- 37 SECTION 6.2 LIENS. Neither Reynolds nor any Restricted Subsidiary will: A. Create, assume, incur or suffer to exist any Lien upon (or, whether by transfer to any Subsidiary or Affiliate or otherwise, subject, or permit any Subsidiary or Affiliate to subject, to the prior payment of any Indebtedness other than that represented by the Notes) any property or assets (real or personal, tangible or intangible, including, without limitation, any stock or other securities of a Restricted Subsidiary) of Reynolds or any Restricted Subsidiary, whether now owned or hereafter acquired, or any income or profits therefrom; B. Own or acquire or agree to acquire any property or assets (real or personal, tangible or intangible) subject to or upon any Lien; or C. Suffer to exist any Indebtedness of Reynolds or any Restricted Subsidiary (except as and to the extent permitted by Section 5.4A or claims or demands against Reynolds or any Restricted Subsidiary, which, Indebtedness, claims or demands, if unpaid, might (in the hands of the holder or anyone who shall have guaranteed the same or who has any right or obligation to purchase the same), by law or upon bankruptcy or insolvency or otherwise, be given any priority whatsoever over its general creditors; provided, however, that the foregoing restrictions shall not prevent: (1) Reynolds or any Restricted Subsidiary from suffering to exist the Liens existing on September 30, 1993 which are listed on Exhibit C to this Agreement; and extensions or renewals thereof upon the same property theretofore subject thereto without increasing the principal amount of Indebtedness then secured thereby; or (2) Reynolds or any Restricted Subsidiary: (i) from making pledges or deposits under workmens' compensation laws, unemployment insurance laws or similar legislation or good faith deposits in connection with bids, tenders, contracts (other than for the repayment of money borrowed) or under leases to which Reynolds or such Restricted Subsidiary is a party; (ii) from making deposits to secure public or statutory obligations of Reynolds or such Restricted Subsidiary or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which Reynolds or such Restricted Subsidiary is a party, or deposits in lieu of such bonds; -37- 38 (iii) from incurring Liens or priorities imposed by law, such as laborers', other employees, carriers', warehousemen's, mechanics', materialmen's and vendors' liens or priorities, and Liens arising out of judgments or awards against Reynolds or such Restricted Subsidiary with respect to which Reynolds or such Restricted Subsidiary at the time shall be prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review; or (iv) from entering into leases and from incurring landlords' liens on fixtures and movable property located on premises leased in the ordinary course of business so long as the rent secured thereby is not in default; or (3) Reynolds or any Restricted Subsidiary from creating or incurring or suffering to exist (i) Liens for taxes or import duties not yet subject to penalties for nonpayment or the nonpayment of which shall be permitted by the proviso to Section 5.4A; or (ii) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraphs and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties, which Liens, exceptions, encumbrances, easements, reservations, rights and restrictions do not, in the opinion of Reynolds, in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of Reynolds and its Subsidiaries; or (4) any Restricted Subsidiary from creating, incurring, assuming or suffering to exist any Lien solely to secure indebtedness owing to Reynolds or any Wholly-owned Restricted Subsidiary; or (5) Reynolds or any Restricted Subsidiary from creating, incurring, assuming or suffering to exist Liens not otherwise permitted by the foregoing clauses 1 through 4, inclusive, of this Section 6.2; provided, however, that at the time of the creation, incurrence or assumption thereof, and immediately after giving effect thereto and to the Indebtedness secured or evidenced thereby, (i) the then outstanding aggregate amount of Priority Indebtedness shall not exceed 15% of the Consolidated Tangible Capitalization; and (ii) Reynolds could incur at least $1 of additional indebtedness in compliance with Section 6.1B. -38- 39 SECTION 6.3 RESTRICTED PAYMENTS. Reynolds will not, directly or indirectly: A. Declare or pay any dividend or make any other distribution (whether by reduction of capital or otherwise) on any shares of any class of its capital stock (other than a dividend or distribution payable in shares of common stock of Reynolds); or B. Purchase, redeem, retire or otherwise acquire, or cause or permit any Subsidiary to purchase, otherwise acquire or make any payment in respect of, any such shares; or C. Make, or permit any Restricted Subsidiary to make, any Restricted Investment; unless immediately after giving effect to any such action, Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B and the sum of: (1) The aggregate amount of all such dividends and distributions (other than dividends or distributions payable in shares of common stock of Reynolds) declared, paid or made subsequent to September 30, 1993; (2) the excess, if any, of (i) the aggregate amount of all such purchases, redemptions, retirements, acquisitions and payments made subsequent to September 30, 1993 over (ii) the net cash proceeds received after September 30, 1993 from the sales (other than to a Subsidiary) of shares of capital stock of Reynolds; and (3) the Aggregate Amount of Restricted Investments made subsequent to September 30, 1993; does not exceed $40,000,000 plus 60% (or minus 100% in the case of a deficit) of Consolidated Net Income accrued subsequent to September 30, 1993. All dividends, distributions, purchases, redemptions, retirements, acquisitions and payments (other than Restricted Investments) made pursuant to this Section 6.3 in property other than cash shall be included for purposes of calculations pursuant to this Section 6.3 at the fair market value thereof (as determined in good faith by the Board of Directors) at the time of declaration of such dividend or at the time of making such distribution, purchase, redemption, retirement, acquisition or payment. SECTION 6.4 RESTRICTIONS ON RESTRICTED SUBSIDIARIES. A. Reynolds will not cause, suffer or permit any Restricted Subsidiary to: (1) issue or dispose of any shares of such Restricted Subsidiary's capital stock to any Person other than Reynolds or a Wholly-owned Restricted Subsidiary, except to -39- 40 the extent that any such shares are required to qualify directors under any applicable law or required to be issued to other stockholders of such Subsidiary by virtue of their exercise of preemptive rights or as their pro rata share of any stock dividend; or (2) sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of another Restricted Subsidiary, or any Indebtedness owing to such Subsidiary from another Restricted Subsidiary, to any Person other than Reynolds or a Wholly-owned Restricted Subsidiary, except in connection with a transaction which complies with Section 6.4B; or (3) sell, assign, lease, transfer or otherwise dispose of any of such Restricted Subsidiary's properties and assets to any Person or consolidate with or merge into any other Person or permit any other Person to merge into it; provided, however, that: (i) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any of its properties and assets if such sale, lease, transfer or disposition is not prohibited by the provisions of Section 6.5B, except that a Restricted Subsidiary may not sell all or substantially all of its properties and assets unless such sale is for cash in an amount not less than the fair market value of such properties and assets and unless: (a) such sale will not materially and adversely affect the conduct of the business of Reynolds or any of its other Restricted Subsidiaries; (b) such Restricted Subsidiary does not own any Indebtedness of Reynolds or capital stock or any Indebtedness of any other Restricted Subsidiary not simultaneously being disposed of in compliance with Section 6.4B; and (c) at the time of such transaction and immediately after giving effect thereto (x) no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing, and (y) Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B, and (z) the aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidated Tangible Capitalization; (ii) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of all or any part of its properties and assets to, or consolidate with or merge into, Reynolds (subject to the provisions of Section 6.5) or a Wholly-owned Restricted Subsidiary; and -40- 41 (iii) any Restricted Subsidiary may permit another person to merge into it provided that the requirements of clause (i)(c) of this Section 6.4A are complied with and immediately after such merger said Restricted Subsidiary is a Wholly-owned Restricted Subsidiary. B. Reynolds will not sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of any Restricted Subsidiary or any Indebtedness owing from any Restricted Subsidiary to Reynolds, except, in the case of share of capital stock, to the extent, if any, required to qualify directors of such Restricted Subsidiary under any applicable law; provided, however, that all shares of capital stock of all classes, together with all Indebtedness, of any Restricted Subsidiary owned by Reynolds and/or one or more Restricted Subsidiaries may be sold as an entirety if such sale, if treated as a sale of such Subsidiary's assets made by such Subsidiary, would not be prohibited by the provisions of Section 6.4A(i). C. Reynolds will not designate any Subsidiary as a Restricted Subsidiary unless it is so designated by resolution of the Board of Directors and: (1) such corporation shall have outstanding only such Indebtedness and Liens as it would then have been permitted to create, incur or assume in compliance with Section 6.1 and Section 6.2; (2) Reynolds and/or one or more Wholly-owned Restricted Subsidiaries shall own, directly or indirectly, all outstanding capital stock of such corporation having any preference as to dividends or upon liquidation, and all rights, options and warrants to acquire any such preference stock; and (3) immediately after such designation, no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing. Any subsidiary so designated as a Restricted Subsidiary may not thereafter cease to be a Restricted Subsidiary. SECTION 6.5 MERGER, CONSOLIDATION, SALE OR LEASE. A. Reynolds will not consolidate with or merge into any Person, or permit any Person to merge into it, or sell, lease, transfer or otherwise dispose of all or substantially all of its properties and assets, unless: (1) the successor formed by or resulting from such consolidation or merger (if other than Reynolds) or the transferee to which such sale, lease, transfer or other disposition shall be made shall be a solvent corporation duly organized and existing under the laws of the United States of America or any State thereof; -41- 42 (2) the due and punctual performance and observance of all the obligations, terms, covenants, agreements and conditions of this Agreement and the Notes to be performed or observed by Reynolds shall, by written instrument furnished to the Bank, be expressly assumed by such successor (if other than Reynolds) or transferee; (3) at the time of such transaction and assumption, and immediately after giving effect thereto: (i) no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing; (ii) Reynolds or such successor or transferee, as the case may be, could incur at least $1 of additional indebtedness in compliance with Section 6.1B; and (iii) the aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidated Tangible Capitalization. B. Except as permitted in Section 6.5 above, Reynolds will not, directly or indirectly through one or more Subsidiaries, sell, assign, lease, transfer or otherwise dispose of (other than in the ordinary course of business) any of its properties and assets to any Person: (1) if the book value (net of related depreciation) of such asset, together with the book value (net of related depreciation) of all other assets of Reynolds and its Restricted Subsidiaries so disposed of in any fiscal year of Reynolds would constitute 10% or more of the book value (net of related depreciation) of all the assets of Reynolds and its Restricted Subsidiaries as of the last day of the fiscal year then most recently ended; or (2) if the sum of the Net Income (excluding a net deficit) for the three fiscal years of Reynolds most recently ended contributed by such asset and all other assets of the Borrower and its Restricted Subsidiaries so disposed of during any fiscal year of Reynolds would exceed 10% of Consolidated Net Income for such period of three fiscal years; or (3) if, with respect to any sale of accounts receivable, the proceeds of any such sale are not simultaneously applied to repay the senior debt on a pro rata basis or reinvested in operating assets of Reynolds within 12 months of the receipt thereof. -42- 43 SECTION 6.6 PURCHASE OF COMPANY NOTES. The Borrower will not, and will not permit any Subsidiary or Affiliate to, acquire directly or indirectly, by repurchase or otherwise, any of the outstanding Company Notes. SECTION 6.7 MAINTENANCE OF CONSOLIDATED EARNINGS RATIO. Reynolds shall not at any time permit Consolidated Earnings Available for Fixed Charges to be less than 175% of Fixed Charges. SECTION 6.8 MAINTENANCE OF CURRENT RATIO. Reynolds will not at any time permit Consolidated Current Assets to be less than 150% of consolidated Current Liabilities. SECTION 6.9 TRANSACTIONS WITH AFFILIATES. Reynolds will not, and will not permit any Restricted Subsidiary to, engage in any transaction with an Affiliate (other than Reynolds or a Restricted Subsidiary) on terms more favorable to the Affiliate than would have been obtainable in arm's length dealing in the ordinary course of business with a person not an Affiliate, provided that Reynolds or any Restricted Subsidiary may sell inventory to any Affiliate in the ordinary course of business at not less than book value. SECTION 6.10 REGULATIONS G, T, U AND X. Reynolds will not use the proceeds of any Loan hereunder, directly or indirectly, to purchase or carry any margin stock (within the meaning of Regulations G, T, U and X of the Board of Governors of the Federal Reserve System) or extend credit to others for the purpose of purchasing or carrying, directly or indirectly, any margin stock. ARTICLE VII NEGATIVE COVENANTS OF REYNA FINANCIAL CORPORATION SECTION 7.1 REYNA INDEBTEDNESS. A. Reyna will not at any time permit Reyna Consolidated Indebtedness to be greater than 700% of Reyna's Consolidated Tangible Net Worth. B. Reyna will not create, issue or otherwise become liable, directly or indirectly, in respect of any Indebtedness owing to Reynolds. -43- 44 SECTION 7.2 LIENS. Neither Reyna nor any Subsidiary will (i) create, assume, incur or suffer to exist any Lien upon, or, whether by transfer to any Subsidiary or Affiliate or otherwise, subject, or permit any Subsidiary or Affiliate to subject, to the prior payment of any Indebtedness other than that represented by the Notes, any property or assets (real or personal, tangible or intangible, including, without limitation, any stock or other securities of a Subsidiary or any Receivables) of Reyna or any Subsidiary, whether now owned or hereafter acquired, or any income or profits therefrom, (ii) own or acquire or agree to acquire any property or assets (real or personal, tangible or intangible) subject to or upon any Lien or (iii) suffer to exist any Indebtedness of Reyna or any Subsidiary (except as and to the extent permitted by Section 5.4A hereof) or claims or demands against Reyna and any Subsidiary, which Indebtedness, claims or demands, if unpaid, might (in the hands of the holder or anyone who shall have guaranteed the same or who has any right or obligation to purchase the same), by law or upon bankruptcy or insolvency or otherwise, be given any priority whatsoever over its general creditors; provided, however, that the foregoing restrictions shall not prevent: A. Reyna or any Subsidiary (i) from making pledges or deposits under workmen's compensation laws, unemployment insurance laws or similar legislation or good faith deposits in connection with bids, tenders, contracts (other than for the repayment of money borrowed) or under leases to which Reyna or such Subsidiary is a party, (ii) from making deposits to secure public or statutory obligations of Reyna or such Subsidiary or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which Reyna or such Subsidiary is a party or deposits in lieu of such bonds, (iii) from incurring Liens or priorities imposed by law, such as laborers' or other employees', carriers', warehousemen's mechanics', materialmen's and vendors' liens or priorities, and Liens arising out of judgments or awards against Reyna or such Subsidiary with respect to which Reyna or such Subsidiary at the time shall be prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review or (iv) from entering into leases and from incurring landlords' liens on fixtures and movable property located on premises leased in the ordinary course of business so long as the rent secured thereby is not in default; or B. Reyna or any Subsidiary from creating or incurring or suffering to exist (i) Liens for taxes not yet subject to penalties for nonpayment or the nonpayment of which shall be permitted by the proviso to Section 5.4A hereof of (ii) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines. telegraphs and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties, which Liens, exceptions, encumbrances. easements, reservations, rights and restrictions do not, in the opinion of Reyna, in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of Reyna and its Subsidiaries; or -44- 45 C. Any Subsidiary from creating, incurring, assuming or suffering to exist any Lien solely to secure Indebtedness owing to Reyna or any Wholly-owned Subsidiary; or D. Reyna from creating, incurring, assuming or suffering to exist any Lien securing Nonrecourse Debt; provided, however, that (i) such Lien shall be limited to the property financed by such Nonrecourse Debt and the lease or security agreement to which such property is subject and (ii) Reyna's Net Equity Investment in the Nonrecourse Receivable with respect to which such Nonrecourse Debt is incurred is in compliance with the provisions of Section 7.8 hereof; or E. Reyna from creating, incurring, assuming or suffering to exist any Lien securing Receivables to the extent such Receivables are required to be secured by the terms of any receivables transfer agreements to which Reyna is a party; provided, however, that the aggregate amount of Receivables secured by all such Liens shall not exceed $40,000,000. SECTION 7.3 RESTRICTION WITH RESPECT TO SUBSIDIARIES; AND MERGERS AND ASSET SALES BY BORROWER. A. Reyna will not cause, suffer or permit any Subsidiary to: (i) Issue or dispose of any shares of such Subsidiary's capital stock to any Person other than Reyna or a Wholly-owned Subsidiary, except to the extent that any such shares are required to qualify directors under any applicable law or required to be directors under any applicable law or required to be issued to other stockholders of such Subsidiary by virtue of their exercise of preemptive rights or as their pro rata share of any stock dividend; or (ii) Sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of another Subsidiary, or any Indebtedness owing to such Subsidiary from another Subsidiary or from Reyna, to any Person other than Reyna or a Wholly-owned Subsidiary, except in connection with a transaction which complies with Section 7.3B hereof; or (iii) Sell, assign, lease, transfer or otherwise dispose of any of such Subsidiary's properties and assets to any Person or consolidate with or merge into any other Person or permit any other Person to merge into it; provided, however, that (a) Any Subsidiary may sell, lease, transfer or otherwise dispose of any of its properties and assets if such sale, lease, transfer or disposition is for cash in an amount not less than the fair market value of such properties and assets and if (x) such sale will not materially and adversely affect the conduct of the business of -45- 46 Reyna or any of its Subsidiaries, (y) such subsidiary does not own any Indebtedness of Reyna or capital stock or any Indebtedness of any other Subsidiary not simultaneously being disposed of in compliance with Section 7.3B hereof, and (z) at the time of such transaction and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing; and (b) Any Subsidiary may sell, lease, transfer or otherwise dispose of all or any part of its properties and assets to, or consolidate with or merge into, Reyna or a Wholly-owned Subsidiary. B. Reyna will not sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of any Subsidiary or any Indebtedness owing from the Subsidiary to Reyna, except, in the case of shares of capital stock to the extent, if any, required to qualify directors of such Subsidiary under any applicable law; provided, however, that all shares of capital stock of all classes, together with all Indebtedness, of any Subsidiary owned by Reyna and/or one or more Subsidiaries may be sold as an entirety if such sale, if treated as a sale of such Subsidiary's assets made by such Subsidiary, would not be prohibited by the provisions of Section 7.3A(iii)(a) hereof. C. Reyna will not consolidate with or merge into any Person, or permit any Person to merge into it, or sell, lease, transfer, or otherwise dispose of a substantial part of its properties and assets. SECTION 7.4 MAINTENANCE OF LIQUID ASSETS. Reyna will at all times maintain its Liquid Assets in an amount greater than 100% of Consolidated Total Liabilities. SECTION 7.5 MAINTENANCE OF CONSOLIDATED TANGIBLE NET WORTH. Reyna will at all times maintain its Consolidated Tangible Net Worth in an amount not less than $15,000,000. SECTION 7.6 MAINTENANCE OF SEPARATE EXISTENCE. Reyna and Reynolds will at all times maintain their separate existence as independent entities and in furtherance thereof: A. Neither Reyna nor any Subsidiary will enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate except in the ordinary course of and pursuant to the reasonable requirements of Reyna's or such Subsidiary's business and upon terms at least as favorable to Reyna or such Subsidiary as would be obtainable from a third party not an Affiliate. -46- 47 B. Reyna and Reynolds will maintain separate and identifiable offices (except that Reyna may maintain offices within Reynolds' offices). C. Reyna will hold meetings of its shareholders and Board of Directors (or otherwise arrange for action by its shareholders and Board of Directors to be taken in accordance with appropriate procedures authorized by law) and maintain appropriate corporate books and records separate and apart from those of Reynolds; Reyna will not suffer any limitation on the authority of its own directors and officers to conduct its business and affairs in accordance with their own business judgment, and will not authorize or suffer any Person other than its officers (or authorized agents) and directors to act on its behalf with respect to matters for which a corporation's own officers and directors would customarily be responsible. D. In all business dealings with third parties, Reyna shall refer to itself and to the extent possible, shall cause others to refer to it, as a distinct entity from Reynolds, and will not treat itself or hold itself out, or, to the extent possible, permit others to treat it, as a department, division or similar unit of Reynolds. E. Reyna and Reynolds will maintain separate physical possession, in its separate records maintained in accordance with Section 7.6C hereof (or in such other manner as counsel to Reyna shall advise is sufficient to perfect the holder's security interest therein), of all chattel paper and other title retention or lien-creating instruments held by it from time to time. F. Reyna and its Subsidiaries will maintain capitalization adequate, in the judgment of their respective Boards of Directors, for the conduct of their respective businesses. G. Reyna will maintain bank accounts which are separate from the bank accounts of any Affiliate. SECTION 7.7 MAINTENANCE OF PRESENT BUSINESS. Reyna will not, and will not permit Reyna Leasing to, engage in any business other than the business in which it is engaged in on the date hereof. SECTION 7.8 LIMIT ON NET EQUITY INVESTMENTS. Reyna will not allow the aggregate amount of Reyna's Net Equity Investments in Non-Recourse Receivables at any time to exceed 5% of Total Assets as of such time. -47- 48 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 EVENTS OF DEFAULT. The Notes shall become and be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrowers, if one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or be 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); A. Default in the payment of any interest upon any Note when such interest becomes due and payable and continuance of such default for a period of five days; B. Default in the payment of principal of (or premium, if any, on) any Note when and as the same shall become due and payable, whether at maturity or at a date fixed for prepayment, or by acceleration or otherwise; or C. Default in the performance or observance of any covenant, agreement or condition contained in Section 6.1 to Section 6.10, or Section 7.1 to 7.8, inclusive and, in the case of such default under: (i) Section 6.2, the aggregate amount of Priority Indebtedness in excess of the amount of Priority Indebtedness permitted to be incurred in compliance with said Section 6.2(C)(5) does not exceed $500,000 for more than 30 days; and (ii) Section 6.8, or Section 7.4, continuance of such default for a period of 30 days; or D. Default in the performance or observance of any other covenant, agreement or condition contained in this Agreement or in the Loan Documents and continuance of such default for a period of 30 days after written notice thereof, specifying such default and requiring it to be remedied, shall have been given to the Borrower by the Bank; or E. The Borrower or a Restricted Subsidiary (i) shall not pay when due, whether by acceleration or otherwise, any evidence of indebtedness of the Borrower or such Restricted Subsidiary (other than the Notes), or (ii) (a) any condition or default shall exist under any such evidence of indebtedness or under any agreement under which the same may have been issued and (b) such evidence of indebtedness shall have been declared due prior to the stated maturity thereof; -48- 49 F. The Borrower or any Restricted Subsidiary shall file a petition seeking relief for itself under Title 11 of the United States Code, as now constituted or hereafter amended, or an answer consenting to, admitting the material allegations of or otherwise not controverting, or shall fail to timely controvert, a petition filed against the Borrower or such Restricted Subsidiary seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended; or the Borrower or any Restricted Subsidiary shall file such a petition or answer with respect to relief under the provisions of any other now existing or future bankruptcy, insolvency or other similar law of the United States of America or any State thereof or of any other country or jurisdiction providing for the reorganization, winding-up or liquidation of corporations or an arrangement, composition, extension or adjustment with creditors; or G. A court of competent jurisdiction shall enter an order for relief which is not stayed within 60 days from the date of entry thereof against the Borrower or any Restricted Subsidiary under Title 11 of the United States Code, as now constituted or hereafter amended; or there shall be entered an order, judgment or decree by operation of law or by a court having jurisdiction in the premises which is not stayed within 60 days from the date of entry thereof adjudging the Borrower or any Restricted Subsidiary a bankrupt or insolvent, or ordering relief against the Borrower or any Restricted Subsidiary, or approving as properly filed a petition seeking relief against the Borrower or any Restricted Subsidiary, under the provision of any other now existing or future bankruptcy, insolvency or other similar law of the United States of America or any State thereof or of any other country or jurisdiction providing for the reorganization, winding-up or liquidation or corporations or an arrangement, composition, extension or adjustment with creditors, or appointing a receiver, liquidator, assignee, sequestrator, trustee, custodian or similar official of the Borrower or any Restricted Subsidiary or of any substantial part of its property, or ordering the reorganization, winding-up or liquidation of its affairs; or any involuntary petition against the Borrower or any Restricted Subsidiary seeking any of the relief specified in this clause shall not be dismissed within 60 days of its filing; or H. The Borrower or any Restricted Subsidiary shall make a general assignment for the benefit of its creditors; or the Borrower or any Restricted Subsidiary shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, sequestrator, trustee, custodian or similar official of the Borrower or such Restricted Subsidiary or of all or any substantial part of its property; or the Borrower or any Restricted Subsidiaries shall have admitted to its insolvency or inability to pay, or shall have failed to pay, its debts generally as such debts become due; or the Borrower or any Restricted subsidiary or its directors or majority stockholders shall take any action looking to the dissolution or liquidation of the Borrower or such Restricted Subsidiary (other than as contemplated by Sections 6.4, 6.5 and 7.3); or I. The rendering against the Borrower or a Restricted Subsidiary of a final judgment, decree or order for the payment of money in excess of $1,000,000 and the continuance of such judgment, decree or order unsatisfied and in effect for any period of 60 consecutive days without a stay of execution; or -49- 50 J. The Borrower or any Restricted Subsidiary shall: (1) engage in any nonexempted "prohibited transaction", as defined in Sections 406 and 408 of ERISA and Section 4975 of the Internal Revenue Code of 1954, as amended; (2) incur any "accumulated funding deficiency", as defined in Section 302 of ERISA, whether or not waived; or (3) terminate or permit the termination of any "employee pension benefit plan", as defined in Section 3 of ERISA, in a manner which could result in the imposition of a Lien on the property of the Borrower or such Restricted Subsidiary pursuant to Section 4068 of ERISA which Lien would secure obligations in excess of $500,000; or K. Any representation by or on behalf of the Borrower in this Agreement or any certificate or instrument furnished in connection herewith or with the Notes proves to have been false or misleading in any material respect as of the date given or made; provided that in the case of any default which directly or indirectly relates to the performance or observance of any covenant, agreement or condition contained in Sections 6 or 7 of the Agreement, there shall become due and payable with respect to any Notes then held by any holder of the Notes entitled to the benefits of said Sections 6 or 7, to the extent permitted by applicable law, the Make-Whole Amount of such Notes plus accrued interest thereon. SECTION 8.2 SUITS FOR ENFORCEMENT. In case an Event of Default shall occur and be continuing, the Bank may proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant contained in this Agreement or the Notes or in aid of the exercise of any power granted in this Agreement or the Notes, or may proceed to enforce the payment of the Notes or to enforce any other legal or equitable right of the Bank. SECTION 8.3 REMEDIES NOT WAIVED. [intentionally omitted] SECTION 8.4 REMEDIES CUMULATIVE. [intentionally omitted] -50- 51 SECTION 8.5 ACCELERATION OF INDEBTEDNESS. If an Event of Default has occurred, then the Bank may, at its option, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower, declare its obligation to make Loans and advances hereunder to be terminated, whereupon the same shall forthwith terminate, and declare any Note, all interest thereon, and all other amounts payable under this Agreement or upon any other promissory note, indebtedness, or loan agreement to the Bank to be forthwith due and payable in full, and accelerate the maturity of the obligations evidenced thereby, which obligations shall become and be forthwith immediately due and payable without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE IX MISCELLANEOUS SECTION 9.1 AMENDMENT, MODIFICATION AND WAIVER. No amendment, modification, termination, waiver, consent to departure or alteration of the terms hereof or of any provision of any of the Loan Documents shall be binding or effective unless the same be in writing, dated subsequent to the date hereof, and duly executed by all parties hereto, and then such amendment, modification or waiver shall be effective only in the specific instances and for the specific purpose for which given. SECTION 9.2 SURVIVAL OF WARRANTIES. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of any Loan hereunder and the execution and delivery of any of the Loan Documents. SECTION 9.3 NOTICE, ETC. All notices and other communications provided for under this Agreement and under any of the Loan Documents to which the Borrowers are parties shall be delivered, mailed registered or certified mail, return receipt requested, or telegraphed to the Borrower, at: The Reynolds & Reynolds Company 115 S. Ludlow Street Dayton, Ohio 45402 Attn: Treasurer -51- 52 and to: Reyna Financial Corporation 115 S. Ludlow Street Dayton, Ohio 45402 Attn: Assistant Treasurer and if to the Bank: PNC Bank, Ohio, National Bank 201 E. Fifth Street Cincinnati, Ohio 45202 Attn: National Corporate Banking or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section. All such notices and communications shall, when mailed or telegraphed, be effective upon receipt or delivery. SECTION 9.4 NO WAIVER-REMEDIES. No course of dealing between the Bank and the Borrower or any delay or failure of the Bank in exercising any right, power, remedy or privilege hereunder or under any of the Loan Documents on any occasion shall affect such right, power or privilege or be construed as a waiver of any requirement of this Agreement or a waiver of the Bank's right to take advantage of any subsequent or continued breach by the Borrower of any covenant contained herein; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power, remedy or privilege be prejudicial to any subsequent exercise of such right, power, remedy or privilege. The rights and remedies of the Bank hereunder are cumulative and not exclusive. All remedies herein provided shall be in addition to and not in substitution for any remedies otherwise available to the Bank. Any waiver, permit, consent or approval of any kind by the Bank of any breach or default hereunder, or such waiver of any provision or condition hereof, must be in writing and shall be effective only to the extent set forth in such writing. SECTION 9.5 SUCCESSORS AND ASSIGNS. The Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Bank and their respective successors and assigns, except that the Borrower may not assign or transfer any of the Loan Documents or any of their rights under any of the Loan Documents to which the Borrowers are parties without the prior written consent of the Bank. SECTION 9.6 COSTS, EXPENSES AND TAXES. The Borrowers agree to pay on demand all reasonable costs and expenses in connection with the negotiation, preparation. execution, delivery, filing, recording, administration, enforcement, litigation, collection, or filing of any legal action on or for any of the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of -52- 53 counsel for the Bank, and counsel who may be retained by said counsel, with respect thereto and with respect to advising the Bank as to its rights and responsibilities under any of the Loan Documents. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of any of the Loan Documents and other documents to be delivered under any such Loan Documents, and agree to save the Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such taxes and fees or against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution, delivery and performance of this Agreement, any Loan and security therefor, if applicable. The obligations of the Borrower under this Section shall survive payment of all Loans. SECTION 9.7 INDEMNIFICATION. The Borrowers will indemnify, defend and hold harmless the Bank, its directors, officers, counsel and employees, from and against all claims, demands, liabilities, judgments, losses, damages, costs and expenses, joint or several (including all accounting fees and attorneys' fees reasonably incurred), that any such indemnified party may incur arising under or by reason of this Agreement, any of the Loans or Loan Documents, or any act hereunder or thereunder or with respect hereto or thereto except the wilful misconduct or gross negligence of such indemnified party. Without limiting the generality of the foregoing, the Borrowers agree that if, after receipt by the Bank of any payment of all or any part of the Notes, demand is made at any time upon the Bank for the repayment or recovery of any amount or amounts received by it in payment or on account of the Notes and the Bank repays all or any part of such amount or amounts by reason of any judgment, decree or order of any court or administrative body, or by reason of any settlement or compromise of any such demand, this Agreement will continue in full force and effect and the Borrowers will be liable, and will indemnify, defend and hold harmless the Bank for the amount or amounts so repaid. The provisions of this Section will be and remain effective notwithstanding any contrary action which may have been taken by the Borrowers in reliance upon such payment, and any such contrary action so taken will be without prejudice to the Bank's rights under this Agreement and will be deemed to have been conditioned upon such payment having become final and irrevocable. The provisions of this Section will survive the termination of this Agreement and the payment of all Loans. SECTION 9.8 RIGHT OF SETOFF. Upon the occurrence and during the continuance of any Event of Default, the Bank is hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), 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 the Bank to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement, any -53- 54 Note or any of the Loan Documents, irrespective of whether or not the Bank shall have made any demand under this Agreement, any Note or any of the Loan Documents and although such obligations may be unmatured. The Bank agrees promptly to notify the Borrower after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Bank may have. In addition, any and all instruments, documents, monies, securities, goods, chooses in action, chattel paper and any other property of the Borrower, or in which the Borrowers have any interest, tangible or intangible, and the proceeds thereof, which now or hereafter are at any time in the custody or possession of the Bank or any third party acting in the Bank's behalf, without regard to whether the Bank received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether the Bank has conditionally released the same, shall constitute additional security for any Note and may be applied at any time to the liability represented thereby which is then due, whether by acceleration or otherwise. SECTION 9.9 PAYMENT. [intentionally omitted] SECTION 9.10 BANK'S DUTIES UPON PAYMENT IN FULL BY BORROWER. Upon payment in full of all obligations hereunder and the termination of the Bank's obligations to make further Loans to the Borrower, the Bank shall reassign to the Borrower any collateral that the Borrower may have previously assigned or delivered to the Bank and not yet fully collected. At the Borrower's written request, the Bank will cause to be canceled of record, all financing statements or other documents which may have previously been filed and recorded in public offices by or on behalf of the Bank evidencing the Borrower's obligations hereunder to the Bank and the security therefor and will deliver to the Borrower any Note paid in full marked "Paid-in-Full". SECTION 9.11 CONSTRUCTION. [intentionally omitted] SECTION 9.12 SEVERABILITY OF PROVISIONS. Any provision contained in any of the Loan Documents 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 of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. -54- 55 SECTION 9.13 COVENANTS IN OTHER INDEBTEDNESS. In the event the Borrower or any Subsidiary thereof shall execute, make or otherwise enter into any instrument, document or agreement relating to the incurrence or maintenance of any Indebtedness, or any amendment, waiver, restatement, reevidencing or other modification of any documentation relating to any of its existing indebtedness (collectively, "Other Loan Documents "), the effect of which in any such case is to implement or subject the Borrower or such Subsidiary to any affirmative, negative, financial or other covenants, or to any events of default (collectively, "Restrictive Covenants"), which Restrictive Covenants are in any respect materially different from the Restrictive Covenants set forth in this Agreement, the Borrower shall promptly so advise the Bank. Thereafter, the Borrower shall provide the Bank such information, in such reasonable detail, as the Bank may reasonably request in respect of the applicable Restrictive Covenants and the Other Loan Documents. The Bank shall have the right, at any time, in its sole discretion, to elect to amend in the manner hereinafter described, this Agreement and the Notes to incorporate any such Restrictive Covenant. If the Bank shall elect to incorporate any such Restrictive Covenant, it shall so notify the Borrower in a written notice and, upon the giving of such notice, this Agreement shall be deemed amended to Incorporate such Restrictive Covenant. Any amendment effected in accordance with the terms of this Section 9.13 shall remain in effect during the entire term of this Agreement, notwithstanding the subsequent termination, rescission, avoidance, waiver, release, amendment or other modification of all or any term or provision of the Other Loan Document from which a Restrictive Covenant shall have originated (including, without limitation, any modification to such Restrictive Covenant in such Other Loan Document), unless the Bank and the Borrower shall otherwise agree in accordance with the procedures set forth in Article VIII hereof. SECTION 9.14 HEADINGS. Article and section numbers in this Agreement are for convenience of reference only and shall not constitute a part of the Agreement for any other purpose. SECTION 9.15 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number or counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same Agreement. SECTION 9.16 GOVERNING LAW AND JURISDICTION. THIS CREDIT AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO. THE BORROWER HEREBY AGREES THAT ANY STATE OR FEDERAL COURT LOCATED WITHIN HAMILTON COUNTY, OHIO (OR, AT THE OPTION OF THE BANK, ANY OTHER COURT IN WHICH THE BANK SHALL -55- 56 INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY) SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWER AND THE BANK RELATING IN ANY WAY TO THIS CREDIT AGREEMENT, ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE BORROWER HEREBY ACCEPTS, GENERALLY, IRREVOCABLY AND UNCONDITIONALLY, THE JURISDICTION OF ANY SUCH COURT AND CONSENTS THAT ANY SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL DIRECTED TO THE BORROWER AT THE ADDRESS SET FORTH HEREIN FOR NOTICES AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED FIVE (5) BUSINESS DAYS AFTER THE SAME HAS BEEN DEPOSITED IN U.S. MAILS, POSTAGE PREPAID. THE BORROWER WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY SUCH JURISDICTION. NOTHING HEREIN CONTAINED SHALL AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS, ENFORCE ANY JUDGMENT OR OTHERWISE PROCEED AGAINST THE BORROWER, ANY SECURITY OR ANY PROPERTY OF THE BORROWER IN ANY OTHER JURISDICTION. SECTION 9.16 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK EACH UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS CREDIT AGREEMENT, THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH AGREEMENTS. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers/authorized partners, effective as of the date first above appearing. WITNESS: THE REYNOLDS AND REYNOLDS COMPANY, an Ohio corporation - -------------------------- By: /s/ Michael J. Gapinski ----------------------------------- Print Name: Michael J. Gapinski --------------------------- Title: Treasurer -------------------------------- -56- 57 REYNA FINANCIAL CORPORATION, an Ohio corporation - -------------------------- By: /s/ Michael J. Gapinski ----------------------------------- Print Name: Michael J. Gapinski --------------------------- Title: Ass't Treasurer -------------------------------- PNC BANK, OHIO, NATIONAL ASSOCIATION, a national banking association /s/ - -------------------------- By: /s/ Matthew D. Texis ----------------------------------- Print Name: Matthew D. Texis --------------------------- Title: Assistant Vice President -------------------------------- -57- EX-5.B 14 EXHIBIT (B)(5) 1 EXHIBIT (b)(5) CREDIT AGREEMENT This Credit Agreement made this 30th day of June, 1994, at Dayton, Ohio by and between The Reynolds & Reynolds Company, an Ohio corporation, and Reyna Financial Corporation, an Ohio corporation (hereinafter collectively referred to as the "Borrowers", individually, a "Borrower", both meaning each entity, jointly and severally) and Bank One, Dayton, NA, a national banking association, (hereinafter referred to as the "Bank"). WITNESSETH: WHEREAS, Borrower desires to receive and the Bank is willing to extend from time to time an aggregate amount not to exceed FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) outstanding at any one time for a revolving line of credit (the "Line"), subject to the terms and conditions set forth below; NOW THEREFORE, in consideration of the agreements herein contained, the parties agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the defined meanings when used herein or in any Note, certificate, report, or other document made or delivered pursuant to this Agreement, unless otherwise defined in context: "Accounts Receivable" means all accounts, contract rights, notes, drafts, acceptances, instruments or chattel paper (including indebtedness of related or affiliated entities) and any other form of right to payment for goods sold or leased or for services rendered, now owned or hereinafter arising or acquired. "Affiliate" means any Person (other than Borrower or any Restricted Subsidiary) which, directly or indirectly, controls or is controlled by or is under common control with Borrower or a Restricted Subsidiary or which beneficially owns or holds or has the power to direct the voting power of 5% or more of any class of voting stock of the company or a Restricted Subsidiary or which has 5% or more of its voting stock (or in the case of a Person which is not a corporation, 5% or more of its equity interest) beneficially owned or held, directly or indirectly, by Borrower or a Restricted Subsidiary. For purposes of this definition, "control" means the power to direct the management and policies of a 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. "Aggregate Amount", when used with respect to Restricted Investments at any time, means and shall be determined by adding together the amount of each such investment, whether or not such investment at such time is shown on the books of the company or a Restricted Subsidiary, determined with respect to each such investment at the greatest of: (i) the amount originally entered on the books of Borrower or any Restricted Subsidiary with respect thereto; (ii) the then current book amount thereof; and 1 2 (iii) the original cost thereof to Borrower or a Restricted Subsidiary, in case any net return of capital upon such investments (through the sale or liquidation of such investments or any part thereof, or otherwise). "Agreement" means this Credit Agreement as amended, supplemented, or modified from time to time. "Board of Directors" means the board of directors of Borrower (or, when so specified or the context so indicates, a Subsidiary) or if duly authorized to exercise the power of the Board of Directors, any duly authorized committee thereof. "Business Day" means any day other than a Saturday, Sunday, or other day on which commercial banks in Ohio are authorized or required to close under the laws of the State of Ohio. "Capital Lease" means and includes at any time any lease of property real or personal, which in accordance with generally accepted accounting principles would at such time be required to be capitalized on a balance sheet of the lessee. "Capital Lease Obligation" means at any time the capitalized amount of the rental commitment under a Capital Lease which in accordance with generally accepted accounting principles would at such time be required to be shown on a balance sheet of the lessee. "CD Rate" means with respect to each Interest Period the sum (rounded upward to the nearest 1/100 of 1%) of (A) the rate obtained by dividing (x) the Certificate of Deposit Rate for such Interest Period by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that would be applicable during such Interest Period to a negotiable certificate of deposit in excess of $100,000 and with a maturity equal to such Interest Period of any member bank of the Federal Reserve System, plus (B) the then daily net annual assessment rate as estimated by the Bank for determining the current maximum annual assessment payable by the Bank to the Federal Deposit Insurance Corporation for insuring such certificates of deposit. "CD Loan" means any Loan bearing interest at the rate provided for in Section 2.6(b). "Certificate of Deposit Rate" means the consensus bid rate determined by the Bank for the bid rates per annum, at approximately 10:00 a.m. (Dayton, Ohio time) on the first day of the Interest Period for which such Certificate of Deposit Rate is to be applicable of two or more New York or Chicago certificate of deposit dealers of recognized standing selected by the Bank for the purchase at face value from the Bank of certificates of deposit in an aggregate amount approximately comparable to the CD Loan for which such Certificates of Deposit Rate is to be applicable and with a maturity equal to such Interest Period. 2 3 "Commitment" means $15,000,000.00, as such amount may be reduced from time to time pursuant to Section 2.11. Moreover, the Commitment shall be automatically reduced on the last Business Day of each month set forth below to an amount not to exceed the amount set forth below opposite each such date:
AMOUNT OF COMMITMENT LAST BUSINESS DAY OF: NOT TO EXCEED: --------------------- -------------------- September 1996 $13,750,000.00 December 1996 12,500,000.00 March 1997 11,250,000.00 June 1997 10,000,000.00 September 1997 8,750,000.00 December 1997 7,500,000.00 March 1998 6,250,000.00 June 1998 5,000,000.00 September 1998 3,750,000.00 December 1998 2,500,000.00 March 1999 1,250,000.00 June 1999 -0-
"Commitment Commission" has the meaning specified in Section 2.10. "Consolidated Current Assets" means the aggregate of all assets which in accordance with generally accepted accounting principles would be so classified and appear upon the asset side of the consolidated balance sheet of the Borrower and its Restricted Subsidiaries, after making any appropriate deduction for adequate reserves in each case where a reserve is proper, in accordance with generally accepted accounting principles. "Consolidated Current Liabilities" means the aggregate of all amounts which in accordance with generally accepted accounting principles would be so classified and appear upon the liability side of the consolidated balance sheet of the Borrower and its Restricted Subsidiaries. "Consolidated Earnings Available for Fixed Charges" means the consolidated income of the Borrower and its Restricted Subsidiaries before income taxes, computed in accordance with generally accepted accounting principles, plus Fixed Charges. "Consolidated Indebtedness" means the aggregate of all Indebtedness of the Borrower and its Restricted Subsidiaries. "Consolidated Tangible Capitalization" means, as of any particular time, the sum of (without duplication): (i) the par value of all of the outstanding capital stock of Borrower; (il) the capital and earned surplus of Borrower and its Restricted Subsidiaries appearing on a consolidated balance sheet of Borrower and its Restricted Subsidiaries prepared in accordance with generally accepted accounting principles; and 3 4 (iii) Consolidated Indebtedness; less the sum of (without duplication): (a) the cost of any treasury shares included on such balance sheet; and (b) the aggregate of all amounts that appear on the asset side of such balance sheet and are attributable to assets which would be treated as intangibles under generally accepted accounting principles, including, without limitation, all such items as goodwill, trademarks, trade names, brand names, copyrights, patents, patent applications, licenses, franchises, permits and rights with respect to the foregoing, and unamortized debt discount and expense but excluding from the operation of this clause (b) software and software licenses. "Consolidated Tangible Net Worth" shall mean, as of the date of determination thereof, the aggregate amount of stockholders' equity of a corporation and its subsidiaries appearing on a consolidated balance sheet of such corporation and its subsidiaries prepared in accordance with generally accepted accounting principles less the sum of (without duplication) (i) the cost of any treasury shares included on such balance sheet and (ii) the aggregate of all amounts that appear on the asset side of such balance sheet and are attributable to assets which would be treated as intangibles under generally accepted accounting principles, including, without limitation, all such items as goodwill, trademarks. trade names, brand names, copyrights, patents, patent applications, licenses, franchises, permits and rights with respect to the foregoing, and unamortized debt discount and expenses, but excluding from the operation of this clause (ii) software and software licenses. "Consolidated Total Liabilities" shall mean all liabilities shown on a consolidated balance sheet of the Borrower Reyna Financial Corporation and its Subsidiaries prepared in accordance with generally accepted accounting principles. "ERISA" means the Employee Retirement Income Security Act of 1974 as amended from time to time, and the regulations and published interpretations thereof. "Eurodollar Loan" means any Loan bearing interest at the rate provided for in Section 2.6(c). "Event of Default" means any of the events specified in Section 8.1 herein, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Fixed Charges" means the sum of interest expense (including without limitation capitalized interest and the interest component of any Capital Lease Obligation) and rental expense of Borrower and its Restricted Subsidiaries, all computed in accordance with generally accepted accounting principles. "Fixed Rate Loan" means a Eurodollar Loan, a CD Loan or a Special Facility Loan. "GAAP" means generally accepted accounting principles in the United States. "Indebtedness" means and includes: (i) all indebtedness or obligations for money borrowed or for the purchase price of property and any notes payable and drafts accepted representing extensions of credit, whether or not representing indebtedness or obligations for money borrowed or for the purchase price of property; 4 5 (ii) indebtedness or obligations secured by or constituting any Lien existing on property owned by the Person whose Indebtedness is being determined, whether or not the indebtedness or obligations secured thereby shall have been assumed; (iii) Capital Lease Obligations; (iv) guarantees and endorsements of (other than endorsements for purposes of collection in the ordinary course of business), and obligations to purchase goods or services for the purpose of supplying funds for the purchase or payment of, or measured by, indebtedness, liabilities or obligations of others (whether or not representing money borrowed) and other contingent obligations in respect of, or to purchase or otherwise acquire or service, indebtedness, liabilities or obligation of others (whether or not representing money borrowed); and (v) all indebtedness, liabilities or obligations (whether or not representing money borrowed) in effect guaranteed by an agreement, contingent or otherwise, to make a loan, advance or capital contribution to or other investment in the debtor for the purpose of assuring or maintaining a minimum equity, asset base, working capital or other balance sheet condition for any date, or to provide finds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in the debtor for such purpose. Anything contained in clauses (iv) and (v) of the preceding paragraph to the contrary notwithstanding: (1) contingent obligations of Borrower to maintain the net earnings or net worth of Reyna pursuant to an operating or similar agreement shall not be deemed to be Indebtedness of Borrower; and (2) contingent obligations in connection with sales of lease and other accounts receivable shall be included as Indebtedness to the extent of any reserve which is maintained or required to be maintained in accordance with generally accepted accounting principles. In case any corporation shall become a Restricted Subsidiary, such corporation shall be deemed to have incurred at the time it becomes a Restricted Subsidiary all Indebtedness of such corporation outstanding immediately thereafter. "Interest Period" has the meaning specified in Section 2.7. "Lease" means any lease (other than a Capital Lease) of real or personal property under which the company or a Restricted Subsidiary is lessee (or guarantor of the lessee's obligations), other than leases between Borrowers and their Restricted Subsidiaries or between Restricted Subsidiaries of Borrowers. "Lien" means any mortgage, lien, pledge, security interest, encumbrance or charge of any kind, any conditional sale or other title retention agreement or any Capital Lease. "Liquid Assets" shall mean the sum of, without duplication, the following assets owned by the Borrower, Reyna Financial Corporation or a Subsidiary: (i) cash, (ii) direct obligations of the United States of America or obligations of any instrumentality or agency thereof backed by the full faith and credit of the United States, in each case maturing within one year, (iii) commercial paper maturing within 180 days rated A-1 or A-2 by Standard & Poor's Corporation or P-1 or P-2 by Moody's Investors Service, Inc. (so long as such ratings shall be the two highest ratings given by such rating services), (iv) certificates of deposit issued by, or bankers acceptances of, or repurchase agreements involving governmental securities of the type 5 6 specified above issued by, any bank or trust company organized under the laws of the United States of America, any state thereof or the District of Columbia having total capital and surplus in excess of $100,000,000.00, in each case maturing within one year, and (v) Receivables, less reserves. "Loan Documents" means this Agreement and any Note. "Loan" when used in the singular and "Loans" when used in the plural means any and all lines of credit executed in favor of the Bank pursuant to Section II herein. "Make-Whole Amount" means, in connection with any prepayment of the Notes pursuant to Section 2.1 hereof or Section 6 of the Agreement, or paid as a result of the existence of an Event of Default, the greater of: (i) par; or (ii) the sum of the present values of each remaining mandatory prepayment and payment at maturity payable in respect of the Notes (in the event the Notes are being prepaid in full), or the present values of the payment at maturity and each mandatory prepayment or portion thereof being prepaid (in the event the Notes are being partially prepaid), (each such mandatory prepayment or portion thereof and payment at maturity being herein referred to as a "Payment"); all determined by discounting (based on semi-annual compounding), at a rate equal to the applicable Treasury Yield, such Payments and the portion of the scheduled interest payments on the Notes which relate thereto from the respective scheduled due dates of such Payment and interest payments to the Redemption Date or the date of prepayment, as the case may be. "Overdue Interest Rate" means the greater (determined on a daily basis) of 7.71% per annum or the rate per annum which Bank One, Dayton, NA announces publicly from time to time as its corporate base rate of interest plus 1%. "Net Equity Investment", when used in connection with Non-Recourse Receivables, means, at the date as of which the amount thereof is to be determined, the result of the following calculation: (i) all rental receivables by the Borrower, Reyna Financial Corporation from Non-Recourse Receivables of the Borrower, Reyna Financial Corporation less the aggregate amount of rentals receivable necessary to fully amortize related Non-Recourse Debt (including, without limitation, principal, interest and other related costs of such Non-Recourse Debt), plus (ii) the residual value of the property financed at the end of the initial term of all Non-Recourse Receivables of the Borrower, Reyna Financial Corporation, less the sum of unearned income with respect to such Non-Recourse Receivables. "Net Income" means, with respect to any Person for any period, the net income (or the deficit, if expenses and charges exceed revenues and other proper income credits) of such Person for such period determined in accordance with generally accepted accounting principles as in effect from time to time; provided, however, that Net Income of Borrower or any Restricted Subsidiary shall not include: (i) the Net Income of any Person (other than a Restricted Subsidiary) in which Borrower or any Restricted Subsidiary has an ownership interest unless such Net Income shall have been actually received by Borrower or such Restricted Subsidiary in the form of cash dividends or similar cash distributions; (ii) any portion of the Net Income of any Restricted Subsidiary which for any reason shall not be available for payment of dividends to Borrower and the Net Income of any Restricted Subsidiary prior to the date it became a Restricted Subsidiary, 6 7 (iii) the Net Income of any Person, any of the stock or other equity interests or assets of which have been acquired by Borrower or any Restricted Subsidiary, realized by such Person prior to the date of such acquisition; (iv) any gain or loss arising from the sale or other disposition, write-up or write-down of capital assets and of capital stock; and (v) any extraordinary item. "Non-Recourse Debt" shall mean Indebtedness of the Borrower Reyna Financial Corporation incurred to finance the acquisition of property which is subject to a chattel mortgage, lease or security agreement under which a Person other than an Affiliate is the lessee or debtor providing for rentals or other payments sufficient to pay the entire principal of and interest on such Indebtedness on or before the date or dates for payment thereof and which Indebtedness does not constitute a general obligation of the Borrower Reyna Financial Corporation but is repayable solely out of rentals or other sums payable under the chattel mortgage, lease or security agreement and/or the property subject thereto; provided, however, that the holder of such Indebtedness (hereinafter call the "Holder") shall have agreed in writing with the Borrower Reyna Financial Corporation at or prior to the time such Indebtedness is incurred by the Borrower Reyna Financial Corporation that: (x) the Borrower Reyna Financial Corporation shall not have any personal liability whatsoever, either in its capacity as owner of the property or in any other capacity, to the Holder for any amounts payable with respect to such Indebtedness and such Indebtedness shall not constitute a general obligation of the Borrower Reyna Financial Corporation, (y) the Holder shall look for repayment of such Indebtedness and payment of interest thereon and all other payments with respect to such Indebtedness solely to rentals or other sums payable under the chattel mortgage, lease or security agreement and/or the proceeds from the sale of the property subject thereto, and (z) in the case of all such Indebtedness incurred subsequent to September 24, 1990, to the extent the Holder may legally do so, the Holder waives any and all right it may have to make the election provided under 11 U.S.C. Section 1111(b)(1)(A) or any other similar or successor provision against the Borrower Reyna Financial Corporation. "Non-Recourse Receivables" shall mean and include any chattel mortgage, lease or security agreement owing or guaranteed by a Person under which the Borrower Reyna Financial Corporation supplies a portion of the purchase price for the property subject to the chattel mortgage, lease or security agreement, and has an equity interest or an interest in the rentals or other payments receivable, which interest may be subordinated to Non-Recourse Debt incurred in connection with the purchase of such property; provided, however, that any lease constituting a Non-Recourse Receivable shall be one in which, at the inception of such lease, it shall appear that the lessor will receive from (a) rentals to become due under the lease during the initial term, (b) estimated residual value at the end of such term, (c) investment tax credit and/or (d) estimated tax benefits due to tax deferrals such as that from interest expense and accelerated depreciation (based upon an estimated reinvestment return of not to exceed 7% per annum on a "sinking fund" basis), an aggregate amount at least sufficient to return to the lessor (i) estimated tax, insurance and maintenance costs and expenses (to the extent not payable by the lessee), (ii) the Net Equity Investment of the lessor in the leased property, and (iii) the aggregate amount necessary to fully amortize the related Non-Recourse Debt; provided further, however, that any lease constituting a Non-Recourse Receivable must be non-cancelable by the lessee unless upon such cancellation the lessee is required to pay to the lessor a premium or penalty which will (1) return any outstanding equity investment of the lessor, (2) fully compensate the lessor for the recapture of any tax benefits previously gained, (3) permit the lessor to fully amortize the related Non-Recourse Debt, including any accrued interest and any premium required thereon, and (4) reimburse the lessor for any taxes, insurance and maintenance costs to the extent not theretofore paid by the lessee. 7 8 "Note" when used in the singular and "Notes" when used in the plural means any and all note or notes executed in favor of the Bank pursuant to Section II herein. "Notice of Borrowing" has the meaning specified in Section 2.3(a). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature. "Plan" means any employee pension benefit plan or other plan subject to Title IV of ERISA, as amended, established, maintained, or to which contributions have been made by the Borrower or any ERISA affiliate. "Prime Rate" means the prime commercial lending rate as announced by the Bank at its Main Office, Kettering Tower, Dayton, Ohio, as in effect from time to time. The Prime Lending Rate established by the Bank is based on its consideration of economic, money market, business and competitive factors, and is not necessarily the Bank's most favored rate. "Prime Loan" means any Loan bearing interest at the rate provided in Section 2.6(a). "Principal Office" means the principal office of Bank One, Dayton, Ohio presently located at the Kettering Tower, 40 North Main Street, P.O. Box 1103, Dayton, Ohio 45401-1103. "Priority Indebtedness" means the sum (without duplicating any such amount) of the amounts described in the following clauses (i) and (ii) incurred by Borrower or a Restricted Subsidiary and outstanding at the time of computation: (i) the aggregate principal of all Indebtedness of Borrower and its Restricted Subsidiaries secured or evidenced by Liens permitted by clauses (1), (2) and all subparts thereto, (3) and all subparts thereto, (4) and (5) and all subparts thereto and of Section 6.2; and (ii) the aggregate principal amount of unsecured Indebtedness of all Restricted Subsidiaries, other than Indebtedness owned by Borrower or any wholly-owned Restricted Subsidiary. "Prohibited Transaction" means any transaction set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from time to time. "Quarterly Payment Date" means the last Business Day of each March, June, September and December of each year commencing with the last Business Day of June, 1994. "Quarterly Principal Payment Date" means the last Business Day of September following the Termination Date, and each Quarterly Payment Date occurring thereafter. "Quoted Rate" means with respect to each Interest Period the rate obtained (rounded upward to the nearest 1/100 of 1%) by dividing (a) the per annum rate of interest determined by the Bank at which U.S. dollar deposits of amounts (in immediately available funds) comparable to the outstanding principal amount of the Eurodollar Loan as to which a Quoted Rate determined with reference to such rate will apply with maturities comparable to the Interest Period for which such Quoted Rate will apply are offered to the Bank by first class banks in the interbank Eurodollar market as of approximately 10:00 a.m. (Dayton, Ohio time) two Business 8 9 Days prior to the commencement or such interest Period, by (b) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that would be applicable during such Interest Period to such Eurodollar Loan. "Receivable" shall mean any account receivable whether represented by an open account, note, security agreement, installment sale agreement, mortgage, factor receivable, direct loan receivable, trade account receivable, lease obligation or otherwise. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect or any successor to all or a portion thereof establishing reserve requirements. "Reportable Event" means any of the events set forth in Section 4043 of ERISA, as amended from time to time, except actions of general applicability by the Secretary of Labor under Section 110 of ERISA. "Restricted Investment" means any investment by Borrower or any Restricted Subsidiary in any other Person, whether by acquisition of stock or Indebtedness, or by loan, advance, guarantee, transfer of property out of the ordinary course of business, capital contribution, extension of credit on terms other than those normal in the business of the company or such Subsidiary, or otherwise; provided, however, that the term "Restricted Investment" shall not include; (i) marketable obligations issued or guaranteed by the United States of America or by any agency of the United States of America or by a state or municipal government within the United States of America, maturing not later than 12 months from the date of acquisition thereof and, in the case of such state or municipal obligations, which have a rating of at least AA or Aa by Standard & Poor's Corporation or Moody's Investors Service, Inc., respectively; (ii) commercial paper which has a rating of at least A-1 or P-1 by Standard & Poor's Corporation or Moody's Investors Service, Inc., respectively, and maturing not later than 270 days from the date of acquisition thereof; (iii) negotiable certificates of deposit (including Eurodollar deposits) or bankers' acceptances issued by or drawn on, a United States commercial bank or trust company or a bank or trust company chartered or organized under the laws of Canada, which has capital and surplus of at least $500,000,000, and maturing not later than 12 months from the date of acquisition thereof; and (iv) any investment in any Restricted Subsidiary or in any corporation which by reason thereof will become a Restricted Subsidiary. "Restricted Subsidiary" means: (i) Reynolds & Reynolds S.A., a company organized under the laws of France; and (ii) any Subsidiary (a) organized and existing under the laws of the United States of America, any State thereof, Canada or any province thereof; (b) having substantially all of its assets located in the United States or Canada; 9 10 (c) at least 51% of the outstanding voting shares of which shall at the time be owned by the company and/or one or more Restricted Subsidiaries; and (d) which has been designated as a Restricted Subsidiary by Borrower or by the Board of Directors. "Reyna" means Reyna Financial Corporation, an Ohio corporation, which is a finance company and wholly-owned subsidiary. "Reyna Consolidated Indebtedness" shall mean the Indebtedness of the Borrower Reyna Financial Corporation and its Subsidiaries, after eliminating inter-company items, all as consolidated and determined in accordance with generally accepted accounting principles. "Reyna Indebtedness" shall mean and include (i) all indebtedness or obligations for money borrowed or for the purchase price of property (whether or not recourse) and any notes payable and drafts accepted representing extensions of credit, whether or not representing indebtedness or obligations for money borrowed or for the purchase price of property, (ii) Non-Recourse Debt and other indebtedness or obligations secured by or constituting any Lien existing on property owned by the Person whose indebtedness is being determined, whether or not the indebtedness or obligations secured thereby shall have been assumed, (iii) Capital Lease Obligations, (iv) guarantees and endorsements of (other than endorsements for purposes of collection in the ordinary course of business), and obligations to purchase goods or services for the purpose of supplying funds for the purchase or payment of, or measured by, indebtedness, liabilities or obligations of others for money borrowed and other contingent obligations in respect of, or to purchase or otherwise acquire or service, indebtedness, liabilities or obligations of others for money borrowed and (v) all indebtedness, liabilities or obligations for money borrowed in effect guaranteed by an agreement, contingent or otherwise, to make a loan, advance or capital contribution to or other investment in the debtor for the purpose of assuring or maintaining a minimum equity, asset base, working capital or other balance sheet condition for any date, or to provide funds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in the debtor for such purpose. In case any corporation shall become a Subsidiary, such corporation shall be deemed to have incurred at the time it becomes a Subsidiary all Indebtedness of such corporation outstanding immediately thereafter. "Reyna Leasing" shall mean Reyna Leasing Corporation, an Ohio corporation. "Special Facility Loan" means any Loan bearing interest at the rate provided for in Section 2.6(d). "Special Rate" means the rate of interest determined by the Bank in its sole discretion to be applicable to a Special Facility Loan for a specified Interest Period. "Subordinated Indebtedness" shall mean all unsecured Indebtedness of the Borrower Reyna Financial Corporation which, as of the date of determination thereof, (i) by its terms has a required final payment not earlier than September 24, 1997, and (ii) is issued under an indenture or other instrument containing provisions for the subordination of such Indebtedness (to which appropriate reference shall be made in the instruments evidencing such Indebtedness) not less favorable to the Bank than the following provisions (the term "Debentures" being, for convenience, used in the provisions set forth below to designate the instruments issued to evidence Subordinated Indebtedness and the term "this Indenture" to designate the indenture or other instrument under which the Debentures are issued and the term "Company " to designate the corporation liable in respect of any Subordinated Indebtedness): 10 11 "All Debentures issued under this Indenture shall be issued subject to the following provisions and each person holding any Debenture whether upon original issue or upon transfer or assignment thereof accepts and agrees to be bound by such provisions. "All Debentures issued hereunder and any coupons thereto appertaining shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right to the prior payment in full of Superior Indebtedness as defined in this Section. For the purposes of this Section the term 'Superior Indebtedness' shall mean (a) all obligations and indebtedness of Reyna Financial Corporation under or in connection with that certain Term Loan Agreement dated as of August 20, 1993 between Reyna Financial Corporation and Credit Lyonnais Chicago Branch, and the note issued thereunder, as said Term Loan Agreement or Note may have been or may hereafter be amended, modified or supplemented, with or without notice to the holders of the Debentures (b) all other indebtedness incurred or to be incurred by the Company for money borrowed unless by its term it is provided that such indebtedness is not Superior Indebtedness, and (c) any deferrals, renewals or extension of any such Superior Indebtedness, or debentures, notes or other evidences of indebtedness issued in exchange for such Superior Indebtedness. "No payment on account of principal, premium, if any, sinking funds, or interest on the Debentures shall be made unless full payment of amounts then due for principal, premium, if any, sinking funds, and interest on Superior Indebtedness has been made or duly provided for in money or money's worth in accordance with its terms. No payment on account of principal, premium, if any, sinking funds, or interest on the Debentures shall be made if, at the time of such payment or immediately after giving effect thereto, there shall have occurred a default with respect to any Superior Indebtedness, as defined therein or in the instrument under which the same is outstanding. "Upon (i) any acceleration of the principal amount due on the Debentures or (ii) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or total or partial liquidation or reorganization of the Company, whether voluntary of involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if any, and interest due or to become due (including interest accruing after the commencement of any such proceedings) upon all Superior Indebtedness shall first be paid in full, or payment thereof provided for in money or money's worth in accordance with its terms, before any payment is made on account of the principal of, premium, if any, or interest on the indebtedness evidenced by the Debentures, and upon any such dissolution or winding-up or liquidation or reorganization any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Debentures or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the holders of the Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Superior Indebtedness (pro rata to each such holder on the basis of the respective amounts of Superior Indebtedness held by such holder) or their representatives, to the extent necessary to pay all Superior Indebtedness (including interest thereon accruing after the commencement of any such proceedings) in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of Superior Indebtedness, before any payment or distribution is made to the holders of the indebtedness evidenced by the Debentures or to the Trustee under this Indenture. In the event that any payment or distribution of assets of the Company of any kind or character not permitted by the foregoing provisions, whether in cash, property or securities, shall be received by the Trustee or the holders of the Debentures before all Superior Indebtedness is paid in full, or provision made for such payment, in accordance with its terms, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of such Superior Indebtedness or their representative or representatives, or to the trustee or trustees under an indenture pursuant to which any instruments evidencing any such 11 12 Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Superior Indebtedness remaining unpaid to the extent necessary to pay all such Superior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to the holders of such Superior Indebtedness. "Subsidiary" means any corporation at least a majority of whose outstanding stock having ordinary voting power for the election of a majority of the members of the board of directors (or other governing body) of such corporation (other than stock having such power only by reason of the happening of a contingency) shall at the time be owned by Borrower and/or one of more Subsidiaries of Borrower. "Termination Date" means June 30, 1996 (or, if such date is not a Business Day, the immediately preceding Business Day) or such earlier date upon which the Commitment is reduced to zero pursuant to Section 2.11 or is terminated pursuant to Article VIII or the Loans become due and payable pursuant to Article VIII. "Total Assets" shall mean, as of the date of determination thereof, the sum of all assets of the Borrower Reyna Financial Corporation (other than intangibles), determined in accordance with generally accepted accounting principles, which would properly appear on a balance sheet of the Borrower Reyna Financial Corporation as an asset at and as of such date. "Treasury Yield" means with respect to any prepayment hereunder: (i) .50%, plus (ii) the yield reported, as of 10:00 a.m. (New York City time) on the display designated as "Page 500" on the Telerate Service (or such other display as may replace Page 500 on the Telerate Service) for actively traded "On the Run" U.S. Treasury securities having maturities equal to the maturity, rounded to the nearest month, of the applicable scheduled payment date of the Payment. If no maturity exactly corresponding to such maturity of the Payment shall appear therein, yields for the next longer and the next shorter published "On the Run" maturities shall be calculated pursuant to the foregoing sentence, and the Treasury Yield shall be interpolated from such yields on a straight-line basis (rounding, in each of such relevant periods to the nearest month). "Wholly-owned Restricted Subsidiary" means any Restricted Subsidiary all of the capital stock (other than directors' qualifying shares) of which shall be owned by the Borrower and/or one or more "Wholly-owned" Restricted Subsidiaries. All accounting terms used herein and not expressly defined in this Note shall have the meanings respectively given to them in accordance with generally accepted accounting principles in the United States consistent with those applied in the preparation of the financial statements referred to in Section 3.7 herein, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles. The aforestated definitions shall be applicable to the singular and plurals of the foregoing defined terms. ARTICLE II AMOUNT AND TERMS OF THE LOAN SECTION 2.1 COMMITMENT. Subject to and upon the terms and conditions herein set forth, the Bank agrees, at any time and from time to time prior to the Termination Date, to make loans (each a "Loan") to either of the Borrowers, which Loans (i) shall, at the opinion of a Borrower, be either Prime Loans, CD Loans, Eurodollar Loans or, in the Bank's sole discretion if a Borrower requests, 12 13 Special Facility Loans and (ii) may be repaid and reborrowed in accordance with the provisions hereof. The Loans made to both of the Borrowers shall not exceed in aggregate principal amount at any time outstanding the Commitment. SECTION 2.2 MINIMUM AMOUNT OF EACH BORROWING. (a) The principal amount of each Loan shall: (i) in the case of Fixed Rate Loans, be not less than $1,000,000 or, if greater, in integral multiples of $1,000,000 or (ii) in the case of Prime Loans, be not less than $100,000 or, if greater, in integral multiples of $100,000. (b) The Borrowers shall not be entitled to have more than ten Loans in the aggregate outstanding at any one time. SECTION 2.3 NOTICES OF BORROWING. (a) Whenever either of the Borrowers desires to borrow a Loan (other than a Special Facility Loan), it shall give the Bank at its Principal Office written notice or telephonic notice (confirmed promptly in writing) of such borrowing (x) in the case of a CD Loan or a Eurodollar Loan, by no later than 10:00 a.m. (Dayton, Ohio time) on the date of borrowing and (y) in the case of a Prime Loan, by no later than 10:00 a.m. (Dayton, Ohio time) on the date of borrowing. Each such notice (each, together with any notice electing to incur a Special Facility Loan given in accordance with Section 2.3(b), a "Notice of Borrowing") shall specify (i) the principal amount which such Borrower desires to borrow, (ii) the date of borrowing (which shall be a Business Day), (iii) whether such Loan is to be maintained as a Prime Loan, CD Loan or Eurodollar Loan and (iv) the Interest Period to be applicable thereto. (b) Whenever either of the Borrowers desires to incur a Special Facility Loan, it shall have the right to contact the Bank to determine the Special Rate which would be applicable to a Special Facility Loan made by the Bank for the principal amount and the Interest Period (which period shall be a period of from 7 to 90 days) requested by such Borrower and the Bank may, in its sole discretion, provide a quote of a Special Rate for such Interest Period. Each notice requesting a quote of a Special Rate shall specify that such request is being made pursuant to the terms of this Agreement. The Bank shall agree with each Borrower from time to time on any additional procedures to be utilized in making a request for a Special Facility Loan (including, without limitation, the applicable notice period and the time period during which the Special Rate, if any, quoted by the Bank shall remain available). Upon electing to incur a Special Facility Loan, the Borrower electing to incur the same shall notify the Bank in accordance with the aforesaid procedures established from time to time with the Bank. Subject to availability, the Bank agrees to use its best efforts to make Special Facility Loans available to the Borrowers; provided that the Bank shall not be obligated to make Special Facility Loans hereunder. SECTION 2.4 DISBURSEMENT OF FUNDS. No later than 12:00 Noon (Dayton, Ohio time) on the date specified in each Notice of Borrowing, the Bank shall make available to the Borrower incurring the same the proceeds of the Loan to be made on such date in U.S. dollars and in immediately available funds by the Bank crediting an account of such Borrower designated by it and maintained with the Bank if its Principal Office. To the extent that a Loan made to such Borrower matures on such date, the Bank shall apply the proceeds of the Loan to be made on such date, to the extent thereof, to the repayment of such maturing Loan. 13 14 SECTION 2.5 THE NOTES. The obligation of each Borrower to pay the principal of, and interest on, all Loans made to it shall be evidenced by promissory notes substantially in the form of Exhibits A and B (each a "Note") payable to the order of the Bank duly executed and delivered by Borrowers with blanks appropriately completed in conformity herewith. Each Note shall: (i) be dated the Effective Date; (ii) be in the original principal amount of the Commitment and be payable in the principal amount of the Loans evidenced thereby; (iii) mature in the case of each Loan evidenced thereby on the expiration of the Interest Period applicable thereto; (iv) bear interest as provided in the appropriate clause of Section 2.6 in respect of the Prime Loans, CD Loans, Eurodollar Loans and Special Facility' Loans, as the case may be, evidenced thereby; and (v) be entitled to the benefits of this Agreement. The Bank shall maintain internal records showing each Loan made hereunder and each principal and interest payment thereon, which records shall, absent manifest error, be final, conclusive and binding. Although each Note shall be dated the Effective Date, interest in respect thereof shall be payable only for the periods during which Loans are evidenced thereby and although the stated principal amount of each Note shall be equal to the Commitment, each note shall be enforceable with respect to the obligation of a Borrower to pay the principal thereof only to the extent of the unpaid principal amount of the Loans evidenced thereby. SECTION 2.6 INTEREST. (a) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Prime Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be equal to the Prime Rate. (b) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each CD Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be 3/4 of 1% in excess of the relevant CD Rate. (c) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be 5/8 of 1% in excess of the relevant Quoted Rate. (d) Each Borrower agrees to pay interest in respect of the unpaid principal amount of each Special Facility Loan made to it from the date the proceeds thereof are made available to it until maturity (whether by acceleration or otherwise) at a rate per annum which shall be the Special Rate applicable to such Special Facility Loan. (e) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall bear interest at a rate per annum equal to 3% in excess of the Prime Rate in effect from time to time; provided, however, that no Loan shall bear interest after maturity at a rate per annum less than the rate of interest applicable thereto at maturity. (f) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Prime Loan, quarterly in arrears on each Quarterly Payment Date and (ii) in respect of each Fixed Rate Loan, on the last day of each Interest Period applicable to such Loan and on any prepayment (on the amount prepaid), and, in the case of all Loans, on the Termination Date, and, after maturity, upon demand. 14 15 Section 2.7 INTEREST PERIODS. At the time it gives any Notice of Borrowing, a Borrower shall have the right to elect by giving the Bank written notice (or telephonic notice promptly confirmed in writing) the interest period (each an "Interest Period") applicable to such Loan, which Interest Period shall (w) in the case of Prime Loans, be a period of from 7 days 90 days, (x) in the case of CD Loans, be either a 30, 60 or 90 days period, (y) in the case of Eurodollar Loans, be either a one, two or three month period, and (z) in the case of Special Facility Loans, be the same period as requested by such Borrower at the time it contacts the Bank for a quote of a Special Rate pursuant to the first sentence of Section 2.3(b). The determination of Interest Periods shall be subject to the following provisions: (i) The Interest Period for any Loan shall commence on the date of such Loan; (ii) If any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period in respect of a Eurodollar Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) No Interest Period shall extend beyond the Termination Date; and (iv) No Interest Period shall extend beyond any date upon which the Loans (or any portion thereof) are required to be prepaid pursuant to Section 2.14, unless the aggregate principal amount of Loans which are Prime Loans or which have Interest Periods which will expire on or before such date is equal to or in excess of the amount of such prepayment. SECTION 2.8 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that the Bank shall have determined (which determination shall, absent manifest error, be final, conclusive and binding) at any time: (i) that by reason of: (x) the requirements of Regulation D (excluding all reserves required under Regulation D to the extent included in the computation of the Quoted Rate or the CD Rate), (y) any change since the date of this Agreement in any applicable law or governmental rule, regulation, guideline, order or request (whether or not having the force of law) or any interpretation or administration thereof by any governmental authority, central bank or comparable agency (including the introduction of any new law or governmental rule, regulation, guideline, order or request) and/or (z) in the case of Eurodollar Loans, other circumstances affecting the Bank or the interbank Eurodollar market or the position of the Bank in such market (such as for example but not limited to a change in the official reserve requirements to the extent not provided for in clause (i)(x) above), the Quoted Rate, the CD Rate or the Special Rate, as the case may be, shall not represent the effective pricing to the Bank for making, finding or maintaining the affected Fixed Rate Loan; or (ii) that the making or continuance of any Eurodollar Loan has become unlawful by compliance by the Bank in good faith with any law or any governmental rule, regulation, guideline, order or request, or has become impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, the Bank shall on such date give notice (by telephone confirmed in writing) of such determination to the Borrower which has requested or which has incurred such affected Fixed Rate Loan. Thereafter (x) in the case of clause (i), such Borrower shall pay to the Bank, upon written demand therefor, such additional 15 16 amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Bank in its reasonable discretion shall determine) as shall be required to compensate or reimburse the Bank for the increased costs resulting from the circumstances described in such clause (i): provided, however, that the liability of the Borrowers to compensate or reimburse the Bank for increased costs resulting from a circumstance described in such clause (i) prior to the first demand by the Bank for such compensation or reimbursement shall be limited to those increased costs incurred in the one year period preceding the date of such demand (a written notice as to additional amounts owed the Bank pursuant to this clause (x), showing the basis for the calculation thereof, submitted to such Borrower by the Bank shall, absent manifest error, be final, conclusive and binding); and (y) in the case of clause (ii), take one of the actions specified in Section 2.8(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Fixed Rate Loan is affected by the circumstances described in Section 2.8(a), the Borrower which has requested or which has incurred such Fixed Rate Loan may (and, in the case of a Fixed Rate Loan affected by the circumstances described in Section 2.8(a)(ii) shall, either (x) if the affected Fixed Rate Loan is then being made pursuant to a Notice of Borrowing by giving the Bank telephonic notice (confirmed promptly in writing) thereof on the same date that such Borrower was notified by the Bank pursuant to Section 2.8(a) either (i) cancel such borrowing or (ii) require the Bank to make the requested Fixed Rate Loan as a Prime Loan or (y) if the affected Fixed Rate Loan is then outstanding, upon at least three Business Days' written notice to the Bank, require the Bank to convert the Fixed Rate Loan so affected into a Prime Loan. (c) In the event that the Bank shall have determined (which determination shall, absent manifest error, be final, conclusive and binding) on any date for determining the Quoted Rate for any Interest Period that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the applicable interest rate on the basis provided for in the definition of Quoted Rate, then the bank shall on such date give notice (by telephone confirmed in writing) of such determination to the Borrower which has requested such affected Eurodollar Loan and, notwithstanding any other provision of this Agreement, the Bank shall have no obligation to make, and shall not make, the requested Eurodollar Loan unless the Borrower requesting such Eurodollar Loan agrees in writing on the date it is notified of such determination by the Bank to pay to the Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Bank in its reasonable discretion shall determine) as shall be required to cause the Bank to receive interest with respect to such affected Eurodollar Loan at a rate per annum which shall equal the effective pricing to the Bank to make such Eurodollar Loan plus the applicable percentage in excess of the Quoted Rate referred to in Section 2.6(c). (d) If the Bank determines at any time that any applicable law or governmental rule, regulation, guideline, order or request (whether or not having the force of law) concerning capital adequacy or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency (including the introduction of any new law or governmental rule, regulation, guideline, order or request), will have the effect of increasing the amount of capital required to be maintained by the Bank based on the existence of the Commitment or its obligations hereunder, then the Borrowers jointly and severally agree to pay to the Bank, upon its written demand therefor, such additional amounts as shall be required to compensate the Bank for the increased cost or reduced rate of return to the Bank as a result of such increase of capital; provided, however, that the liability of the Borrowers to compensate the Bank under this Section 2.8(d) prior to the first demand by the Bank for such compensation shall be limited to compensation for the increased cost or reduced rate of return incurred in the one year period preceding the date of such demand. In determining such additional amounts, 16 17 the Bank will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that the Bank's determination of compensation owing under this Section 2.8(d) shall, absent manifest error, be final, conclusive and binding. SECTION 2.9 COMPENSATION. Each Borrower shall compensate the Bank with respect to any Fixed Rate Loan made or to be made to it, upon the Bank's written request (which request shall set forth the basis in reasonable detail for requesting such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by the Bank to lenders of funds borrowed by it to make or carry a Fixed Rate Loan to the extent not recovered by the Bank in connection with the re-employment of such funds), which the Bank may sustain: (i) if for any reason (other than a default by the Bank) a borrowing of a Fixed Rate Loan does not occur on a date specified therefor in a Notice of Borrowing, (ii) if any prepayment of a Fixed Rate Loan occurs on a date which is not the last day of an Interest Period applicable thereto, (iii) if any prepayment of a Fixed Rate Loan is not made on the date specified in a notice of prepayment given pursuant to Section 2.13 or (iv) as a consequence of (x) without duplication of any amounts paid pursuant to Section 2.6(e), any other default by such Borrower to repay a Fixed Rate Loan when required by the terms of this Agreement or (y) an election made by such Borrower pursuant to Section 2.8(b). For purposes of this Section 2.9, the rate of interest which the Bank shall be deemed to earn from the re-employment of funds shall be a rate of interest per annum, determined by the Bank in good faith, equal to the rate found at that point of the United States Treasury securities yield curve (determined with such interpolation as is necessary) for securities (if they were to be issued) with a term to maturity comparable to the Fixed Rate Loan in question, such yield curve to be constructed by the Bank using then current asking prices by dealers in United States Treasury securities for the offering for sale of current issues (most recently auctioned) of Treasury Bills and converting such prices into yield rates. SECTION 2.10 COMMITMENT COMMISSION. The Borrowers jointly and severally agree to pay to the Bank a commitment commission (the "Commitment Commission") for the period from the date hereof until the Termination Date computed at the rate of 1/4 of 1% per annum on the daily average unutilized portion of the Commitment; payable quarterly in arrears on each Quarterly Payment Date and on the Termination Date. SECTION 2.11 REDUCTION IN COMMITMENT. The Borrowers shall jointly have the right, at any time and from time to time, upon at least 30 Business Days' prior written notice to the Bank, to irrevocably reduce the unutilized portion of the Commitment, in whole or in part, provided that partial reductions shall be in the amount of $1,000,000 or an integral multiple thereof. SECTION 2.12 PAYMENTS ON NONBUSINESS DAYS. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, if a payment of principal has been so extended, interest shall be payable on such principal at the applicable rate during such extension; provided, however, in the event that the day on which any such payment relating to a Eurodollar Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day. 17 18 SECTION 2.13 VOLUNTARY PREPAYMENTS. The Borrowers shall have the right to prepay the Loans in whole or in part, without premium or penalty, from time to time pursuant to this Section 2.13 on the following terms and conditions: (i) the Borrower prepaying a Loan shall give the Bank at its Principal Office at least three Business Days', in the case of a prepayment of Fixed Rate Loans, or one Business Day's, in the case of a prepayment of Prime Loans prior written notice or telephonic notice (confirmed promptly in writing) of its intent to prepay, the amount of such prepayment and which Loans are to be prepaid; (ii) each prepayment shall be in a principal amount of $1,000,000 (or an integral multiple thereof) in the case of Fixed Rate Loans or $100,000 (or an integral multiple thereof) in the case of Prime Loans; and (iii) at the time of any prepayment of Fixed Rate Loans, such Borrower shall pay all interest accrued on the principal amount of such prepayment. It is understood that each prepayment of Fixed Rate Loans shall be subject to the provisions of Section 2.9. SECTION 2.14 MANDATORY PREPAYMENTS. The Borrowers agree to make a mandatory prepayment with respect to the Loans outstanding on each Quarterly Principal Payment Date, each such prepayment to be in a principal amount equal to the excess of (i) the aggregate principal amount of the Loans then outstanding over (ii) the then Commitment (as calculated after giving effect to any reduction to the Commitment made on such Quarterly Principal Payment Date). SECTION 2.15 MANDATORY PREPAYMENT IN CERTAIN EVENTS. In the event that any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) at any time hereafter becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of capital shares of Reynolds entitled at the time of voting power in the election of directors of 50% or more, then the Bank, by written notice to the Borrowers, may at any time within 90 days after the occurrence of such event: (i) declare the principal of and accrued interest in respect of the Notes to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind and/or (ii) declare the Commitment terminated, whereupon the Commitment and the obligation of the Bank to make Loans shall terminate immediately and any accrued Commitment Commission shall forthwith become due and payable without any other notice of any kind. SECTION 2.16 METHOD AND PLACE OF PAYMENT. All payments under this Agreement and the Notes shall be made to the Bank at its Principal Office not later than 12:00 Noon (Dayton, Ohio time) on the date when due in U.S. dollars and in immediately available funds. SECTION 2.17 NET PAYMENTS. All payments under this Agreement and the Notes shall be made without set-off or counterclaim and in such amounts as may be necessary so that all such payments (after deduction or withholding for or on account of any present or future Taxes) shall not be less than the amounts otherwise specified to be paid under this Agreement and the Notes. A certificate as to any additional amounts payable to the Bank under this Section 2.17 submitted to either of the Borrowers by the Bank shall show in reasonable detail the amount payable and the calculations used to determine in good faith such amount and shall, absent manifest error, be final, conclusive and binding. With respect to each deduction or withholding for or on account of any Taxes, each Borrower shall promptly furnish to the Bank such certificates, receipts and other documents as may be required (in the judgment of the Bank) to establish any tax credit to which the Bank may be entitled. 18 19 SECTION 2.18 PLACE OF LOANS. All Loans made hereunder shall be disbursed from and be payable at the Bank's principal office, 40 North Main Street, Kettering Tower, Dayton, Ohio 45401. SECTION 2.19 IMMEDIATELY AVAILABLE DOLLARS. All borrowings and payments hereunder shall be in United States dollars and in immediately available funds . SECTION 2.20 FAILURE TO CHARGE NOT SUBSEQUENT WAIVER. The Borrower explicitly agrees that any decision by the Bank not to require payment of any fees and/or compensation for costs, or to reduce the amount of such fees and/or compensation for costs, for any Loan shall in no way limit the Bank's right to require full payment of any fees and/or compensation for costs for any Loan. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrowers make the following representations and warranties to the Bank, all of which shall survive the execution of this Agreement: SECTION 3.1 LEGAL STATUS. The Borrowers are corporations duly organized and incorporated, validly existing and in good standing under the laws of the State of Ohio; have the corporate power and authority to own their own assets and transact the business in which they are now engaged in or proposed to be engaged in, and are duly qualified to do business as foreign corporations and are in good standing under the laws of each other jurisdiction in which such qualification is required. The Borrowers have no subsidiaries or affiliates except as otherwise disclosed herein. SECTION 3.2 CORPORATE POWER AND AUTHORITY. The execution, delivery, and performance by Borrowers of all of the Loan Documents have been duly authorized by all necessary corporate action and will not require any consent or approval of the stockholders of such corporations; do not contravene such corporations charters or by-laws; and, will not cause such corporations to be in default under any law, rule, regulation, order, writ, judgment, injunction, decree, determination, award, or any other indenture, agreement, lease or instrument. SECTION 3.3 NO VIOLATION. The making and performance by Borrowers of any of the Loan Documents does not violate any provision of law, statute or ordinance, or any rule or regulation promulgated pursuant thereto. SECTION 3.4 LEGALLY ENFORCEABLE AGREEMENT. This Agreement, and each of the other Loan Documents when delivered under this Agreement, have been duly authorized, executed and delivered; will be legal, valid and binding obligations of the Borrowers; and any Note created or to be issued hereunder by the Bank upon advances being made in accordance with the provisions of this Agreement, will be a valid and 19 20 binding obligation of the Borrowers in accordance with its respective terms except to the extent that such obligation may be limited by the applicable bankruptcy, insolvency, and other similar laws affecting creditor's rights generally. SECTION 3.5 NO CONFLICT WITH REQUIREMENTS OF OTHER INSTRUMENTS. The Borrowers are not parties to any indenture, loan, credit agreement, or to any lease or other agreement or instrument, or subject to any charter or resolution which could (a) have a material adverse affect on the business, properties, assets, operations, or conditions, financial or otherwise, of the Borrowers, (b) affect the ability. of the Borrowers to carry out their obligations under the Loan Documents to which they are parties or (c) result in the breach of or constitute a default under any such indenture, loan, credit agreement, lease or other agreement or instrument. The Borrowers are not in default in any respect in the performance, observance or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument to which it is a party. SECTION 3.6 LITIGATION. There is no pending or threatened action or proceeding against or affecting the Borrower before any court, governmental agency, arbitrator or administrative agency which may in any one case, or in the aggregate could, materially adversely affect the financial condition, properties, business or operations of the Borrower or the ability of the Borrowers to perform their obligations under any of the Loan Documents, other than those heretofore disclosed by the Borrowers to the Bank in writing. SECTION 3.7 CORRECTNESS OF FINANCIAL STATEMENTS. The financial statement(s) dated September 30, 1993 and related documents heretofore delivered and furnished by the Borrowers to the Bank fairly present the financial condition of the Borrowers, and have been prepared in accordance with GAAP consistently applied. As of the date of such financial statement(s), and since such date, there has been no material adverse change in the condition (financial or otherwise), business, or operations of the Borrowers, nor have the Borrowers mortgaged, pledged or granted a security interest in or encumbered any of the Borrower's assets or properties since such date, except as otherwise disclosed to the Bank in writing. There are no liabilities of the Borrowers, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising or incurred during the course of business since the date of such financial statement(s) . No information, exhibit, or report furnished by the Borrowers to the Bank in connection with the negotiation of this Agreement contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statement contained therein not materially misleading. SECTION 3.8 TITLE TO PROPERTY AND ASSETS. The Borrowers have good and marketable title to all of their property and assets, real and personal, including the properties and assets and leasehold interests reflected in the financial statement referred to in Section 5.8 herein, subject only to the existing liens, mortgages, pledges, encumbrances or charges as described in the financial statements delivered pursuant to Section 5.8 herein, as otherwise disclosed by the Borrowers to the Bank in writing, or which may be permitted pursuant to Section 6.2 herein. The Borrowers have no liabilities, contingent or otherwise, except as disclosed on such financial statement(s) (including borrowings with other banks) or as otherwise disclosed by the Borrowers to the Bank in writing. Excepted here from are liens for taxes not yet due and payable and minor liens of an immaterial nature. 20 21 SECTION 3.9 DEBT. Borrowers shall, upon reasonable request of Bank, provide to Bank, a complete and correct list of all credit agreement, indentures, purchase agreements, guarantees, capital leases, and other investments, agreements and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which the Borrowers are in any manner directly or contingently obligated; and the maximum principal or face amounts of the credits in question, which are outstanding and which can be outstanding, are correctly stated, and all mortgages, deed of trusts, pledges, Liens, security interests or other charges or encumbrances of any nature given or agreed to be given as security therefore shall be correctly described or indicated in said list provided to Bank. SECTION 3.10 TAXES. The Borrowers have filed all Federal, State and local tax returns required to be filed and have paid all taxes, assessments and governmental charges and levies thereon shown to be due on such returns, and have made provisions for all liabilities not so paid or accrued under returns not yet due. The Borrowers have no knowledge of any pending assessments or adjustments of any tax payable with respect to any year, except those which are being contested in good faith or where there is a bona fide dispute. The Borrowers have paid all premiums due under all applicable workers compensation and unemployment compensation laws. Excepted herefrom are such taxes, as are being contested in good faith and by proper proceedings and as to which adequate reserves have been maintained. SECTION 3.11 NAME RIGHTS, LICENSES, FRANCHISES, ETC. The Borrowers possess, and so long as any amount of credit pursuant hereto remains unpaid or available, will continue to possess all permits, trade memberships, franchises, contracts, licenses, trademarks, trademarks hereafter obtained, permits, memberships, franchises, contracts, and licenses required and all trademark rights, trade names, trade name rights, patents, patent rights, and fictitious name rights necessary to enable them to conduct the business in all material respects in which they are now engaged and as presently proposed to be conducted, without conflict or violation of any valid rights of others with respect to the foregoing . Nothing in this Section, however, shall prevent the Borrowers from failing to renew or from entering into additional permits, trade memberships, franchises, contracts, licenses, trade marks, trade mark rights, trade names, trade name rights, patents, patent rights and fictitious name rights if in the judgment of the Borrower reasonably exercised such action is advisable for business purposes and will not materially and adversely effect the business in which they are engaged. SECTION 3.12 USE OF LOAN PROCEEDS WILL NOT VIOLATE FEDERAL RESERVE BOARD REGULATIONS. The Borrowers will not use any portion of the proceeds of any Loan for the purpose of purchasing or carrying any margin stock within the meaning of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System (herein called "Margin Stock"), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of Regulation U or X, or in any manner which might involve any Bank in a violation of Regulation U or Regulation X, or cause this Agreement or any transaction contemplated hereby to violate Regulation U, Regulation X or any other regulation of the Board of Governors of the Federal Reserve System, or under the Securities Exchange Act of 1934, each as now in effect or as the same may hereafter be in effect. 21 22 SECTION 3.13 NO GOVERNMENT APPROVAL REQUIRED. The Borrower's execution and performance of the Loan Documents does not require the approval, filing or notice to any government, governmental agency, administrative authority or instrumentality, as a condition to the validity of any of the Loan Documents. SECTION 3.14 CONSIDERATION OF TRANSACTION. The Loan Documents executed pursuant hereto are all entered into for valuable consideration received to the full satisfaction of the Borrowers. SECTION 3.15 LABOR RELATIONS. The Borrower's labor relations are satisfactory and no dispute, lockout, labor dispute or litigation presently exists or is contemplated or anticipated which would materially and adversely affect the Borrower's operation. SECTION 3.16 ERISA. The Borrowers are in compliance in all material respects with all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred and is continuing with respect to any Plan; no notice of intent to terminate a Plan has been filed nor has any Plan been terminated for which there are any unfunded outstanding liabilities; no circumstances exist which constitute grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administrate, a Plan, nor has the PBGC instituted any such proceedings; neither the Borrowers nor any ERISA affiliate have completely or partially withdrawn under Sections 4201 or 4204 of ERISA from a multiemployer Plan; the Borrowers, and each ERISA affiliate, have met its minimum funding requirement under ERISA with respect to all of its Plans and the present fair market value of all Plan assets exceeds the present value of all vested benefits under each Plan, as determined on the most recent valuation of the Plan assets and in accordance with the provisions of ERISA and the regulations thereunder for calculating the potential liability of the Borrowers or any ERISA affiliate to the PBGC or the Plan under Title IV of ERISA; and neither the Borrowers nor any ERISA affiliate has incurred any liability to the PBGC under ERISA. SECTION 3.17 ACTS OF GOD. Neither the business nor the properties of the Borrowers are affected by any fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of God or other casualty (whether or not covered by insurance) which materially or adversely affects such business or property or operation of the Borrowers. SECTION 3.18 NO SUBORDINATION. The obligations of the Borrowers pursuant to any of the Loan Documents are not subordinated in any manner to any other obligation of the Borrowers. SECTION 3.19 REPRESENTATIONS AND COVENANTS RELATING TO ENVIRONMENTAL LAWS AND REGULATIONS. (a) To the Borrowers knowledge, the Borrowers are in material compliance with all state and federal laws and regulations pertaining to environmental protection, the violation of which would have a material effect on the Borrower's business. The Borrowers have not received any written or oral communication or notice from any court or governmental agency 22 23 nor are they aware of any investigation by any agency for any material violation of any environmental protection law or regulation. (c) The Borrowers agree to comply with all applicable requirements in effect from time to time of all federal, state, local and other governmental authorities with respect to environmental protection. (d) The Borrowers further agree promptly to notify the Bank of any environmental proceedings brought or threatened by any state or federal agency against the Borrower, and the Borrowers hereby agree to indemnify and hold the Bank harmless from and against any claim which may be brought against the Bank by any state or federal agency by reason of the Bank being a lender to the Borrower. (e) The Borrowers agree further that, in view of recent environmental litigation involving bank lenders, the Borrowers waive any right and agree to assert no claim against the Bank which might otherwise arise or be claimed by the Borrowers, should the Bank elect to forego its rights to seek satisfaction of Borrower's obligations to Bank from any of Borrower's real estate for the reason that enforcement of such rights might expose the Bank to liability for Hazardous Materials upon such real estate under federal or state environmental laws or regulations. (f) For purposes of this paragraph, "Hazardous Materials" includes, without limit, any flammable explosives, radioactive materials, hazardous materials defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 9601 et seq.), and in the regulations adopted and publications promulgated pursuant thereto, or any other federal, state or local environmental law, ordinance, rule, or regulation. The provisions of this Section shall be in addition to any and all other obligations and liabilities the Borrower may have to the Bank at common law, and shall survive the transactions contemplated herein. ARTICLE IV CONDITIONS PRECEDENT The obligation of the Bank to make any Loan to Borrowers and to enter into this Agreement is conditioned upon the Borrowers delivery of each of the following conditions precedent on or before the day of each Loan or advance hereunder, in form and substance satisfactory to the Bank: SECTION 4.1 COMPLIANCE. The representations and warranties contained herein shall be true on and as of the date of the closing of this Agreement and at the time of any advance hereunder with the same effect as though such representations and warranties had been made on and as of such date, and on such date no Event of Default, and no condition, event or act which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default, shall have occurred and be continuing or shall exist. 23 24 SECTION 4.2 DOCUMENTATION. The Borrowers shall deliver to the Bank on or before the date of this Agreement the following, in form and substance satisfactory to the Bank and Bank's counsel: (a) Properly executed Note in accordance with the provisions of Article II herein; (b) Certified (as of the date of this Agreement) copies of all corporate action taken by the Borrowers, including resolution of their Board of Directors, authorizing the execution, delivery and performance of the Loan Documents and every other document to be delivered pursuant to this Agreement; (c) Incumbency certificate (dated as of the date of this Agreement) signed by Secretary of the Borrowers for each person executing on behalf of the Borrowers of any of the Loan Documents required hereby; (d) A favorable opinion of Counsel for the Borrowers as to the matters referred to in this Agreement, in form and substance satisfactory to the Bank. SECTION 4.3 OTHER DOCUMENTATION. Such other approvals, opinions and documents as the Bank may reasonably request in order to effect fully the purposes of this Agreement. ARTICLE V AFFIRMATIVE COVENANTS The Borrower covenants that so long as any Note shall remain unpaid or the Bank could have any obligation to lend hereunder; SECTION 5.1 TO PAY NOTES. Borrower will punctually pay or cause to be paid the principal and interest (and Make-Whole Amount, if any) to become due in respect of the Notes according to the terms thereof. SECTION 5.2 MAINTENANCE OF BORROWER OFFICE. Borrower will maintain an office or agency at 115 S. Ludlow St., Dayton, OH 45402 (or such other place in the United States of America as the Borrower may designate in writing to the holder hereof) where notices, presentations and demands to or upon the company in respect of the Notes may be given or made. SECTION 5.3 TO KEEP BOOKS. Borrower will, and will cause each of its Restricted Subsidiaries to, keep proper books of record and account in accordance with generally accepted accounting principles. 24 25 SECTION 5.4 PAYMENT OF TAXES; CORPORATE EXISTENCE: Borrower will, and will cause each of its Restricted Subsidiaries to: A. Pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it, its income or profit or its property before the same shall become in default, as well as all lawful claims and liabilities of any kind (including claims and liabilities for labor, materials and supplies) which, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Borrower nor any Restricted Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or any such Restricted Subsidiary shall have set aside on its books reserves in respect thereof (segregated to the extent required by generally accepted accounting principles) deemed adequate in the opinion of the Chief Financial Office or Treasurer of the Borrower; B. Subject to Section 6.5 and Section 6.6, do all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that neither the Borrower nor any Restricted Subsidiary shall be required to preserve any right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in its conduct of business; and SECTION 5.5 TO INSURE. Borrower will, and will cause each of its Restricted Subsidiaries to: A. Keep all of its insurable properties owned by it insured against all risks usually insured against by persons operating like properties in the localities where the properties are located, all in amounts sufficient to prevent the Borrower or such Restricted Subsidiary, as the case may be, from becoming a coinsurer within the terms of the policies in question, but in any event in amounts not less than 80% of the then full replacement value thereof; B. Maintain public liability insurance against claims for personal injury, death or property damage suffered by others upon or in or about any premises occupied by it or occurring as a result of its maintenance or operation of any airplanes, automobiles, trucks or other vehicles or other facilities (including, but not limited to, any machinery used therein or thereon) or as the result of the use of products sold by it or services rendered by it; C. Maintain such other types of insurance with respect to its business as is usually carried by persons of comparable size engaged in the same or a similar business and similarly situated; and D. Maintain all such workers' compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business. All insurance for which provision has been made in Section 5.5B and Section 5.5C shall be maintained in at least such amounts as such insurance is usually carried by persons of comparable size engaged in the same or a similar business and similarly situated; and all insurance herein provided for shall be effected under a valid and enforceable policy or policies issued by insurers of recognized responsibility, except that the Borrower or any such Restricted Subsidiary may effect (i) workers' compensation or other similar insurance in respect of operations in any state or other jurisdiction either through an insurance fund operated by such state or other jurisdiction or by causing to be maintained a system or systems of self-insurance which are in accord with applicable laws, and (ii) all other insurance required by Sections 5.5B and 5.5C through a system of self-insurance maintained in accordance with the Borrowers' current practices. 25 26 SECTION 5.6 CONDUCT OF BUSINESS. Continue to engage in an efficient and economical manner in the business of the same general type as now conducted by the Borrower. Provided, however, that nothing contained in this Section shall prevent the Borrower from discontinuing any part of the business of the Borrower if the discontinuance would not result in a material adverse change to the business of Borrower. SECTION 5.7 MAINTENANCE OF PROPERTIES. Maintain, keep and preserve all of their properties (tangible and intangible) real, chattel and otherwise, in good order and working condition and from time to time make necessary repairs, renewals and replacements thereto in order that such properties are fully and efficiently preserved and maintained. SECTION 5.8 FINANCIAL STATEMENTS. From and after the date hereof and so long as you (or a nominee designated by you) shall hold any of the Notes, Borrower will deliver to Bank in duplicate: (a) as soon as practicable, and in any event within 60 days after the end of each quarterly period (excluding the last quarterly period) in each fiscal year of the company: (1) each Borrower's Quarterly Report on Form 1O-Q filed with the S.E.C. with respect to such quarterly period; (2) the consolidated statements of earnings, stockholders' equity and changes in financial position of Borrower and its Restricted Subsidiaries for such period and for that part of the fiscal year ended with such quarterly period and the consolidated balance sheet of Borrower and its Restricted Subsidiaries as at the end of such period; and (3) the statements of earnings, stockholders' equity and changes in financial position of Reyna for such period and for that part of the fiscal year ended with such quarterly period and the balance sheet of Reyna as at the end of such period; setting forth in each case in comparative form the corresponding figures as at the end of and for the corresponding period of the preceding fiscal year, all in reasonable detail, prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of previous years (except as otherwise stated therein or in the notes thereto and except that footnotes shall not be required) and certified by the Chief Financial Officer, the Chief Accounting Officer or the Treasurer of the company as presenting fairly the financial condition and results of operations of Borrower and its Restricted Subsidiaries as at the end of and for the fiscal periods to which they relate, subject to Borrower's or Reyna's year-end adjustments; (b) as soon as practicable, and in any event within 90 days after the end of each fiscal year: (1) Borrower's Annual Report on Form 10K filed with the S.E.C. with respect to such fiscal year; 26 27 (2) the consolidated balance sheet and related consolidated statements of earnings, stockholders' equity and changes in financial position of the company and its Subsidiaries; (3) the balance sheet and related statements of earnings, stockholders' equity and changes in financial position of Reyna; and (4) the consolidated balance sheet and related consolidated statements of earnings, stockholders' equity and changes in financial position of Borrower and its Restricted Subsidiaries; each as at the end of and for such year, setting forth in each case in comparative form the corresponding figures of the previous fiscal year, all in reasonable detail, prepared in conformity with generally accepted accounting principles applied on a basis consistent with that of previous years (except otherwise stated therein or in the notes thereto) and certified by the Chief Financial Officer, the Chief Accounting Officer or the Treasurer of Borrower as presenting fairly the financial condition and results of operations and changes in financial position of Borrower and its Subsidiaries and Reyna, respectively, as at the end of and for the fiscal year to which they relate, and, with respect to the reports delivered pursuant to clauses (2) and (3) above, accompanied by a report or opinion of independent certified public accountants of recognized national standing selected by Borrower stating that such financial statements present fairly the consolidated financial condition and results of operations and changes in financial position of Borrower and its Subsidiaries and Reyna, respectively, in accordance with generally accepted accounting principles consistency applied (except for changes with which such accountants concur) and that the examinations of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards; (c) concurrently with the financial statements delivered pursuant to Section 5.8 (b) (2) and (3), the written statement of said accountants that in making the examination necessary for their report or opinion on said financial statements they have obtained no knowledge of any Event of Default or default by any Borrower in the fulfillment of any of the terms, covenants, provisions or conditions of the Notes or, if such accountants shall have obtained knowledge of any such default or Event of Default, they shall disclose in such statement the default or defaults or Event or Events of Default and the nature and status thereof, but such accountants shall not be liable, directly or indirectly, to anyone for any failure to obtain knowledge of any such default or Event of Default; (d) concurrently with the financial statements delivered pursuant to Section 5.8 (b), a certificate of the Chief Financial Officer, the Chief Accounting Officer or Treasurer of Borrower: (1) setting forth, as of the end of the preceding fiscal year, the extent to which the Borrower and its Restricted Subsidiaries have completed with the requirements of Section 6.01 and 6.09, inclusive, of the Notes, including in each case a brief description, together with all necessary computations, of the manner in which such compliance was determined; (2) stating that a review of the activities of Borrower and its Subsidiaries during the preceding fiscal year has been made under his supervision to determine whether Borrower has fulfilled all of its obligations under this Agreement and the Notes; and 27 28 (3) stating that, to the best at his knowledge, Borrower is not and has not been in default in the fulfillment of any of the terms, covenants, provisions or conditions hereof and thereof and no Event of Default exists or existed or, if any such default or Event of Default exists or existed, specifying such default or Event of Default and the nature and status thereof; (e) promptly after the formation or acquisition of a Subsidiary, written notice thereof, including the name of such Subsidiary, its jurisdiction or incorporation, a brief description of its business, and whether is has been designated as a Restricted Subsidiary and, if so designated, a certificate of a principal financial officer of the Borrower showing compliance with Section 6.4C of the Notes; (f) as soon as practicable, copies of all such financial statements, proxy statements and reports as the Borrower or any of its Subsidiaries shall send or make available generally to its security holders and all registration statements (other than on Form S-8) and regular periodic reports, if any, which it or any of its Subsidiaries may file with the Securities and Exchange Commission or any governmental agency or agencies substituted thereof or with any national securities exchange; (g) immediately after the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller or any Executive Vice President, Assistant Treasurer or Assistant Controller of Borrower becomes aware of the existence of a condition, event or act which constitutes an Event of Default or an event of default under any other evidence of Indebtedness of Borrower or any Restricted Subsidiary, or which, with notice or lapse of time or both, would constitute such an Event of Default or event of default, a written notice specifying the nature and period of existence thereof and what action Borrower or such Restricted Subsidiary, as the case may be, is taking or proposes to take with respect thereto; (h) immediately after the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller or any Executive Vice President, Assistant Treasurer or Assistant Controller of Borrower becomes aware of the occurrence of any (1) "reportable event, as defined in Section 4043 or ERISA, or (2) nonexempted "prohibited transaction, " as defined in Sections 406 and 408 or ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended, in connection with any "employee pension benefit plan," as defined in Section 3 of ERISA, or any trust created thereunder, a written notice specifying the nature thereof, what action Borrower is taking or proposes to take with respect thereto and, when known, any action taken by the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect thereto; and (i) such other information as to the business and properties of Borrower and its Subsidiaries, including consolidating financial statements of Borrower and its Restricted Subsidiaries, and financial statements and other reports filed with any governmental department, bureau, commission or agency, as you may from time to time reasonably request. SECTION 5.9 COMPLIANCE WITH LAWS. Comply in all respects with all applicable laws, rules, regulations and orders. 28 29 SECTION 5.10 NOTICE OF LITIGATION. Promptly after the commencement thereof, give notice to the Bank of any actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Borrower, which, if determined adversely to the Borrower, could have a material adverse affect on the financial condition. SECTION 5.11 NOTICE TO THE BANK. Promptly give notice in writing to the Bank of: (a) Any change in the name, trade name, address, identity or corporate structure of the Borrower; (b) Any uninsured or partially uninsured loss through fire, theft, liability or property damage to the property of the Borrower which has a material adverse affect on the business of Borrower; (c) Any condition, event or act which constitutes an Event of Default, or which, with the giving of notice of lapse of time, or both could or would constitute an Event of Default, by delivering to the Bank the certificate of the Treasurer or Chief Financial Officer of the Borrower specifying such condition, event or act, the period of existence thereof, and what action the Borrower proposes to take with respect thereto; (d) The filing or receiving thereof, along with copies of all reports, including annual reports, and notices, which the Borrowers file with or receive from the PBGC or the U.S. Department of Labor under ERISA, as soon as possible and in any event with thirty (30) days after the Borrowers or have reason to know that any Reportable Event or Prohibited Transaction has occurred with respect to any Plan or the PBGC or the Borrowers have instituted or will institute proceedings under Title IV of ERISA to terminate any Plan, along with a certificate of the Chief Financial Officer or Treasurer of the Borrower setting forth details as to such Reportable Event or Prohibited Transaction or Plan termination and the action the Borrower proposes to take with respect thereto; (e) The sending or filing thereof, along with copies of all proxy statements, financial statements, and reports which the Borrowers send to their stockholders, and copies of all regular, periodic, and special reports, and all registration statements which the Borrowers file with the Securities and Exchange Commission or any governmental authority which may be substituted therefore, or with any national securities exchange; (f) Any other event or fact which materially and adversely may affect the financial or operating conditions, the Borrower or the Collateral pledged as security hereunder; or (g) Such other information respecting the condition or operations, financial or otherwise, of the Borrower as the Bank may from time to time reasonably request. 29 30 SECTION 5.12 RIGHT OF INSPECTION. At any reasonable time and from time to time, permit the Bank or any agent or representative thereof to examine and make copies of and abstracts from the records and books of the account of, and visit the properties of the Borrower, and to discuss affairs, finances and accounts of the Borrower with any of their respective officers and directors and the Borrower's independent accountants. The Bank agrees to comply with the security regulations of the Borrower, as the case may be. The Bank shall notify the Borrower in advance of any discussion between the Bank and the Borrower's independent accountants, and the Borrower shall have the right to be present during such discussions. The Bank agrees to use its best efforts to maintain the confidentiality of the information obtained by the Bank or its agents, except as otherwise required by the Bank's examining authorities or by legal process and except as necessary for the enforcement of its rights under this Agreement. SECTION 5.13 COMPLIANCE WITH LAWS AND REGULATIONS. Comply with all laws and regulations of any applicable jurisdiction with which the Borrowers are required to comply including, without limitation, worker's compensation laws, the Occupation Safety and Health Act of 1970, as amended, and the Environmental Protection Act, as amended. In addition, the Borrower shall maintain material compliance with all state and federal laws and regulations pertaining to environmental protection. ARTICLE VI NEGATIVE COVENANTS OF THE REYNOLDS AND REYNOLDS COMPANY Borrower The Reynolds and Reynolds Company ("Reynolds") further covenants that so long as any Note remains unpaid or the Bank may have an obligation to lend hereunder: SECTION 6.1 INDEBTEDNESS. Neither Reynolds nor any Restricted Subsidiary will create, assume or incur, or in any manner become liable, contingently or otherwise, in respect of, any indebtedness other than: A. Indebtedness represented by the Notes; and B. Indebtedness in an amount such that, at the time of the creation, assumption or incurrence thereof and immediately after giving effect thereto Consolidated Indebtedness shall not exceed 60% of Consolidated Tangible Capitalization. SECTION 6.2 LIENS Neither Reynolds nor any Restricted Subsidiary will: A. Create, assume, incur or suffer to exist any Lien upon (or, whether by transfer to any Subsidiary or Affiliate or otherwise, subject, or permit any Subsidiary or Affiliate to subject, to the prior payment of any Indebtedness other than that represented by the Notes) any property or assets (real or personal, tangible or 30 31 intangible, including, without limitation, any stock or other securities of a Restricted Subsidiary) of Reynolds or any Restricted Subsidiary, whether now owned or hereafter acquired, or any income or profits therefrom; B. Own or acquire or agree to acquire any property or assets (real or personal, tangible or intangible) subject to or upon any Lien; or C. Suffer to exist any Indebtedness of Reynolds or any Restricted Subsidiary (except as and to the extent permitted by Section 5.4A or claims or demands against Reynolds or any Restricted Subsidiary, which, Indebtedness, claims or demands, if unpaid, might (in the hands of the holder or anyone who shall have guaranteed the same or who has any right or obligation to purchase the same), by law or upon bankruptcy or insolvency or otherwise, be given any priority whatsoever over its general creditors; provided, however, that the foregoing restrictions shall not prevent: (1) Reynolds or any Restricted Subsidiary from suffering to exist the Liens existing on September 30, 1993 which are listed on Exhibit C to the Agreement; and extensions or renewals thereof upon the same property theretofore subject thereto without increasing the principal amount of Indebtedness then secured thereby; or (2) Reynolds or any Restricted Subsidiary: (i) from making pledges or deposits under workmens' compensation laws, unemployment insurance laws or similar legislation or good faith deposits in connection with bids, tenders, contracts (other than for the repayment of money borrowed) or under leases to which Reynolds or such Restricted Subsidiary is a party; (ii) from making deposits to secure public or statutory obligations of Reynolds or such Restricted Subsidiary or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which Reynolds or such Restricted Subsidiary is a party, or deposits in lieu of such bonds; (iii) from incurring Liens or priorities imposed by law, such as laborers' other employees, carriers', warehousemen's, mechanics', materialmen's and vendors' liens or priorities, and Liens arising out of judgments or awards against Reynolds or such Restricted Subsidiary with respect to which Reynolds or such Restricted Subsidiary at the time shall be prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review; or (iv) from entering into leases and from incurring landlords' liens on fixtures and movable property located on premises leased in the ordinary course of business so long as the rent secured thereby is not in default; or (3) Reynolds or any Restricted Subsidiary from creating or incurring or suffering to exist (i) Liens for taxes or import duties not yet subject to penalties for nonpayment or the nonpayment of which shall be permitted by the provision to Section 5.4A; or 31 32 (ii) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraphs and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties, which Liens, exceptions, encumbrances, easements, reservations, rights and restrictions do not, in the opinion of Reynolds, in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of Reynolds and its Subsidiaries; or (4) any Restricted Subsidiary from creating, incurring, assuming or suffering to exist any Lien solely to secure Indebtedness owing to Reynolds or any Wholly-owned Restricted Subsidiary; or (5) Reynolds or any Restricted Subsidiary from creating, incurring, assuming or suffering to exist Liens not otherwise permitted by the foregoing clauses 1 through 4, inclusive, of this Section 6.2; provided, however, that at the time of the creation, incurrence or assumption thereof, and immediately after giving effect thereto and to the Indebtedness secured or evidenced thereby, (i) the then outstanding aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidated Tangible Capitalization; and (ii) Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B. 6.3 RESTRICTED PAYMENTS. Reynolds will not, directly or indirectly: A. Declare or pay any dividend or make any other distribution (whether by reduction of capital or otherwise) on any shares of any class of its capital stock (other than a dividend or distribution payable in shares of common stock of Reynolds); or B. Purchase, redeem, retire or otherwise acquire, or cause or permit any Subsidiary to purchase, otherwise acquire or make any payment in respect of, any such shares; or C. Make, or permit any Restricted Subsidiary to make, any Restricted Investment; unless immediately after giving effect to any such action, Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B and the sum of: (1) The aggregate amount of all such dividends and distributions (other than dividends or distributions payable in shares of common stock of Reynolds) declared, paid or made subsequent to September 30, 1993; (2) the excess, if any, of (i) the aggregate amount of all such purchases, redemptions, retirements, acquisitions and payments made subsequent to September 30, 1993 over (ii) the net cash proceeds received after September 30, 1993 from the sales (other than to a Subsidiary) of shares of capital stock of Reynolds; and (3) the Aggregate Amount of Restricted Investments made subsequent to September 30, 1993; 32 33 does not exceed $40,000,000 plus 60% (or minus 100% in the case of a deficit) of Consolidated Net Income accrued subsequent to September 30, 1993. All dividends, distributions, purchases, redemptions, retirements, acquisitions and payments (other than Restricted Investments) made pursuant to this Section 6.3 in property other than cash shall be included for purposes of calculations pursuant to this Section 6.3 at the fair market value thereof (as determined in good faith by the Board of Directors) at the time of declaration of such dividend or at the time of making such distribution, purchase, redemption, retirement, acquisition or payment. 6.4 RESTRICTIONS ON RESTRICTED SUBSIDIARIES. A. Reynolds will not cause, suffer or permit any Restricted Subsidiary to: (1) issue or dispose of any shares of such Restricted Subsidiary's capital stock to any Person other than Reynolds or a Wholly-owned Restricted Subsidiary, except to the extent that any such shares are required to qualify directors under any applicable law or required to be issued to other stockholders of such Subsidiary by virtue of their exercise of preemptive rights or as their pro rata share of any stock dividend; or (2) sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of another Restricted Subsidiary, or any Indebtedness owing to such Subsidiary from another Restricted Subsidiary, to any Person other than Reynolds or a Wholly-owned Restricted Subsidiary, except in connection with a transaction which complies with Section 6.4B; or (3) sell, assign, lease, transfer or otherwise dispose of any of such Restricted Subsidiary's properties and assets to any Person or consolidate with or merge into any other Person or permit any other Person to merge into it; provided, however, that: (i) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any of its properties and assets if such sale, lease, transfer or disposition is not prohibited by the provisions of Section 6.5B, except that a Restricted Subsidiary may not sell all or substantially all of its properties and assets unless such sale is for cash in an amount not less than the fair market value of such properties and assets and unless: (a) such sale will not materially and adversely affect the conduct of the business of Reynolds or any of its other Restricted Subsidiaries; (b) such Restricted Subsidiary does not own any Indebtedness of Reynolds or capital stock or any Indebtedness of any other Restricted Subsidiary not simultaneously being disposed of in compliance with Section 6.4B; and (c) at the time of such transaction and immediately after giving effect thereto (x) no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing, and (y) Reynolds could incur at least $1 of additional Indebtedness in compliance with Section 6.1B, and (z) the aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidated Tangible Capitalization; 33 34 (ii) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of all or any part of its properties and assets to, or consolidate with or merge into, Reynolds (subject to the provisions of Section 6.5) or a Wholly-owned Restricted Subsidiary; and (iii) any Restricted Subsidiary may permit another person to merge into it provided that the requirements of clause (i) (c) of this Section 6.4A are complied with and immediately after such merger said Restricted Subsidiary is a Wholly-owned Restricted Subsidiary. B. Reynolds will not sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of any Restricted Subsidiary or any Indebtedness owning from any Restricted Subsidiary to Reynolds, except, in the case of shares of capital stock, to the extent, if any, required to qualify directors of such Restricted Subsidiary under any applicable law; provided, however, that all shares of capital stock of all classes, together with all Indebtedness, of any Restricted Subsidiary owned by Reynolds and/or one or more Restricted Subsidiaries may be sold as an entirety if such sale, if treated as a sale of such Subsidiary's assets made by such Subsidiary, would not be prohibited by the provisions of Section 6.4A(i). C. Reynolds will not designate any Subsidiary as a Restricted Subsidiary unless it is so designated by resolution of the Board of Directors and: (1) such corporation shall have outstanding only such Indebtedness and Liens as it would then have been permitted to create, incur or assume in compliance with Section 6.1 and Section 6.2; (2) Reynolds and/or one or more Wholly-owned Restricted Subsidiaries shall own, directly or indirectly, all outstanding capital stock of such corporation having any preference as to dividends or upon liquidation, and all rights, options and warrants to acquire any such preference stock; and (3) immediately after such designation, no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing. Any subsidiary so designated as a Restricted Subsidiary may not thereafter cease to be a Restricted Subsidiary. 6.5 MERGER, CONSOLIDATION, SALE OR LEASE. A. Reynolds will not consolidate with or merge into any Person, or permit any Person to merge into it, or sell, lease, transfer or otherwise dispose of all or substantially all of its properties and assets, unless: (1) the successor formed by or resulting from such consolidation or merger (if other than the Company) or the transferee to which such sale, lease, transfer or other disposition shall be made shall be solvent corporation duly organized and existing under the laws of the United States of America or any State thereof; (2) the due and punctual performance and observance of all the obligations, terms, covenants, agreements and conditions of the Agreement and the Notes to be performed or observed by Reynolds shall, by written instrument furnished to each holder of the Notes, be expressly assumed by such successor (if other than Reynolds) or transferee; 34 35 (3) at the time of such transaction and assumption, and immediately after giving effect thereto: (i) no Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default shall have occurred and be continuing; (ii) Reynolds or such successor or transferee, as the case may be, could incur at least $1 of additional Indebtedness in compliance with Section 6.1B; and (iii) the aggregate amount of Priority Indebtedness shall not exceed 15% of Consolidated Tangible Capitalization. B. Except as permitted in Section 6.5A above, Reynolds will not, directly or indirectly through one or more Subsidiaries, sell, assign, lease, transfer or otherwise dispose of (other than in the ordinary course of business) any of its properties and assets to any Person: (1) if the book value (net of related depreciation) of such asset, together with the book value (net of related depreciation) of all other assets of Reynolds and its Restricted Subsidiaries so disposed of in any fiscal year of Reynolds would constitute 10% or more of the book value (net of related depreciation) of all the assets of Reynolds and its Restricted Subsidiaries as of the last day of the fiscal year then most recently ended; or (2) if the sum of the Net Income (excluding a net deficit) for the three fiscal years of Reynolds most recently ended contributed by such asset and all other assets of the borrower and its Restricted Subsidiaries so disposed of during any fiscal year of Reynolds would exceed 10% of Consolidated Net Income for such period of three fiscal years; or (3) if, with respect to any sale of accounts receivable, the proceeds of any such sale are not simultaneously applied to repay the senior debt on a pro rata basis or reinvested in operating assets of Reynolds within 12 months of the receipt thereof. 6.6 PURCHASE OF NOTES. Except as provided in Article II, the Company will not, and will not permit any Subsidiary or Affiliate to, acquire directly or indirectly, by repurchase or otherwise, any of the outstanding Notes. 6.7 MAINTENANCE OF CONSOLIDATED EARNINGS RATIO. Reynolds shall not at any time permit Consolidated Earnings Available for Fixed Charges to be less than 175% of Fixed Charges. 6.8 MAINTENANCE OF CURRENT RATIO. Reynolds will not at any time permit Consolidated Current Assets to be less than 150% of Consolidated Current Liabilities. 35 36 6.9 TRANSACTIONS WITH AFFILIATES. Reynolds will not, and will not permit any Restricted Subsidiary to, engage in any transaction with an Affiliate (other than Reynolds or a Restricted Subsidiary) on terms more favorable to the Affiliate than would have been obtainable in arm's length dealing in the ordinary course of business with a Person not an Affiliate, provided that Reynolds or any Restricted Subsidiary may sell inventory to any Affiliate in the ordinary course of business at not less than book value. SECTION 6.10 REGULATIONS G, T, U AND X. Use the proceeds of any Loan hereunder, directly or indirectly, to purchase or carry any margin stock (within the meaning of Regulations G, T, U and X of the Board of Governors of the Federal Reserve System) or extend credit to others for the purpose of purchasing or carrying, directly or indirectly, any margin stock. ARTICLE VII NEGATIVE COVENANTS OF REYNA FINANCIAL CORPORATION Borrower Reyna Financial Corporation ("Reyna") further covenants that so long as any Note remains unpaid or the Bank may have an obligation to lend hereunder: SECTION 7.1 REYNA INDEBTEDNESS. A. Reyna will not at any time permit Reyna Consolidated Indebtedness to be greater than 700% of Reyna's Consolidated Tangible Net Worth. B. Reyna will not create, issue or otherwise become liable, directly or indirectly, in respect of any Indebtedness owing to the Parent, other than Subordinated Indebtedness. SECTION 7.2 LIENS. Neither Reyna nor any Subsidiary will (i) create, assume, incur or suffer to exist any Lien upon, or, whether by transfer to any Subsidiary or Affiliate or otherwise, subject, or permit any Subsidiary or Affiliate to subject, to the prior payment of any Indebtedness other than that represented by the Note any property or assets (real or personal, tangible or intangible, including, without limitation, any stock or other securities of a Subsidiary or any Receivables) of Reyna or any Subsidiary, whether now owned or hereafter acquired, or any income or profits therefrom, (ii) own or acquire or agree to acquire any property or assets (real or personal, tangible or intangible) subject to or upon any Lien or (iii) suffer to exist any Indebtedness of Reyna or any Subsidiary (except as and to the extent permitted by Section 5.4A hereof) or claims or demands against Reyna or any Subsidiary, which Indebtedness, claims or demands, if unpaid, might (in the hands of the holder or anyone who shall have guaranteed the same or who has any right or obligation to purchase the same), by law or upon bankruptcy or insolvency or otherwise, be given any priority whatsoever over its general creditors; provided, however, that the foregoing restrictions shall not prevent: A. Reyna or any Subsidiary (i) from making pledges or deposits under workmen's compensation laws, unemployment insurance laws or similar legislation or good faith deposits in connection with bids, tenders, contracts (other than for the repayment of money borrowed) or under leases to which Reyna or such Subsidiary is a party, (ii) from making deposits to secure public or statutory obligations of Reyna or such Subsidiary or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which Reyna or such Subsidiary is a party or deposits in lieu of such bonds, (iii) from incurring Liens or priorities imposed by law, such as laborers' or other employees', carriers', warehousemen's, mechanics', 36 37 materialmen's and vendors' liens or priorities, and Liens arising out of judgments or awards against Reyna or such Subsidiary with respect to which Reyna or such Subsidiary at the time shall be prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review or (iv) from entering into leases and from incurring landlords' liens on fixtures and movable property located on premises leased in the ordinary course of business so long as the rent secured thereby is not in default; or B. Reyna or any Subsidiary from creating or incurring or suffering to exist (i) Liens for taxes not yet subject to penalties for nonpayment or the nonpayment of which shall be permitted by the proviso to Section 5.4A hereof or (ii) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraphs and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties, which Liens, exceptions, encumbrances, easements, reservations, rights and restrictions do not, in the opinion of Reyna, in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of Reyna and its Subsidiaries; or C. Any Subsidiary from creating, incurring, assuming or suffering to exist any Lien solely to secure Indebtedness owing to Reyna or any Wholly-owned Subsidiary; or D. Reyna from creating, incurring, assuming or suffering to exist any Lien securing Nonrecourse Debt; provided, however, that (i) such Lien shall be limited to the property financed by such Nonrecourse Debt and the lease or security agreement to which such property is subject and (ii) Reyna's Net Equity Investment in the Nonrecourse Receivable with respect to which such Nonrecourse Debt is incurred is in compliance with the provisions of Section 7.8 hereof; or E. Reyna from creating, incurring, assuming or suffering to exist any Lien securing Receivables to the extent such Receivables are required to be secured by the terms of any receivables transfer agreements to which Reyna is a party; provided, however, that the aggregate amount of Receivables secured by all such Liens shall not exceed $40,000,000. SECTION 7.3 RESTRICTIONS WITH RESPECT TO SUBSIDIARIES; AND MERGERS AND ASSET SALES BY BORROWER. A. Reyna will not cause, suffer or permit any Subsidiary to: (i) Issue or dispose of any shares of such Subsidiary's capital stock to any Person other than Reyna or a Wholly-owned Subsidiary, except to the extent that any such shares are required to qualify directors under any applicable law or required to be directors under any applicable law or required to be issued to other stockholders of such Subsidiary by virtue of their exercise of preemptive rights or as their pro rata share of any stock dividend; or (ii) Sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of another Subsidiary, or any Indebtedness owing to such Subsidiary from another Subsidiary or from Reyna, to any Person other than Reyna or a Wholly-owned Subsidiary, except in connection with a transaction which complies with Section 7.3B hereof; or (iii) Sell, assign, lease, transfer or otherwise dispose of any of such Subsidiary's properties and assets to any Person or consolidate with or merge into any other Person or permit any other Person to merge into it; provided, however, that 37 38 (a) Any Subsidiary may sell, lease, transfer or otherwise dispose of any of its properties and assets if such sale, lease, transfer or disposition is for cash in an amount not less than the fair market value of such properties and assets and if (x) such sale will not materially and adversely affect the conduct of the business of Reyna or any of its Subsidiaries, (y) such Subsidiary does not own any Indebtedness of Reyna or capital stock or any Indebtedness of any other Subsidiary not simultaneously being disposed of in compliance with Section 7.3B hereof, and (z) at the time of such transaction and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing; and (b) Any Subsidiary may sell, lease, transfer or otherwise dispose of all or any part of its properties and assets to, or consolidate with or merge into, Reyna or a Wholly-owned Subsidiary. B. Reyna will not sell, assign, transfer, dispose of, or in any way part with control of, any shares of capital stock of any Subsidiary or any Indebtedness owing from the Subsidiary to Reyna, except, in the case of shares of capital stock to the extent, if any, required to qualify directors of such Subsidiary under any applicable law; provided, however, that all shares of capital stock of all classes, together with all Indebtedness, or any Subsidiary owned by Reyna and/or one or more Subsidiaries may be sold as an entirety if such sale, if treated as a sale of such Subsidiary's assets made by such Subsidiary, would not be prohibited by the provisions of Section 7.3A(iii)(a) hereof. C. Reyna will not consolidate with or merge into any Person, or permit any Person to merge into it, or sell, lease, transfer, or otherwise dispose of a substantial part of its properties and assets. SECTION 7.4 MAINTENANCE OF LIQUID ASSETS. Reyna will at all times maintain its Liquid Assets in an amount greater than 100% of Consolidated Total Liabilities. SECTION 7.5 MAINTENANCE OF CONSOLIDATED TANGIBLE NET WORTH. Reyna will at all times maintain its Consolidated Tangible Net Worth in an amount not less than $15,000,000. SECTION 7.6 MAINTENANCE OF SEPARATE EXISTENCE. Reyna and the Parent will at all times maintain their separate existence as independent entities and in furtherance thereof: A. Neither Reyna nor any Subsidiary will enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate except in the ordinary course of and pursuant to the reasonable requirements of Reyna's or such Subsidiary's business and upon terms at least as favorable to Reyna or such Subsidiary as would be obtainable from a third party not an Affiliate. B. Reyna and the Parent will maintain separate and identifiable offices (except that Reyna may maintain offices within the Parent's offices). 38 39 C. Reyna will hold meetings of its shareholders and Board of Directors (or otherwise arrange for action by its shareholders and Board of Directors to be taken in accordance with appropriate procedures authorized by law) and maintain appropriate corporate books and records separate and apart from those of the Parent; Reyna will not suffer any limitation on the authority of its own directors and officers to conduct its business and affairs in accordance with their own business judgment, and will not authorize or suffer any Person other than its officers (or authorized agents) and directors to act on its behalf with respect to matters for which a corporation's own officers and directors would customarily be responsible. D. In all business dealings with third parties, Reyna shall refer to itself and to the extent possible, shall cause others to refer to it, as distinct entity from the Parent, and will not treat itself or hold itself out, or, to the extent possible, permit others to treat it, as a department, division or similar unit of the Parent. E. Reyna and the Parent will maintain separate physical possession, in its separate records maintained in accordance with Section 7.6C hereof (or in such other manner as counsel to Reyna shall advise is sufficient to perfect the holder's security interest therein), of all chattel paper and other title retention or lien-creating instruments held by it from time to time. F. Reyna and its Subsidiaries will maintain capitalization adequate, in the judgment of their respective Boards of Directors, for the conduct of their respective businesses. G. Reyna will maintain bank accounts which are separate from the bank accounts of any Affiliate. SECTION 7.7 MAINTENANCE OF PRESENT BUSINESS. Reyna will not, and will not permit Reyna Leasing to, engage in any business other than the business in which it is engaged in on the date hereof. SECTION 7.8 LIMIT ON NET EQUITY INVESTMENTS. Reyna will not allow the aggregate amount of Reyna's Net Equity Investments in Non-Recourse Receivables at any time to exceed 5% of Total Assets as of such time. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 EVENTS OF DEFAULT. This Note shall become and be due and payable upon written demand of the holder hereof if one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or be 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), and be continuing at the time of such demand or at the time of a similar demand from the holder of any other Note; A. Default in the payment of any interest upon any Note when such interest becomes due and payable and continuance of such default for a period of five days; B. Default in the payment of principal of (or premium, if any, on) any Note when and as the same shall become due and payable, whether at maturity or at a date fixed for prepayment, or by acceleration or otherwise; or 39 40 C. Default in the performance or observance or any covenant, agreement or condition contained in Section 6.1 to Section 6.10, or Section 7.1 to 7.8, inclusive and, in the case of such default under: (i) Section 6.2, the aggregate amount of Priority Indebtedness in excess of the amount of Priority Indebtedness permitted to be incurred in compliance with said Section 6.2 (5) does not exceed $500,000 for more than 30 days; and (ii) Section 6.8, or Section 7.4, continuance of such default for a period of 30 days; or D. Default in the performance or observance of any other covenant, agreement or condition contained in this Note or in the Agreement and continuance of such default for a period of 30 days after written notice thereof, specifying such default and requiring it to be remedied, shall have been given to the Borrower by the holder of any Note; or E. The Borrower or a Restricted Subsidiary (i) shall not pay when due, whether by acceleration or otherwise, any evidence of indebtedness of the Borrower or such Restricted Subsidiary (other than the Notes), or (ii) (a) any condition or default shall exist under any such evidence of indebtedness or under any agreement under which the same may have been issued and (b) such evidence of indebtedness shall have been declared due prior to the stated maturity thereof; F. The Borrower or any Restricted Subsidiary shall file a petition seeking relief for itself under Title 11 of the United States Code, as now constituted or hereafter amended, or an answer consenting to, admitting the material allegations of or otherwise not controverting, or shall fail to timely controvert, a petition filed against the Borrower or such Restricted Subsidiary seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended; or the Borrower or any Restricted Subsidiary shall file such a petition or answer with respect to relief under the provisions of any other now existing or future bankruptcy, insolvency or other similar law of the United States of America or any State thereof or of any other country or jurisdiction providing for the reorganization, winding-up or liquidation of corporations or an arrangement, composition, extension or adjustment with creditors; or G. A court of competent jurisdiction shall enter an order for relief which is not stayed within 60 days from the date of entry thereof against the Borrower or any Restricted Subsidiary under Title 11 of the United States Code, as now constituted or hereafter amended; or there shall be entered an order, judgment or decree by operation of law or by a court having jurisdiction in the premises which is not stayed within 60 days from the date of entry thereof adjudging the Borrower or any Restricted Subsidiary a bankrupt or insolvent, or ordering relief against the Borrower or any Restricted Subsidiary, or approving as properly filed a petition seeking relief against the Borrower or any Restricted Subsidiary, under the provisions of any other now existing or future bankruptcy, insolvency or other similar law of the United States of America or any State thereof or of any other country or jurisdiction providing for the reorganization, winding-up or liquidation of corporations or an arrangement, composition, extension or adjustment with creditors, or appointing a receiver, liquidator, assignee, sequestrator, trustee, custodian or similar official of the Borrower or any Restricted Subsidiary or of any substantial part of its property, or ordering the reorganization, winding-up or liquidation of its affairs; or any involuntary petition against the Borrower or any Restricted Subsidiary seeking any of the relief specified in this clause shall not be dismissed within 60 days of its filing; or 40 41 H. of The Borrower or any Restricted Subsidiary shall make a general assignment or the benefit its creditors; or the Borrower or any Restricted Subsidiary shall consent to the appointment of or taking possession by a receiver, liquidator, assignee. sequestrator, trustee, custodian or similar official of the Borrower or such Restricted Subsidiary or of all or any substantial part of its property; or the Borrower or any Restricted Subsidiaries shall have admitted to its insolvency or inability to pay, or shall have failed to pay, its debts generally as such debts become due; or the Borrower or any Restricted Subsidiary or its directors or majority stockholders shall take any action looking to the dissolution or liquidation of the Borrower or such Restricted Subsidiary (other than as contemplated by Sections 6.4, 6.5 and 7.3); or I. The rendering against the Borrower or a Restricted Subsidiary of a final judgment, decree or order for the payment of money in excess of $1,000,000 and the continuance of such judgment, decree or order unsatisfied and in effect for any period of 60 consecutive days without a stay of execution; or J. The Borrower or any Restricted Subsidiary shall: (1) engage in any nonexempted "prohibited transaction", as defined in Sections 406 and 408 of ERISA and Section 4975 of the Internal Revenue Code of 1954, as amended; (2) incur any "accumulated funding deficiency", as defined in Section 302 of ERISA, whether or not waived; or (3) terminate or permit the termination of any "employee pension benefit plan", as defined in Section 3 of ERISA, in a manner which could result in the imposition of a Lien on the property of the Borrower or such Restricted Subsidiary pursuant to Section 4068 of ERISA which Lien would secure obligations in excess of $500,000; or K. Any representation by or on behalf of the Borrower in the Agreement or any certificate or instrument furnished in connection therewith or with the Notes proves to have been false or misleading in any material respect as of the date given or made; provided that in the case of any default which directly or indirectly relates to the performance or observance of any covenant, agreement or condition contained in Sections 6 or 7 of the Agreement, there shall become due and payable with respect to any Notes then held by any holder of the Notes entitled to the benefits of said Sections 6 or 7, to the extent permitted by applicable law, the Make-Whole Amount of such Notes plus accrued interest thereon. 8.2 SUITS FOR ENFORCEMENT. In case an Event of Default shall occur and be continuing, the holder of this Note may proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant contained in this Note or in aid of the exercise of any power granted in this Note, or may proceed to enforce the payment of this Note or to enforce any other legal or equitable right of the holder of this Note. If any holder of a Note shall demand payment thereof or take any other action in respect of an Event of Default, the Borrower will forthwith given written notice, as in Section 9.3 provided, to other holders of Notes specifying such action and the nature and status of the Event of Default, 8.3 REMEDIES NOT WAIVED. No course of dealing between the holder hereof and the Borrower or any delay or failure on the part of the holder hereof in exercising any rights hereunder shall operate as a waiver of any rights of the holder hereof. 41 42 8.4 REMEDIES CUMULATIVE. No remedy herein conferred upon the holder hereof is intended to be exclusive of any other remedy and each and every remedy shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. SECTION 8.5 ACCELERATION OF INDEBTEDNESS. If an Event of Default has occurred, then the Bank may, at its option, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower, declare its obligation to make loans and advances hereunder to be terminated, whereupon the same shall forthwith terminate, and declare any Note, all interest thereon, and all other amounts payable under this Agreement or upon any other promissory note, indebtedness, or loan agreement to the Bank to be forthwith due and payable in full, and accelerate the maturity of the obligations evidenced thereby, which obligations shall become and be forthwith immediately due and payable without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower. In the Event of Default, the remedies provided to Bank herein shall be cumulative and shall be in addition to every other remedy provided herein or otherwise provided by law. ARTICLE IX MISCELLANEOUS SECTION 9.1 AMENDMENT, MODIFICATION AND WAIVER. No amendment, modification, termination, waiver, consent to departure or alteration of the terms hereof or of any provision of any of the Loan Documents shall be binding or effective unless the same be in writing, dated subsequent to the date hereof, and duly executed by all parties hereto, and then such amendment, modification or waiver shall be effective only in the specific instance and for the specific purpose for which given. SECTION 9.2 SURVIVAL OF WARRANTIES. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of any Loan hereunder and the execution and delivery of any of the Loan Documents. SECTION 9.3 NOTICE, ETC. All notices and other communications provided for under this Agreement and under any of the Loan Documents to which the Borrowers are parties shall be delivered, mailed registered or certified mail, return receipt requested, or telegraphed to the Borrower, at: The Reynolds & Reynolds Company 115 S. Ludlow St. Dayton, OH 45402 ATTN: Treasurer and to: Reyna Financial Corporation 115 S. Ludlow St. Dayton, OH 45402 ATTN: Assistant Treasurer 42 43 and it to the Bank: Bank One, Dayton, NA Kettering Tower Dayton, OH 45401 ATTN: R. Michael Dunlavey or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section. All such notices and communications shall, when mailed or telegraphed, be effective upon receipt or delivery. SECTION 9.4 NO WAIVER-REMEDIES. No delay or failure of the Bank in exercising any right, power, remedy or privilege hereunder or under any of the Loan Documents on any occasion shall affect such right, power or privilege or be construed as a waiver of any requirement of this Agreement or a waiver of the Bank's right to take advantage of any subsequent or continued breach by the Borrower of any covenant contained herein; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or privilege be prejudicial to any subsequent exercise of such right, power or privilege. The rights and remedies of the Bank hereunder are cumulative and not exclusive. All remedies herein provided shall be in addition to and not in substitution for any remedies otherwise available to the Bank. Any waiver, permit, consent or approval of any kind by the Bank of any breach or default hereunder, or such waiver of any provision or condition hereof, must be in writing and shall be effective only to the extent set forth in such writing. SECTION 9.5 SUCCESSORS AND ASSIGNS. The Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Bank and their respective successors and assigns, except that the Borrower may not assign or transfer any of the Loan Documents or any of their rights under any of the Loan Documents to which the Borrowers are parties without the prior written consent of the Bank. SECTION 9.6 COSTS, EXPENSES AND TAXES. The Borrowers agree to pay on demand all reasonable costs and expenses in connection with the negotiation, preparation, execution, delivery, filing, recording, administration, enforcement, litigation, collection, or filing of any legal action on or for any of the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Bank, and counsel who may be retained by said counsel, with respect thereto and with respect to advising the Bank as to its rights and responsibilities under any of the Loan Documents. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of any of the Loan Documents and other documents to be delivered under any such Loan Documents, and agree to save the Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such taxes and fees or against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution, delivery and performance of this Agreement, any Loan and security therefore, if applicable. The obligations of the Borrower under this Section shall survive payment of all Loans. 43 44 SECTION 7.7 INDEMNIFICATION. The Borrowers agree to indemnify, save, and hold harmless the Bank and its directors, officers, agents and employees (collectively the "Indemnitees") from and against: (a) Any and all writs, subpoenas, claims, demand, actions or causes of action that are served on or asserted against any Indemnitee by any Person, and (b) Any and all liabilities, losses, costs or expenses (including reasonable attorneys fees) that any Indemnitee suffers or incurs as a result of any other matter specified in this Section. The obligations of the Borrower under this Section shall survive payment of all Loans. SECTION 9.8 RIGHT OF SETOFF. Upon the occurrence and during the continuance of any Event of Default the Bank is hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), 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 the Bank to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement, any Note or any of the Loan Documents, irrespective of whether or not the Bank shall have made any demand under this Agreement, any Note or any of the Loan Documents and although such obligations may be unmatured. The Bank agrees promptly to notify the Borrower after any such setoff and application, provided that the failure to give to such notice shall not affect the validity of such setoff and application. The rights of the Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Bank may have. In addition, any and all instruments, documents, monies, securities, goods, chooses in action, chattel paper and any other property of the Borrower, or in which the Borrowers have any interest, tangible or intangible, and the proceeds thereof, which now or hereafter are at any time in the custody or possession of the Bank or any third party acting in the Bank's behalf, without regard to whether the Bank received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether the Bank has conditionally released the same, shall constitute additional security for any Note and may be applied at any time to the liability represented thereby which is then due, whether by acceleration or otherwise. SECTION 9.9 PAYMENT. Whenever any payment to be made hereunder or on any Loan shall become due and payable on a Saturday, Sunday or a legal holiday under the laws of the State of Ohio, such payment may be made in the next succeeding business day and such extension of time shall in such case be included in computing interest on such payment. SECTION 9.10 BANK'S DUTIES UPON PAYMENT IN FULL BY BORROWER. Upon payment in full of all obligations hereunder and the termination of the Bank's obligations to make further loans to the Borrower, the Bank shall reassign to the Borrower any collateral that the Borrower may have previously assigned or delivered to the Bank and not yet fully collected. At the Borrower's written request, the Bank will cause to be cancelled of record, all financing statements or other documents which may have previously been filed and recorded in public offices by or on behalf of the Bank evidencing the Borrower's obligation hereunder to the Bank and the security therefore and will deliver to the Borrower any Note paid in full marked "Paid-in-Full". 44 45 SECTION 9.11 CONSTRUCTION. This Agreement, the Loan Documents, including but not limited to any Security Documents and the Notes, shall be governed and construed in accordance with the laws of the State of Ohio, or to the extent such laws are superseded because the Bank is a national banking association, by the banking laws of the United States. SECTION 9.12 SEVERABILITY OF PROVISIONS. Any provision contained in any of the Loan Documents 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 of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 9.13. COVENANTS IN OTHER INDEBTEDNESS. In the event the Borrower or any Subsidiary thereof shall execute, make or otherwise enter into any instrument, document or agreement relating to the incurrence or maintenance of any Indebtedness, or any amendment, waiver, restatement, reevidencing or other modification of any documentation relating to any of its existing Indebtedness (collectively, "Other Loan Documents"), the effect of which in any such case is to implement or subject, the Borrower or such Subsidiary to any affirmative, negative, financial or other covenants, or to any events of default (collectively, "Restrictive Covenants"), which Restrictive Covenants are in any respect materially different from the Restrictive Covenants set forth in this Agreement, the Borrower shall promptly so advise the Bank. Thereafter, the Borrower shall provide the Bank such information, in such reasonable detail, as the Bank may reasonably request in respect of the applicable Restrictive Covenants and the Other Loan Documents. The Bank shall have the right, at any time, in its sole discretion, to elect to amend in the manner hereinafter described, this Agreement and the Note to incorporate any such Restrictive Covenant, other than any Restrictive Covenant which would effect an amendment of Section 2.6 or 2.14 of this Agreement. If the Bank shall elect to incorporate any such Restrictive Covenant, it shall so notify the Borrower in a written notice and, upon the giving of such notice, this Agreement shall be deemed amended to incorporate such Restrictive Covenant. Any amendment effected in accordance with the terms of this Section 9.13 shall remain in effect during the entire term of this Agreement, notwithstanding the subsequent termination, rescission, avoidance, waiver, release, amendment or other modification of all or any term or provision of the Other Loan Document from which a Restrictive Covenant shall have originated (including, without limitation, any modification to such Restrictive Covenant in such Other Loan Document), unless the Bank and the Borrower shall otherwise agree in accordance with the procedures set forth in Article VIII hereof. SECTION 9.14 HEADINGS. Article and section numbers in this Agreement are for convenience of reference only and shall not constitute a part of the Agreement for any other purpose. SECTION 9.15 EXECUTION IN COUNTERPARTS. This Agreement 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 and all of which taken together shall constitute but one and the same Agreement. 45 46 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers/authorized partners, effective as of the date first above appearing. WITNESS: THE REYNOLDS and REYNOLDS COMPANY, an Ohio corporation /s/ - -------------------------- By: /s/ Michael J. Gapinski --------------------------------- Title: Treasurer ------------------------------ REYNA FINANCIAL CORPORATION, an Ohio corporation /s/ - -------------------------- By: /s/ Michael J. Gapinski --------------------------------- Title: Ass't Treasurer ------------------------------ BANK ONE, DAYTON, NA /s/ - -------------------------- By: /s/ Michael Dunleavy --------------------------------- Title: Senior Loan Officer ------------------------------ 46 EX-1.C 15 EXHIBIT (C)(1) 1 EXHIBIT (c)(1) AGREEMENT AND PLAN OF MERGER among THE REYNOLDS AND REYNOLDS COMPANY, DELAWARE ACQUISITION CO., and DUPLEX PRODUCTS INC. dated as of April 20, 1996 2 TABLE OF CONTENTS
1. THE OFFER AND MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 -------------------- 1.1 The Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 --------- 1.2 Company Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 --------------- 1.3 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 --------- 1.4 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ---------- 1.5 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 -------------- 1.6 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ------- 1.7 Surviving Corporation Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . 8 -------------------------------------------- 1.8 Shareholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 --------------------- 1.9 Merger Without Meeting of Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 -------------------------------------- 2. CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ------------------------ 2.1 Conversion of Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 --------------------------- 2.2 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ------------------------ 2.3 Company Option Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 -------------------- 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 13 --------------------------------------------- 3.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ------------ 3.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 -------------- 3.3 Authorization; Validity of Agreement; Company Action. . . . . . . . . . . . . . . . . . . . 15 ---------------------------------------------------- 3.4 Consents and Approvals; No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ------------------------------------- 3.5 SEC Reports and Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ------------------------------------ 3.6 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 -------------------------- 3.7 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 -------------------------- 3.8 Information in Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ------------------------------ 3.9 Employee Benefit Plans; ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ----------------------------- 3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ---------- 3.11 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ------------------- 3.12 Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ------------- 3.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ----- 3.14 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 --------------- 3.15 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 -------------------- 3.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 --------- 3.17 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 --------- 3.18 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ------------- 3.19 Opinions of Financial Advisors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ------------------------------ 3.20 Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ------------- 3.21 Title to Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ------------------- 3.22 Intellectual Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 ----------------------- 3.23 Broker's or Finder's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ------------------------- 3.24 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 --------------------- 3.25 State Takeover Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ----------------------- 3.26 Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ---------------- 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER. . . . . . . . . . . . . . . . . . . 30 ---------------------------------------------------------- 4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ------------ 4.2 Authorization; Validity of Agreement; Necessary Action. . . . . . . . . . . . . . . . . . . 30 ------------------------------------------------------
i 3 4.3 Consents and Approvals; No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ------------------------------------- 4.4 Information in Proxy Statement; Schedule 14D-9. . . . . . . . . . . . . . . . . . . . . . . 31 ---------------------------------------------- 4.5 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 --------- 4.6 Purchaser's Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ---------------------- 5. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 --------- 5.1 Interim Operations of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 --------------------------------- 5.2 Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 ---------------- 5.3 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 ------- 5.4 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 --------------------- 5.5 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ---------------------- 5.6 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ----------------- 5.7 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 --------------- 5.8 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ------------------ 5.9 Additional Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 --------------------- 5.10 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 --------- 5.11 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 ------------------------------- 5.12 Directors' and Officers' Insurance and Indemnification. . . . . . . . . . . . . . . . . . . 38 ------------------------------------------------------ 6. CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ---------- 6.1 Shareholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 -------------------- 6.2 Statutes; Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ------------------ 6.3 Injunctions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ----------- 6.4 Purchase of Shares in Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 --------------------------- 7. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ----------- 7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ----------- 7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 --------------------- 8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ------------- 8.1 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ----------------- 8.2 Amendment and Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 -------------------------- 8.3 Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ------------------------------ 8.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ------- 8.5 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 -------------- 8.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ------------ 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership. . . . . . . . . . . . . 44 ------------------------------------------------------------------- 8.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 ------------ 8.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 ------------- 8.10 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 ---------- 8.11 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 -------- 8.12 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 -----------------
ii 4 INDEX OF DEFINED TERMS
Defined Term Section No. Acquisition Proposal. . . . . . . . . . 5.7(b) Agreement . . . . . . . . . . . . . . . Recitals Appointment Date. . . . . . . . . . . . 5.1 Benefit Plans . . . . . . . . . . . . . 3.9(a) Certificate of Merger . . . . . . . . . 1.5(a) Certificates. . . . . . . . . . . . . . 2.2(b) Claims. . . . . . . . . . . . . . . . . 3.24(b) Closing . . . . . . . . . . . . . . . . 1.6 Closing Date. . . . . . . . . . . . . . 1.6 Code. . . . . . . . . . . . . . . . . . 3.9(b) Company . . . . . . . . . . . . . . . . Introduction Company Common Stock. . . . . . . . . . 1.1(a) Company SEC Documents . . . . . . . . . 3.5 Confidentiality Agreement . . . . . . . 5.4 DGCL. . . . . . . . . . . . . . . . . . 1.4 Disclosure Letter . . . . . . . . . . . 3.4 Dissenting Stock. . . . . . . . . . . . 2.1(c) Dissenting Stockholder. . . . . . . . . 2.1(c) Duff & Phelps . . . . . . . . . . . . . 1.2(b) Exchange Act . . . . . . . . . . . . . 1.1(a) Effective Time. . . . . . . . . . . . . 1.5(a) Environmental Claim . . . . . . . . . . 3.24(b) Environmental Law . . . . . . . . . . . 3.24(b) ERISA . . . . . . . . . . . . . . . . . 3.9(a) ERISA Affiliate . . . . . . . . . . . . 3.9(a) Exchange Act. . . . . . . . . . . . . . 1.1(a) GAAP. . . . . . . . . . . . . . . . . . 3.5 Governmental Entity . . . . . . . . . . 3.4 Hazardous Substances. . . . . . . . . . 3.24(b) HSR Act . . . . . . . . . . . . . . . . 3.4 Indemnified Parties . . . . . . . . . . 5.12(a) Intellectual Property . . . . . . . . . 3.22 Know-how. . . . . . . . . . . . . . . . 3.22 Indenture . . . . . . . . . . . . . . . 3.2(a) Material Agreements . . . . . . . . . . 3.4 Merger. . . . . . . . . . . . . . . . . 1.4 Merger Consideration. . . . . . . . . . 2.1(c) Minimum Condition . . . . . . . . . . . 1.1(a) 1984 Option Plan. . . . . . . . . . . . 2.3(a) 1993 Option Plan. . . . . . . . . . . . 2.3(a) 1995 Financial Statements . . . . . . . 3.5 1995 Form 10-K. . . . . . . . . . . . . 3.5 NLRB. . . . . . . . . . . . . . . . . . 3.14 Offer . . . . . . . . . . . . . . . . . 1.1(a) Offer Documents . . . . . . . . . . . . 1.1(d) Offer Price . . . . . . . . . . . . . . 1.1(a) Offer to Purchase . . . . . . . . . . . 1.1(b) Option Plans. . . . . . . . . . . . . . 2.3(a) Options . . . . . . . . . . . . . . . . 2.3(a)
iii 5 Parent. . . . . . . . . . . . . . . . . Introduction Paying Agent. . . . . . . . . . . . . . 2.2(a) Payment Fund. . . . . . . . . . . . . . 2.2(d) PBGC. . . . . . . . . . . . . . . . . . 3.9(e) Permitted Investments . . . . . . . . . 2.2(d) Preferred Stock . . . . . . . . . . . . 3.2(a) Proxy Statement . . . . . . . . . . . . 1.8(a) Purchaser . . . . . . . . . . . . . . . Introduction Purchaser Common Stock. . . . . . . . . 2.1 Restricted Stock Plan . . . . . . . . . 2.3(b) Rights. . . . . . . . . . . . . . . . . 1.1(a) Rights Agreement. . . . . . . . . . . . 1.1(a) Rights Amendment. . . . . . . . . . . . 1.2(e) Schedule 14D-1. . . . . . . . . . . . . 1.1(d) Schedule 14D-9. . . . . . . . . . . . . 1.2(c) SEC . . . . . . . . . . . . . . . . . . 1.1(d) Secretary of State. . . . . . . . . . . 1.5(a) Securities Act. . . . . . . . . . . . . 3.4 Section 16. . . . . . . . . . . . . . . 2.3(a) Service . . . . . . . . . . . . . . . . 3.9(d) Shares. . . . . . . . . . . . . . . . . 1.1(a) Special Meeting . . . . . . . . . . . . 1.8(a) Subsidiary. . . . . . . . . . . . . . . 3.1 Superior Proposal . . . . . . . . . . . 5.7(b) Surviving Corporation . . . . . . . . . 1.4 Taxes . . . . . . . . . . . . . . . . . 3.13(t) Tax Return. . . . . . . . . . . . . . . 3.13(t) Tender Agreements . . . . . . . . . . . 1.2(a) Tender Offer Conditions . . . . . . . . 1.1(a) Third Party Confidentiality Agreements. 5.7(d) Transactions. . . . . . . . . . . . . . 1.2(a) Trigger Event . . . . . . . . . . . . . 8.1(b) Voting Debt . . . . . . . . . . . . . . 3.2(a)
iv 6 AGREEMENT AND PLAN OF MERGER THE REYNOLDS AND REYNOLDS COMPANY ("PARENT"), DELAWARE ACQUISITION CO. (the "PURCHASER"), and DUPLEX PRODUCTS INC. (the "COMPANY") agree as follows: RECITALS Parent is an Ohio corporation. The Purchaser is a Delaware corporation and a wholly owned subsidiary of Parent. The Company is a Delaware corporation. The Boards of Directors of Parent, the Purchaser and the Company have approved, and deem it advisable and in the best interests of their respective shareholders to consummate, the acquisition of the Company by Parent upon the terms and subject to the conditions set forth in this agreement (the "AGREEMENT"). 1. THE OFFER AND MERGER. --------------------- 1.1 THE OFFER. (a) As promptly as practicable (but in no event later than five business days after the public announcement of the execution hereof) and provided that none of the events described in the attached Annex A has occurred and is then continuing, the Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) an offer (the "OFFER") to purchase for cash all of the issued and outstanding common stock, par value $1.00 per share (either the "SHARES" or "COMPANY COMMON STOCK"), of the Company (including the associated Preferred Stock Purchase Rights (the "RIGHTS") issued pursuant to the Rights Agreement between the Company and Harris Trust and Savings Bank, dated as of June 8, 1989, as amended (the "RIGHTS AGREEMENT")), at a price of $12.00 per Share, net to the seller in cash (such price, or such higher price per Share as may be paid in the Offer, being referred to herein as the "OFFER PRICE"), subject to there being validly tendered and not withdrawn prior to the expiration of the Offer, that number of Shares which, together with the Shares beneficially owned by Parent or the Purchaser, represent at least 70% of the Shares outstanding on a fully diluted basis (the "MINIMUM CONDITION") and to the other conditions set forth in Annex A (collectively, the "TENDER OFFER CONDITIONS"). (b) The Purchaser shall, on the terms and subject to the prior satisfaction or waiver (subject to the limitations on waiver described in the first sentence of Section 1.1(c)) of the Tender Offer Conditions, accept for payment and pay for Shares tendered as soon as it is legally permitted to do so under applicable law. The obligations of the Purchaser to commence the Offer and to accept for payment and to pay for any Shares validly tendered on or prior to the expiration of the Offer and not withdrawn shall be subject 1 7 only to the Tender Offer Conditions. The Offer shall be made by means of an offer to purchase (the "OFFER TO PURCHASE") containing the terms set forth in this Agreement and the Tender Offer Conditions. (c) (i) Any of the Tender Offer Conditions may be waived; provided, however, that, without the consent of the Company, the Purchaser shall not waive the Minimum Condition. The Tender Offer Conditions are for the sole benefit of Parent and the Purchaser and may be asserted by Parent and the Purchaser regardless of the circumstances giving rise to any such Tender Offer Conditions and, subject to the preceding sentence, may be waived by Parent and the Purchaser in whole or in part. (ii) The Purchaser expressly reserves the right to modify the terms of the Offer (except as provided in the following sentence), including, without limitation, to extend the Offer beyond any scheduled expiration date; provided, however, without the consent of the Company, the Purchaser shall not (A) reduce the number of Shares to be purchased in the Offer, (B) reduce the Offer Price, (C) modify or add to the Tender Offer Conditions or (D) change the form of consideration payable in the Offer. Notwithstanding the preceding sentence, if, as of the scheduled expiration date of the Offer (as the same may have been duly extended), any of the Tender Offer Conditions shall not have been satisfied, the Offer may be extended in Purchaser's sole discretion; provided, however, that under any circumstance the Offer may not be extended beyond June 15, 1996. In addition, the Offer Price may be increased (any increase shall be at Purchaser's sole discretion and Purchaser shall have no obligation to increase the Offer Price) and the Offer may be extended to the extent required by law in connection with such increase, in each case without the consent of the Company. (d) (i) As soon as practicable on the date the Offer is commenced, Parent and the Purchaser shall file with the United States Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer (together with all amendments and supplements thereto and including the exhibits thereto, the "SCHEDULE 14D-1"). The Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form of letter of transmittal and summary advertisement (collectively, together with any amendments and supplements thereto, the "OFFER DOCUMENTS"). (ii) The Offer Documents will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's shareholders, shall not 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 were made, not misleading, except that no representation 2 8 is made by Parent or Purchaser with respect to information supplied by the Company in writing for inclusion in the Offer Documents. Each of Parent and the Purchaser further agrees to take all steps necessary to cause the Offer Documents to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Each of Parent and the Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false and misleading in any material respect and the Purchaser further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given the opportunity to review the Schedule 14D-1 before it is filed with the SEC. In addition, Parent and the Purchaser agree to provide the Company and its counsel in writing with any comments Parent, the Purchaser or their counsel may receive from time to time from the SEC with respect to the Offer Documents promptly after receipt of such comments. 1.2 COMPANY ACTIONS. (a) The Company hereby approves of and consents to the Offer and represents that the Board of Directors, at a meeting duly called and held, has: (i) determined by unanimous vote that each of this Agreement and the transactions contemplated hereby, including the Offer and the Merger (as defined in Section 1.4) is fair to and in the best interest of the holders of the Company Common Stock (the Offer and the Merger are collectively referred to in this Agreement as the "TRANSACTIONS"); (ii) approved by unanimous vote this Agreement and each of the Transactions and, for the purposes of Section 203 of the DGCL (as defined in Section 1.4), the tender agreements (or letters of intent to tender) to be entered into immediately after this Agreement on the date hereof between Parent, the Purchaser and one or more of Tweedy Browne & Company, LP, College Retirement Equities Fund - Stock, Smith (Donald) & Company, Inc. Franklin Balance Sheet Investment Fund, Delphi Management, David L. Babson & Company, Inc., Babson Enterprise Fund, Brinson Partners, Brinson Post-Venture Fund and The Franklin Microcap Value Fund (collectively, the "TENDER AGREEMENTS"); (iii) resolved to recommend that the shareholders of the Company accept the Offer, tender their Shares thereunder to the Purchaser and approve and adopt this Agreement and the Merger; provided, that such recommendation may be withdrawn, modified or amended only under the circumstances described in Section 5.7; and 3 9 (iv) taken all other action necessary to render the Rights Agreement inapplicable to the Transactions and the Tender Agreements. The Company represents that the actions set forth in this Section 1.2(a) and all other actions it has taken in connection therewith are, assuming the accuracy of, and in reliance upon, the information received in writing from Parent as to the ownership of Shares by Parent, Purchaser and their affiliates, sufficient to render (i) Section 203 of the DGCL inapplicable to the Transactions and the Tender Agreements and (ii) the super-majority voting requirements set forth in the Company's Restated Certificate of Incorporation inapplicable to this Agreement and the Transactions. (b) The Company further represents that Duff & Phelps Capital Markets Company ("DUFF & PHELPS") has delivered to the Company its opinion that the consideration to be received by the holders of Company Common Stock pursuant to the Offer and the Merger is fair to such holders from a financial point of view, subject to the assumptions and qualifications set forth in such opinion. (c) (i) Concurrently with the commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto and including the exhibits thereto, the "SCHEDULE 14D-9") which shall, subject to the fiduciary duties of the Company's directors under applicable law (and the provisions of Section 5.7) and to the provisions of this Agreement, contain the recommendation referred to in clause (iii) of Section 1.2(a) hereof. (ii) The Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's shareholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Parent or the Purchaser in writing for inclusion in the Schedule 14D-9. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Each of the Company, on the one hand, and Parent and the Purchaser, on the other hand, agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false and misleading in any material respect and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Parent and 4 10 its counsel shall be given the opportunity to review the Schedule 14D-9 before it is filed with the SEC. The Company agrees to provide Parent and its counsel with any comments the Company or its counsel may receive from the SEC with respect to the Schedule 14D-9 promptly after receipt of such comments, and shall provide Parent and its counsel with an opportunity to participate, including by way of discussions with the SEC, in the response of the Company to such comments. Notwithstanding anything to the contrary contained herein, the subsequent withdrawal, modification or amendment of such recommendation under the circumstances described in Section 5.7 shall not constitute a breach of this Agreement. (d) In connection with the Offer, the Company will promptly furnish or cause to be furnished to the Purchaser mailing labels, security position listings and any available listing or computer file containing the names and addresses of the record holders of the Shares as of a recent date, and shall furnish the Purchaser with such information and assistance as the Purchaser or its agents may reasonably request in communicating the Offer to the shareholders of the Company. Except for such steps as are necessary to disseminate the Offer Documents, Parent and the Purchaser shall hold in confidence the information contained in any of such labels and lists and the additional information referred to in the preceding sentence, will use such information only in connection with the Offer, and, if this Agreement is terminated, will upon request of the Company deliver or cause to be delivered to the Company all copies of such information then in its possession or the possession of its agents or representatives. (e) As promptly as practicable on or after the date hereof, but in no event later than two days following announcement of the Offer, the Company will amend the Rights Agreement, as necessary (the "RIGHTS AMENDMENT"), (i) to prevent this Agreement, the Transactions or the Tender Agreements or the consummation of any of the Transactions contemplated thereby, including without limitation, the publication or other announcement of the Offer and the consummation of the Offer and the Merger, from resulting in the distribution of separate Rights certificates or the occurrence of a Distribution Date (as defined therein) or being deemed a Triggering Event (as defined therein) and (ii) to provide that neither Parent nor the Purchaser shall be deemed to be an Acquiring Person (as defined therein) by reason of the transactions expressly provided for in this Agreement and the Tender Agreements. The Company represents that the Rights Amendment will be sufficient to render the Rights inoperative with respect to any acquisition of Shares by Parent, the Purchaser or any of their affiliates pursuant to this Agreement and/or the Tender Agreements. As a result of the Rights Amendment, the Rights shall not be exercisable upon or at any time after, the acceptance for payment of Shares pursuant to the Offer and/or the purchase of Shares pursuant to the Tender Agreements. 5 11 1.3 DIRECTORS. (a) Promptly upon the purchase of and payment for any Shares by Parent and Purchaser which represents at least a majority of the outstanding shares of Company Common Stock (on a fully diluted basis) Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of directors on such Board (giving effect to the directors designated by Parent pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by the Purchaser and Parent bears to the total number of shares of Company Common Stock then outstanding. The Company shall, upon request of the Purchaser, use its best efforts promptly either to increase the size of its Board of Directors and/or, at the Company's election, secure the resignations of such number of its incumbent directors as is necessary to enable Parent's designees to be so elected to the Company's Board, and shall cause Parent's designees to be so elected. At such time, the Company shall also cause persons designated by Parent to constitute the same percentage (rounded up to the next whole number) as is on the Company's Board of Directors of (i) each committee of the Company's Board of Directors, (ii) each board of directors (or similar body) of each Subsidiary (as defined in Section 3.1) of the Company and (iii) each committee (or similar body) of each such board, in each case only to the extent permitted by applicable law or the rules of any stock exchange on which the Company Common Stock is listed. Notwithstanding the foregoing, until the Effective Time (as defined in Section 1.5 hereof), the Company shall use all reasonable efforts to retain as a member of its Board of Directors at least two directors who are directors of the Company on the date hereof; provided, that subsequent to the purchase of and payment for Shares pursuant to the Offer, Parent shall always have its designees represent at least a majority of the entire Board of Directors. The Company's obligations under this Section 1.3(a) shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions required pursuant to such Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 1.3(a), including mailing to shareholders the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be elected to the Company's Board of Directors. Parent or the Purchaser will supply the Company any information with respect to either of them and their nominees, officers, directors and affiliates required by such Section 14(f)and Rule 14f-1. The provisions of this Section 1.3(a) are in addition to and shall not limit any rights which the Purchaser, Parent or any of their affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. (b) From and after the time, if any, that Parent's designees constitute a majority of the Company's Board of 6 12 Directors, any amendment of this Agreement, any termination of this Agreement by the Company, any extension of time for performance of any of the obligations of Parent or the Purchaser hereunder, any waiver of any condition or any of the Company's rights hereunder or other action by the Company hereunder may be effected only by the action of a majority of the directors of the Company then in office who were directors of the Company on the date hereof, which action shall be deemed to constitute the action of the full Committee and the full Board of Directors; provided, that if there shall be no such directors, such actions may be effected by majority vote of the entire Board of Directors of the Company. 1.4 THE MERGER. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 1.5 hereof), the Company and the Purchaser shall consummate a merger (the "MERGER") pursuant to which (a) the Purchaser shall be merged with and into the Company and the separate corporate existence of the Purchaser shall thereupon cease, (b) the Company shall be the successor or surviving corporation in the Merger and shall continue to be governed by the laws of the State of Delaware under the name of "Duplex Products Inc.", and (c) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger. Pursuant to the Merger, (x) the Restated Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Restated Certificate of Incorporation, and (y) the By-laws of the Company, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as provided by law, the Restated Certificate of Incorporation and such By-laws. The corporation surviving the Merger is sometimes hereinafter referred to as the "SURVIVING CORPORATION." The Merger shall have the effects set forth in the Delaware General Corporation Law (the "DGCL"). 1.5 EFFECTIVE TIME. Parent, the Purchaser and the Company will cause an appropriate Certificate of Merger (the "CERTIFICATE OF MERGER") to be executed, acknowledged and filed on the date of the Closing (as defined in Section 1.6) (or on such other date as Parent and the Company may agree) with the Secretary of State of the State of Delaware (the "SECRETARY OF STATE") as provided in the DGCL. The Merger shall become effective on the date on which the Certificate of Merger has been duly filed with the Secretary of State or such time as is agreed upon by the parties and specified in the Certificate of Merger, and such time is hereinafter referred to as the "EFFECTIVE TIME." 1.6 CLOSING. The closing of the Merger (the "CLOSING") will take place at 10:00 a.m. on a date to be specified by the parties, which shall be no later than the fifth business day after satisfaction or waiver of all of the conditions set forth in Section 6 hereof (the "CLOSING DATE"), at the Chicago, Illinois 7 13 offices of Hinshaw & Culbertson, unless another date or place is agreed to in writing by the parties hereto. 1.7 SURVIVING CORPORATION DIRECTORS AND OFFICERS. The directors and officers of the Purchaser at the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and By-laws. 1.8 SHAREHOLDERS' MEETING. (a) If required by applicable law in order to consummate the Merger, the Company, acting through its Board of Directors, shall, in accordance with applicable law: (i) duly call, give notice of, convene and hold a special meeting of its shareholders (the "SPECIAL MEETING") as soon as practicable following the acceptance for payment and purchase of Shares by the Purchaser pursuant to the Offer for the purpose of considering and taking action upon this Agreement; (ii) prepare and file with the SEC a preliminary proxy or information statement relating to the Merger and this Agreement and use its reasonable efforts (x) to obtain and furnish the information required to be included by the SEC in the Proxy Statement (as defined below) and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement (the "PROXY STATEMENT") to be mailed to its shareholders and (y) to obtain the necessary approvals of the Merger and this Agreement by its shareholders; and (iii) include in the Proxy Statement the recommendation of the Board that shareholders of the Company vote in favor of the approval of the Merger and the adoption of this Agreement, subject, however, to the withdrawal, modification or amendment of that recommendation under the circumstances described in Section 5.7 of this Agreement. (b) Parent agrees that it will vote, or cause to be voted, all of the Shares then owned by it, the Purchaser or any of its other subsidiaries and affiliates in favor of the approval of the Merger and the adoption of this Agreement. 1.9 MERGER WITHOUT MEETING OF SHAREHOLDERS. Notwithstanding Section 1.8 hereof, in the event that Parent, the Purchaser or any other subsidiary of Parent shall acquire at least 90% of the Company Common Stock, pursuant to the Offer or otherwise, the 8 14 parties hereto agree, at the request of Parent and subject to Section 6 hereof, to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of shareholders of the Company, in accordance with Section 253 of the DGCL. 2. CONVERSION OF SECURITIES. 2.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of any shares of Company Common Stock or common stock, no par value, of the Purchaser (the "PURCHASER COMMON STOCK"): (a) Purchaser Common Stock. Each issued and outstanding share of the Purchaser Common Stock shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. (b) Cancellation of Treasury Stock and Parent-Owned Stock. All shares of Company Common Stock that are owned by the Company as treasury stock and any shares of Company Common Stock owned by Parent, the Purchaser or any other wholly owned Subsidiary (as defined in Section 3.1 hereof) of Parent shall be cancelled and retired and shall cease to exist, and no stock of Parent or other consideration shall be delivered in exchange therefor. (c) Exchange of Shares. Each issued and outstanding share of Company Common Stock, including the associated Rights (other than shares to be cancelled in accordance with Section 2.1(b)) shall be converted into the right to receive the Offer Price, payable to the holder thereof, without interest (the "MERGER CONSIDERATION"), upon surrender of the certificate formerly representing such share of Company Common Stock in the manner provided in Section 2.2. All such shares of Company Common Stock, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor upon the surrender of such certificate in accordance with Section 2.2, without interest. Notwithstanding anything in this Agreement to the contrary, but only to the extent required by DGCL, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and with respect to which the holders comply with all the provisions of the DGCL concerning the right of holders of Company Common Stock to dissent from the Merger and require appraisal of their shares of Company Common Stock ("DISSENTING STOCK") shall not be converted into the right to receive the Merger Consideration but shall become the right to receive such consideration as may be determined to be due the holders of the Dissenting Stock ("DISSENTING STOCKHOLDERS") pursuant to the DGCL; provided, however, that (i) if any Dissenting Stockholder shall subsequently deliver a written withdrawal of his or her demand for appraisal 9 15 (with the written approval of the Surviving Corporation, if such withdrawal is not tendered within 60 days after the Effective Time), or (ii) if any Dissenting Stockholder fails to establish and perfect his or her entitlement to appraisal rights as provided by the DGCL, or (iii) if within 120 days of the Effective Time neither any Dissenting Stockholder nor the Surviving Corporation has filed a petition demanding a determination of the value of all shares of Company Common Stock outstanding at the Effective Time and held by Dissenting Stockholders in accordance with the DGCL, then such Dissenting Stockholder or Stockholders, as the case may be, shall forfeit the right to appraisal of such shares and such shares shall thereupon be deemed to have been converted into the right to receive, as of the Effective Time, the Merger Consideration, without interest. The Company shall give Parent and the Purchaser (A) prompt notice of any written demands for appraisal, withdrawals of demands for appraisal and any other related instruments received by the Company, and (B) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal. The Company will not voluntarily make any payment with respect to any demands for appraisal and will not, except with the prior written consent of Parent, settle or offer to settle any such demand. 2.2 EXCHANGE OF CERTIFICATES. (a) Paying Agent. Parent shall designate a bank or trust company to act as agent for the holders of shares of Company Common Stock in connection with the Merger (the "PAYING AGENT") to receive the funds to which holders of shares of Company Common Stock shall become entitled pursuant to Section 2.1(c). Such funds shall be invested by the Paying Agent as directed by Parent or the Surviving Corporation. (b) Exchange Procedures. (i) As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate or certificates, which immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the "CERTIFICATES"), whose shares were converted pursuant to Section 2.1 into the right to receive the Merger Consideration (A) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Parent and the Company may reasonably specify) and (B) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration. (ii) Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each share of Company Common Stock formerly represented by such 10 16 Certificate and the Certificate so surrendered shall forthwith be cancelled. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid any transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such tax either has been paid or is not applicable. (iii) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof as determined in accordance with this Section 2, provided that, the person to whom the Merger Consideration is paid shall, as a condition precedent to the payment thereof, give the Surviving Corporation a bond in such sum as it may direct or otherwise indemnify the Surviving Corporation in a manner satisfactory to it against any claim that may be made against the Surviving Corporation with respect to the Certificate claimed to have been lost, stolen or destroyed. (iv) Until surrendered as contemplated by this Section 2.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration in cash as contemplated by this Section 2.2. (c) Transfer Books; No Further Ownership Rights in Company Common Stock. At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of shares of Company Common Stock on the records of the Company. From and after the Effective Time, the holders of Certificates evidencing ownership of shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by applicable law. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Section 2. (d) Termination of Fund; No Liability. (i) Concurrently with the Effective Time, Parent or the Purchaser shall deposit in trust with the Paying Agent cash in United States dollars in an aggregate amount equal to the product of (A) the number of shares of Company Common Stock outstanding immediately prior to the Effective Time (less those shares to be cancelled in accordance with Section 2.1(b) and any shares known at the time of such deposit to be Dissenting Stock), multiplied by (B) the Merger 11 17 Consideration (such amount being hereinafter referred to as the "PAYMENT FUND"). The Payment Fund shall be invested by the Paying Agent as directed by Parent in direct obligations of the United States, obligations for which the full faith and credit of the United States is pledged to provide for the payment of principal and interest, commercial paper rated of the highest quality by Moody's Investors Services, Inc. or Standard & Poor's Ratings Group or certificates of deposit, bank repurchase agreements or bankers' acceptances of a commercial bank having at least $100,000,000 in assets (collectively, "PERMITTED INVESTMENTS") or in money market funds which are invested in Permitted Investments, and any net earnings with respect thereto shall be paid to Parent as and when requested by Parent. The Paying Agent shall, pursuant to irrevocable instructions, make the payments referred to in Section 2.1(c) hereof out of the Payment Fund. The Payment Fund shall not be used for any other purpose except as otherwise agreed to by Parent. (ii) At any time following one hundred twenty (120) days after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it the remaining balance of the Payment Fund (including any interest received with respect thereto), and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest thereon. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. 2.3 COMPANY OPTION PLANS. (a) Parent and the Company shall take all actions necessary to provide that, effective as of the Effective Time, (i) each outstanding employee stock option to purchase Shares (an "OPTION") granted under the Company's 1984 Incentive Stock Option Plan (the "1984 OPTION PLAN") or the Company's 1993 Incentive Stock Option Plan (the "1993 OPTION PLAN" and collectively with the 1984 Option Plan, the "OPTION PLANS"), whether or not then exercisable or vested, shall become fully exercisable and vested, (ii) each Option that is then outstanding shall be cancelled and (iii) in consideration of such cancellation, and except to the extent that Parent or the Purchaser and the holder of any such Option otherwise agree, the Company (or, at Parent's option, the Purchaser) shall pay to such holders of Options an amount in respect thereof equal to the product of (A) the excess, if any, of the Offer Price over the exercise price thereof and (B) the number of Shares subject thereto (such payment to be net of applicable withholding taxes); provided that the foregoing (x) shall be subject to the obtaining of any necessary consents of holders of Options and the making of any necessary amendments to the Option Plans, it being agreed that 12 18 the Company and Parent will use all reasonable efforts to obtain any such consents and make any such amendments, and (y) shall not require any action that violates the Option Plans; provided, further, that if it is determined that compliance with any of the foregoing would cause any individual subject to Section 16 of the Exchange Act ("SECTION 16") to become subject to the profit recovery provisions thereof, any Options held by such individual will be cancelled or purchased, as the case may be, as promptly as possible so as not to subject such individual to any liability pursuant to Section 16, subject to receiving an agreement from the holder of such Option not to exercise such Option after the Effective Time, and such individual shall be entitled to receive from the Company, for each Share subject to an Option an amount equal to the excess, if any, of the Offer Price over the per Share exercise price of such Option. Notwithstanding the foregoing, any payment to the holders of Options contemplated by this Section 2.3 may be withheld in respect of any Option until any necessary consents or releases are obtained. (b) Each Share previously issued in the form of restricted stock (both "Restricted Shares" and "Investment Shares") under the Company's Restricted Stock Purchase Plan (the "RESTRICTED STOCK PLAN") shall become fully and freely transferable under the terms of the Offer immediately prior to the Effective Time. (c) Except as provided herein or as otherwise agreed to by the parties and to the extent permitted by the Option Plans and the Restricted Stock Plan, (i) the Option Plans and the Restricted Stock Plan shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of its subsidiaries shall be deleted as of the Effective Time and (ii) the Company shall take all actions necessary to ensure that following the Effective Time, the Company will not be bound by any Options, other options, warrants, rights or agreements which would entitle any person (other than Parent or the Purchaser) to own or acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof or to receive any payment in respect thereof. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to Parent and the Purchaser as follows: 3.1 ORGANIZATION. Each of the Company and its Subsidiaries is a corporation, partnership or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite corporate or other power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to 13 19 have such power, authority, and governmental approvals would not have a material adverse effect on the Company and its Subsidiaries taken as a whole. As used in this Agreement, the word "SUBSIDIARY" means, with respect to any person, any corporation or other organization, whether incorporated or unincorporated, of which (a) such person or any other Subsidiary of such person is a general partner (excluding such partnerships where such person or any Subsidiary of such person do not have a majority of the voting interest in such partnership) or (b) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such person or by any one or more of its Subsidiaries, or by such person and one or more of its Subsidiaries. As used in this Agreement, any reference to any event, change or effect being material or having a material adverse effect on or with respect to any person (or group of persons taken as a whole) means such event, change or effect is materially adverse to the consolidated financial condition, businesses or results of operations of such person (or, if used with respect thereto, of such group of persons taken as a whole). The Company and each of its Subsidiaries is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not in the aggregate have a material adverse effect on the Company and its Subsidiaries taken as a whole. The only Subsidiary of the Company is Puerto Rico Envelopes, Inc. 3.2 CAPITALIZATION. (a) The authorized capital stock of the Company consists of 20,000,000 shares of Company Common Stock and 1,000,000 preferred shares, $1.00 par value (the "PREFERRED STOCK"). As of the date hereof, (i) 7,481,278 shares of Company Common Stock are issued and outstanding, (ii) 753,190 shares of Company Common Stock are issued and held in the treasury of the Company, and (iii) 188,000 shares of Company Common Stock are reserved for issuance upon exercise of then outstanding Options granted under the Option Plans or rights granted under the Restricted Stock Plan. As of the date hereof, there are no shares of Preferred Stock issued and outstanding and 1,000,000 shares of Preferred Stock were reserved for issuance upon exercise of the Rights. All the outstanding shares of the Company's capital stock are, and all shares which may be issued pursuant to the exercise of outstanding Options or Rights will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable. There are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having such rights)("VOTING DEBT") of the Company or any of its Subsidiaries issued and outstanding. Except as set forth 14 20 above and except for the transactions contemplated by this Agreement, as of the date hereof, (x) there are no shares of capital stock of the Company authorized, issued or outstanding and (y) there are no existing options, warrants, calls, preemptive rights, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the issued or unissued capital stock of the Company or any of its Subsidiaries, obligating the Company or any of its Subsidiaries to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other equity interest in, the Company or any of its Subsidiaries or securities convertible into or exchangeable for such shares or equity interests or obligations of the Company or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment. Except as contemplated by this Agreement, there are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Shares or the capital stock of the Company or any subsidiary or affiliate of the Company or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary or any other entity. After the Effective Time, the Surviving Corporation will have no obligation to issue, sell or transfer any shares of capital stock of the Surviving Corporation pursuant to any Benefit Plan (as defined in Section 3.9(a)). (b) All of the outstanding shares of capital stock of each of the Subsidiaries are beneficially owned by the Company, directly or indirectly, and all such shares have been validly issued and are fully paid and nonassessable and are owned by either the Company or one of its Subsidiaries free and clear of all liens, charges, claims or encumbrances. (c) There are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of the capital stock of the Company or any of the Subsidiaries. None of the Company or its Subsidiaries is required to redeem, repurchase or otherwise acquire shares of capital stock of the Company, or any of its Subsidiaries, respectively, as a result of the transactions contemplated by this Agreement. 3.3 AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION. (a) The Company has full corporate power and authority to execute and deliver this Agreement and, subject to obtaining the necessary approval of its shareholders with respect to the Merger, to consummate the Transactions. The execution, delivery and performance by the Company of this Agreement, and the consummation by it of the Transactions, have been duly authorized by its Board of Directors and, except for those actions contemplated by Section 1.2(a) and obtaining the approval of its shareholders as contemplated by Section 1.8, no other corporate action on the part 15 21 of the Company is necessary to authorize the execution and delivery by the Company of this Agreement and the consummation by it of the Transactions. This Agreement has been duly executed and delivered by the Company and is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. (b) The Board of Directors of the Company has duly and validly approved and taken all corporate action required to be taken by the Board of Directors for the consummation of the Transactions, including the Offer, the acquisition of Shares pursuant to the Offer, the Merger and the Tender Agreements, including, but not limited to, all actions required to render Section 203 of the DGCL, the super-majority voting provisions of Article IX of the Company's Restated Certificate of Incorporation and the Rights Agreement inapplicable to such transactions. 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the Securities Act of 1933, as amended (the "SECURITIES ACT"), state securities or blue sky laws, applicable state takeover statutes and the DGCL, none of the execution, delivery or performance of this Agreement by the Company or the consummation by the Company of the Transactions or the compliance by the Company with any of the provisions hereof will (a) conflict with or result in any breach of any provision of the certificate of incorporation or by-laws or similar organizational documents of the Company or of any of its Subsidiaries, (b) require any filing with, or permit, authorization, consent or approval of, any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency (a "GOVERNMENTAL ENTITY"), except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not have a material adverse effect on the Company and its Subsidiaries taken as a whole, (c) except for the those agreements described in Section 3.4 of the disclosure letter prepared by the Company for the benefit of Parent and the Purchaser in connection with the transactions contemplated by this Agreement (the "DISCLOSURE LETTER"), result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound and 16 22 which either (i) has been filed as an exhibit to the Company SEC Documents (as defined in Section 3.5) or (ii) is otherwise material to the financial condition, business or results of operations of the Company (such agreements, contracts, etc. described in the foregoing clauses (i) and (ii) to be referred to herein as the "MATERIAL AGREEMENTS") or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company, any of its Subsidiaries or any of their properties or assets, except in the case of (c) or (d) for such violations, breaches or defaults which would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries taken as a whole, and which will not materially impair the ability of the Company to consummate the transactions contemplated hereby and to operate in the ordinary course of business after the Effective Time. 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has filed with the SEC, and has heretofore made available to Parent true and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by it since November 1, 1992 under the Exchange Act or the Securities Act (as such documents have been amended since the time of their filing, collectively, the "COMPANY SEC DOCUMENTS"). As of their respective dates or, if amended, as of the date of the last such amendment, the Company SEC Documents, including, without limitation, any financial statements or schedules included therein (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. None of the Subsidiaries is required to file any forms, reports or other documents with the SEC pursuant to Section 12 or 15 of the Exchange Act. The financial statements of the Company (the "1995 FINANCIAL STATEMENTS") included in the Company's annual report on Form 10-K for the fiscal year ended October 28, 1995, as amended and subsequently restated (including the related notes thereto) (the "1995 FORM 10-K")and in the quarterly report on Form 10-Q for the fiscal quarter filed since the 1995 Form 10-K have been prepared from, and are in accordance with, the books and records of the Company and its consolidated subsidiaries, comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto and subject, in the case of quarterly financial statements, to normal and recurring year-end adjustments) and fairly present the consolidated financial position and the consolidated results of operations and cash flows (and changes in financial position, if any) of the Company and its consolidated 17 23 subsidiaries as at the dates thereof or for the periods presented therein. 3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Company SEC Documents or in Section 3.6 of the Disclosure Letter, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary and usual course and there has not occurred (i) any events, changes, or effects (including the incurrence of any liabilities of any nature, whether accrued, contingent or otherwise) having, individually or in the aggregate, a material adverse effect on the Company and its Subsidiaries, taken as a whole; (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to the equity interests of the Company or of any of its Subsidiaries; or (iii) any change by the Company or any of its Subsidiaries in accounting principles or methods, except insofar as may be required by a change in GAAP. 3.7 NO UNDISCLOSED LIABILITIES. Except (a) as disclosed in the Company's SEC Documents and (b) for liabilities and obligations incurred in the ordinary course of business and consistent with past practice, since October 28, 1995, neither the Company nor any of its Subsidiaries has incurred any liabilities or obligations of any nature, whether accrued, contingent or otherwise, that have, or would be reasonably likely to have, a material adverse effect on the Company and its Subsidiaries taken as a whole or would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries (including the notes thereto). Section 3.7 of the Disclosure Letter sets forth a list of all debt obligations of the Company (including capitalized leases), and the total amounts of principal (both current and long-term portions) and unpaid interest outstanding under the same (even if $0). 3.8 INFORMATION IN PROXY STATEMENT. The Proxy Statement (or any amendment thereof or supplement thereto) will, at the date mailed to Company shareholders and at the time of the meeting of Company shareholders to be held in connection with the Merger, not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to statements made therein based on information supplied by Parent or the Purchaser in writing for inclusion in the Proxy Statement. The Proxy Statement will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. 3.9 EMPLOYEE BENEFIT PLANS; ERISA. (a) Section 3.9(a) of the Disclosure Letter lists all material employee benefit plans, arrangements, contracts or agreements (including employment agreements and severance 18 24 agreements) of any type, including but not limited to plans described in section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and all retirement, savings and other pension plans, all health, severance, insurance, disability and other employee welfare plans and all incentive, vacation, accrued leave, sick pay, sick leave and other similar plans, all bonus, stock option, stock purchase, restricted stock, incentive, profit-sharing, deferred compensation, supplemental retirement, unemployment benefit, severance and other employee benefit plans, programs or arrangements (whether or not insured) and all material employment, consulting, termination, or compensation agreements, in each case for the benefit of, or relating to current employees and former employees or directors of the Company, whether or not any such items are in writing or are exempt from the provisions of ERISA, that have been established, maintained or contributed to or with respect to which any potential material liability is borne by the Company, any of its Subsidiaries or any trade or business, whether or not incorporated (an "ERISA AFFILIATE"), that together with the Company would be deemed a "single employer" within the meaning of section 4001(b)(15) of ERISA, or with respect to which the Company or any of its Subsidiaries has or may have a liability (collectively, the "BENEFIT PLANS"). Neither the Company nor any ERISA Affiliate has any formal plan or commitment, whether legally binding or not, to create any additional Benefit Plan or modify or change any existing Benefit Plan that would affect any employee or terminated employee of the Company or any Subsidiary. (b) (i) Neither the Company nor any ERISA Affiliate has at any time maintained, contributed to, had an obligation to contribute to, or otherwise sponsored a "defined benefit plan," as defined in ERISA Section 3(35), a plan subject to Section 412 of the Internal Revenue Code of 1986, as amended (the "CODE"), or a "multiemployer plan," as defined in ERISA Section 4001(a)(3). (ii) Neither the Company nor any ERISA Affiliate maintains any Benefit Plan which is a "group health plan" (as such term is defined in Section 5000(b)(1) of the Code) that has not been administered and operated in all material respects in compliance with the applicable requirements of Section 601 of ERISA and Section 4980B(f) of the Code and neither the Company nor any of its subsidiaries is subject to any material liability as a result of such administration and operation. Except as set forth in Section 3.9(b) of the Disclosure Letter, neither the Company nor any ERISA Affiliate maintains any Benefit Plan (whether qualified or nonqualified within the meaning of Section 401(a) of the Code) providing for retiree health and/or life benefits and having material unfunded liabilities. (iii) Except as set forth in Section 3.9(b) of the Disclosure Letter neither the Company nor any ERISA Affiliate has any material unfunded liabilities pursuant to any Benefit Plan that 19 25 is not intended to be qualified under Section 401(a) of the Code. (c) All Benefit Plans have at all times been maintained and operated in all material respects in compliance with their terms and the requirements prescribed by all applicable statutes, orders or governmental rules or regulations with respect thereto, and the Company and its ERISA Affiliates have performed all material obligations required to be performed by them under, and are not in any material respect in default under or in violation of, any of the Benefit Plans. No condition or circumstance exists that would prevent the amendment or termination of any Benefit Plan. (d) Except as set forth in Section 3.9(d) of the Disclosure Letter, each Benefit Plan intended to be qualified under Section 401(a) of the Code has heretofore been determined by the Internal Revenue Service (the "SERVICE") to so qualify, and each trust created thereunder has heretofore been determined by the Service to so qualify, and each trust created thereunder has heretofore been determined by the Service to be exempt from tax under the provisions of Section 501(a) of the Code and, to the best knowledge of the Company nothing has occurred since the date of the most recent determination that would be reasonably likely to cause any such Benefit Plan or trust to fail to qualify under Section 401(a) or 501(a) of the Code. (e) The Company has not incurred any material liability to the Pension Benefit Guaranty Corporation ("PBGC") under Section 4001 et seq. of ERISA, and no condition exists that could reasonably be expected to result in the Company incurring material liability under Title IV of ERISA, either singly or as a member of any trade or business, whether or not incorporated, under common control of or affiliated with the Company, within the meaning of Section 414(b), (c), (m) or (o) of the Code. All premiums payable to the PBGC have been paid when due. (f) The Company has made available to Parent, copies of all material documents in connection with each Benefit Plan including, without limitation (where applicable), (i) all Benefit Plans as in effect on the date hereof, together with all amendments thereto, including, in the case of any Benefit Plan not set forth in writing, a written description thereof; (ii) all current summary plan descriptions, summaries of material modifications and material communications; (iii) all current trust agreements, declarations of trust and other documents establishing other funding arrangements (and all amendments thereto and the latest financial statements thereof); (iv) the most recent Service determination letter, if applicable; (v) annual reports required to be filed within the last year pursuant to ERISA or the Code with respect to the Benefit Plans; (vi) the most recently prepared financial statements; and (vii) all material contracts relating to each Benefit Plan, including, without limitation, service provider agreements, insurance contracts, annuity contracts, investment management 20 26 agreements, subscription agreements, participation agreements, and recordkeeping agreements. (g) Neither the Company nor any of its ERISA Affiliates nor, to the best knowledge of the Company, any of their respective directors, officers, employees or other persons who participate in the operation of any Benefit Plan or related trust or funding vehicle, has engaged in any transaction with respect to any Benefit Plan or breached any applicable fiduciary responsibilities or obligations under Title I of ERISA that would subject any of them to a material tax, penalty or liability for prohibited transactions under ERISA or the Code or would result in any material claim being made under, by or on behalf of any such Benefit Plan by any party with standing to make such claim. (h) Full payment has been made of all amounts which the Company or any of its ERISA Affiliates is required, under applicable law or under any Benefit Plan or any agreement relating to any Benefit Plan to which the Company or any of ERISA Affiliates is a party, to have paid as contributions thereto as of the last day of the most recent fiscal year of such Benefit Plan ended prior to the date hereof. Benefits under all Benefit Plans are as represented and have not been increased subsequent to the date as of which documents have been provided. (i) There are no actions, suits or claims pending, or to the best knowledge of the Company, threatened or anticipated (other than routine claims for benefits) with respect to any Benefit Plan. (j) Except as set forth in Section 3.9(j) of the Disclosure Letter, no Benefit Plan provides for the payment of severance benefits upon the termination of an employee's employment. No compensation or benefit that is or will be payable in connection with the Transactions contemplated by this Agreement will be characterized as an "excess parachute payment" within the meaning of Section 280G of the Code. (k) The Company has not made any commitment to establish any new Benefit Plan, to modify any Benefit Plan or to increase benefits or compensation of employees or former employees of the Company (except for normal increases in compensation consistent with past practices or as disclosed in Section 3.9(k) of the Disclosure Letter), nor has any intention to do so been communicated to employees or former employees of the Company. 3.10 LITIGATION. Except as disclosed in the Company SEC Documents, filed prior to the date of this Agreement, there is no suit, claim, action, proceeding or investigation pending or, to the best knowledge of the Company, threatened against or affecting, the Company or any of its Subsidiaries which, if concluded adversely to the Company or its Subsidiary, would have, individually or in the aggregate, a material adverse effect on the Company and its Subsidiaries, taken as a whole, or a material adverse effect on the 21 27 ability of the Company to consummate the transactions contemplated by this Agreement or to operate in the ordinary course of business after the Effective Time. 3.11 CONDUCT OF BUSINESS. The business of the Company and each of its Subsidiaries is not being conducted in default or violation of any term, condition or provision of (a) its respective certificate of incorporation or by-laws or similar organizational documents, (b) any Material Agreement or (c) any federal, state, local or foreign statute, law, ordinance, rule, regulation, judgment, decree, order, concession, grant, franchise, permit or license or other governmental authorization or approval applicable to the Company or any of its Subsidiaries, excluding from the foregoing clauses (b) and (c), defaults or violations that would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole. Except as previously disclosed to Parent in writing, as of the date of this Agreement, no investigation or review by any Governmental Entity or other entity with respect to the Company or any of its Subsidiaries is pending or, to the best knowledge of the Company, threatened, nor has any Governmental Entity or other entity indicated an intention to conduct the same, other than, in each case, those the outcome of which, as far as reasonably can be foreseen, in the future will not, individually or in the aggregate have a material adverse effect on the Company and its Subsidiaries, taken as a whole. 3.12 REIMBURSEMENT. The Company or its Subsidiaries, as the case may be, are parties to such agreements with third party payors, including Medicaid, health maintenance organizations, preferred provider organizations, insurance companies and other payment sources, which are necessary to conduct their respective businesses as of the date of this Agreement. 3.13 TAXES. (a) The Company and its Subsidiaries have (i) duly filed (or there has been filed on their behalf) with the appropriate governmental authorities all Tax Returns (as hereinafter defined) required to be filed by them on or prior to the date hereof, and such Tax Returns are true, correct and complete in all material respects, and (ii) duly paid in full or made provision in accordance with GAAP (or there has been paid or provision has been made on their behalf) for the payment of all Taxes (as hereinafter defined) for all periods ending through the date hereof. (b) There are no material liens for Taxes upon any property or assets of the Company or any Subsidiary thereof, except for liens for Taxes not yet due and liens for Taxes the assessment of which is being contested in good faith and with respect to which adequate reserves have been established in accordance with GAAP (a list of such contests is set forth in Section 3.13(b) of the Disclosure Letter). 22 28 (c) Since October 28, 1994, neither the Company nor any of its Subsidiaries has made any change in accounting methods, received a ruling from any taxing authority or signed an agreement likely to have a material adverse effect on the Company and its Subsidiaries taken as a whole. (d) The Company and its Subsidiaries have complied in all material respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes (including, without limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or similar provisions under any foreign laws) and have, within the time and the manner prescribed bylaw, withheld from employee wages and paid over to the proper governmental authorities all amounts required to be so withheld and paid over under applicable laws. (e) Except as described in Section 3.13(e) of the Disclosure Letter, no federal, state, local or foreign audits or other administrative proceedings or court proceedings are presently pending with regard to any Taxes or Tax Returns of the Company or its Subsidiaries wherein an adverse determination or ruling in any one such proceeding or in all such proceedings in the aggregate could have a material adverse effect on the Company and its Subsidiaries, taken as a whole, and neither the Company nor its subsidiaries has received a written notice of any pending audits or proceedings. (f) The federal income Tax Returns of the Company and its Subsidiaries have been examined by the Service (or the applicable statutes of limitation for the assessment of federal income Taxes for such periods have expired) for all periods through and including October 28, 1994, and no material deficiencies were asserted as a result of such examinations which have not been resolved and fully paid. (g) There are no outstanding requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against the Company or any of its Subsidiaries, and no power of attorney granted by either the Company or any of its Subsidiaries with respect to any Taxes is currently in force. (h) Neither the Company nor any of its Subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes. (i) Except as disclosed in Section 3.9(j) of the Disclosure Letter, neither the Company nor its Subsidiaries is a party to any agreement, contract or arrangement that could result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code. 23 29 (j) Neither the Company nor any of its Subsidiaries has, with regard to any assets or property held, acquired or to be acquired by any of them, filed a consent to the application of Section 341(f) of the Code, or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by the Company or any of its Subsidiaries. (k) The deductibility of compensation paid by the Company and/or its Subsidiaries will not be limited by Section 162(m) of the Code. (l) None of the assets of the Company is property that the Company is required to treat as being owned by any other person pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of the Code. (m) None of the assets of the Company directly or indirectly secures any debt on interest which is tax-exempt under Section 103(a) of the Code. (n) None of the assets of the Company is "tax-exempt use property" within the meaning of Section 168(h) of the Code. (o) The Company has not agreed to make nor is it required to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise. (p) The Company has not participated in an international boycott within the meaning of Section 999 of the Code. (q) The Company is not and has not been a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. (r) The Company does not have and has not had a permanent establishment in any foreign countries, as defined in any application tax treaty or commitment between the United States and such foreign country. (s) Except as set forth in Section 3.13(s) of the Disclosure Letter, the Company is not a party to any joint venture, partnership or other arrangement or contract that could be treated as a partnership for federal income tax purposes. (t) "TAXES" shall mean any and all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross receipts, excise, real or personal property, sales, withholding, social security, occupation, use, service, service use, license, net worth, payroll, franchise, transfer and recording taxes, fees and charges, imposed by the Service or any taxing authority (whether domestic or foreign including, without 24 30 limitation, any state, county, local or foreign government or any subdivision or taxing agency thereof (including a United States possession)), whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest whether paid or received, fines, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments. "TAX RETURN" shall mean any report, return, document, declaration or other information or filing required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect to Taxes, including, without limitation, information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information. 3.14 LABOR RELATIONS. There is no labor strike, slowdown or work stoppage or lockout pending or to the Company's knowledge threatened against the Company or any of its Subsidiaries. There is no unfair labor practice charge or complaint against or pending before the National Labor Relations Board (the "NLRB") which if decided adversely could have a material adverse effect on the Company and its Subsidiaries, taken as a whole. There is no representation claim or petition pending before the NLRB and no question concerning representation exists with respect to the employees of the Company or its Subsidiaries. No collective bargaining agreement is currently being negotiated by the Company or any of its Subsidiaries and neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement. Except as identified in Section 3.14 of the Disclosure Letter, there exist no employment, consulting, severance, indemnification or deferred compensation agreements between the Company and any director, officer or employee of the Company or any agreement that would give any person the right to receive any payment from the Company as a result of the Transactions. 3.15 COMPLIANCE WITH LAWS. The Company and its Subsidiaries have complied in a timely manner with all laws and governmental regulations and orders relating to any of the Company or its Subsidiaries or the property owned, leased or used by them, or applicable to their business, including, but not limited to, equal employment opportunity, discrimination, occupational safety and health, environmental, and antitrust laws, except where the failure to so comply would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole. 3.16 INSURANCE. As of the date hereof, the Company and each of its Subsidiaries are insured by insurers, reasonably believed by the Company to be of recognized financial responsibility and solvency, against such losses and risks and in such amounts as are customary in the businesses in which they are engaged. All material policies of insurance and fidelity or surety bonds are in 25 31 full force and effect. All necessary notifications of claims have been made to insurance carriers other than those which will not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. Section 3.16 of the Disclosure Letter contains a complete list of all material insurance policies and fidelity or surety bonds maintained by the Company as of the date of this Agreement. 3.17 CONTRACTS. Each Material Agreement is legally valid and binding and in full force and effect, except where failure to be legally valid and binding and in full force and effect would not have a material adverse effect on the Company and its Subsidiaries taken as a whole, and there are no defaults thereunder, except those defaults that would not have a material adverse effect on the Company and its Subsidiaries taken as a whole. The Company has previously made available for inspection by Parent or the Purchaser all Material Agreements. Neither the Company nor any of its Subsidiaries is a party to or bound by the terms of any agreement, contract or commitment (a) to obtain all or a substantial portion of its supply of any material good or service from any other person (or group of persons), (b) to maintain the confidentiality of any non-public information of another person; or (c) to refrain from competing or otherwise offering its services or products to any other person. 3.18 REAL PROPERTY. The Company and the Subsidiaries, as the case may be, have sufficient title or leaseholds to real property to conduct their respective businesses as currently conducted with only such exceptions as individually or in the aggregate would not have a material adverse effect on the Company and the Subsidiaries, taken as a whole. 3.19 OPINIONS OF FINANCIAL ADVISORS. The Company has received an opinion from Duff & Phelps to the effect that the consideration to be received by the shareholders of the Company pursuant to the Offer and the Merger is fair to such shareholders from a financial point of view, and a complete and correct signed copy of such opinion will be promptly delivered to Parent. 3.20 VOTE REQUIRED. Unless the Merger is consummated in accordance with the provisions of Section 253 of the DGCL, the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock are the only votes of the holders of any class or series of the Company's capital stock necessary to approve the Merger. 3.21 TITLE TO PROPERTIES. The Company and each of its Subsidiaries has good, valid and marketable title to (a) all its material tangible properties and assets (real and personal), including, without limitation, all material properties and assets reflected in the consolidated balance sheet as of October 28, 1995 except as indicated in the notes thereto and except for properties and assets reflected in the consolidated balance sheet as of 26 32 October 28, 1995 which have been sold or otherwise disposed of in the ordinary course of business, and (b) all material tangible properties and assets purchased by the Company and any of its Subsidiaries since October 28, 1995 except for such properties and assets which have thereafter been sold or otherwise disposed of in the ordinary course of business; in each case subject to no encumbrance, lien, charge or other restriction of any kind or character, except for (w) liens reflected in the consolidated balance sheet as of October 28, 1995, (x) liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real property or irregularities in title thereto which do not materially detract from the value of, or impair the use of, such property by the Company or any of its subsidiaries in the operation of its respective business, (y) liens for current taxes, assessments or governmental charges or levies on such property not yet due and delinquent and (z) mechanics, materialmen's and other similar liens imposed by law and incurred in the ordinary course of business. 3.22 INTELLECTUAL PROPERTIES. (a) In the operation of its business, the Company and its Subsidiaries have used, and currently use, domestic and foreign patents, patent applications, patent licenses, software licenses, know-how licenses, trade names, trademarks, copyrights, service marks, trademark registrations and applications, service mark registrations and applications, copyright registrations and applications, (collectively, the "INTELLECTUAL PROPERTY") and unpatented inventions, trade secrets and other confidential proprietary information (collectively, the "KNOW-HOW"). (b) Section 3.22 of the Disclosure Letter contains an accurate and complete list of all Intellectual Property which, to the best knowledge of the Company, is of material importance to the operation of the business of the Company or any of its Subsidiaries. Unless otherwise indicated in Section 3.22 of the Disclosure Letter, the Company (or the Subsidiary indicated) owns the entire right, title and interest in and to the Intellectual Property listed on Section 3.22 of the Disclosure Letter used in the operation of its business (including, without limitation, the exclusive right to use and license the same) and each item constituting part of the Intellectual Property which is owned by the Company or a Subsidiary and listed on Section 3.22 of the Disclosure Letter has been, to the extent indicated in Section 3.22 of the Disclosure Letter, duly registered with, filed in or issued by, as the case may be, the United States Patent and Trademark Office or such other government entities, domestic or foreign, as are indicated in Section 3.22 of the Disclosure Letter and such registrations, filings and issuances remain in full force and effect. Except as stated in such Section 3.22 of the Disclosure Letter, there are no pending or to the best knowledge of the Company, threatened proceedings or litigation which would have a material adverse effect on the Company's use of such Intellectual Property or other material adverse claims affecting or with respect 27 33 to the Intellectual Property or the Know-How. Section 3.22 of the Disclosure Letter lists all notices or claims currently pending or received by the Company or any of its subsidiaries during the past two years which claim infringement, contributory infringement, inducement to infringe, misappropriation or breach by the Company or any of its Subsidiaries of any domestic or foreign patents, patent applications, patent licenses and know-how licenses, trade names, trademark registrations and applications, service marks, copyrights, copyright registrations or applications, trade secrets or other confidential proprietary information. To the best knowledge of the Company, there exists no reasonable basis upon which a claim may be asserted against the Company or any of its Subsidiaries for infringement, contributory infringement, inducement to infringe, misappropriation or breach of any domestic or foreign patents, patent applications, patent licenses, know-how licenses, trade names, trademark registrations and applications, common law trademarks, service marks, copyrights, copyright registrations or applications, trade secrets or other confidential proprietary information. To the best knowledge of the Company, except as indicated on Section 3.22 of the Disclosure Letter, no person is infringing the Intellectual Property or the Know-How. 3.23 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm acting on behalf of the Company is, or will be, entitled to any fee, commission or broker's or finder's fees from any of the parties hereto, or from any person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the Transactions. 3.24 ENVIRONMENTAL MATTERS. (a) Except as disclosed in the Company SEC Documents or in Section 3.24 of the Disclosure Letter or as would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries taken as a whole, (i) the Company and its Subsidiaries are in compliance with all Environmental Laws (as defined in Section 3.24(b)); (ii) Hazardous Substances (as defined in Section 3.24(b)) requiring remediation under any Environmental Law have not been released or disposed of on any real property owned or operated by the Company or any of its Subsidiaries; (iii) the Company and its Subsidiaries are not subject to liability for any off-site disposal or contamination; (iv) the Company and its Subsidiaries have not received any Environmental Claims (as defined in Section 3.24(b)) under any Environmental Law; and (v) there are no facts, conditions, occurrences or circumstances regarding the Company, its Subsidiaries or any property owned or operated by the Company or its subsidiaries that could reasonably be expected (A) to form the basis of any Environmental Claim against the Company, its Subsidiaries or any property owned or operated by the Company or its Subsidiaries, or (B) to cause such property to be subject to any restrictions on the ownership, use, or transferability of any such property under any Environmental Law. 28 34 (b) "ENVIRONMENTAL LAWS" means all federal, state and local statutory and common laws, regulations or orders relating to pollution, protection of the environment or human health and safety, including those relating to the manufacture, production, distribution, use, treatment, storage, disposal, transport or handling, emission, discharge or release of pollutants, contaminants, chemicals, industrial, hazardous or toxic materials or wastes or nuisance. "HAZARDOUS SUBSTANCE" means any hazardous or toxic material, substance, waste, pollutant or contaminant as defined under any Environmental Law, in any concentration, including, without limitation, any petroleum or petroleum products, friable asbestos or polychlorinated biphenyls. "ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or judicial actions, suits, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law (hereinafter "CLAIMS"), including, without limitation, (i) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (ii) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Substances or arising from alleged injury or threat of injury to human health, safety or the environment. 3.25 STATE TAKEOVER STATUTES. The Board of Directors of the Company has approved the Offer, the Merger, this Agreement and the entering into, and performance, by Parent and Purchaser of the Tender Agreements and such approval is sufficient to render Section 203 of the DGCL inapplicable to the Offer, the Merger, this Agreement and the entering into, and performance, by Parent and the Purchaser of the Tender Agreements and the other transactions contemplated by this Agreement and the Tender Agreements. 3.26 RIGHTS AGREEMENT. The Company and the Board of Directors of the Company have taken and will, until the termination, if any, of this Agreement pursuant to Section 7.1, maintain in effect all necessary action to (i) render the Rights Agreement inapplicable with respect to the Offer, the Merger, this Agreement, and the entering into, and performance, by Parent and the Purchaser of the Tender Agreements and the other transactions contemplated by this Agreement and (ii) ensure that (A) neither Parent nor the Purchaser nor any of their Affiliates (as defined in the Rights Agreement) or Associates (as defined in the Rights Agreement) is considered to be an Acquiring Person (as defined in the Rights Agreement) and (B) the provisions of the Rights Agreement, including the occurrence of a Distribution Date (as defined in the Rights Agreement), are not and shall not be triggered by reason of the announcement or consummation of the Offer, the Merger, the Tender Agreements or the consummation of any of the other transactions contemplated by this Agreement or the Tender Agreements. The Company has delivered to Parent a complete 29 35 and correct copy of the Rights Agreement as amended and supplemented to the date of this Agreement. 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER. Parent and the Purchaser represent and warrant to the Company as follows: 4.1 ORGANIZATION. Each of Parent and the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate or other power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power, authority, and governmental approvals would not have a material adverse effect on Parent and its Subsidiaries taken as a whole. Parent and each of its Subsidiaries is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not, in the aggregate, have a material adverse effect on Parent and its Subsidiaries, taken as a whole. 4.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION. Each of Parent and the Purchaser has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the Offer and the Merger and of the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and the Purchaser and no other corporate proceedings on the part of Parent and the Purchaser are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly executed and delivered by Parent and the Purchaser, as the case may be, and, assuming this Agreement constitutes a valid and binding obligation of the Company, constitutes a valid and binding obligation of each of Parent and the Purchaser, as the case may be, enforceable against them in accordance with its respective terms, except that (a) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally, and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act, the Securities Act, the HSR Act, the DGCL, state securities 30 36 or blue sky laws and applicable state takeover laws, neither the execution, delivery or performance of this Agreement by Parent and the Purchaser nor the consummation by Parent and the Purchaser of the transactions contemplated hereby nor compliance by Parent and the Purchaser with any of the provisions hereof will (a) conflict with or result in any breach of any provision of the respective certificate of incorporation or by-laws of Parent and the Purchaser, (b) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity (except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not have a material adverse effect on Parent and its Subsidiaries taken as a whole), (c) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which Parent or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent, any of its Subsidiaries or any of their properties or assets, except in the case of (c) and (d) for violations, breaches or defaults which would not, individually or in the aggregate, have a material adverse effect on Parent and its Subsidiaries taken as a whole. 4.4 INFORMATION IN PROXY STATEMENT; SCHEDULE 14D-9. None of the information supplied by Parent or the Purchaser for inclusion or incorporation by reference in the Proxy Statement or the Schedule 14D-9 will, at the date mailed to shareholders and at the time of the meeting of shareholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. 4.5 FINANCING. Either Parent or the Purchaser has sufficient funds available (through existing credit arrangements or otherwise) to purchase all of the Shares outstanding on a fully diluted basis and to pay all fees and expenses related to the transactions contemplated by this Agreement. 4.6 PURCHASER'S OPERATIONS. The Purchaser was formed solely for the purpose of engaging in the transactions contemplated hereby and has not engaged in any business activities or conducted any operations other than in connection with the transactions contemplated hereby. 5. COVENANTS. 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company covenants and agrees that, except (i) as expressly contemplated by this Agreement, or (ii) as agreed in writing by Parent, after the date 31 37 hereof, and prior to the time the directors of the Purchaser have been elected to, and shall constitute a majority of, the Board of Directors of the Company pursuant to Section 1.3 (the "APPOINTMENT DATE"): (a) the business of the Company and its Subsidiaries shall be conducted only in the ordinary and usual course and, to the extent consistent therewith, each of the Company and its Subsidiaries shall use its best efforts to preserve its business organization intact and maintain its existing relations with customers, suppliers, employees, creditors and business partners; (b) the Company will not, directly or indirectly, (i) sell, transfer or pledge or agree to sell, transfer or pledge any Company Common Stock, Preferred Stock or capital stock of any of its Subsidiaries beneficially owned by it, either directly or indirectly; or (ii) split, combine or reclassify the outstanding Company Common Stock or any outstanding capital stock of any of the Subsidiaries of the Company; (c) except for those actions contemplated in Section 1.2, neither the Company nor any of its Subsidiaries shall: (i) amend its certificate of incorporation or by-laws or similar organizational documents; (ii) declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; (iii) issue, sell, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company or its Subsidiaries, other than issuances pursuant to the exercise of Options outstanding on the date hereof; (iv) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any material assets other than in the ordinary and usual course of business and consistent with past practice, or incur or modify any material indebtedness or other liability, other than in the ordinary and usual course of business and consistent with past practice; or (v) redeem, purchase or otherwise acquire directly or indirectly any of its capital stock; (d) except as expressly provided in Section 2.3, neither the Company nor any of its Subsidiaries shall: (i) grant any increase in the compensation payable or to become payable by the Company or any of its Subsidiaries to any of its executive officers or key employees or (A) adopt any new, or (B) amend or otherwise increase, or accelerate the payment or vesting of the amounts payable or to become payable under any existing, bonus, incentive compensation, deferred compensation, severance, profit sharing, stock option, stock purchase, insurance, pension, retirement or other employee benefit plan agreement or arrangement; or (ii) enter into any employment or severance agreement with or, except in accordance with the existing written policies of the Company, grant any severance or termination pay to any officer, director or employee of the Company or any its Subsidiaries; 32 38 (e) neither the Company nor any of its Subsidiaries shall modify, amend or terminate any Material Agreement or waive, release or assign any material rights or claims, except in the ordinary course of business and consistent with past practice; (f) neither the Company nor any of its Subsidiaries shall permit any material insurance policy naming it as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent, except in the ordinary course of business and consistent with past practice; (g) neither the Company nor any of its Subsidiaries shall: (i) incur or assume any long-term debt, or except in the ordinary course of business, incur or assume any short-term indebtedness in amounts not consistent with past practice; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except in the ordinary course of business and consistent with past practice; (iii) make any loans, advances or capital contributions to, or investments in, any other person (other than to wholly-owned Subsidiaries of the Company or customary loans or advances to employees in accordance with past practice); or (iv) enter into any material commitment or transaction (including, but not limited to, any borrowing, capital expenditure or purchase, sale or lease of assets); (h) neither the Company nor any of its Subsidiaries shall change any of the accounting principles used by it unless required by GAAP; (i) neither the Company nor any of its Subsidiaries shall pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of any such claims, liabilities or obligations, (i) in the ordinary course of business and consistent with past practice, of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its consolidated Subsidiaries, (ii) incurred in the ordinary course of business and consistent with past practice or (iii) which are legally required to be paid, discharged or satisfied (provided that if such claims, liabilities or obligations referred to in this clause (iii) are legally required to be paid and are also not otherwise payable in accordance with clauses (i) or (ii) above, the Company will notify Parent in writing if such claims, liabilities or obligations exceed, individually or in the aggregate, $50,000 in value, reasonably in advance of their payment); (j) neither the Company nor any of its Subsidiaries will adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other 33 39 reorganization of the Company or any of its Subsidiaries (other than the Merger); (k) neither the Company nor any of its Subsidiaries will take, or agree to commit to take, any action that would make any representation or warranty of the Company contained herein inaccurate in any respect at, or as of any time prior to, the Effective Time; or (l) neither the Company nor any of its Subsidiaries will enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing. 5.2 RIGHTS AGREEMENT. Except for the amendments contemplated by Section 1.2(d) hereof or amendments approved in writing by Parent or the Purchaser, the Company will not, following the date hereof, amend the Rights Agreement in any manner. In addition, the Company covenants and agrees that it will not redeem the Rights unless such redemption is consented to in writing by Parent prior to such redemption. 5.3 HSR ACT. The Company and Parent shall take all reasonable actions necessary to file as soon as practicable notifications under the HSR Act and to respond as promptly as practicable to any inquiries received from the Federal Trade Commission and the Anti-trust Division of the Department of Justice for additional information or documentation and to respond as promptly as practicable to all inquiries and requests received from any State Attorney General or other Governmental Entity in connection with antitrust matters. 5.4 ACCESS TO INFORMATION. Upon reasonable notice, the Company shall (and shall cause each of its Subsidiaries to) afford to the officers, employees, accountants, counsel, financing sources and other representatives of Parent, access, during normal business hours during the period prior to the Appointment Date, to all its properties, books, contracts, commitments and records and, during such period, the Company shall (and shall cause each of its Subsidiaries to) furnish promptly to the Parent (a) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws, and (b) all other information concerning its business, properties and personnel as Parent may reasonably request. After the Appointment Date, the Company shall provide Parent and such persons as Parent shall designate with all such information, at such time, as Parent shall request. Unless otherwise required by law and until the Appointment Date, Parent will hold any such information which is nonpublic in confidence in accordance with the provisions of the letter agreement between the Company and the Parent (the "CONFIDENTIALITY AGREEMENT") dated as of March 3, 1996, as amended by letter dated as of March 7, 1996 and letter dated April 16, 1996. 34 40 5.5 CONSENTS AND APPROVALS. Each of the Company, Parent and the Purchaser will take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on it with respect to this Agreement and the transactions contemplated hereby (which actions shall include, without limitation, furnishing all information required under the HSR Act and in connection with approvals of or filings with any other Governmental Entity) and will promptly cooperate with and furnish information to each other in connection with any such requirements imposed upon any of them or any of their Subsidiaries in connection with this Agreement and the transactions contemplated hereby. Each of the Company, Parent and the Purchaser will, and will cause its Subsidiaries to, take all reasonable actions necessary to obtain (and will cooperate with each other in obtaining) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity or other public or private third party required to be obtained or made by Parent, the Purchaser, the Company or any of their Subsidiaries in connection with the Merger or the taking of any action contemplated thereby or by this Agreement. 5.6 EMPLOYEE BENEFITS. Parent agrees that following the Effective Time the employees of the Company and its Subsidiaries will continue to be provided with employee benefit plans (other than stock option, employee stock ownership or other plans involving the potential issuance of securities of the Company or of Parent) which in the aggregate are substantially comparable to those currently provided by the Company and its Subsidiaries to such employees. Parent will, and will cause the Surviving Corporation to, honor employee (or former employee) benefit obligations and contractual rights existing as of the Effective Time and all employment, incentive and deferred compensation or severance agreements, plans or policies adopted by the Board of Directors of the Company (or any committee thereof) prior to the date hereof in accordance with their terms other than stock option, employee stock ownership or other plans involving the potential issuance of securities of the Company or of Parent. 5.7 NO SOLICITATION. (a) Neither the Company nor any of its Subsidiaries, shall, directly or indirectly, take (and the Company shall not authorize or permit its or its subsidiaries, officers, directors, employees, representatives, consultants, investment bankers, attorneys, accountants or other agents or affiliates, to so take) any action to (i) solicit or initiate the submission of any Acquisition Proposal (as defined in Section 5.7(b)), (ii) enter into an agreement for the sale or other disposition by the Company or any of its subsidiaries of a material amount of assets or a sale of shares of capital stock whether by merger or other business combination or tender or exchange offer or (iii) participate in any way in discussions or negotiations with, or, furnish any information to, any person (other than Parent or the Purchaser) in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal (and 35 41 the Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing); provided, however, that the Company may participate in discussions or negotiations with or furnish information to any third party which proposes a transaction which the Board of Directors of the Company reasonably believes will result in an Acquisition Proposal, if the Board of Directors reasonably and in good faith believes (and has received a written opinion to that effect from independent counsel) that failing to take such action would constitute a breach of its fiduciary duties and if such third party, as a condition to receipt of such information, executes a confidentiality agreement no less restrictive than the Confidentiality Agreement. In addition, neither the Board of Directors of the Company nor any Committee thereof shall withdraw or modify in a manner adverse to Parent the approval and recommendation of the Offer and this Agreement or approve or recommend any Acquisition Proposal, provided that the Company may recommend to its shareholders an Acquisition Proposal and in connection therewith withdraw or modify its approval or recommendation of the Offer or the Merger if (i) the Board of Directors of the Company has reasonably and in good faith determined that the Acquisition Proposal is a Superior Proposal (as defined in Section 5.7(b)) and the Board of Directors has received a written opinion from independent legal counsel that failure to withdraw or modify its recommendation of the Offer and the Merger and to terminate this Agreement pursuant to Section 7.1(e) would constitute a breach of the Board's fiduciary duties, (ii) all the conditions to the Company's right to terminate this Agreement in accordance with Section 7.1(e) have been satisfied (including the payment of the amount required by Section 8.1), (iii) simultaneously with such withdrawal, modification or recommendation, this Agreement is terminated in accordance with Section 7.1(e) and (iv) the Acquisition Proposal does not provide for any breakup fee or other inducement to the acquiror other than reimbursement of documented out-of-pocket expenses incurred in connection with such Acquisition Proposal. Any actions permitted under, and taken in compliance with, this Section 5.7 shall not be deemed a breach of any other covenant or agreement of such party contained in this Agreement. (b) "ACQUISITION PROPOSAL" shall mean any proposed merger or other business combination, sale or other disposition of any material amount of assets, sale of shares of capital stock, tender offer or exchange offer or similar transactions involving the Company or any of its Subsidiaries. "SUPERIOR PROPOSAL" shall mean a bona fide proposal made by a third party to acquire all of the outstanding shares of the Company pursuant to a tender offer or a merger, or to purchase all or substantially all of the assets of the Company on terms which a majority of the members of the Board of Directors of the Company determines in its good faith reasonable judgment (based on the advice of its financial and legal advisors) to be more favorable to the Company and its shareholders than the transactions contemplated hereby, and which does not provide for 36 42 any breakup fee or other inducement to the acquiror other than reimbursement of documented out-of-pocket expenses incurred in connection with the Superior Proposal. (c) In addition to the obligations of the Company set forth in Section 5.7(a), the Company shall promptly advise Parent of any request for information or of any Acquisition Proposal, or any proposal with respect to any Acquisition Proposal, the material terms and conditions of such request or takeover proposal, and the identity of the person making any such takeover proposal or inquiry. The Company will use its reasonable best efforts to keep Parent informed of the status and details (including amendments or proposed amendments) of any such request, takeover proposal or inquiry. (d) Immediately following the purchase of Shares pursuant to the Offer, the Company will request each person (other than Purchaser or Parent) which has heretofore executed a confidentiality agreement in connection with its consideration of acquiring the Company or any portion thereof (the "THIRD PARTY CONFIDENTIALITY AGREEMENTS") to return all confidential information heretofore furnished to such person by or on behalf of the Company. 5.8 BROKERS OR FINDERS. Each of Parent and the Company represents, as to itself, its Subsidiaries and its affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any brokers' or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement and each of Parent and the Company agrees to indemnify and hold the other harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or expenses asserted by any person on the basis of any act or statement alleged to have been made by such party or its affiliates. 5.9 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, or to remove any injunctions or other impediments or delays, legal or otherwise, to consummate and make effective the Merger and the other transactions contemplated by this Agreement (including the provision of such certificates and opinions of counsel as are reasonable and customary under the circumstances). In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of the Company and Parent shall use all reasonable efforts to take, or cause to be taken, all such necessary actions. 5.10 PUBLICITY. The initial press release with respect to the execution of this Agreement shall be a joint press release 37 43 acceptable to Parent and the Company. Thereafter, so long as this Agreement is in effect, neither the Company, Parent nor any of their respective affiliates shall issue or cause the publication of any press release or other announcement with respect to the Merger, this Agreement or the other transactions contemplated hereby without the prior consultation of the other party, except as may be required by law or by any listing agreement with a national securities exchange. 5.11 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to Parent and Parent shall give prompt notice to the Company, of (a) the occurrence, or non-occurrence of any event the occurrence, or non-occurrence of which would cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Effective Time and (b) any material failure of the Company or Parent, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.11 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 5.12 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. (a) For two (2) years from the Effective Time, the Surviving Corporation shall either (i) maintain in effect the Company's current directors' and officers' liability insurance covering those persons who are currently covered on the date of this Agreement by the Company's directors' and officers' liability insurance policy (a copy of which has been previously delivered to Parent) (the "INDEMNIFIED PARTIES"); provided, however, that in no event shall Parent be required to expend in any one year an amount in excess of 100% of the annual premiums currently paid by the Company for such insurance which the Company represents to be $74,000 for the twelve month period ended November 1, 1996; and; provided further, that if the annual premiums of such insurance coverage exceed such amount, the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount; provided further, that the Surviving Corporation may substitute for such Company policies, policies with at least the same coverage containing terms and conditions which are no less advantageous and provided that said substitution does not result in any gaps or lapses in coverage with respect to matters occurring prior to the Effective Time or (ii) cause the Parent's directors' and officers' liability insurance then in effect to cover those persons who are covered on the date of this Agreement by the Company's directors' and officers' liability insurance policy with respect to those matters covered by the Company's directors' and officers' liability policy. (b) From and after the date of purchase of Shares pursuant to the Offer, Parent shall (or shall cause the Surviving Corporation to) indemnify all Indemnified Parties to the fullest extent permitted by Delaware law and the Company's Restated 38 44 Certificate of Incorporation and By-laws with respect to all acts and omissions arising out of such individuals' services as officers, directors, employees or agents of the Company or any of its subsidiaries, occurring prior to the Effective Time including, without limitation, the transactions contemplated by this Agreement. Without limitation of the foregoing, in the event any such Indemnified Party is or becomes involved in any capacity in any action, proceeding or investigation in connection with any matter, including without limitation, the transactions contemplated by this Agreement, occurring prior to, and including, the Effective Time, Parent, from and after the date of purchase of Shares pursuant to the Offer, will pay as incurred such Indemnified Party's reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. Subject to Section 5.12(c), Parent shall pay all reasonable expenses, including attorneys' fees, that may be incurred by any Indemnified Party in enforcing this Section 5.12 or any action involving an Indemnified Party resulting from the transactions contemplated by this Agreement. (c) Any Indemnified Party wishing to claim indemnification under Section 5.12(b), upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Parent thereof. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Parent or the Surviving Corporation shall have the right, from and after the purchase of Shares pursuant to the Offer, to assume the defense thereof and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) Parent shall not be liable for any settlement effected without its prior written consent; and provided further that Parent shall not have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. 6. CONDITIONS. The respective obligation of each party to effect the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions. 6.1 SHAREHOLDER APPROVAL. This Agreement shall have been approved and adopted by the requisite vote of the holders of Company Common Stock, if required by applicable law and the Restated Articles of Incorporation, in order to consummate the Merger. 6.2 STATUTES; CONSENTS. No statute, rule, order, decree or regulation shall have been enacted or promulgated by any foreign or domestic government or any governmental agency or authority of 39 45 competent jurisdiction which prohibits the consummation of the Offer, the Merger or the Tender Agreements or has the effect of making illegal the purchase of Company Common Stock by Parent or the Purchaser and all foreign or domestic governmental consents, orders and approvals required for the consummation of the Offer, the Merger and the transactions contemplated by this Agreement shall have been obtained and shall be in effect at the Effective Time. 6.3 INJUNCTIONS. No preliminary or permanent injunction or other order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits the consummation of the Offer or the Merger and the transactions contemplated by this Agreement and which is in effect at the Effective Time, provided, however, that, in the case of a decree, injunction or other order, each of the parties shall have used reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any decree, injunction or other order that may be entered. 6.4 PURCHASE OF SHARES IN OFFER. Parent, the Purchaser or their affiliates shall have purchased shares of Company Common Stock pursuant to the Offer. 7. TERMINATION. 7.1 TERMINATION. This Agreement may be terminated and the transactions contemplated hereby may be abandoned, at any time prior to the Effective Time, whether before or after approval of the Merger by the Company's stockholders: (a) subject to the provisions of Section 1.3 hereof, by mutual consent of the Company, on the one hand, and of Parent and the Purchaser, on the other hand; (b) by either Parent, on the one hand, or the Company, on the other hand, if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable; (c) by Parent, on the one hand, or the Company, on the other hand, if the Effective Time shall not have occurred on or before June 15, 1996 unless the Effective Time shall not have occurred because of a material breach of any representation, warranty, obligation, covenant, agreement or condition set forth in this Agreement on the part of the party seeking to terminate this Agreement; (d) by Parent, on the one hand, or the Company, on the other hand, if the Offer is terminated or expires in accordance 40 46 with its terms without the Purchaser having purchased any Common Stock thereunder due to a failure of any of the conditions set forth in Annex A hereto to be satisfied, unless such termination or expiration has been caused by or results from the failure of the party seeking to terminate this Agreement to perform in any material respect any of its respective covenants or agreements contained in this Agreement; (e) by either Parent, on the one hand, or the Company, on the other hand, if the Board of Directors of the Company reasonably and in good faith determines that an Acquisition Proposal is a Superior Proposal and the Board believes (and has received a written opinion from independent legal counsel) that a failure to terminate this Agreement would constitute a breach of its fiduciary duties; provided, however, the Company may not terminate this Agreement pursuant to this Section 7.1(e) unless (i) the Company has notified Parent and the Purchaser in writing promptly after receipt of any Acquisition Proposal and following such notification by the Company, the Company has fully cooperated with Parent, including, without limitation, informing Parent of the terms and conditions of such Acquisition Proposal (and any modification thereto), and the identity of the Person making such Proposal, with the intent of enabling the parties hereto to agree to a modification of the terms and conditions of this Agreement so that the transactions contemplated hereby may be effected, and (ii) prior to such termination, Parent has received the amount set forth in Section 8.1(b) by wire transfer in same day funds; and (f) prior to the consummation of the Offer, by the Company, if (i) any of the representations and warranties of Parent or the Purchaser contained in this Agreement were untrue or incorrect in any material respect when made or have since become, and at the time of termination remain, incorrect in any material respect, or (ii) Parent or the Purchaser shall have breached or failed to comply in any material respect with any of their respective obligations under this Agreement, including, without limitation, their obligation to commence the Offer within the time period required by Section 1.1(a) of this Agreement. 7.2 EFFECT OF TERMINATION. In the event of the termination of this Agreement as provided in Section 7.1, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become null and void, and there shall be no liability on the part of the Parent or the Company except (a) for fraud or for material breach of this Agreement and (b) as set forth in this Section 7.2 and Section 8.1. 8. MISCELLANEOUS. 8.1 FEES AND EXPENSES. (a) Except as provided in Section 8.1(b) below, all costs and expenses incurred in connection with this Agreement and the consummation of the transactions 41 47 contemplated hereby shall be paid by the party incurring such costs and expenses. (b) If this Agreement is terminated by Parent in accordance with Section 7.1(d) because of the occurrence of any of the events set forth in paragraphs (iv)(e) or (iv)(h) of Annex A or if this Agreement is terminated by the Company in accordance with Section 7.1(e), then the Company shall, within two business days of such termination (except as required to be earlier paid in accordance with Section 7.1(e)), pay to Parent in same day funds the sum of $3,366,575. 8.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement may be amended, modified and supplemented in any and all respects, whether before or after any vote of the shareholders of the Company contemplated hereby, by written agreement of the parties hereto, by action taken by their respective Boards of Directors (which in the case of the Company shall include approvals as contemplated in Section 1.3(b)), at any time prior to the Closing Date with respect to any of the terms contained herein; provided, however, that after the approval of this Agreement by the shareholders of the Company, no such amendment, modification or supplement shall reduce or change the Merger Consideration. 8.3 REPRESENTATIONS AND WARRANTIES. The respective representations and warranties of the Company, on the one hand, and Parent and the Purchaser, on the other hand, contained herein or in any certificates or other documents delivered prior to or at the Closing shall not be deemed waived or otherwise affected by any investigation made by any party. Each and every such representation and warranty shall expire with, and be terminated and extinguished by, the Closing and thereafter none of the Company, Parent or the Purchaser shall be under any liability whatsoever with respect to any such representation or warranty. This Section 8.3 shall have no effect upon any other obligation of the parties hereto, whether to be performed before or after the Effective Time. 8.4 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by an overnight courier service, such as Federal Express, to the parties at the following addresses(or at such other address for a party as shall be specified by like notice): (a) if to Parent or the Purchaser, to: The Reynolds and Reynolds Company 115 South Ludlow Street Dayton, Ohio 45402 ATTN: Adam M. Lutynski Telecopy No. (513) 449-4123 42 48 with a copy to: Coolidge Wall Womsley & Lombard 33 W. First Street, Suite 600 Dayton, Ohio 45402 ATTN: Jeffry A. Melnick Telecopy No. (513) 449-5788 and (b) if to the Company, to: Duplex Products Inc. 1947 Bethany Road Sycamore, Illinois 60178 ATTN: Mark A. Robinson, Esq. Telecopy No. (815) 895-1091 with a copy to: Hinshaw & Culbertson 220 East State Street P.O. Box 1389 Rockford, Illinois 61105-1389 ATTN: Charles F. Thomas, Esq. Telecopy No. (815) 965-9529 8.5 INTERPRETATION. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation". The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. The phrases "the date of this Agreement", "the date hereof", and terms of similar import, unless the context otherwise requires, shall be deemed to refer to April 20, 1996. As used in this Agreement, the term "affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the Exchange Act. References to a party's "knowledge" or the "best knowledge" of a party or words of similar import shall mean to the actual knowledge of the officers and directors of the applicable party after reasonable inquiry into the subject matter. The term "person" shall mean and include an individual, a partnership (limited, limited liability or general), a limited liability company, a joint venture, a corporation, a trust, an unincorporated organization, a group and a government or other department or agency thereof. 8.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the 43 49 same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 8.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP. This Agreement, the Disclosure Letter, and the Confidentiality Agreement (including the documents and the instruments referred to herein and therein): (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Sections 5.6 and 5.12 are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 8.8 SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 8.9 GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the state of Delaware without giving effect to the principles of conflicts of law thereof. 8.10 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that the Purchaser may assign, in its sole discretion, any or all of its rights, interest and obligations hereunder to Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 8.11 HEADINGS. The descriptive headings of the Sections of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. 8.12 EXTENSION; WAIVER. Subject to the provisions of Sections 1.1 or 1.3 hereof, at any time prior to the Effective Time, the parties hereto, by action taken by or on behalf of the respective Boards of Directors of the Company, Parent or the Purchaser, may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or 44 50 (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. [SIGNATURES APPEAR ON THE FOLLOWING PAGE] 45 51 IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the 20th day of April, 1996. THE REYNOLDS AND REYNOLDS COMPANY ATTEST: By_______________________ By______________________________ Name:____________________ Name:___________________________ Title:___________________ Title:__________________________ DELAWARE ACQUISITION CO. By_______________________ By______________________________ Name:____________________ Name:___________________________ Title:___________________ Title:__________________________ DUPLEX PRODUCTS INC. By_______________________ By______________________________ Name:____________________ Name:___________________________ Title:___________________ Title:__________________________ 46 52 ANNEX A CONDITIONS TO THE TENDER OFFER Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) the Purchaser's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any tendered Shares, and may terminate the Offer as to any Shares not then paid for, if: (i) any applicable waiting period under the HSR Act has not expired or terminated; (ii) the Minimum Condition has not been satisfied; (iii) the Rights Agreement shall not have been amended in a manner which renders the Rights inoperative with respect to any acquisition of Shares by Parent or the Purchaser, or (iv) at any time on or after April 20, 1996 and before the time of payment for any such Shares, any of the following events shall occur or shall be determined by the Purchaser to have occurred: (a) there shall be threatened, instituted or pending any action or proceeding by any Governmental Entity (i) challenging or seeking to, or which could reasonably be expected to make illegal, impede, delay or otherwise directly or indirectly restrain, prohibit or make materially more costly the Offer or the Merger or seeking to obtain material damages, (ii) seeking to prohibit or materially limit the ownership or operation by Parent or Purchaser of all or any material portion of the business or assets of the Company or any of its subsidiaries taken as a whole or to compel Parent or Purchaser to dispose of or hold separately all or any material portion of the business or assets of Parent or Purchaser or the Company or any of its subsidiaries taken as a whole, or seeking to impose any material limitation on the ability of Parent or Purchaser to conduct its business or own such assets, (iii) seeking to impose material limitations on the ability of Parent or Purchaser effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by Purchaser or Parent on all matters properly presented to the Company's stockholders, (iv) seeking to require divestiture by Parent or Purchaser of any Shares, or (v) otherwise materially adversely affecting the condition of the Company and its subsidiaries taken as a whole; A-1 53 (b) any court shall have entered an order which is in effect and which (i) makes illegal, impedes, delays or otherwise directly or indirectly restrains, prohibits or makes materially more costly the Offer or the Merger, (ii) prohibits or materially limits the ownership or operation by Parent or Purchaser of all or any material portion of the business or assets of the Company or any of its subsidiaries taken as a whole or compels Parent or Purchaser to dispose of or hold separately all or any material portion of the business or assets of Parent or Purchaser or the Company or any of its subsidiaries taken as a whole, or imposes any material limitation on the ability of Parent or Purchaser to conduct its business or own such assets, (iii) imposes material limitations on the ability of Parent or Purchaser effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by Purchaser or Parent on all matters properly presented to the Company's stockholders, (iv) requires divestiture by Parent or Purchaser of any Shares, or (v) otherwise materially adversely affects the Company and its Subsidiaries taken as a whole; provided, however, that in the case of a preliminary injunction to the effect described in this paragraph (b), the provisions of this paragraph (b) shall not be deemed to have been triggered until the earlier of (X) the date on which such injunction becomes final or (Y) the Company ceases its efforts to have such preliminary injunction dissolved; (c) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to (i) Parent, Purchaser, the Company or any subsidiary of the Company or (ii) the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, other than the routine application of the waiting period provisions of the HSR Act to the Offer or to the Merger, which could reasonably be expected to directly or indirectly result in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (d) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the American Stock Exchange for a period in excess of three hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) a commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any foreign or United States governmental authority on the extension of credit by banks or other financial institutions, (v) any decline in either the Dow Jones Industrial Average or the Standard & Poor's Index of 500 Industrial Companies by an amount in excess of 20% measured from the close of business on April 19, 1996 or (vi) in the case of any of the A-2 54 foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; (e) the representations and warranties of the Company set forth in the Merger Agreement shall not be true and correct in any material respect as of the date of consummation of the Offer as though made on or as of such date, except (i) for changes specifically permitted by the Merger Agreement and (ii) those representations and warranties that address matters only as of a particular date are true and correct as of such date, or the Company shall have breached or failed in any material respect to perform or comply with any material obligation, agreement or covenant required by the Merger Agreement to be performed or complied with by it; (f) the Merger Agreement shall have been terminated in accordance with its terms; (g) (i) it shall have been publicly disclosed or Parent or the Purchaser shall have otherwise learned that any person, entity or "group" (as defined in Section 13(d)(3)of the Exchange Act), other than Parent or its affiliates or any group of which any of them is a member, shall have acquired beneficial ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of more than 19.9% of any class or series of capital stock of the Company (including the Shares), through the acquisition of stock, the formation of a group or otherwise, or shall have been granted an option, right or warrant, conditional or otherwise, to acquire beneficial ownership of more than 19.9% of any class or series of capital stock of the Company (including the Shares); or (ii) any person or group shall have entered into a definitive agreement or agreement in principle with the Company with respect to a merger, consolidation or other business combination with the Company; (h) the Company's Board of Directors shall have withdrawn, or modified or changed in a manner adverse to Parent or the Purchaser (including by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement, or the Merger, or recommended another proposal (including a Superior Proposal) or offer, or shall have resolved to do any of the foregoing; (i) any change shall have occurred or been threatened (or any condition, event or development shall have occurred or been threatened involving a prospective change), that is reasonably likely to have a material adverse effect on the business, properties, assets, liabilities, operations, results of operations, conditions (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole; or (j) all consents, registrations, approvals, permits, authorizations, notices, reports or other filings required to be obtained or made by the Company, Parent or Purchaser with or from any Governmental Entity in connection with the execution, delivery and performance of the Merger Agreement, the Offer and the A-3 55 consummation of the transactions contemplated by the Merger Agreement shall not have been made or obtained and such failure could reasonably be expected to have a material adverse effect on the Company and any of its Subsidiaries, taken as a whole, or could be reasonably likely to prevent or materially delay consummation of the transactions contemplated by the Merger Agreement. The foregoing conditions are for the sole benefit of the Purchaser and Parent and may be waived by Parent or the Purchaser, in whole or in part at any time and from time to time in the sole discretion of Parent or the Purchaser; provided that the Minimum Condition may not be waived without the written consent of the Company. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. A-4 EX-2.C.A 16 EXHIBIT (C)(2)(A) 1 EXHIBIT (c)(2)(A) TENDER AGREEMENT ---------------- THE REYNOLDS AND REYNOLDS COMPANY ("REYNOLDS" or "PARENT"), DELAWARE ACQUISITION CO. ("PURCHASER") and SMITH (DONALD) & COMPANY, INC. ("SHAREHOLDER") agree as follows: RECITALS -------- Immediately prior to the execution of this Agreement, Parent, Purchaser and Duplex Products Inc. (the "COMPANY"), have entered into an Agreement and Plan of Merger (the "MERGER AGREEMENT"; capitalized terms used and not defined herein have the respective meanings ascribed to them in the Merger Agreement), pursuant to which Purchaser will be merged with and into the Company (the "MERGER"). In furtherance of the Merger, Parent and the Company desire that as soon as practicable (and not later than five (5) business days) after the execution and delivery of the Merger Agreement, Purchaser shall commence the Offer to purchase at the Offer price all outstanding shares of Company Common Stock including all of the Shares (as defined in Section 2.1) owned beneficially by the Shareholder. As an inducement and a condition to entering into the Merger Agreement, Parent has required that the Shareholder agree, and the Shareholder has agreed, to enter into this Agreement. 1. DEFINITIONS. For purposes of this Agreement: ----------- 1.1 "BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect to any securities shall mean having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a Person shall include securities Beneficially Owned by all other Persons with whom such Person would constitute a "group" as within the meanings of Section 13(d)(3) of the Exchange Act. 1.2 "PERSON" shall mean an individual, corporation, partnership, joint venture, limited liability company, association, trust, unincorporated organization or other entity. 2. TENDER OF SHARES. ----------------- 2.1 TENDER. Shareholder agrees to validly tender (or cause the record owner of such shares to tender), and not withdraw, pursuant to and in accordance with the terms of the Offer, not later than the fifth (5th) business day after commencement of the Offer pursuant to Section 1.1 of the Merger Agreement and Rule 14d-2 under the Exchange Act, all shares of Company Common Stock 2 (including the associated preferred stock purchase rights (the "EXISTING SHARES") Beneficially Owned by Shareholder (Shareholder represents that as of April __, 1996 Shareholder beneficially owned ___________ shares of Company Common Stock) together with any shares of Company Common Stock acquired by the Shareholder in any capacity after the date hereof and prior to the termination of this Agreement (whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution, gift, bequest, inheritance or as successor in interest in any capacity (including a fiduciary capacity) or otherwise, the "SHARES"). The Shareholder hereby acknowledges and agrees that the Parent's and the Purchaser's obligation to accept for payment and pay for Shares in the Offer, including the Shares Beneficially Owned by Shareholder, is subject to the terms and conditions of the Offer. The parties agree that the Shareholder will, for all Shares tendered by Shareholder in the Offer and accepted for payment and paid for by Purchaser, receive the same per Share consideration paid to other shareholders who have tendered into the Offer. 2.2 TITLE. The transfer by the Shareholder of the Shares to Purchaser in the Offer shall pass to and unconditionally vest in Purchaser good and valid title to the Shares, free and clear of all claims, liens, restrictions, security interests, pledges, limitations and encumbrances whatsoever. 2.3 PERMITTED DISCLOSURE. The Shareholder hereby agrees to permit Parent and Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's shareholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the SEC) its identity and ownership of Company Common Stock and the nature of its commitments, arrangements and understandings under this Agreement. 3. PROVISIONS CONCERNING COMPANY COMMON STOCK. The Shareholder hereby agrees that during the period commencing on the date hereof and continuing until the first to occur of the Effective Time or termination of the Merger Agreement in accordance with its terms, at any meeting of the holders of Company Common Stock, however called, or in connection with any written consent of the holders of Company Common Stock, the Shareholder shall vote (or cause to be voted) the Shares held of record or Beneficially Owned by the Shareholder, whether issued, heretofore owned or hereafter acquired, (a) in favor of the Merger, the execution and delivery by the Company of the Merger Agreement and the approval of the terms thereof and each of the other actions contemplated by the Merger Agreement and this Agreement and any actions required in furtherance thereof; (b) against any action or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or this Agreement (after giving effect to any materiality or similar qualifications contained therein); and (c) except as otherwise agreed to in writing in advance by 2 3 Parent, against the following actions (other than the Merger and the transactions contemplated by the Merger Agreement): (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its Subsidiaries; (ii) a sale, lease or transfer of a material amount of assets of the Company or its Subsidiaries, or a reorganization, recapitalization, dissolution or liquidation of the Company or its Subsidiaries; (iii)(A) any change in a majority of the persons who constitute the board of directors of the Company; (B) any change in the present capitalization of the Company or any amendment of the Company's Restated Articles of Incorporation or By-laws; (C) any other material change in the Company's corporate structure or business; or (D) any other action which, in the case of each of the matters referred to in clauses (iii)(A), (B), (C) or (D), is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially adversely affect the Merger and the transactions contemplated by this Agreement and the Merger Agreement. The Shareholder shall not enter into any agreement or understanding with any person or entity the effect of which would be inconsistent or violative of the provisions and agreements contained in this Section 3. 4. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. The Shareholder hereby represents and warrants to Parent and Purchaser as follows: 4.1 OWNERSHIP OF SHARES. The Shareholder is the record and Beneficial Owner of the Shares. On the date hereof, the Existing Shares constitute all of the Shares owned of record or Beneficially Owned by the Shareholder. The Shareholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Sections 2 and 3 hereof, sole power of disposition, sole power of conversion, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Existing Shares with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. Shareholder will defend title to the Shares against all claims. 4.2 POWER; BINDING AGREEMENT. The Shareholder has the legal capacity, power and authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by the Shareholder will not violate any other agreement to which the Shareholder is a party including, without limitation, any voting agreement, proxy arrangement, pledge agreement, shareholders agreement or voting trust. This Agreement has been duly and validly executed and delivered by the Shareholder and constitutes a valid and binding agreement of the Shareholder, enforceable against the Shareholder in accordance with its terms except to the extent such enforcement may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors rights. 3 4 No action will be taken with respect to the Shares except as contemplated herein. 4.3 NO CONFLICTS. Except for (i) filings under the HSR Act and the Exchange Act, (a) no filing with, and no permit, authorization, consent or approval of, any state or federal body or authority is necessary for the execution of this Agreement by the Shareholder and the consummation by the Shareholder of the transactions contemplated hereby and (b) neither the execution and delivery of this Agreement by the Shareholder, the consummation by the Shareholder of the transactions contemplated hereby or compliance by the Shareholder with any of the provisions hereof shall (1) conflict with or result in any breach of any applicable organizational documents applicable to the Shareholder, (2) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, loan agreement, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which the Shareholder is a party or by which the Shareholder or any of its properties or assets may be bound, or (3) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to the Shareholder or any of its properties or assets. 4.4 ENCUMBRANCES. Except as applicable in connection with the transactions contemplated by Sections 2 and 4.7 hereof, the Shares and the certificates representing such Shares are now, and at all times during the term hereof will be, held by the Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. 4.5 FINDER'S FEES. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Shareholder. 4.6 SOLICITATION. The Shareholder shall not, in the capacity as a shareholder or otherwise (including as an officer and/or director of the Company), directly or indirectly, solicit (including by way of furnishing information) or respond to any inquiries or the making of any proposal by any person or entity (other than Parent or any affiliate of Parent) concerning any merger, tender offer, exchange offer, sale of assets, sale of shares of capital stock or debt securities or similar transactions involving the Company or any Subsidiary, division or operating or principal business unit of the Company, except as permitted by Sections 1.2(a) and 5.7 of the Merger Agreement. If the 4 5 Shareholder receives any such inquiry or proposal, then the Shareholder shall promptly inform Parent of the existence thereof in the same manner set forth in Section 5.7 of the Merger Agreement. The Shareholder will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. 4.7 RESTRICTION ON TRANSFER, PROXIES AND NON- INTERFERENCE. Except as applicable in connection with the transactions contemplated by Section 2 hereof, the Shareholder shall not, directly or indirectly: (a) offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of the Shares or any interest therein; (b) except as contemplated by this Agreement, grant any proxies or powers of attorney, deposit the Shares into a voting trust or enter into a voting agreement with respect to the Shares; or (c) take any action that would make any representation or warranty of the Shareholder contained herein untrue or incorrect or have the effect of preventing or disabling the Shareholder from performing its obligations under this Agreement. 4.8 RELIANCE BY PARENT. The Shareholder understands and acknowledges that Parent is entering into, and causing Purchaser to enter into, the Merger Agreement in reliance upon the Shareholder's execution and delivery of this Agreement. 4.9 FURTHER ASSURANCES. From time to time, at the other party's request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 5. STOP TRANSFER. The Shareholder agrees with, and covenants to, Parent that the Shareholder shall not request that the Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of the Shares, unless such transfer is made in compliance with this Agreement (including the provisions of Section 2 hereof). In the event of a stock dividend or distribution, or any change in the Company Common Stock by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, the term "Shares" shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any shares into which or for which any or all of the Shares may be changed or exchanged. 6. TERMINATION. Except as otherwise provided herein, the covenants and agreements contained herein with respect to the 5 6 Shares shall terminate upon the termination of the Merger Agreement. 7. CONFIDENTIALITY. The Shareholder recognizes that successful consummation of the transactions contemplated by this Agreement may be dependent upon confidentiality with respect to the matters referred to herein. In this connection, pending public disclosure thereof, the Shareholder hereby agrees not to disclose or discuss such matters with anyone not a party to this Agreement (other than its counsel and advisors, if any) without the prior written consent of Parent, except for filings required pursuant to the Exchange Act and the rules and regulations thereunder or disclosures its counsel advises are necessary in order to fulfill its obligations imposed by law, in which event such Shareholder shall give notice of such disclosure to Parent as promptly as practicable so as to enable Parent to seek a protective order from a court of competent jurisdiction with respect thereto. 8. MISCELLANEOUS. 8.1 ENTIRE AGREEMENT. This Agreement and the Merger Agreement constitute the entire agreement between 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. 8.2 BINDING AGREEMENT. The Shareholder agrees that this Agreement and the obligations hereunder shall attach to the Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including, without limitation, the Shareholder's heirs, distributees, guardians, administrators, executors, legal representatives, or successors or other transferees (for value or otherwise) and any other successors in interest. Notwithstanding any transfer of Shares, the transferor shall remain liable for the performance of all obligations under this Agreement of the transferor. 8.3 ASSIGNMENT. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the other party, provided that Parent may assign, in its sole discretion, its rights and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. 8.4 AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto. 8.5 NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be 6 7 given (and shall be deemed to have been duly received if given) by hand delivery or telecopy (with a confirmation copy sent for next day delivery via courier service, such as Federal Express), or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: (a) if to Parent or the Purchaser, to: The Reynolds and Reynolds Company 115 South Ludlow Street Dayton, Ohio 45402 ATTN: Adam M. Lutynski Telecopy No. (513) 449-4123 with a copy to: Coolidge Wall Womsley & Lombard 33 W. First Street, Suite 600 Dayton, Ohio 45402 ATTN: Jeffry A. Melnick Telecopy No. (513) 449-5788 and (b) if to the Company, to: Smith (Donald) & Company, Inc. 15 Essex Road Parmus, New Jersey 07652 ATTN: Richard Greenberg Telecopy No. (201) ___________ with a copy to: _____________________________ _____________________________ _____________________________ ATTN:________________________ Telecopy No. (___)___________ or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 8.6 SEVERABILITY. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this 7 8 Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 8.7 SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore each of the parties hereto agrees that in the event of any such breach the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 8.8 REMEDIES CUMULATIVE. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. 8.9 NO WAIVER. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. 8.10 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to be for the benefit of, and shall not be enforceable by, any person or entity who or which is not a party hereto. 8.11 GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. 8.12 DESCRIPTIVE HEADINGS. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 8.13 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same Agreement. 8 9 IN WITNESS WHEREOF, Parent, the Purchaser and Shareholder have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the _____ day of April, 1996. THE REYNOLDS AND REYNOLDS COMPANY ATTEST: By_______________________ By______________________________ Name:____________________ Name:___________________________ Title:___________________ Title:__________________________ DELAWARE ACQUISITION CO. By_______________________ By______________________________ Name:____________________ Name:___________________________ Title:___________________ Title:__________________________ SMITH (DONALD) & COMPANY, INC. By_______________________ By______________________________ Name:____________________ Name:___________________________ Title:___________________ Title:__________________________ 9 EX-2.C.B 17 EXHIBIT (C)(2)(B) 1 EXHIBIT (c)(2)(B) Tweedy, Telephone: (212) 916 0600 Browne Telecopier: (212) 916 0649 Company L.P. Trading desk: (212) 916 0606 ______________________________________________________________________________ 52 Vanderbilt Avenue New York, NY 10017 General Partners Christopher H. Browne William H. Browne John D. Spears April 21, 1996 The Reynolds and Reynolds Company 115 South Ludlow Street Dayton, Ohio 45402 Re: Duplex Products, Inc. Dear Sir or Madam: Tweedy, Browne Company L.P. ("TBC") is registered as an investment adviser with the Securities and Exchange Commission, and as such, has investment discretion and/or voting discretion over 671,758 shares of Common Stock, par value $1.00 per share (the "Common Stock") of Duplex Products, Inc. (the "Company"). Such shares (the "TBC Shares") are beneficially owned by various client accounts, and TBC has investment discretion with respect to all of the TBC Shares and has voting authority with respect to 581,701 TBC Shares. In addition, two affiliated investment partnerships, Vanderbilt Partners, L.P. ("Vanderbilt") and TBK Partners, L.P. ("TBK") own shares of Common Stock. Each of the general partners of each of Vanderbilt and TBK (three of whom are also general partners of TBC) have investment and voting discretion with respect to the shares of Common Stock owned by Vanderbilt and TBK. Vanderbilt beneficially owns directly 12,300 shares of Common Stock (the "Vanderbilt Shares") and TBK beneficially owns directly 20,000 shares of Common Stock (the "TBK Shares"). It is the current intention of each of TBC, TBK and Vanderbilt to tender the TBC Shares, the TBK Shares and the Vanderbilt Shares, respectively, for $12 per share in the merger transaction described in our discussion with the Company held on April 18, 1996. We believe that an all cash bid of $12 per share is an attractive price for the Company's Common Stock in the current environment, and we intend to support the proposed merger. However, we reserve the right to accept a higher bid offered at any time by other parties, or to sell Shares in the open market. Established in 1920 Registered investment advisers/ Members of the National Association of Securities Dealers, Inc. and SIPO 2 Letter to The Reynolds and Reynolds Company April 21, 1996 Page Two - ------------------------------------------------------------------------------- Each of TBC, TBK and Vanderbilt hereby agrees to permit you to disclose to others the information set forth above. Very truly yours, TWEEDY, BROWNE COMPANY L.P. By: /s/ John D. Spears ----------------------------- John D. Spears General Partner TBK PARTNERS, L.P. By: /s/ John D. Spears ----------------------------- John D. Spears General Partner VANDERBILT PARTNERS, L.P. By: /s/ John D. Spears ----------------------------- John D. Spears General Partner EX-2.C.C 18 EXHIBIT (C)(2)(C) 1 EXHIBIT c(2)(C) [BRINSON PARTNERS, INC Letterhead] Alvin W. Marley, CFA Partner April 21, 1996 The Reynolds and Reynolds Company 115 South Ludlow Street Dayton, Ohio 45402 RE: DUPLEX PRODUCTS Dear Sir or Madam: Brinson Partners, Inc. ("Brinson Partners") is registered as an investment adviser with the Securities and Exchange Commission, and as such, has investment discretion and/or voting discretion over 688,700 shares of Common Stock, par value $1.00 per share (the "Common Stock") of Duplex Products, Inc. (the "Company"). It is the current intention of Brinson Partners to tender such Company shares for $12 per share in the merger transaction described in our discussion with the Company held on April 19, 1996. However, we reserve the right to accept a higher bid offered at any time by other parties. Brinson Partners hereby agrees to permit you to disclose to others the information set forth above. Sincerely, /s/ Alvin W. Marley ---------------------- Alvin W. Marley EX-3.C 19 EXHIBIT (C)(3) 1 EXHIBIT (c)(3) [ LOGO ] DUPLEX INFORMATION PRODUCTS AND TECHNOLOGIES VIA TELEFAX 513/290-7270 March 3, 1996 Mr. Daniel Dittman The Reynolds and Reynolds Co. 3555 S. Kettering Blvd. Moraine, Ohio 45439 RE: Confidentiality Agreement Dear Dan: In connection with our discussions regarding a proposed business transaction involving Reynolds & Reynolds Co. ("Reynolds") and Duplex Products Inc. ("the Company"), Reynolds has requested the opportunity to review documents, records, and other information that the Company views as confidential or proprietary (collectively, "Confidential Information"). While we understand your desire to review and examine such Confidential Information, and have no general objection to providing it under the circumstances, we believe it appropriate that the Company obtain Reynolds' written agreement to maintain the confidentiality of such Confidential Information before we make it available. I am sure you can understand that the Company tries to exert every possible effort to minimize the risk that any of our plans, trade secrets, or other information might be disclosed or utilized in any improper fashion. Accordingly, the balance of this letter contains an agreement on the part of Reynolds to preserve the confidentiality of information provided to it or any of its agents or designees. Out of respect for the Federal Trade Commission's watchful eye over exchanges of information among competitors, we are reluctant to provide you, at this time, with information relating to current prices, current customers, current or future costs from which price can be derived or marketing plans. Reynolds hereby agrees that it will not use any Confidential Information for purposes including planning, marketing, product development or pricing. The Confidential Information is being provided to Reynolds to enable it to consider the desirability, feasibility and timing of a potential business transaction with the Company. However, such Confidential Information would 1 Duplex Products Inc. P.O. Box 1947 1947 Bethany Road Sycamore, Illinois 60178 2 not be provided if Reynolds did not sign this Confidentiality Agreement, and it is being provided in reliance upon this Confidentiality Agreement. This Agreement relates to all Confidential Information provided by the Company to Reynolds about the Company, its business and its share of the industry, including, but not limited to, information regarding the Company's business; plans; financial results and statements; markets; projected activities and results of operations; customers; materials requirements and sources; contracts; backlog; means; methods, and processes of manufacture and assembly; trade secrets; customer lists and customer names and contacts; and stock ownership and other financial information. Confidential Information shall also specifically include any information relating to the fact that the Company and Reynolds have entered into discussions about a possible business transaction. Reynolds agrees that Confidential Information will be disclosed only to such of its personnel, and to such of its outside experts and advisors, as (1) reasonably need to know such information to advise Reynolds in connection with, or to determine the value or desirability of entering into, a transaction of the type under discussion with the Company, and (2) agree to be bound by the provisions and restrictions regarding Confidential Information contained herein. Reynolds will be, and will remain, fully responsible to the Company for any use of Confidential Information by any person who receives it on Reynolds's behalf, or to whom Reynolds or any such person discloses it, for any reason, in all respects as though Reynolds had made such use of such information. Unless later agreed to in writing to the contrary, Reynolds will disclose Confidential Information only to its Executive officers, directors and acquisition and finance staff. Reynolds's marketing and sales personnel shall be excluded from access to any Confidential Information. Furthermore, Reynolds agrees that all Confidential Information will be kept and maintained confidential by Reynolds, will not be disclosed to any third person (except as described in the preceding paragraph); will under no circumstances (and without in any manner limiting the preceding clause) be disclosed to, or utilized in connection with, any supplier, customer or competitor (present or potential) of the Company's (including any such person now or hereafter controlled by Reynolds) and will not in any way be used, or be permitted to be used, in a manner detrimental to the business or prospects of the Company. If and when discussions related to the proposed business relationship between Reynolds and the Company should be terminated, the foregoing restrictions shall nonetheless continue and remain in effect, and Reynolds shall return to the Company all copies of Confidential Information then held by Reynolds, its agents and advisors, or shall certify to the Company's satisfaction that all such copies have been destroyed, and neither Reynolds nor any of its agents or advisors will retain any of the Confidential Information in their possession or control. Without limiting the foregoing, Reynolds further agrees that none of the Confidential Information or any other information provided by the Company to Reynolds will be used by Reynolds, or disclosed to others for use, in connection with purchasing, selling or trading in the Company's securities in any manner that is in violation of legal or regulatory restrictions applicable from time to time, and Reynolds acknowledges a duty not to purchase, sell or trade in securities on the basis of any material 2 3 "inside" information that is not publicly known, and shall so instruct any employees, agents or advisors utilized. The foregoing limitations will not apply to any information disclosed by the Company to Reynolds that would otherwise be within the definition of Confidential Information (1) if such information is generally and readily availabe to the public, or can be demonstrated to have been independently known by Reynolds at the time of its disclosure to Reynolds, or (2) after the time, if any, that such information becomes generally and readily available to the public, or can be demonstrated to have been independently disclosed to Reynolds, without any utilization of Confidential Information disclosed to Reynolds hereunder, and without any breach by Reynolds (or by any of Reynolds' personnel or advisors) of the obligations binding on Reynolds and reflected herein; or (3) after the expiration of three (3) years from the date hereof. The furnishing of Confidential Information hereunder shall not obligate either party to enter into any further agreement or negotiation with the other or to refrain from entering into an agreement or negotiation with any other party. Assuming that you agree to the foregoing, please sign below and on the enclosed copy of this letter and return one copy to me promptly, whereupon it shall become a binding agreement between Reynolds and the Company. Except as may be required by law, without the prior written consent of the other party, neither party hereto nor their respective representatives will disclose to any person either the fact that discussions or negotiations are taking place concerning a possible transaction between the Company and Reynolds or any other terms, conditions or other facts with respect to any such possible transaction, including the status thereof. The Company does not make any representation or warranty with respect to the accuracy or completeness of any Confidential Information, or any other information provided to Reynolds, including specifically any financial projections or other forward looking information, except such representations or warranties as may be set forth in an acquisition agreement executed by the Company and Reynolds. In the event Reynolds discloses, disseminates or releases any Confidential Information, except as provided above, such disclosure, dissemination or release will be deemed a material breach of this Agreement and the Company may demand prompt return of all Confidential Information previously provided. The parties acknowledge that any breach of the provisions of this Agreement would cause the Company to suffer irreparable damage that could not be adequately remedied at law. Therefore, the Company shall have the right to seek specific performance or other injunctive relief to enjoin any breach, in addition to its other rights and remedies available at law. Our agreement shall be construed and enforced in accordance with the laws of Illinois. If you should have any questions or concerns, please do not hesitate to call. Any requests for clarification or for additional information should be directed to the Company's Chief Financial 3 4 Officer, James Ramig, or to me. My fax number is 815/895-1091. Yours sincerely, DUPLEX PRODUCTS INC. /s/ Mark A. Robinson By: Mark A. Robinson, Secretary/General Counsel AGREED AND CONFIRMED: REYNOLDS & REYNOLDS CO. BY: /s/ Daniel W. Dittman, see attached letter --------------------- dated 3/7/96. ITS: Sr. Vice President --------------------- DATE: 3/7, 1996 --- 4 5 April 16, 1996 [DUPLEX LOGO] The Reynolds and Reynolds Company 115 S. Ludlow Street Dayton, Ohio 45402 ATTN: Daniel W. Dittman Re: Confidentiality Agreement dated as of March 3, 1996, as amended by letter dated as of March 7, 1996 (the "Agreement"). Dear Dan: This letter will confirm our discussions regarding an amendment to the Agreement. Duplex Products Inc. hereby consents, pursuant to Section 2 of the March 7 letter, to the sharing of Confidential Information with your sales and marketing personnel. Except as amended in the preceding sentence, the Agreement will not be amended or modified and shall remain in full force and effect. Sincerly, DUPLEX PRODUCTS INC. /s/ Mark A. Robinson By: Mark A. Robinson Its: Vice President/General Counsel and Secretary Agreed and accepted as of the 16th day of April, 1996 THE REYNOLDS AND REYNOLDS COMPANY By: __________________________ Its: _________________________ DUPLEX PRODUCTS INC. P.O. BOX 1947 1947 BETHANY ROAD SYCAMORE, ILLINOIS 60178 6 REYNOLDS+REYNOLDS BUSINESS FORMS DIVISION PO BOX 2237 DAYTON, OHIO 45401-2237 513 443 2000 VIA TELECOPY - (815) 895-1091 - ----------------------------- March 7, 1996 Mark A. Robinson, Esq. Secretary and General Counsel Duplex Products, Inc. 1947 Bethany Road Sycamore, IL 60178 Re: Confidentiality Agreement Dear Mark: Thank you for your March 3, 1996 letter. The terms of that letter are satisfactory to Reynolds subject to the following modifications: 1. Given that we are only at an initial exploratory phase, we understand your reasons for not providing at this time information relating to current prices, current customers, current or future costs from which price can be derived or marketing plans. As we have discussed, if the transaction proceeds to the due diligence phase, that investigation will be based upon a mutually satisfactory schedule and methodology. During that phase, we will need to obtain the pricing, customer, cost and marketing information at a time which is satisfactory to you and which will provide us a reasonable time to digest and evaluate that information. 2. Similarly, we understand your reason for wanting to exclude our sales and marketing personnel from access to the Confidential Information at this time, but, if we proceed to the due diligence phase as described, we will need to share appropriate Confidential Information with certain of our with sales and marketing personnel who are part of our acquisition team. We propose a solution similar to that for the cost and pricing information (i.e., we will not provide any Confidential Information to sales and marketing personnel who are part of our due diligence team until you have consented to that disclosure; provided, that you will give your consent at a time which will provide such sales and marketing personnel a reasonable time to digest and evaluate the applicable Confidential Information). 3. We expect in the course of the discussions regarding the proposed transaction that Reynolds will deliver documents, records and other information that Reynolds views as confidential or proprietary. Accordingly, the agreement should be deemed to be 7 Mark A. Robinson, Esq. Page 2 March 7, 1996 mutual in all respects, including reciprocal provisions in all respects with regard to any such confidential or proprietary information and mirror-image rights and obligations of Duplex to all rights and obligations of Reynolds (including, without limitation, the prohibition on certain activities in Reynolds' stock). 4. Information which is disclosed orally would only be deemed "Confidential Information" if that information is later embodied in a tangible means of expression which is delivered to the receiving party. 5. There should be an exception for compelled disclosure as follows: "Notwithstanding anything to the contrary in this letter, in the event that the party receiving any Confidential Information is requested or becomes compelled (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any of the Confidential Information or take any other action prohibited by this letter, the receiving party will provide the disclosing party with prompt written notice so that the letter may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this letter. In the event that such a protective order or other remedy is not obtained or that the disclosing party waives compliance with the provisions of this letter, the receiving party will furnish only that portion of the Confidential Information or take only such action which is legally required and will in good faith seek to obtain reasonable assurance that confidential treatment will be accorded to the Confidential Information so furnished." 6. Finally, we had a few technical corrections: a. Reynolds' correct legal name is "The Reynolds and Reynolds Company." b. The second and third sentences of the third paragraph on page one should be reversed, and the words "any other" inserted after the word "for" and before the word "purposes" in the former second sentence. If the foregoing changes are acceptable, please execute this letter where indicated below and return a copy to me by fax at (513) 290-7270. Upon receipt of that fax, the March 3 letter, as amended in 8 Mark A. Robinson, Esq. Page 3 March 7, 1996 the manner set forth in this letter, will thereby become a binding agreement of Reynolds and Duplex. On the assumption that the changes will be acceptable, I am also returning a copy of the March 3 letter executed on behalf of Reynolds. Please call me (513-290-7270) if you have any questions. We look forward to working with you. Very truly yours, THE REYNOLDS AND REYNOLDS COMPANY By: /s/ Daniel W. Dittman ----------------------------- Daniel W. Dittman Senior Vice President Enclosure 648000\WASH1.MSC AGREED AND ACCEPTED THIS 13th DAY OF March , 1996: ------ -------- DUPLEX PRODUCTS, INC. BY: /s/ Mark A. Robinson -------------------------- TITLE: Vice President/Secretary ------------------------ EX-4.C.A 20 EXHIBIT (C)(4)(A) 1 EXHIBIT (c)(4)(A) CONSULTING AND NON-COMPETITION AGREEMENT ---------------------------------------- The parties agree as follows: RECITALS -------- Consultant is currently employed by Duplex in the position of President. Consultant and Duplex previously entered into the Severance Agreement which, among other things, provided for certain compensation and severance benefits to be paid to Consultant following a "change in control" of Duplex. Reynolds and Duplex have entered into the Merger Agreement pursuant to which Reynolds will commence the Offer to purchase all of the Shares. It is the intention of Consultant and Reynolds that, on the Effective Date, this Consulting Agreement shall become effective and supersede the Severance Agreement and any other oral or written agreement, policy, plan, commitment or other arrangement between Consultant and Duplex relating to employment or severance. Capitalized terms used in this Agreement have the meanings set forth in Schedule 1. 1. RESIGNATION, WAIVER AND TERMINATION. Effective as of the Effective Date: (a) Consultant resigns from any and all positions held with Duplex; (b) Consultant releases Duplex from any and all claims, and waives any and all rights, arising out of Consultant's employment and the termination of Consultant's employment with Duplex; and (c) Consultant agrees to terminate and render null and void the Severance Agreement. Nothing in this Agreement shall affect the vesting of any stock options held by Consultant. 2. ENGAGEMENT. Reynolds hereby retains Consultant for the Term to render consulting and advisory services to Reynolds with respect to Duplex as Reynolds may reasonably request from time to time. 3. CONDITION PRECEDENT. This Agreement is conditioned upon the occurrence of the Effective Date and shall become effective simultaneously with the closing contemplated by the definition of "Effective Date". 4. DUTIES. During the Term, Consultant shall provide information, advice and consultation with respect to Duplex and its business and such other services as reasonably requested by Reynolds and upon reasonable advance notice by Reynolds. Consultant shall provide such services at such locations as Reynolds may reasonably request (Consultant acknowledges that Consultant will not be provided any office space by Reynolds or Duplex). 5. COMPENSATION. As full and complete compensation for all services rendered under this Agreement, Consultant shall receive the consideration described in this Section 5. 5.1 Unused Vacation. Consultant shall be paid an amount equal to Consultant's accrued but unused vacation as of the Effective Date (payable in a lump sum on the Effective Date simultaneous with the closing contemplated by the definition of that term). 5.2 Fixed Consideration. Consultant shall be paid the sum of $637,000 payable as described in this Section 5.2. The First Installment shall be paid on the Effective Date simultaneous with the closing contemplated by the definition of that term. Subject to the provisions of Section 10.2, the Second Installment shall be payable on the two (2)-month anniversary of the Effective Date. 5.3 Life Insurance. Consultant currently enjoys group term life insurance provided by the Company in the amount of $750,000. Consultant shall procure replacement term insurance in the same or a lesser amount and the Company shall reimburse Consultant for the premiums actually paid by Consultant for such replacement insurance for the one (1) year period ending on the first anniversary of the Effective Date; provided, however, that the maximum amount payable by the Company under this Section shall be 120% of the premium cost to Duplex of the current term life insurance. 2 Consultant is responsible for the payment of all applicable federal, state and local taxes arising out of the compensation provided for in this Agreement, and Consultant shall indemnify and hold harmless Reynolds, its successors and assigns, from and against any and all taxes and any associated damage, loss, cost or expense (including reasonable attorney's fees) arising out of, or related to, such taxes, except for any taxes and related costs that may result from the negligence or misconduct of Reynolds. 6. BUSINESS EXPENSES. During the Term, Consultant will be reimbursed monthly for reasonable business expenses incurred for the benefit of Reynolds in the performance of this Agreement. Consultant will account to Reynolds with enough detail to entitle Reynolds to a federal income tax deduction for each of those expenses, if deductible. 7. COVENANT NOT TO COMPETE; AGREEMENT NOT TO DISCLOSE. 7.1 COVENANT NOT TO COMPETE. Consultant covenants and agrees that Consultant will not Directly or Indirectly Compete with Reynolds. 7.2 AGREEMENT NOT TO DISCLOSE. Consultant agrees to hold in strictest confidence and not to use or disclose or make accessible to any person or entity, without the prior written consent of an officer of Reynolds, any Duplex Intellectual Property. Additionally, Consultant agrees not to make any disparaging remarks concerning Reynolds, Duplex, or the transactions contemplated by the Merger Agreement or to make any public statements concerning the transactions contemplated by the Merger Agreement without Reynolds prior written consent. 7.3 SEVERABILITY. If any court of competent jurisdiction determines that any provision of this Section 7 is invalid or unenforceable, that determination will not affect the other provisions of this Agreement. The invalid or unenforceable provision will be modified to the minimum degree necessary to make the affected provision valid and enforceable, and this Agreement will then be enforced to the fullest extent possible. 7.4 ACKNOWLEDGEMENT. Consultant acknowledges that a breach of any provision of this Section 7 cannot be compensated adequately by damages in an action at law, and that a breach would cause Reynolds irreparable harm. Consultant agrees that Reynolds will be entitled to temporary and permanent injunctive and other equitable relief, provided that those equitable remedies will be in addition to and not instead of other remedies available at law or in equity to Reynolds as a result of a breach of this Section 7. Consultant agrees that the duration, scope and subject matter of this Section are reasonable in light of all of the facts and circumstances. To the extent permitted by law, Consultant waives any defenses or 2 3 objections related to the reasonableness of the duration, geographical scope and subject matter of this Section 7. In no event shall the total of any and all monetary damages recoverable from Consultant pursuant to this Agreement or any breach thereof exceed the total amount paid to Consultant hereunder. 8. OWNERSHIP. Consultant understands that the Duplex Intellectual Property is owned solely by Duplex (or third parties), and that Consultant may use Duplex Intellectual Property only for the benefit of Reynolds or Duplex as directed by an officer of Reynolds. 9. RELATIONSHIP. Consultant acknowledges that Consultant shall not be deemed to be an employee of Reynolds. Consultant shall at all times be an independent contractor and not a partner or joint venturer of Reynolds. 10. TERMINATION AND CONSEQUENCES . 10.1 CAUSES OF TERMINATION. The Term may be terminated by the parties as follows: (a) by Consultant upon five (5) days' prior written notice; (b) by Consultant immediately upon written notice if Reynolds commits a material breach of this Agreement and the breach is not cured within ten (10) days after written notice from Consultant; (c) upon the death or disability of Consultant; (d) by Reynolds upon five (5) days' prior written notice; or (e) by Reynolds immediately upon written notice if (i) Consultant commits a material breach of this Agreement and that breach is not cured within ten (10) days after written notice from Reynolds, or (ii) if Consultant commits any act or omission involving willful misconduct, gross negligence, fraud, material misrepresentation, material dishonesty, or deliberate or attempted injury to Reynolds. 10.2 CONSEQUENCES OF TERMINATION. Upon termination under Section 10.1, the Term will cease, and the parties' respective obligations under this Agreement will cease, except: (a) if termination arises out of Sections 10.1(b), (c) or (d), Reynolds shall pay the Second Installment to Consultant on the effective date of termination; (b) Reynolds will continue to be subject to the provisions of Sections 6, 10, 11, 12 and 13; and (c) Consultant will continue to be subject to the provisions of Sections 1, 7, 10, 12 and 13. Payment by Reynolds of the amount due under clause (a) of the preceding sentence shall constitute the sole and exclusive remedy of Consultant under this Agreement or otherwise arising out of the engagement or termination of Consultant (and will be subject 3 4 to the execution by Consultant of a reasonably satisfactory release of claims related thereto). 11. PROVISION OF OUTPLACEMENT SERVICES. 11.1 GENERALLY. For a period of twelve (12) months beginning on the Effective Date, Reynolds shall provide Consultant with outplacement services. Such services shall be provided by a mutually agreed upon firm. In all other respects, the terms and conditions of the outplacement services, including arrangements and amounts expended shall be determined by Reynolds (the parties agree that the amount expended shall be fifteen percent (15%) of Consultant's salary in effect prior to this Agreement). Reynolds shall reimburse Consultant for job search related long distance telephone calls during the outplacement services. 11.2 PAYMENT OPTION. Consultant shall have the option (which may be exercised only by written notice to Reynolds prior to the Effective Date) to receive a cash payment on the Effective Date equal to $37,500 in lieu of the outplacement services and telephone expense reimbursement contemplated by Section 11.1. If such option is exercised and payment made, Reynolds shall be released from any further obligations under this Section 11. 12. GOVERNING LAW. This Agreement will be governed by the laws of the state of Illinois with respect to contracts entered into and performed entirely within that state. 13. MISCELLANEOUS. 13.1 NOTICES. All notices and other communications under this Agreement will be in writing and will be deemed given and received: (a) on the date of delivery when delivered by hand or when transmitted by a confirmed simultaneous telecopy, (b) on the following business day when sent by receipted overnight courier, or (c) three (3) business days after deposit in the United States Mail when mailed by registered or certified mail, return receipt requested, first class postage prepaid, if sent to the applicable addresses or telecopy numbers listed in Schedule 2. Either party may change the address to which notices are to be sent to it by giving written notice of that change of address to the other party in the manner provided above for giving notices. 13.2 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right of the parties hereunder may be assigned or delegated, whether voluntarily or involuntarily, without the prior written consent of the other party provided, however, that no consent will be required in the event of the sale of substantially all the assets of or a merger involving Reynolds or the assignment by Reynolds of this Agreement to any parent, subsidiary or other entity of which Reynolds (or Reynolds' parent) holds fifty percent (50%) or more of the voting power. This Agreement will be binding on the parties to this Agreement and their respective permitted successors, assigns and transferees. 13.3 HEADINGS; SCHEDULES. The section, subsection and other headings in this Agreement are inserted only for reference and are not a part of this Agreement. The Schedules attached to this Agreement are a material part of this Agreement and are incorporated into this Agreement by this reference. 13.4 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which will be considered one agreement 4 5 and effective when one counterpart has been signed by each party and delivered to the other party. 13.5 INTEGRATION OF AGREEMENT. This Agreement supersedes all prior agreements, oral and written, between the parties or between Consultant and Duplex about the subject matter of this Agreement (any other oral or written agreement, policy, plan, commitment or other arrangement between Consultant and Duplex relating to employment or severance). Neither this Agreement, nor any provision of this Agreement, may be changed, waived, discharged, supplemented or terminated orally, but only by a writing signed by the party against which the enforcement is sought. In the case of Reynolds, the writing must be signed by an officer of Reynolds. 13.6 WAIVER. Failure of either party to exercise its rights under the terms of this Agreement on any one occasion will not be construed as a waiver of any requirement of this Agreement or a waiver of that party's right to take advantage of any subsequent or continued breach by the other party of any agreement or covenant contained in this Agreement. Except as expressly provided in this Agreement, all remedies provided in this Agreement will be in addition to and not in substitution for any remedies otherwise available to the aggrieved party. 13.7 CERTAIN TERMS. When used in this Agreement, (a) "including" means "including, without limitation," whether or not that language is specifically set forth, and will not be deemed to limit the range of possibilities to those items specifically enumerated, and (b) "person" will be broadly interpreted to include, without limitation, any corporation, partnership, association, limited liability company, other association, trust or individual. 13.8 ARBITRATION. Any dispute or controversy arising out of this Agreement or its performance shall be resolved by binding arbitration before a panel of three(3) arbitrators in Dayton, Ohio pursuant to the rules of the American Arbitration Association. The prevailing party's costs and expenses (including reasonable attorney's fees) shall be borne by the other party. [SIGNATURES APPEAR ON FOLLOWING PAGE] 5 6 The parties have signed this Agreement as of the 20th day of April, 1996. REYNOLDS: CONSULTANT: THE REYNOLDS AND REYNOLDS COMPANY By:______________________________ ______________________________ Print Name:______________________ Print Name:___________________ Print Title:_____________________ 6 7 SCHEDULE 1 Definitions ----------- Capitalized terms shall have the meanings given them in the Merger Agreement, or, if not defined in the Merger Agreement, the meanings set forth below. 1. "MERGER AGREEMENT" means the Agreement and Plan of Merger dated April 20, 1996 among Reynolds, Delaware Acquisition Co. and Duplex. 2. "BUSINESS" means the manufacture, sale, distribution or marketing of business forms and/or related services. 3. "COMPETE WITH REYNOLDS" means: 3.1 during the Term or the Post Termination Period, calling on, soliciting, taking away, or accepting as a client or customer any person that is presently or becomes a client or customer of Duplex during the Term or the one-year period prior to the Effective Date; 3.2 during the two (2) month period immediately following the Effective Date, entering into any business substantially similar to the Business, either Directly or Indirectly (Reynolds acknowledges that Consultant shall be permitted to interview for another position in the Business but that the beginning date of employment or other relationship shall not be during the Term); or 3.3 during the Term or the Post Termination Period, hiring or attempting to hire, for Consultant's or another person's behalf, any employee who is then an employee of Duplex or Reynolds. 4. "DIRECTLY OR INDIRECTLY" means: 4.1 acting as an agent, representative, consultant, officer, director, independent contractor or employee of any person, or 4.2 participating in any such person as an owner, partner, limited partner, joint venturer, creditor, stockholder, or member. Direct or Indirect competition will not include the ownership of voting securities or other equity interests representing less than 5% of the voting power of an entity whose securities are traded on a national securities exchange or in the over-the-counter market. 5. "EFFECTIVE DATE" means the date of closing of the purchase by Reynolds of common stock of Duplex pursuant to the Offer. 6. "DUPLEX" means Duplex Products Inc. 7. "CONSULTANT" means Andrew A. Campbell. 8. "REYNOLDS" means The Reynolds and Reynolds Company. 8 9. "DUPLEX INTELLECTUAL PROPERTY" means all confidential and/or proprietary information of Duplex, including customer information, trade secrets and know-how. 10. "SEVERANCE AGREEMENT" means a Severance Agreement dated as of November 14, 1995, an Agreement dated as of January 26, 1996 and a letter agreement dated as of March 13, 1996 between Consultant and Duplex. 11. "FIRST INSTALLMENT" means a payment in the amount of $500,000. 12. "SECOND INSTALLMENT" means a payment in the amount of $137,000. 13. "POST TERMINATION PERIOD" means the period commencing upon the termination of the Term and ending on the six (6)-month anniversary of the Effective Date. 14. "TERM" means the two (2) month period commencing on the Effective Date. 2 9 SCHEDULE 2 1. Notice Address and Telecopy Numbers. 1.1 If to Reynolds: The Reynolds and Reynolds Company 115 South Ludlow Street Dayton, Ohio 45402 Attn: Adam M. Lutynski Telecopy No. (513) 449-4123 1.2 If to Consultant: Andrew A. Campbell 14 Polo Drive South Barrington, Illinois 60010 Telecopy number: 847-842-0544 EX-4.C.B 21 EXHIBIT (C)(4)(B) 1 EXHIBIT (c)(4)(B) CONSULTING AND NON-COMPETITION AGREEMENT ---------------------------------------- The parties agree as follows: RECITALS -------- Consultant is currently employed by Duplex in the position of Vice President of Finance and Chief Financial Officer. Consultant and Duplex previously entered into the Severance Agreement. Reynolds and Duplex have entered into the Merger Agreement pursuant to which Reynolds will commence the Offer to purchase all of the Shares which, among other things, provided for certain compensation and severance benefits to be paid to Consultant following a "change in control" of Duplex. It is the intention of Consultant and Reynolds, that on the Effective Date this Consulting Agreement shall become effective and supersede the Severance Agreement and any other oral or written agreement, policy, plan, commitment or other arrangement between Consultant and Duplex relating to employment or severance. Capitalized terms used in this Agreement have the meanings set forth in Schedule 1. 1. RESIGNATION, WAIVER AND TERMINATION. Effective as of the Effective Date: (a) Consultant resigns from any and all positions held with Duplex; (b) Consultant releases Duplex from any and all claims, and waives any and all rights, arising out of Consultant's employment and the termination of Consultant's employment with Duplex; and (c) Consultant agrees to terminate and render null and void the Severance Agreement. Nothing in this Agreement shall affect the vesting of any stock options held by Consultant. 2. ENGAGEMENT. Reynolds hereby retains Consultant for the Term to render consulting and advisory services to Reynolds with respect to Duplex as Reynolds may request from time to time. 3. CONDITION PRECEDENT. This Agreement is conditioned upon the occurrence of the Effective Date and shall become effective simultaneously with the closing contemplated by the definition of "Effective Date". 4. DUTIES. During the Term, Consultant shall provide information, advice and consultation with respect to Duplex and its business and such other services as reasonably requested by Reynolds and upon reasonable advance notice by Reynolds. Consultant shall provide such services at such locations as Reynolds may reasonably request. (Consultant acknowledges that Consultant will not be provided any office space by Reynolds or Duplex). 5. COMPENSATION. As full and complete compensation for all services rendered under this Agreement, Consultant shall receive the consideration described in this Section 5. 5.1 UNUSED VACATION. Consultant shall be paid an amount equal to Consultant's accrued but unused vacation as of the Effective Date (payable in a lump sum on the Effective Date simultaneous with the closing contemplated by the definition of that term). 5.2 FIXED CONSIDERATION. Consultant shall be paid the sum of $365,500 payable as described in this Section 5.2. The First Installment shall be paid on the Effective Date simultaneous with the clsoing contemplated by the definition of that term. Subject to the provisions of Section 10.2, the Second Installment shall be payable on 2 the three (3)-month anniversary of the Effective Date. Consultant is responsible for the payment of all applicable federal, state and local taxes arising out of the compensation provided for in this Agreement, and Consultant shall indemnify and hold harmless Reynolds, its successors and assigns, from and against any and all taxes and any associated damage, loss, cost or expense (including reasonable attorney's fees) arising out of, or related to, such taxes, except for any taxes that may result from the negligence or misconduct of Reynolds. 6. BUSINESS EXPENSES; COBRA REIMBURSEMENT. 6.1 BUSINESS EXPENSES. During the Term, Consultant will be reimbursed monthly for reasonable business expenses incurred for the benefit of Reynolds in the performance of this Agreement. Consultant will account to Reynolds with enough detail to entitle Reynolds to a federal income tax deduction for each of those expenses, if deductible. 6.2 COBRA REIMBURSEMENT. To the extent permitted under the applicable plans and applicable law, Consultant will continue to participate in the group life, health and dental insurance plans maintained by Duplex, at the cost of Duplex (Consultant shall be responsible for all deductibles, co-payments and the like), for a period of one (1) year after the Effective Date, and, thereafter, Consultant may elect continuation coverage under the applicable plans pursuant to COBRA at Consultant's cost and to the extent permitted under applicable law. However, if for any reason Consultant is not permitted to so participate in those plans for the one year period following the Effective Date, then: (a) non-COBRA plans - Reynolds will pay to Consultant on a monthly basis an amount equal to the amount of the premiums that would have been paid by Duplex on Consultant's behalf had Consultant participated in such plans during such period; and (b) COBRA plans - Consultant will elect continuation coverage under COBRA and Reynolds agrees that for the shorter of (i) one (1) year from the Effective Date, or (ii) the period that Consultant is entitled to continuation coverage under COBRA, Reynolds will reimburse Consultant for the premiums paid by Consultant to maintain such continuation coverage. 7. COVENANT NOT TO COMPETE; AGREEMENT NOT TO DISCLOSE. 7.1 COVENANT NOT TO COMPETE. Consultant covenants and agrees that for the six (6)-month period following the Effective Date, Consultant will not Directly or Indirectly Compete with Reynolds. 7.2 AGREEMENT NOT TO DISCLOSE. Consultant agrees to hold in strictest confidence and not to use or disclose or make accessible to any person or entity, without the prior written consent of an officer of Reynolds, any Reynolds Intellectual Property. Additionally, Consultant agrees not to make any disparaging remarks concerning Reynolds, Duplex, or the transactions contemplated by the Merger Agreement or to make any public statements concerning the transactions contemplated by the Merger Agreement without Reynolds prior written consent. 7.3 SEVERABILITY. If any court of competent jurisdiction determines that any provision of this Section 7 is invalid or unenforceable, that determination will not affect the other provisions of this Agreement. The invalid or unenforceable provision will be modified to the minimum degree necessary to make the affected provision valid and enforceable, and this Agreement will then be enforced to the fullest extent possible. 7.4 ACKNOWLEDGEMENT. Consultant acknowledges that a breach of any provision of this Section 7 cannot be compensated adequately by damages in an action at law, and that a breach would cause Reynolds irreparable harm. Consultant agrees that Reynolds will be 2 3 entitled to temporary and permanent injunctive and other equitable relief, provided that those equitable remedies will be in addition to and not instead of other remedies available at law or in equity to Reynolds as a result of a breach of this Section 7. Consultant agrees that the duration, scope and subject matter of this Section are reasonable in light of all of the facts and circumstances. To the extent permitted by law, Consultant waives any defenses or objections related to the reasonableness of the duration, geographical scope and subject matter of this Section 7. In no event shall the total of any and all monetary damages recoverable from Consultant pursuant to this Agreement or any breach thereof exceed the total amount paid to Consultant hereunder. 8. OWNERSHIP. Consultant understands that the Duplex Intellectual Property is owned solely by Duplex (or third parties), and that Consultant may use Duplex Intellectual Property only for the benefit of Reynolds or Duplex as directed by an officer of Reynolds. 9. RELATIONSHIP. Consultant acknowledges that Consultant shall not be deemed to be an employee of Reynolds. Consultant shall at all times be an independent contractor and not a partner or joint venturer of Reynolds. 10. TERMINATION AND CONSEQUENCES . 10.1 CAUSES OF TERMINATION. The Term may be terminated by the parties as follows: (a) by Consultant upon five (5) days' prior written notice; (b) by Consultant immediately upon written notice if Reynolds commits a material breach of this Agreement and the breach is not cured within ten (10) days after written notice from Consultant; (c) upon the death or disability of Consultant; (d) by Reynolds upon five (5) days' prior written notice; or (e) by Reynolds immediately upon written notice if (i) Consultant commits a material breach of this Agreement and that breach is not cured within ten (10) days after written notice from Reynolds, or (ii) if Consultant commits any act or omission involving willful misconduct, gross negligence, fraud, material misrepresentation, material dishonesty, or deliberate or attempted injury to Reynolds. 10.2 CONSEQUENCES OF TERMINATION. Upon termination under Section 10.1, the Term will cease, and the parties' respective obligations under this Agreement will cease, except: (a) if termination arises out of Sections 10.1(b), (c) or (d), Reynolds shall pay the Second Installment to Consultant on the effective date of termination and Reynolds' obligations under Section 6.2 3 4 shall survive; (b) Reynolds will continue to be subject to the provisions of Sections 6.1, 10, 11, 12 and 13; and (c) Consultant will continue to be subject to the provisions of Sections 1, 7, 10, 12 and 13. Payment by Reynolds of the amount due under clause (a) of the preceding sentence shall constitute the sole and exclusive remedy of Consultant under this Agreement or otherwise arising out of the engagement or termination of Consultant (and will be subject to the execution by Consultant of a reasonably satisfactory release of claims related thereto). 11. OUTPLACEMENT SERVICES. Consultant acknowledges that Reynolds shall have no obligation to provide outplacement or similar services. 12. GOVERNING LAW. This Agreement will be governed by the laws of the state of Illinois with respect to contracts entered into and performed entirely within that state. 13. MISCELLANEOUS. 13.1 NOTICES. All notices and other communications under this Agreement will be in writing and will be deemed given and received: (a) on the date of delivery when delivered by hand or when transmitted by a confirmed simultaneous telecopy, (b) on the following business day when sent by receipted overnight courier, or (c) three (3) business days after deposit in the United States Mail when mailed by registered or certified mail, return receipt requested, first class postage prepaid, if sent to the applicable addresses or telecopy numbers listed in Schedule 2. Either party may change the address to which notices are to be sent to it by giving written notice of that change of address to the other party in the manner provided above for giving notices. 13.2 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right of the parties hereunder may be assigned or delegated, whether voluntarily or involuntarily, without the prior written consent of the other party provided, however, that no consent will be required in the event of the sale of substantially all the assets of or a merger involving Reynolds or the assignment by Reynolds of this Agreement to any parent, subsidiary or other entity of which Reynolds (or Reynolds' parent) holds fifty percent (50%) or more of the voting power. This Agreement will be binding on the parties to this Agreement and their respective permitted successors, assigns and transferees. 13.3 HEADINGS; SCHEDULES. The section, subsection and other headings in this Agreement are inserted only for reference and are not a part of this Agreement. The Schedules attached to this Agreement are a material part of this Agreement and are incorporated into this Agreement by this reference. 13.4 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which will be considered one agreement 4 5 and effective when one counterpart has been signed by each party and delivered to the other party. 13.5 INTEGRATION OF AGREEMENT. This Agreement supersedes all prior agreements, oral and written, between the parties (or between Consultant and Duplex) about the subject matter of this Agreement (any other oral or written agreement, policy, plan, commitment or other arrangement between Consultant and Duplex relating to employment or severance). Neither this Agreement, nor any provision of this Agreement, may be changed, waived, discharged, supplemented or terminated orally, but only by a writing signed by the party against which the enforcement is sought. In the case of Reynolds, the writing must be signed by an officer of Reynolds. 13.6 WAIVER. Failure of either party to exercise its rights under the terms of this Agreement on any one occasion will not be construed as a waiver of any requirement of this Agreement or a waiver of that party's right to take advantage of any subsequent or continued breach by the other party of any agreement or covenant contained in this Agreement. Except as expressly provided in this Agreement, all remedies provided in this Agreement will be in addition to and not in substitution for any remedies otherwise available to the aggrieved party. 13.7 CERTAIN TERMS. When used in this Agreement, (a) "including" means "including, without limitation," whether or not that language is specifically set forth, and will not be deemed to limit the range of possibilities to those items specifically enumerated, and (b) "person" will be broadly interpreted to include, without limitation, any corporation, partnership, association, limited liability company, other association, trust or individual. 13.8 ARBITRATION. Any dispute or controversy arising out of this Agreement or its performance shall be resolved by binding arbitration before a panel of three (3) arbitrators in Dayton, Ohio pursuant to the rules of the American Arbitration Association. The prevailing party's costs and expenses (including reasonable attorney's fees) shall be borne by the other party. [SIGNATURES APPEAR ON FOLLOWING PAGE] 5 6 The parties have signed this Agreement as of the 20th day of April, 1996. REYNOLDS: CONSULTANT: THE REYNOLDS AND REYNOLDS COMPANY By:______________________________ ______________________________ Print Name:______________________ Print Name:___________________ Print Title:_____________________ 6 7 SCHEDULE 1 Definitions ----------- Capitalized terms shall have the meanings given them in the Merger Agreement, or, if not defined in the Merger Agreement, the meanings set forth below. 1. "MERGER AGREEMENT" means the Agreement and Plan of Merger dated April 20, 1996 among Reynolds, Delaware Acquisition Co. and Duplex. 2. "BUSINESS" means the manufacture, sale, distribution or marketing of business forms and/or related services. 3. "COMPETE WITH REYNOLDS" means hiring or attempting to hire, for Consultant's or another person's behalf, any person who is then an employee of Duplex. 4. "DIRECTLY OR INDIRECTLY" means: 4.1 acting as an agent, representative, consultant, officer, director, independent contractor or employee of any person, or 4.2 participating in any such person as an owner, partner, limited partner, joint venturer, creditor, stockholder, or member. Direct or Indirect competition will not include the ownership of voting securities or other equity interests representing less than 5% of the voting power of an entity whose securities are traded on a national securities exchange or in the over-the-counter market. 5. "EFFECTIVE DATE" means the date of closing of the purchase by Reynolds of common stock of Duplex pursuant to the Offer. 6. "DUPLEX" means Duplex Products Inc. 7. "CONSULTANT" means James R. Ramig. 8. "REYNOLDS" means The Reynolds and Reynolds Company. 9. "DUPLEX INTELLECTUAL PROPERTY" means all confidential and/or proprietary information of Duplex, including customer information, trade secrets and know-how. 10. "SEVERANCE AGREEMENT" means a Severance Agreement dated as of October 2, 1995, Agreement dated as of January 26, 1996 and a letter agreement dated as of March 13, 1996 between Consultant and Duplex. 11. "FIRST INSTALLMENT" means a payment in the amount of $270,000. 12. "SECOND INSTALLMENT" means a payment in the amount of $95,500. 8 13. "TERM" means the three (3) month period commencing on the Effective Date. 2 9 SCHEDULE 2 1. Notice Address and Telecopy Numbers. 1.1 If to Reynolds: The Reynolds and Reynolds Company 115 South Ludlow Street Dayton, Ohio 45402 Attn: Adam M. Lutynski Telecopy No. (513) 449-4123 1.2 If to Consultant: James R. Ramig 14715 Golf Road Orlando Park, Illinois 60462 Telecopy number: 708-349-3315 EX-4.C.C 22 EXHIBIT (C)(4)(C) 1 Exhibit (c)(4)(C) EMPLOYMENT AND NON-COMPETITION AGREEMENT ---------------------------------------- The parties agree as follows: RECITALS -------- Capitalized terms used in this Agreement have the meanings set forth in Schedule 1. Employee is currently employed as the Vice President, Operations of the Company. Employee and the Company previously entered into the Prior Agreement which, among other things, provided for certain compensation and severance benefits to be paid to Employee following a "change of control" of the Company. Reynolds and the Company desire that the Company employ Employee following the Closing on the terms of this Agreement and that the Prior Agreement be rendered null and void by this Agreement and Employee desires to be so employed and to so terminate the Prior Agreement. 1. CONDITION PRECEDENT. This Agreement is conditioned upon and shall become effective simultaneously with the Closing. 2. TERMINATION OF PRIOR AGREEMENT. Employee and the Company hereby agree to terminate and render null and void the Prior Agreement simultaneously with the Closing. 3. EMPLOYMENT AND TERM. The Company agrees to employ Employee for the Term on the terms and subject to the conditions set forth in this Agreement. 4. DUTIES. During the Term, Employee will serve in the capacity described in Schedule 2 and perform the duties described in Schedule 2. Employee will devote all of Employee's working time, attention and efforts to the business affairs and best interests of the Company and Reynolds. 5. COMPENSATION. The compensation of Employee during the Term will be as described in Schedule 2. All such amounts are subject to all applicable withholdings by the Company. Salary payments shall begin on the next regular payment date after the Closing. 6. BUSINESS EXPENSES. During the Term, Employee will be reimbursed for reasonable business expenses incurred for the benefit of the Company under the Company's usual practices for similarly situated employees of the Company. Employee will account to the Company with enough detail to entitle the Company to a 2 federal income tax deduction for each of those expenses, if deductible. 7. BENEFITS. In addition to the compensation described in Section 5 and reimbursement of business expenses under Section 6, during the Term Employee will be entitled to the benefits then-currently available to other similarly situated employees of the Company, as the same may change from time to time, provided Employee meets the applicable terms and conditions of those benefits. 8. COVENANT NOT TO COMPETE; AGREEMENT NOT TO DISCLOSE. 8.1 COVENANT NOT TO COMPETE. Employee covenants and agrees that during the Term and the Post Termination Period, Employee will not Directly or Indirectly Compete with the Company. 8.2 AGREEMENT NOT TO DISCLOSE. Employee agrees to hold in strictest confidence and not to use or disclose or make accessible to any person or entity, without the prior written consent of an officer of Reynolds, any Company Intellectual Property. Additionally, Employee agrees not to make any disparaging remarks concerning Reynolds, the Company, or the transactions contemplated by the Offer or to make any public statements concerning the transactions contemplated by the Offer without Reynolds' prior written consent. 8.3 SEVERABILITY. If any court of competent jurisdiction determines that any provision of this Section is invalid or unenforceable, that determination will not affect the other provisions of this Agreement. The invalid or unenforceable provision will be modified to the minimum degree necessary to make the affected provision valid and enforceable, and this Agreement will then be enforced to the fullest extent possible. 8.4 ACKNOWLEDGEMENT. Employee acknowledges that a breach of any provision of this Section cannot be compensated adequately by damages in an action at law, and that a breach would cause the Company irreparable harm. Employee agrees that the Company will be entitled to temporary and permanent injunctive and other equitable relief, provided that those equitable remedies will be in addition to and not instead of other remedies available at law or in equity to the Company as a result of a breach of this Section. Employee agrees that the duration, scope and subject matter of this Section 6 are reasonable in light of all of the facts and circumstances. To the extent permitted by law, Employee waives any defenses or objections related to the reasonableness of the duration, geographical scope and subject matter of this Section. 9. OWNERSHIP. Employee understands that Company Intellectual Property is owned solely by Company (or third parties) and that Employee may use Company Intellectual Property only for the benefit of the Company as directed by an officer of Reynolds. 2 3 10. OWNERSHIP AND DISCLOSURE OF INVENTIONS. 10.1 OWNERSHIP. Employee agrees that all Company Inventions will belong to the Company. 10.2 DISCLOSURE; RECORDS; RETURN OF DOCUMENTS. Employee will disclose promptly and completely to the Company all Company Inventions. Upon the Company's request at any time during or after the Term, Employee will immediately return to the Company all of its documents, devices, data, software, equipment, and other property, which are in Employee's possession, custody or control, including any reproductions of those items. 10.3 FURTHER DOCUMENTATION. Employee will cooperate from time to time in the transfer of the Company Inventions to the Company and will assist the Company in prosecuting any applications, claims or rights of any kind involving Company Inventions. This obligation applies at all times during and after the Term. 10.4 ASSIGNMENT AND POWER OF ATTORNEY. (a) If, under applicable law or judgment of a court of competent jurisdiction, Company is not deemed to be the owner of any Company Inventions upon creation, then Employee hereby irrevocably assigns and transfers to the Company all right, title and interest to those Company Inventions, including copyrights. (b) Employee hereby assigns to the Company all claims of any nature which Employee may now or hereafter have for infringement of any intellectual property rights involving Company Inventions. (c) Employee hereby appoints the Company and its officers and agents, with full power of substitution, as Employee's true and lawful agent and attorney-in-fact: (1) to demand and receive from time to time embodiments of Company Inventions and to give receipts and releases for and about Company Inventions; (2) to institute and prosecute in the Employee's name or otherwise, but at the expense and for the benefit of the Company, any and all proceedings at law, in equity or otherwise, which the Company may deem proper to collect, assert or enforce any claim, right or title of any kind in and to the Company Inventions; (3) to defend or compromise any and all actions, suits or proceedings involving Company Inventions; and (4) if the Company cannot for any reason, including mental or physical incapacity, obtain Employee's signature to apply for or pursue any intellectual property registration, to execute and file any applications and documents and to do all other 3 4 lawfully permitted acts to further the prosecution and issuance of letters patent, copyright, trademark or other intellectual property registrations, or transfers thereof with the same legal force and effect as if executed by Employee. The appointments made and the powers granted in this Section are coupled with an interest and cannot be revoked by Employee for any reason. 11. TERMINATION AND CONSEQUENCES. 11.1 CAUSES OF TERMINATION. The Term may be terminated by the parties as follows: (a) by Employee upon 15 days' prior written notice; (b) by Employee immediately upon written notice if either (i) the Company commits a material breach of this Agreement and the breach is not cured within 15 days after written notice from Employee, or (ii) in the event of a Constructive Discharge; (c) upon the death or disability of Employee (Employee will be deemed disabled and Employee's employment terminated under this subsection (c) if Employee is not able to perform Employee's required duties for a period of 30 consecutive days due to a disability and the Company reasonably determines that it is unlikely that Employee will be able to return to full performance of Employee's duties within 30 days after that); (d) by the Company upon 15 days' prior written notice; or (e) by the Company immediately upon written notice if Employee commits a material breach of this Agreement and that breach is not cured within 15 days after written notice from the Company, or if Employee commits any act involving willful misconduct, gross negligence, fraud, material misrepresentation, material dishonesty, deliberate or attempted injury to the Company or Reynolds, or refusal to follow the reasonable direction of Employee's supervisor. 11.2 CONSEQUENCES OF TERMINATION. Upon termination under Section 11.1, the Term will cease, and the parties' respective obligations under this Agreement will cease, except: (a) the Company will: (1) remain liable to pay to Employee all amounts due or becoming due and all benefits to be provided for the period up to the effective date of termination under Sections 5, 6 and 7; (2) if termination occurs under Section 11.1(b) or Section 11.1(d): 4 5 (a) the Company shall on the effective date of termination pay to Employee any balance of the Bonus which remains unpaid; and (b) the Company shall on the effective date of termination pay to Employee an amount equal to one (1)-year's salary, less $50,000; and (3) continue to be subject to the provisions of Sections 11-14, inclusive. (b) Employee will continue to be subject to the provisions of Sections 8-14, inclusive. Payment by the Company of the amounts due under Section 11.2(a) shall constitute the sole and exclusive remedy of Employee under this Agreement or otherwise (including any severance policy then in effect) arising out of the employment or termination of Employee and payment of such amounts shall be conditioned upon the execution by Employee of a binding and confidential release of all claims against the Company and/or Reynolds reasonably satisfactory to the Company and Reynolds. 12. GOVERNING LAW. This Agreement will be governed by the laws of the state of Illinois with respect to contracts entered into and performed entirely within that state. 13. MISCELLANEOUS. 13.1 NOTICES. All notices and other communications under this Agreement will be in writing and will be deemed given and received: (a) on the date of delivery when delivered by hand or when transmitted by a confirmed simultaneous telecopy, (b) on the following business day when sent by receipted overnight courier, or (c) three (3) business days after deposit in the United States Mail when mailed by registered or certified mail, return receipt requested, first class postage prepaid, if sent to the applicable addresses or telecopy numbers listed in Schedule 2. Either party may change the address to which notices are to be sent to it by giving written notice of that change of address to the other party in the manner provided above for giving notices. 13.2 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right of the parties hereunder may be assigned or delegated, whether voluntarily or involuntarily, without the prior written consent of the other party provided, however, that no consent will be required in the event of the sale of substantially all the assets of or a merger involving the Company or the assignment by the Company of this Agreement to Reynolds or to any parent, subsidiary or other entity of which the Company (or the Company's parent) holds fifty percent (50%) or more of the voting power. 5 6 This Agreement will be binding on the parties to this Agreement and their respective permitted successors, assigns and transferees and it is expressly intended that Reynolds be a third party beneficiary of the rights of the Company under this Agreement. 13.3 HEADINGS; SCHEDULES. The section, subsection and other headings in this Agreement are inserted only for reference and are not a part of this Agreement. The Schedules attached to this Agreement are a material part of this Agreement and are incorporated into this Agreement by this reference. 13.4 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which will be considered one agreement and effective when one counterpart has been signed by each party and delivered to the other party. 13.5 INTEGRATION OF AGREEMENT. This Agreement supersedes all prior agreements, oral and written, between the parties about the subject matter of this Agreement (including severance). Neither this Agreement, nor any provision of this Agreement, may be changed, waived, discharged, supplemented or terminated orally, but only by a writing signed by the party against which the enforcement is sought. In the case of the Company, the writing must also be signed by an officer of Reynolds. 13.6 WAIVER. Failure of either party to exercise its rights under the terms of this Agreement on any one occasion will not be construed as a waiver of any requirement of this Agreement or a waiver of that party's right to take advantage of any subsequent or continued breach by the other party of any agreement or covenant contained in this Agreement. Except as expressly provided in this Agreement, all remedies provided in this Agreement will be in addition to and not in substitution for any remedies otherwise available to the aggrieved party. 13.7 CERTAIN TERMS. When used in this Agreement, (a) "including" means "including, without limitation," whether or not that language is specifically set forth, and will not be deemed to limit the range of possibilities to those items specifically enumerated, and (b) "person" will be broadly interpreted to include, without limitation, any corporation, partnership, association, limited liability company, other association, trust or individual. 13.8 ARBITRATION. Any dispute or controversy arising out of this Agreement or its performance shall be resolved by binding arbitration before a panel of three (3) arbitrators in Dayton, Ohio pursuant to the rules of the American Arbitration Association. The prevailing party's costs and expenses (including reasonable attorney's fees) shall be borne by the other party. 14. REPLACEMENT TERMS. 14.1 OPTIONAL TERMINATION. If at any time after the six (6) - month anniversary of the Closing but prior to the expiration of the Term, Employee shall be dissatisfied with his employment, then, in that event and notwithstanding anything in this Agreement to the contrary, Employee shall be entitled to terminate this Agreement upon 15 days prior written notice to the Company and on the effective date of termination Employee shall receive a payment of $75,000 (for all other purposes of this Agreement such a termination shall be deemed a termination pursuant to Section 11.1(a)). 14.2 REPLACEMENT TERMS. Following the six-month anniversary of the Closing but prior to the 9-month anniversary of the Closing, the Company and Reynolds shall propose to Employee in writing new terms of employment. Employee shall have a period of 30 days following receipt of the written proposal to accept (which must be evidenced by execution of a mutually satisfactory agreement) such proposal (failure to execute such an agreement within the 30-day period shall be deemed rejection of the proposal and a "Constructive Discharge" for purposes of Section 11, and the Term shall cease 6 7 upon expiration of such 30-day period). If the proposal is accepted it will replace this Agreement. [SIGNATURES APPEAR ON FOLLOWING PAGE] 7 8 The parties have signed this Agreement as of the 20th day of April, 1996. DUPLEX PRODUCTS INC. EMPLOYEE: By:______________________________ ______________________________ Print Name:______________________ Print Name:___________________ Print Title:_____________________ 8 LOOMER3.AGR 9 SCHEDULE 1 DEFINITIONS ----------- 1. "AGREEMENT" means this agreement. 2. "BONUS" means the bonus described in Section 3 of Schedule 2. 3. "CLOSING" means the closing of the purchase by Reynolds of common stock of the Company pursuant to the Offer. 4. "COMPANY" means Duplex Products Inc. 5. "COMPANY INTELLECTUAL PROPERTY" means all information, documents, drawings, customer lists, software, and ideas belong to the Company, its customers, clients, vendors, suppliers, licensors, competitors, or alliances which are disclosed to Employee or of which Employee becomes aware, during the course of Employee's employment with the Company. 6. "COMPANY INVENTIONS" means any of the Inventions, whether or not embodied in a tangible means of expression, which: 6.1 are in whole or in part conceived or made by Employee in the course of Employee's employment with the Company or which result from any work performed by Employee for the Company, or 6.2 are made through the use of any Company Intellectual Property or any of the Company's equipment, facilities, supplies or time. 7 "COMPETE WITH THE COMPANY" means hiring or attempting to hire, for Employee's or another person's behalf, any employee who is a plant supervision employee of the Company at any time during (a) the Term, (b) the six (6)-month period prior to the Closing or (c) the Post Termination Period. 8. "CONSTRUCTIVE DISCHARGE" means termination of the Term by Employee (in his discretion) as described in Section 14.2 or following either: (a) a material reduction in Employee's duties or responsibilities; or (b) relocation of Employee's position to a location other than the Company's Sycamore, Illinois headquarters. 10 9. "DIRECTLY OR INDIRECTLY" means: 9.1 acting as an agent, representative, consultant, officer, director, independent contractor or employee of any person, or 9.2 participating in any person as an owner, partner, limited partner, joint venturer, creditor, stockholder, or member. Direct or Indirect competition will not include the ownership of voting securities or other equity interests representing less than 5% of the voting power of an entity whose securities are traded on a national securities exchange or in the over-the-counter market. 10. "EMPLOYEE" means Marc A. Loomer. 11. "INVENTIONS" means all inventions, discoveries, ideas, improvements, trade secrets, patents, trademarks, service marks, concepts, computer software, designs, drawings, specifications, techniques, know-how, other intellectual property, derivatives of any of the above, and all copyright, trademark and patent applications and registrations. 12. "MERGER AGREEMENT" means the Agreement and Plan of Merger among Reynolds, Delaware Acquisition Co. and the Company dated as of April 20, 1996. 13. "OFFER" means the proposed tender offer by Reynolds for the common stock of Duplex contemplated by the Merger Agreement. 14. "PRIOR AGREEMENT" means the agreement between the Company and Employee dated as of January 26, 1996 as amended by letter dated March 13, 1996. 15. "POST TERMINATION PERIOD" means the period immediately following the Term ending on the second (2nd) anniversary of the Closing. 16. "TERM" means the period commencing on the Closing and ending, unless sooner terminated pursuant to Section 11.1, on the first anniversary of the Closing. 2 11 SCHEDULE 2 1. CAPACITY. Employee shall continue to be employed during the Term in the same capacity as immediately prior to the Closing. 2. DUTIES. Those duties performed by Employee immediately prior to the Closing. 3. COMPENSATION. 3.1 Salary. Until the first anniversary of the Closing, Employee shall be paid an annual salary of $125,000 payable in accordance with the Company's ordinary payment policy as the same may change from time to time. 3.2 Bonus. Employee shall be paid a bonus of $225,000, payable in two (2) installments as follows: (a) $175,000 - simultaneous with the Closing; and (b) $50,000 - on the six (6)-month anniversary of the Closing; provided, however, that if Employee's employment is terminated pursuant to Section 11.1(a) or Section 11.1(e), Employee shall be deemed to have waived all rights to the unpaid balance of the Bonus as of the effective date of termination. 4. NOTICE ADDRESS AND TELECOPY NUMBERS. 4.1 If to the Company: Duplex Products Inc. 1947 Bethany Road Sycamore, Illinois 60178 ATTN: President Fax No. (815) 895-1091 with a copy to: The Reynolds and Reynolds Company 115 S. Ludlow St. Dayton, OH 45402 ATTN: Adam M. Lutynski Fax No. (513) 449-4123 4.2 If to Employee: Marc A. Loomer 801 Stevens Ave. Sycamore, Illinois 60178 EX-4.C.D 23 EXHIBIT (C)(4)(D) 1 Exhibit (c)(4)(D) EMPLOYMENT AND NON-COMPETITION DISCLOSURE AGREEMENT --------------------------------------------------- The parties agree as follows: RECITALS -------- Capitalized terms used in this Agreement have the meanings set forth in Schedule 1. Employee is currently employed as the Vice President, Sales of the Company. Employee and the Company previously entered into the Prior Agreement which, among other things, provided for certain compensation and severance benefits to be paid to Employee following a "change of control" of the Company. Reynolds and the Company desire that the Company employ Employee following the Closing on the terms of this Agreement and that the Prior Agreement be rendered null and void by this Agreement and Employee desires to be so employed and to so terminate the Prior Agreement. 1. CONDITION PRECEDENT. This Agreement is conditioned upon and shall become effective simultaneously with the Closing. 2. TERMINATION OF PRIOR AGREEMENT. Employee and the Company hereby agree to terminate and render null and void the Prior Agreement simultaneously with the Closing. 3. EMPLOYMENT AND TERM. The Company agrees to employ Employee for the Term on the terms and subject to the conditions set forth in this Agreement. 4. DUTIES. During the Term, Employee will serve in the capacity described in Schedule 2 and perform the duties described in Schedule 2. Employee will devote all of Employee's working time, attention and efforts to the business affairs and best interests of the Company and Reynolds. 5. COMPENSATION. The compensation of Employee during the Term will be as described in Schedule 2. All such amounts are subject to all applicable withholdings by the Company. Salary payments shall begin on the next regular payment date after the Closing. 6. BUSINESS EXPENSES. During the Term, Employee will be reimbursed for reasonable business expenses incurred for the benefit of the Company under the Company's usual practices for similarly situated employees of the Company. Employee will account to the Company with enough detail to entitle the Company to a 2 federal income tax deduction for each of those expenses, if deductible. 7. BENEFITS. In addition to the compensation described in Section 5 and reimbursement of business expenses under Section 6, during the Term Employee will be entitled to the benefits then-currently available to other similarly situated employees of the Company, as the same may change from time to time, provided Employee meets the applicable terms and conditions of those benefits, and, provided, further, that such benefits shall not, in the aggregate, be less than currently provided by the Company (with the exception of stock options in Company stock). 8. COVENANT NOT TO COMPETE; AGREEMENT NOT TO DISCLOSE. 8.1 COVENANT NOT TO COMPETE. Employee covenants and agrees that during the Term and the Post Termination Period, Employee will not Directly or Indirectly Compete with the Company. 8.2 AGREEMENT NOT TO DISCLOSE. Employee agrees to hold in strictest confidence and not to use or disclose or make accessible to any person or entity, without the prior written consent of an officer of Reynolds, any Company Intellectual Property. Additionally, Employee agrees not to make any disparaging remarks concerning Reynolds, the Company, or the transactions contemplated by the Offer or to make any public statements concerning the transactions contemplated by the Offer without Reynolds' prior written consent. 8.3 SEVERABILITY. If any court of competent jurisdiction determines that any provision of this Section is invalid or unenforceable, that determination will not affect the other provisions of this Agreement. The invalid or unenforceable provision will be modified to the minimum degree necessary to make the affected provision valid and enforceable, and this Agreement will then be enforced to the fullest extent possible. 8.4 ACKNOWLEDGEMENT. Employee acknowledges that a breach of any provision of this Section cannot be compensated adequately by damages in an action at law, and that a breach would cause the Company irreparable harm. Employee agrees that the Company will be entitled to temporary and permanent injunctive and other equitable relief, provided that those equitable remedies will be in addition to and not instead of other remedies available at law or in equity to the Company as a result of a breach of this Section. Employee agrees that the duration, scope and subject matter of this Section 6 are reasonable in light of all of the facts and circumstances. To the extent permitted by law, Employee waives any defenses or objections related to the reasonableness of the duration, geographical scope and subject matter of this Section. 9. OWNERSHIP. Employee understands that Company Intellectual Property is owned solely by Company (or third parties) and that Employee may use Company Intellectual Property only for the benefit of the Company as directed by an officer of Reynolds. 2 3 10. OWNERSHIP AND DISCLOSURE OF INVENTIONS. 10.1 OWNERSHIP. Employee agrees that all Company Inventions will belong to the Company. 10.2 DISCLOSURE; RECORDS; RETURN OF DOCUMENTS. Employee will disclose promptly and completely to the Company all Company Inventions. Upon the Company's request at any time during or after the Term, Employee will immediately return to the Company all of its documents, devices, data, software, equipment, and other property, which are in Employee's possession, custody or control, including any reproductions of those items. 10.3 FURTHER DOCUMENTATION. Employee will cooperate from time to time in the transfer of the Company Inventions to the Company and will assist the Company in prosecuting any applications, claims or rights of any kind involving Company Inventions. This obligation applies at all times during and after the Term. 10.4 ASSIGNMENT AND POWER OF ATTORNEY. (a) If, under applicable law or judgment of a court of competent jurisdiction, Company is not deemed to be the owner of any Company Inventions upon creation, then Employee hereby irrevocably assigns and transfers to the Company all right, title and interest to those Company Inventions, including copyrights. (b) Employee hereby assigns to the Company all claims of any nature which Employee may now or hereafter have for infringement of any intellectual property rights involving Company Inventions. (c) Employee hereby appoints the Company and its officers and agents, with full power of substitution, as Employee's true and lawful agent and attorney-in-fact: (1) to demand and receive from time to time embodiments of Company Inventions and to give receipts and releases for and about Company Inventions; (2) to institute and prosecute in the Employee's name or otherwise, but at the expense and for the benefit of the Company, any and all proceedings at law, in equity or otherwise, which the Company may deem proper to collect, assert or enforce any claim, right or title of any kind in and to the Company Inventions; (3) to defend or compromise any and all actions, suits or proceedings involving Company Inventions; and (4) if the Company cannot for any reason, including mental or physical incapacity, obtain Employee's signature to apply for or pursue any intellectual property registration, to execute and file any applications and documents and to do all other 3 4 lawfully permitted acts to further the prosecution and issuance of letters patent, copyright, trademark or other intellectual property registrations, or transfers thereof with the same legal force and effect as if executed by Employee. The appointments made and the powers granted in this Section are coupled with an interest and cannot be revoked by Employee for any reason. 11. TERMINATION AND CONSEQUENCES. 11.1 CAUSES OF TERMINATION. The Term may be terminated by the parties as follows: (a) by Employee upon 15 days' prior written notice; (b) by Employee immediately upon written notice if either (i) the Company commits a material breach of this Agreement and the breach is not cured within 15 days after written notice from Employee, or (ii) in the event of a Constructive Discharge; (c) upon the death or disability of Employee (Employee will be deemed disabled and Employee's employment terminated under this subsection (c) if Employee is not able to perform Employee's required duties for a period of 30 consecutive days due to a disability and the Company reasonably determines that it is unlikely that Employee will be able to return to full performance of Employee's duties within 30 days after that); (d) by the Company upon 15 days' prior written notice; or (e) by the Company immediately upon written notice if Employee commits a material breach of this Agreement and that breach is not cured within 15 days after written notice from the Company, or if Employee commits any act involving willful misconduct, gross negligence, fraud, material misrepresentation, material dishonesty, deliberate or attempted injury to the Company or Reynolds, or refusal to follow the reasonable direction of Employee's supervisor. 11.2 CONSEQUENCES OF TERMINATION. Upon termination under Section 11.1, the Term will cease, and the parties' respective obligations under this Agreement will cease, except: (a) the Company will: (1) remain liable to pay to Employee all amounts due or becoming due and all benefits to be provided for the period up to the effective date of termination under Sections 5, 6 and 7; (2) if termination occurs under Section 11.1(b) or Section 11.1(d): 4 5 (a) the Company shall on the effective date of termination pay to Employee any balance of the Bonus which remains unpaid; and (b) the Company shall on the effective date of termination pay to Employee an amount equal to one (1)-year's salary, less $50,000; and (3) continue to be subject to the provisions of Sections 11-14, inclusive. (b) Employee will continue to be subject to the provisions of Sections 8-14, inclusive. Payment by the Company of the amounts due under Section 11.2(a) shall constitute the sole and exclusive remedy of Employee under this Agreement or otherwise (including any severance policy then in effect) arising out of the employment or termination of Employee and payment of such amounts shall be conditioned upon the execution by Employee of a binding and confidential release of all claims against the Company and/or Reynolds reasonably satisfactory to the Company and Reynolds. 12. GOVERNING LAW. This Agreement will be governed by the laws of the state of Illinois with respect to contracts entered into and performed entirely within that state. 13. MISCELLANEOUS. 13.1 NOTICES. All notices and other communications under this Agreement will be in writing and will be deemed given and received: (a) on the date of delivery when delivered by hand or when transmitted by a confirmed simultaneous telecopy, (b) on the following business day when sent by receipted overnight courier, or (c) three (3) business days after deposit in the United States Mail when mailed by registered or certified mail, return receipt requested, first class postage prepaid, if sent to the applicable addresses or telecopy numbers listed in Schedule 2. Either party may change the address to which notices are to be sent to it by giving written notice of that change of address to the other party in the manner provided above for giving notices. 13.2 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right of the parties hereunder may be assigned or delegated, whether voluntarily or involuntarily, without the prior written consent of the other party provided, however, that no consent will be required in the event of the sale of substantially all the assets of or a merger involving the Company or the assignment by the Company of this Agreement to Reynolds or to any parent, subsidiary or other entity of which the Company (or the Company's parent) holds fifty percent (50%) or more of the voting power. 5 6 This Agreement will be binding on the parties to this Agreement and their respective permitted successors, assigns and transferees and it is expressly intended that Reynolds be a third party beneficiary of the rights of the Company under this Agreement. 13.3 HEADINGS; SCHEDULES. The section, subsection and other headings in this Agreement are inserted only for reference and are not a part of this Agreement. The Schedules attached to this Agreement are a material part of this Agreement and are incorporated into this Agreement by this reference. 13.4 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which will be considered one agreement and effective when one counterpart has been signed by each party and delivered to the other party. 13.5 INTEGRATION OF AGREEMENT. This Agreement supersedes all prior agreements, oral and written, between the parties about the subject matter of this Agreement (including severance). Neither this Agreement, nor any provision of this Agreement, may be changed, waived, discharged, supplemented or terminated orally, but only by a writing signed by the party against which the enforcement is sought. In the case of the Company, the writing must also be signed by an officer of Reynolds. 13.6 WAIVER. Failure of either party to exercise its rights under the terms of this Agreement on any one occasion will not be construed as a waiver of any requirement of this Agreement or a waiver of that party's right to take advantage of any subsequent or continued breach by the other party of any agreement or covenant contained in this Agreement. Except as expressly provided in this Agreement, all remedies provided in this Agreement will be in addition to and not in substitution for any remedies otherwise available to the aggrieved party. 13.7 CERTAIN TERMS. When used in this Agreement, (a) "including" means "including, without limitation," whether or not that language is specifically set forth, and will not be deemed to limit the range of possibilities to those items specifically enumerated, and (b) "person" will be broadly interpreted to include, without limitation, any corporation, partnership, association, limited liability company, other association, trust or individual. 13.8 ARBITRATION. Any dispute or controversy arising out of this Agreement or its performance shall be resolved by binding arbitration before a panel of three (3) arbitrators in Dayton, Ohio pursuant to the rules of the American Arbitration Association. The prevailing party's costs and expenses (including reasonable attorney's fees) shall be borne by the other party. 14. REPLACEMENT TERMS. 14.1 OPTIONAL TERMINATION. If at any time after the six (6) - month anniversary of the Closing but prior to the expiration of the Term, Employee shall be dissatisfied with his employment, then, in that event and notwithstanding anything in this Agreement to the contrary, Employee shall be entitled to terminate this Agreement upon 15 days prior written notice to the Company and on the effective date of termination Employee shall receive a payment of $90,000 (for all other purposes of this Agreement such a termination shall be deemed a termination pursuant to Section 11.1(a)). 14.2 REPLACEMENT TERMS. Following the six-month anniversary of the Closing but prior to the 9-month anniversary of the Closing, the Company and Reynolds shall propose to Employee in writing new terms of employment. Employee shall have a period of 30 days following receipt of the written proposal to accept (which must be evidenced by execution of a mutually satisfactory agreement) such proposal (failure to execute such an agreement within the 30-day period shall be deemed rejection of the proposal and a "Constructive Discharge" for purposes of Section 11, and the Term shall cease 6 7 upon expiration of such 30-day period). If the proposal is accepted it will replace this Agreement. [SIGNATURES APPEAR ON FOLLOWING PAGE] 7 8 The parties have signed this Agreement as of the 20th day of April, 1996. DUPLEX PRODUCTS INC. EMPLOYEE: By:______________________________ ______________________________ Print Name:______________________ Print Name:___________________ Print Title:_____________________ 8 PRESTN3.AGR 9 SCHEDULE 1 DEFINITIONS ----------- 1. "AGREEMENT" means this agreement. 2. "BONUS" means the bonus described in Section 3 of Schedule 2. 3. "CLOSING" means the closing of the purchase by Reynolds of common stock of the Company pursuant to the Offer. 4. "COMPANY" means Duplex Products Inc. 5. "COMPANY INTELLECTUAL PROPERTY" means all information, documents, drawings, customer lists, software, and ideas belong to the Company, its customers, clients, vendors, suppliers, licensors, competitors, or alliances which are disclosed to Employee or of which Employee becomes aware, during the course of Employee's employment with the Company. 6. "COMPANY INVENTIONS" means any of the Inventions, whether or not embodied in a tangible means of expression, which: 6.1 are in whole or in part conceived or made by Employee in the course of Employee's employment with the Company or which result from any work performed by Employee for the Company, or 6.2 are made through the use of any Company Intellectual Property or any of the Company's equipment, facilities, supplies or time. 7. "COMPETE WITH THE COMPANY" means: 7.1 calling on, soliciting, taking away, or accepting as a client or customer any person that is presently or becomes a client or customer of the Company during the Term or the six (6)-month period prior to the Closing; or 7.2 hiring or attempting to hire, for Employee's or another person's behalf, any employee who is a sales-related employee of the Company at any time during (a) the Term, (b) the six (6)-month period prior to the Closing or (c) the Post Termination Period. 8. "CONSTRUCTIVE DISCHARGE" means termination of the Term by Employee (in his discretion) as described in Section 14.2 or following either: (a) a material reduction in Employee's duties or responsibilities; or (b) relocation of Employee's position to a location other than the Company's Sycamore, Illinois headquarters. 10 9. "DIRECTLY OR INDIRECTLY" means: 9.1 acting as an agent, representative, consultant, officer, director, independent contractor or employee of any person, or 9.2 participating in any person as an owner, partner, limited partner, joint venturer, creditor, stockholder, or member. Direct or Indirect competition will not include the ownership of voting securities or other equity interests representing less than 5% of the voting power of an entity whose securities are traded on a national securities exchange or in the over-the-counter market. 10. "EMPLOYEE" means David B. Preston. 11. "INVENTIONS" means all inventions, discoveries, ideas, improvements, trade secrets, patents, trademarks, service marks, concepts, computer software, designs, drawings, specifications, techniques, know-how, other intellectual property, derivatives of any of the those, and all copyright, trademark and patent applications and registrations. 12. "MERGER AGREEMENT" means the Agreement and Plan of Merger among Reynolds, Delaware Acquisition Co. and the Company dated as of April 20, 1996. 13. "OFFER" means the proposed tender offer by Reynolds for the common stock of Duplex contemplated by the Merger Agreement. 14. "PRIOR AGREEMENT" means the agreement between the Company and Employee dated as of January 26, 1996 as amended by letter dated March 13, 1996. 15. "POST TERMINATION PERIOD" means the period immediately following the Term ending on the second (2nd) anniversary of the Closing. 16. "TERM" means the period commencing on the Closing and ending, unless sooner terminated pursuant to Section 11.1, on the first anniversary of the Closing. 2 11 SCHEDULE 2 1. CAPACITY. Employee shall continue to be employed during the Term in the same capacity as immediately prior to the Closing. 2. DUTIES. Those duties performed by Employee immediately prior to the Closing. 3. COMPENSATION. 3.1 Salary. Until the first anniversary of the Closing, Employee shall be paid an annual salary of $140,000, payable in accordance with the Company's ordinary payment policy as the same may change from time to time. 3.2 Bonus. Employee shall be paid a bonus of $175,000, payable in two (2) installments as follows: (a) $125,000 - simultaneous with the Closing; and (b) $50,000 - on the six (6)-month anniversary of the Closing; provided, however, that if Employee's employment is terminated pursuant to Section 11.1(a) or Section 11.1(e), Employee shall be deemed to have waived all rights to the unpaid balance of the Bonus as of the effective date of termination. 4. NOTICE ADDRESS AND TELECOPY NUMBERS. 4.1 If to the Company: Duplex Products Inc. 1947 Bethany Road Sycamore, Illinois 60178 ATTN: President Fax No. (815) 895-1091 with a copy to: The Reynolds and Reynolds Company 115 S. Ludlow St. Dayton, OH 45401 ATTN: Adam M. Lutynski Fax No. (513) 449-4123 4.2 If to Employee: David B. Preston 3611 Wildwood Ridge Kingswood, Texas 77339 2 EX-4.C.E 24 EXHIBIT (C)(4)(E) 1 EXHIBIT (c)(4)(E) EMPLOYMENT AND NON-DISCLOSURE AGREEMENT ---------------------------------------- The parties agree as follows: RECITALS -------- Capitalized terms used in this Agreement have the meanings set forth in Schedule 1. Employee is currently employed as the Vice President and General Counsel and Secretary of the Company. Employee and the Company previously entered into the Prior Agreement which, among other things, provided for certain compensation and severance benefits to be paid to Employee following a "change of control" of the Company. Reynolds and the Company desire that the Company employ Employee following the Closing on the terms of this Agreement and that the Prior Agreement be rendered null and void by this Agreement and Employee desires to be so employed and to so terminate the Prior Agreement. 1. CONDITION PRECEDENT. This Agreement is conditioned upon and shall become effective simultaneously with the Closing. 2. TERMINATION OF PRIOR AGREEMENT. Employee and the Company hereby agree to terminate and render null and void the Prior Agreement. 3. EMPLOYMENT AND TERM. The Company agrees to employ Employee for the Term on the terms and subject to the conditions set forth in this Agreement. 4. DUTIES. During the Term, Employee will serve in the capacity described in Schedule 2 and perform the duties described in Schedule 2. Employee will devote all of Employee's working time, attention and efforts to the business affairs and best interests of the Company and Reynolds. 5. COMPENSATION. The compensation of Employee during the Term will be as described in Schedule 2. All such amounts are subject to all applicable withholdings by the Company. Salary payments shall begin on the next regular payment date after the Closing. 6. BUSINESS EXPENSES. During the Term, Employee will be reimbursed for reasonable business expenses incurred for the benefit of the Company under the Company's usual practices for similarly situated employees of the Company. Employee will account to the Company with enough detail to entitle the Company to a 2 federal income tax deduction for each of those expenses, if deductible. 7. BENEFITS. In addition to the compensation described in Section 5 and reimbursement of business expenses under Section 6, during the Term Employee will be entitled to the benefits then-currently available to other similarly situated employees of the Company, as the same may change from time to time, provided Employee meets the applicable terms and conditions of those benefits, and, provided, further, that such benefits shall not, in the aggregate, be less than currently provided by the Company (with the exception of stock options in Company stock). 8. AGREEMENT NOT TO DISCLOSE. 8.1 AGREEMENT NOT TO DISCLOSE. Employee agrees to hold in strictest confidence and not to use or disclose or make accessible to any person or entity, without the prior written consent of an officer of Reynolds, any Company Intellectual Property. Additionally, Employee agrees not to make any disparaging remarks concerning Reynolds, the Company, or the transactions contemplated by the Offer or to make any public statements concerning the transactions contemplated by the Offer without Reynolds' prior written consent. 8.2 SEVERABILITY. If any court of competent jurisdiction determines that any provision of this Section is invalid or unenforceable, that determination will not affect the other provisions of this Agreement. The invalid or unenforceable provision will be modified to the minimum degree necessary to make the affected provision valid and enforceable, and this Agreement will then be enforced to the fullest extent possible. 8.3 ACKNOWLEDGEMENT. Employee acknowledges that a breach of any provision of this Section cannot be compensated adequately by damages in an action at law, and that a breach would cause the Company irreparable harm. Employee agrees that the Company will be entitled to temporary and permanent injunctive and other equitable relief, provided that those equitable remedies will be in addition to and not instead of other remedies available at law or in equity to the Company as a result of a breach of this Section. Employee agrees that the duration, scope and subject matter of this Section are reasonable in light of all of the facts and circumstances. To the extent permitted by law, Employee waives any defenses or objections related to the reasonableness of the duration and subject matter of this Section. 9. OWNERSHIP. Employee understands that Company Intellectual Property is owned solely by Company (or third parties) and that Employee may use Company Intellectual Property only for the benefit of the Company as directed by an officer of Reynolds. 10. OWNERSHIP AND DISCLOSURE OF INVENTIONS. 2 3 10.1 OWNERSHIP. Employee agrees that all Company Inventions will belong to the Company. 10.2 DISCLOSURE; RECORDS; RETURN OF DOCUMENTS. Employee will disclose promptly and completely to the Company all Company Inventions. Upon the Company's request at any time during or after the Term, Employee will immediately return to the Company all of its documents, devices, data, software, equipment, and other property, which are in Employee's possession, custody or control, including any reproductions of those items. 10.3 FURTHER DOCUMENTATION. Employee will cooperate from time to time in the transfer of the Company Inventions to the Company and will assist the Company in prosecuting any applications, claims or rights of any kind involving Company Inventions. This obligation applies at all times during and after the Term. 10.4 ASSIGNMENT AND POWER OF ATTORNEY. (a) If, under applicable law or judgment of a court of competent jurisdiction, Company is not deemed to be the owner of any Company Inventions upon creation, then Employee hereby irrevocably assigns and transfers to the Company all right, title and interest to those Company Inventions, including copyrights. (b) Employee hereby assigns to the Company all claims of any nature which Employee may now or hereafter have for infringement of any intellectual property rights involving Company Inventions. (c) Employee hereby appoints the Company and its officers and agents, with full power of substitution, as Employee's true and lawful agent and attorney-in-fact: (1) to demand and receive from time to time embodiments of Company Inventions and to give receipts and releases for and about Company Inventions; (2) to institute and prosecute in the Employee's name or otherwise, but at the expense and for the benefit of the Company, any and all proceedings at law, in equity or otherwise, which the Company may deem proper to collect, assert or enforce any claim, right or title of any kind in and to the Company Inventions; (3) to defend or compromise any and all actions, suits or proceedings involving Company Inventions; and (4) if the Company cannot for any reason, including mental or physical incapacity, obtain Employee's signature to apply for or pursue any intellectual property registration, to execute and file any applications and documents and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright, trademark or other intellectual property 3 4 registrations, or transfers thereof with the same legal force and effect as if executed by Employee. The appointments made and the powers granted in this Section are coupled with an interest and cannot be revoked by Employee for any reason. 11. TERMINATION AND CONSEQUENCES. 11.1 CAUSES OF TERMINATION. The Term may be terminated by the parties as follows: (a) by Employee upon 15 days' prior written notice; (b) by Employee immediately upon written notice if either (i) the Company commits a material breach of this Agreement and the breach is not cured within 15 days after written notice from Employee, or (ii) in the event of a Constructive Discharge; (c) upon the death or disability of Employee (Employee will be deemed disabled and Employee's employment terminated under this subsection (c) if Employee is not able to perform Employee's required duties for a period of 30 consecutive days due to a disability and the Company reasonably determines that it is unlikely that Employee will be able to return to full performance of Employee's duties within 30 days after that); (d) by the Company upon 15 days' prior written notice; or (e) by the Company immediately upon written notice if Employee commits a material breach of this Agreement and that breach is not cured within 15 days after written notice from the Company, or if Employee commits any act involving willful misconduct, gross negligence, fraud, material misrepresentation, material dishonesty, deliberate or attempted injury to the Company or Reynolds, or refusal to follow the reasonable direction of Employee's supervisor. 11.2 CONSEQUENCES OF TERMINATION. Upon termination under Section 11.1, the Term will cease, and the parties' respective obligations under this Agreement will cease, except: (a) the Company will: (1) remain liable to pay to Employee all amounts due or becoming due and all benefits to be provided for the period up to the effective date of termination under Sections 5, 6 and 7; (2) if termination occurs under Section 11.1(b) or Section 11.1(d): 4 5 (a) the Company shall on the effective date of termination pay to Employee any balance of the Bonus which remains unpaid; and (b) the Company shall on the effective date of termination pay to Employee an amount equal to one (1)-year's salary; and (3) continue to be subject to the provisions of Sections 11-14, inclusive. (b) Employee will continue to be subject to the provisions of Sections 8-14, inclusive. Payment by the Company of the amounts due under Section 11.2(a) shall constitute the sole and exclusive remedy of Employee under this Agreement or otherwise (including any severance policy then in effect) arising out of the employment or termination of Employee and payment of such amounts shall be conditioned upon the execution by Employee of a binding and confidential release of all claims against the Company and/or Reynolds reasonably satisfactory to the Company and Reynolds. 12. GOVERNING LAW. This Agreement will be governed by the laws of the state of Illinois with respect to contracts entered into and performed entirely within that state. 13. MISCELLANEOUS. 13.1 NOTICES. All notices and other communications under this Agreement will be in writing and will be deemed given and received: (a) on the date of delivery when delivered by hand or when transmitted by a confirmed simultaneous telecopy, (b) on the following business day when sent by receipted overnight courier, or (c) three (3) business days after deposit in the United States Mail when mailed by registered or certified mail, return receipt requested, first class postage prepaid, if sent to the applicable addresses or telecopy numbers listed in Schedule 2. Either party may change the address to which notices are to be sent to it by giving written notice of that change of address to the other party in the manner provided above for giving notices. 13.2 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right of the parties hereunder may be assigned or delegated, whether voluntarily or involuntarily, without the prior written consent of the other party provided, however, that no consent will be required in the event of the sale of substantially all the assets of or a merger involving the Company or the assignment by the Company of this Agreement to Reynolds or to any parent, subsidiary or other entity of which the Company (or the Company's parent) holds fifty percent (50%) or more of the voting power. This Agreement will be binding on the parties to this Agreement and 5 6 their respective permitted successors, assigns and transferees and it is expressly intended that Reynolds be a third party beneficiary of the rights of the Company under this Agreement. 13.3 HEADINGS; SCHEDULES. The section, subsection and other headings in this Agreement are inserted only for reference and are not a part of this Agreement. The Schedules attached to this Agreement are a material part of this Agreement and are incorporated into this Agreement by this reference. 13.4 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which will be considered one agreement and effective when one counterpart has been signed by each party and delivered to the other party. 13.5 INTEGRATION OF AGREEMENT. This Agreement supersedes all prior agreements, oral and written, between the parties about the subject matter of this Agreement (including severance). Neither this Agreement, nor any provision of this Agreement, may be changed, waived, discharged, supplemented or terminated orally, but only by a writing signed by the party against which the enforcement is sought. In the case of the Company, the writing must also be signed by an officer of Reynolds. 13.6 WAIVER. Failure of either party to exercise its rights under the terms of this Agreement on any one occasion will not be construed as a waiver of any requirement of this Agreement or a waiver of that party's right to take advantage of any subsequent or continued breach by the other party of any agreement or covenant contained in this Agreement. Except as expressly provided in this Agreement, all remedies provided in this Agreement will be in addition to and not in substitution for any remedies otherwise available to the aggrieved party. 13.7 CERTAIN TERMS. When used in this Agreement, (a) "including" means "including, without limitation," whether or not that language is specifically set forth, and will not be deemed to limit the range of possibilities to those items specifically enumerated, and (b) "person" will be broadly interpreted to include, without limitation, any corporation, partnership, association, limited liability company, other association, trust or individual. 13.8. ARBITRATION. Any dispute or controversy arising out of this Agreement or its performance shall be resolved by binding arbitration before a panel of three (3) arbitrators in Dayton, Ohio pursuant to the rules of the American Arbitration Association. The prevailing party's costs and expenses (including reasonable attorney's fees) shall be borne by the other party. 14. REPLACEMENT TERMS. 14.1 OPTIONAL TERMINATION. During the first six (6) months of the Term, Employee will be based in Sycamore, Illinois subject to reasonable travel requirements. If at any time after 90 days after the Closing but prior to the expiration of the Term, Employee shall be dissatisfied with his employment, then, in that event and notwithstanding anything in this Agreement to the contrary, Employee shall be entitled to terminate this Agreement upon 15 days prior written notice to the Company and on the effective date of termination Employee shall receive a payment of $105,000 (for all other purposes of this Agreement such a termination shall be deemed a termination pursuant to Section 11.1(a)). 14.2 REPLACEMENT TERMS. Following the six-month anniversary of the Closing but prior to the 9-month anniversary of the Closing, the Company and Reynolds shall propose to Employee in writing new terms of employment. Employee shall have a period of 30 days following receipt of the written proposal to accept (which must be evidenced by execution of a mutually satisfactory agreement) such proposal (failure to execute such an agreement within the 30-day period shall be deemed rejection of the proposal and a "Constructive Discharge" for purposes of Section 11, and the Term shall cease 6 7 upon expiration of such 30-day period). If the proposal is accepted it will replace this Agreement. [SIGNATURES APPEAR ON FOLLOWING PAGE] 7 8 The parties have signed this Agreement as of the 20th day of April, 1996. DUPLEX PRODUCTS INC. EMPLOYEE: By:______________________________ ______________________________ Print Name:______________________ Print Name:___________________ Print Title:_____________________ ROBIN3.AGR 9 SCHEDULE 1 DEFINITIONS ----------- 1. "AGREEMENT" means this agreement. 2. "BONUS" means the bonus described in Section 3 of Schedule 2. 3. "CLOSING" means the closing of the purchase by Reynolds of common stock of the Company pursuant to the Offer. 4. "COMPANY" means Duplex Products Inc. 5. "COMPANY INTELLECTUAL PROPERTY" means all information, documents, drawings, customer lists, software, and ideas belong to the Company, its customers, clients, vendors, suppliers, licensors, competitors, or alliances which are disclosed to Employee or of which Employee becomes aware, during the course of Employee's employment with the Company. 6. "COMPANY INVENTIONS" means any of the Inventions, whether or not embodied in a tangible means of expression, which: 6.1 are in whole or in part conceived or made by Employee in the course of Employee's employment with the Company or which result from any work performed by Employee for the Company, or 6.2 are made through the use of any Company Intellectual Property or any of the Company's equipment, facilities, supplies or time. 7. "CONSTRUCTIVE DISCHARGE" means termination of the Term by Employee (in his discretion) as described in Section 14.2 or following either: (a) a material reduction in Employee's duties or responsibilities; or (b) relocation of Employee's position to a location other than the Company's Sycamore, Illinois headquarters. 8. "DIRECTLY OR INDIRECTLY" means: 8.1 acting as an agent, representative, consultant, officer, director, independent contractor or employee of any person, or 8.2 participating in any person as an owner, partner, limited partner, joint venturer, creditor, stockholder, or member. Direct or Indirect competition will not include the ownership of voting securities or other equity interests representing less than 5% of the voting power of an entity whose securities are traded on a national securities exchange or in the over-the-counter market. 9. "EMPLOYEE" means Mark A. Robinson. 10 10. "INVENTIONS" means all inventions, discoveries, ideas, improvements, trade secrets, patents, trademarks, service marks, concepts, computer software, designs, drawings, specifications, techniques, know-how, other intellectual property, derivatives of any of the above, and all copyright, trademark and patent applications and registrations. 11. "MERGER AGREEMENT" means the Agreement and Plan of Merger among Reynolds, Delaware Acquisition Co. and the Company dated as of April 20, 1996. 12. "OFFER" means the proposed tender offer by Reynolds for the common stock of Duplex contemplated by the Merger Agreement. 13. "PRIOR AGREEMENT" means the agreement between the Company and Employee dated as of January 26, 1996 as amended by letter dated March 13, 1996. 14. "POST TERMINATION PERIOD" means the period immediately following the Term ending on the second (2nd) anniversary of the Closing. 15. "TERM" means the period commencing on the Closing and ending, unless sooner terminated pursuant to Section 11.1, on the first anniversary of the Closing. 2 11 SCHEDULE 2 1. CAPACITY. Employee shall continue to be employed during the Term in the same capacity as immediately prior to the Closing. 2. DUTIES. Those duties performed by Employee immediately prior to the Closing. 3. COMPENSATION. 3.1 Salary. Employee shall be paid an annual salary of $105,000, payable in accordance with the Company's ordinary payment policy as the same may change from time to time. 3.2 Bonus. Employee shall be paid a bonus of $275,000, payable in two (2) installments as follows: (a) $$225,000 -simultaneous with the Closing; and (b) $50,000 - on the six (6)-month anniversary of the Closing; provided, however, that if Employee's employment is terminated pursuant to Section 11.1(a) or Section 11.1(e), Employee shall be deemed to have waived all rights to the unpaid balance of the Bonus as of the effective date of termination. 4. NOTICE ADDRESS AND TELECOPY NUMBERS 4.1 If to the Company: Duplex Products Inc. 1947 Bethany Road Sycamore, Illinois 60178 ATTN: President Fax No. (815) 895-1091 with a copy to: The Reynolds and Reynolds Company 115 S. Ludlow St. Dayton, OH 45402 ATTN: Adam M. Lutynski Fax No. (513) 449-4123 4.2 If to Employee: Mark A. Robinson 415 Wood Road Rockford, Illinois 61107 Fax No. (815) 229-8633 2 -----END PRIVACY-ENHANCED MESSAGE-----