-----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, E+8IZpvG2y5IWFaIPEe3y/plMymQ5GefOuDsLmgHMoVB1zMQYqixeeY/q9A3CE68 bRrH1lVDLqz7niwZreDJJA== 0000853102-98-000013.txt : 19980925 0000853102-98-000013.hdr.sgml : 19980925 ACCESSION NUMBER: 0000853102-98-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980924 ITEM INFORMATION: FILED AS OF DATE: 19980924 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAY RUNNER INC CENTRAL INDEX KEY: 0000853102 STANDARD INDUSTRIAL CLASSIFICATION: BLANKBOOKS, LOOSELEAF BINDERS & BOOKBINDING & RELATED WORK [2780] IRS NUMBER: 953624280 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-19835 FILM NUMBER: 98714185 BUSINESS ADDRESS: STREET 1: 15295 ALTON PARKWAY CITY: IRVINE STATE: CA ZIP: 92718 BUSINESS PHONE: 714/680-3500 MAIL ADDRESS: STREET 1: 15295 ALTON PARKWAY CITY: IRVINE STATE: CA ZIP: 92718 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 24, 1998 DAY RUNNER, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation) 0-19835 95-3624280 (Commission File Number) (I.R.S. Employer Identification No.) 15295 Alton Parkway Irvine, CA 92618 (Address of principal executive offices) Registrant's telephone number, including area code: 714/680-3500 ITEM 5. OTHER EVENTS. On September 23, 1998, Day Runner, Inc., a Delaware corporation (the "Registrant"), and Day Runner UK, plc, a corporation organized under the laws of the United Kingdom and a wholly-owned subsidairy of the Registrant (the "Purchaser"), entered into a Revolving Loan Agreement (the "Loan Agreement") with a bank. The Loan Agreement provides for borrowings through September 30, 2005 (the "Maturity Date"). Borrowings will bear interest either at fixed rates based on the higher of the bank's prime rate and the Federal Funds Rate published by the Federal Reserve Bank of New York or at floating rates calculated by reference to the interest rates at which the bank offers deposits in US dollars in amounts approximately equal to the amount of the relevant Loan and for a period of time comparable to the number of days the relevant Loan will remain outstanding, together with a margin. The maximum amount that may be outstanding under the Loan Agreement is $160,000,000 through December 31, 2000. Thereafter, the maximum amount of borrowings that may be outstanding under the Loan Agreement is reduced by $20,000,000 in 2001 and by $10,000,000 in each of the following calendar years up to the Maturity Date. On September 24, 1998, Registrant announced a cash offer (the "Offer") for Filofax Group plc ("Filofax"), a UK-based company traded on the London Stock Exchange. The offer is for (pound)2.00 (approximately US $3.36) per share for a total of approximately US $80,500,000. The acquisition is being made pursuant to a tender offer by Purchaser to purchase all of the outstanding ordinary shares of stock of Filofax. The Offer has not been recommended by Filofax's Board of Directors. The proposed acquisition will be funded by bank debt pursuant to the Loan Agreement. Consummation of the Company's Offer is subject to, among other things, the acceptance of Filofax's stockholders, regulatory approvals and the satisfaction or waiver of various other conditions. There can be no assurance that the acquisition will be consummated, or as to the terms on which it may be consummated. Copies of the Revolving Loan Agreement, Registrant's fiscal 1998 audited financial statements and the related press releases announcing the Offer are attached as exhibits hereto and are incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits Item No. Exhibit Index 10.1 Revolving Loan Agreement dated September 23, 1998 between the Registrant, Purchaser and Wells Fargo Bank, National Association, including Revolving Line of Credit Note 27.1 Financial Data Schedule 99.1 Fiscal 1998 audited financial statements of the Registrant 99.2 Press Release (US version) issued September 24, 1998 by the Registrant 99.3 Press Release (UK version) issued September 24, 1998 by the Registrant SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DAY RUNNER, INC. by: /s/ JAMES E. FREEMAN, Jr. ----------------------------- James E. Freeman, Jr. Chief Executive Officer Dated: September 24, 1998 EXHIBIT INDEX Exhibit Number Description Page No. 10.1 Revolving Loan Agreement dated September 23, 1998 between the Registrant, Purchaser and Wells Fargo Bank, National Association, including Revolving Line of Credit Note 27.1 Financial Data Schedule 99.1 Fiscal 1998 audited financial statements of the Registrant 99.2 Press Release (US version) issued September 24, 1998 by the Registrant 99.3 Press Release (UK version) issued September 24, 1998 by the Registrant EX-10 2 REVOLVING LOAN AGREEMENT EXHIBIT 10.1 EXECUTION COPY REVOLVING LOAN AGREEMENT Dated as of September 23, 1998 among DAY RUNNER, INC. ULTIMA DISTRIBUTION INC. and DAY RUNNER UK plc as Borrowers THE LENDERS HEREIN NAMED as Lenders and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent
TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS.......................................................................1 1.1. Defined Terms..............................................................................1 1.2. Use of Defined Terms......................................................................28 1.3. Accounting Terms..........................................................................28 1.4. Rounding..................................................................................28 1.5. Exhibits and Schedules....................................................................28 1.6. References to.............................................................................28 1.7. Miscellaneous Terms.......................................................................28 ARTICLE 2 LOANS AND LETTERS OF CREDIT............................................................................29 2.1. Syndicated Loans..........................................................................29 2.2. Money Market Loans........................................................................30 2.3. Foreign Currency Loans....................................................................34 2.4. Type of Loans.............................................................................35 2.5. Funding of Loans..........................................................................35 2.6. Notes.....................................................................................36 2.7. Letters of Credit.........................................................................36 2.8. Voluntary Reduction of Commitments........................................................40 2.9. Swing Line Loans..........................................................................40 2.10. Guaranty.................................................................................42 ARTICLE 3 PAYMENTS AND FEES......................................................................................42 3.1. Interest..................................................................................42 3.2. Principal.................................................................................43 3.3. Commitment Fee............................................................................44 3.4. Administrative Agent Fees.................................................................44 3.5. Letter of Credit Fees.....................................................................44 3.6. Increased Commitment Costs................................................................45 3.7. Eurodollar Costs and Related Matters......................................................45 3.8. Foreign Currency Costs and Related Matters................................................49 3.9. Late Payments.............................................................................51 3.10. Computation of Interest and Fees.........................................................51 3.11. Non-Banking Days.........................................................................52 3.12. Manner and Treatment of Payments.........................................................52 3.13. Funding Sources..........................................................................53 3.14. Failure to Charge Not Subsequent Waiver..................................................53 3.15. Administrative Agent's Right to Assume Payments Will be Made.............................53 3.16. Fee Determination Detail.................................................................54 3.17. Survivability............................................................................54 ARTICLE 4 REPRESENTATIONS AND WARRANTIES.........................................................................54 4.1. Existence and Qualification; Power; Compliance With Laws..................................54 4.2. Authority; Compliance With Other Agreements and Instruments and Government Regulations...........................................................................55 4.3. No Governmental Approvals Required........................................................55 4.4. Subsidiaries..............................................................................55 4.5. Financial Statements......................................................................56 4.6. No Other Liabilities; No Material Adverse Changes.........................................56 4.7. Title to Property.........................................................................56 4.8. Intangible Assets.........................................................................57 4.9. Public Utility Holding Company Act........................................................57 4.10. Litigation...............................................................................57 4.11. Binding Obligations......................................................................57 4.12. No Default...............................................................................57 4.13. ERISA....................................................................................57 4.14. Regulations U and X; Investment Company Act..............................................58 4.15. Disclosure...............................................................................58 4.16. Tax Liability............................................................................58 4.17. Projections..............................................................................58 4.18. Environmental Matters....................................................................59 4.19. Solvency.................................................................................59 4.20. Year 2000 Matters........................................................................59 ARTICLE 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING REQUIREMENTS)..............................60 5.1. Payment of Taxes and Other Potential Liens................................................60 5.2. Preservation of Existence.................................................................60 5.3. Maintenance of Properties.................................................................60 5.4. Maintenance of Insurance..................................................................61 5.5. Compliance With Laws......................................................................61 5.6. Inspection Rights.........................................................................61 5.7. Keeping of Records and Books of Account...................................................61 5.8. Compliance With Agreements................................................................61 5.9. Use of Proceeds...........................................................................61 5.10. Hazardous Materials Laws.................................................................61 5.11. Additional Borrowers and Additional Subsidiaries.........................................62 5.12. Syndication Process......................................................................63 5.13. Tender Offer.............................................................................63 5.14. Funded Debt..............................................................................64 ARTICLE 6 NEGATIVE COVENANTS.....................................................................................64 6.1. Payment of Subordinated Obligations.......................................................64 6.2. Disposition of Property...................................................................65 6.3. Mergers...................................................................................65 6.4. Hostile Acquisitions......................................................................65 6.5. Acquisitions..............................................................................65 6.6. Distributions.............................................................................65 6.7. ERISA.....................................................................................66 6.8. Change in Nature of Business..............................................................66 6.9. Liens and Sale Leasebacks.................................................................66 6.10. Indebtedness and Guaranty Obligations....................................................67 6.11. Transactions with Affiliates.............................................................67 6.12. Funded Debt Ratio........................................................................68 6.13. Fixed Charge Coverage Ratio..............................................................68 6.14. Stockholders' Equity.....................................................................68 6.15. Investments..............................................................................68 6.16. Capital Expenditures.....................................................................69 6.17. Payment Restrictions Affecting Subsidiaries..............................................69 6.18. Lease Obligations........................................................................69 ARTICLE 7 INFORMATION AND REPORTING REQUIREMENTS.................................................................70 7.1. Financial and Business Information........................................................70 7.2. Compliance Certificates...................................................................72 ARTICLE 8 CONDITIONS 72 8.1. Closing Date and Effectiveness of Commitment..............................................72 8.2. Tender Offer Loans........................................................................74 8.3. General Purpose Loans.....................................................................75 ARTICLE 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT...................................................75 9.1. Events of Default.........................................................................75 9.2. Remedies Upon Event of Default............................................................77 9.3. Certain Funds Period......................................................................78 ARTICLE 10 THE ADMINISTRATIVE AGENT..............................................................................78 10.1. Appointment and Authorization............................................................78 10.2. Administrative Agent and Affiliates......................................................79 10.3. Lenders' Credit Decisions................................................................79 10.4. Action by Administrative Agent...........................................................79 10.5. Liability of Administrative Agent........................................................80 10.6. Indemnification..........................................................................81 10.7. Successor Administrative Agent...........................................................82 10.8. No Obligations of Borrowers..............................................................82 ARTICLE 11 MISCELLANEOUS.........................................................................................83 11.1. Cumulative Remedies; No Waiver...........................................................83 11.2. Amendments; Consents.....................................................................83 11.3. Costs, Expenses and Taxes................................................................84 11.4. Nature of Lenders' Obligations...........................................................85 11.5. Survival of Representations and Warranties...............................................85 11.6. Notices..................................................................................85 11.7. Execution of Loan Documents..............................................................85 11.8. Binding Effect; Assignment...............................................................86 11.9. Right of Setoff..........................................................................88 11.10. Sharing of Setoffs......................................................................88 11.11. Indemnity by Borrowers..................................................................89 11.12. Nonliability of the Lenders.............................................................90 11.13. No Third Parties Benefited..............................................................90 11.14. Confidentiality.........................................................................91 11.15. Further Assurances......................................................................91 11.16. Integration.............................................................................91 11.17. Governing Law...........................................................................91 11.18. Severability of Provisions..............................................................92 11.19. Headings................................................................................92 11.20. Time of the Essence.....................................................................92 11.21. Foreign Lenders and Participants........................................................92 11.22. Joint and Several Liability.............................................................92 11.23. Removal of a Lender.....................................................................93 11.24. Waiver of Right to Trial by Jury........................................................94 11.25. Purported Oral Amendments...............................................................94
EXHIBITS Exhibit Number Exhibit Name Exhibit A Form of Borrower Guaranty Exhibit B Form of Commitments Assignment and Acceptance Exhibit C Form of Compliance Certificate Exhibit D-1 Form of Opinion of Orrick, Herrington & Sutcliffe Exhibit D-2 Form of Opinion of Skadden, Arps, Slate, Meagher & Flom Exhibit E Form of Pricing Certificate Exhibit F Form of Request for Letter of Credit Exhibit G Form of Subsidiary Guaranty Exhibit H Notice of Syndicated Loan Exhibit I Form of Money Market Quote Request Exhibit J Form of Invitation for Money Market Quotes Exhibit K Form of Money Market Quote Exhibit L Notice of Money Market Loan Exhibit M Form of Note Exhibit N Notice of Swingline Loan SCHEDULES Schedule Number Schedule Name Schedule 1.1A Existing Letters of Credit Schedule 1.1B Lender Pro Rata Shares Schedule 4.1 Borrowers Schedule 4.4 Subsidiaries Schedule 4.6 Funded Debt Schedule 4.7 Liens Schedule 6.10 Existing Indebtedness Schedule 6.16 Existing Investments REVOLVING LOAN AGREEMENT Dated as of September 23, 1998 This REVOLVING LOAN AGREEMENT ("Agreement") is entered into by and among Day Runner, Inc., a Delaware corporation ("Day Runner"), Ultima Distribution Inc., a Canadian corporation and a wholly-owned subsidiary of Day Runner ("Ultima"), Day Runner UK plc, a company incorporated with limited liability under the laws of England and Wales and a wholly-owned subsidiary of Day Runner ("Bidco"), each lender whose name is set forth on the signature pages of this Agreement and each lender which may hereafter become a party to this Agreement pursuant to Section 11.8 (collectively, the "Lenders" and individually, a "Lender"), and Wells Fargo Bank, National Association, as Administrative Agent and Issuing Lender. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.2. "Acquisition" means any transaction, or any series of related transactions, consummated after the Closing Date, by which any Borrower and/or any of its Subsidiaries directly or indirectly (a) acquires any ongoing business or all or substantially all of the assets of any Person engaged in any ongoing business, whether through purchase of assets, merger or otherwise, (b) acquires control of securities of a Person engaged in an ongoing business, which, when aggregated with other securities controlled by such Borrower and/or such Subsidiary, represent more than 50% of the ordinary voting power for the election of directors or other governing body if the business affairs of such Person are managed by a board of directors or other governing body or (c) acquires control of more than 50% of the ownership interest in any partnership, joint venture, limited liability company, business trust or other Person engaged in an ongoing business that is not managed by a board of directors or other governing body. "Acquisition Purchase Price" means, with respect to any Acquisition by any Borrower or any Subsidiary, the purchase price paid by such Borrower or such Subsidiary in connection with such Acquisition, whether in Cash, Property (valued at fair market value) or capital stock of such Person, and including without limitation (a) the principal amount of any Indebtedness assumed by any Borrower or any Subsidiary of any Borrower in connection with such Acquisition and (b) the principal amount of any Funded Debt of any Person acquired, or with respect to whom securities are acquired, pursuant to such Acquisition. "Adjusted Eurodollar Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable Eurodollar Rate by (ii) 1.00 minus the Eurodollar Reserve Percentage. "Administrative Agent" means Wells Fargo Bank, National Association, when acting in its capacity as the Administrative Agent under any of the Loan Documents, or any successor Administrative Agent. "Administrative Agent's Office" means the Administrative Agent's address as set forth on the signature pages of this Agreement, or such other address as the Administrative Agent hereafter may designate by written notice to the Borrowers and the Lenders. "Affiliate" means, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (and the correlative terms, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided that, in any event, any Person that owns, directly or indirectly, 20% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation that has more than 100 record holders of such securities, or 20% or more of the partnership or other ownership interests of any other Person that has more than 100 record holders of such interests, will be deemed to be an Affiliate of such corporation, partnership or other Person. "Aggregate Effective Amount" means as of any date of determination and with respect to all Letters of Credit then outstanding, the sum of (a) the aggregate effective face amounts of all such Letters of Credit not then paid by the Issuing Lender plus (b) the aggregate amounts paid by the Issuing Lender under such Letters of Credit not then reimbursed to the Issuing Lender by Borrowers. "Agreement" means this Revolving Loan Agreement as it may from time to time be supplemented, modified, amended, restated or extended. "Alternate Base Rate" means, as of any date of determination, the rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the higher of (a) the Prime Rate in effect on such date or (b) the Federal Funds Rate in effect on such date plus 1/2 of 1% (50 basis points). "Alternate Base Rate Loan" means a Loan made hereunder and specified to be an Alternate Base Rate Loan in accordance with Article 2. "Applicable Base Rate Margin" means (a) for the Initial Pricing Period, zero (0), (b) for the Second Pricing Period, the interest rate margin set forth below (expressed in basis points per annum) opposite the Applicable Pricing Level for the Fiscal Quarter ending on September 30, 1998 and (c) for each Pricing Period thereafter, the interest rate margin set forth below (expressed in basis points per annum) opposite the Applicable Pricing Level for the Fiscal Quarter ending 55 days prior to the commencement of such Pricing Period: -------------------------------- --------------------------- Applicable Pricing Level Margin -------------------------------- --------------------------- -------------------------------- --------------------------- I 0 -------------------------------- --------------------------- -------------------------------- --------------------------- II 0 -------------------------------- --------------------------- -------------------------------- --------------------------- III 12.5 -------------------------------- --------------------------- -------------------------------- --------------------------- IV 25.0 -------------------------------- --------------------------- -------------------------------- --------------------------- V 50.0 -------------------------------- --------------------------- Any change in the Applicable Base Rate Margin based on a change in the Applicable Pricing Level shall be effective immediately after the receipt by the Administrative Agent of the Pricing Certificate relating to the Fiscal Quarter ending 55 days prior to the commencement of such Pricing Period; provided, that (i) in the event that the Borrowers do not deliver a Pricing Certificate with respect to any Fiscal Quarter within the time set forth in Section 7.1(b), then until (but only until) such Pricing Certificate is delivered the Applicable Pricing Level shall be Pricing Level V and (ii) if any Pricing Certificate is subsequently determined to be in error, then any resulting change in the Applicable Pricing Level shall be made retroactively to the beginning of the relevant Pricing Period. "Applicable Commitment Fee Rate" means (a) for the Initial Pricing Period, 30 basis points per annum, (b) for the Second Pricing Period, the commitment fee rate forth below (expressed in basis points per annum) opposite the Applicable Pricing Level for the Fiscal Quarter ending on September 30, 1998 and (c) for each subsequent Pricing Period, the rate set forth below (expressed in basis points per annum) opposite the Applicable Pricing Level for the Fiscal Quarter ending 55 days prior to the commencement of such Pricing Period: -------------------------------- --------------------------- Applicable Pricing Level Commitment Fee Rate -------------------------------- --------------------------- -------------------------------- --------------------------- I 22.50 -------------------------------- --------------------------- -------------------------------- --------------------------- II 25.00 -------------------------------- --------------------------- -------------------------------- --------------------------- III 30.00 -------------------------------- --------------------------- -------------------------------- --------------------------- IV 37.50 -------------------------------- --------------------------- -------------------------------- --------------------------- V 50.00 -------------------------------- --------------------------- Any change in the Applicable Commitment Fee Rate based on a change in the Applicable Pricing Level shall be effective immediately after the receipt by the Administrative Agent of the Pricing Certificate relating to the Fiscal Quarter ending 55 days prior to the commencement of such Pricing Period; provided, that (i) in the event that the Borrowers do not deliver a Pricing Certificate with respect to any Fiscal Quarter within the time set forth in Section 7.1(b), then until (but only until) such Pricing Certificate is delivered the Applicable Pricing Level shall be Pricing Level V and (ii) if any Pricing Certificate is subsequently determined to be in error, then any resulting change in the Applicable Pricing Level shall be made retroactively to the beginning of the relevant Pricing Period. "Applicable Eurodollar Rate Margin" means (a) for the Initial Pricing Period, 112.5 basis points per annum, (b) for the Second Pricing Period, the interest rate margin set forth below (expressed in basis points per annum) opposite the Applicable Pricing Level for the Fiscal Quarter ending on September 30, 1998 and (c) for each subsequent Pricing Period, the interest rate margin set forth below (expressed in basis points per annum) opposite the Applicable Pricing Level for the Fiscal Quarter ending 55 days prior to the commencement of such Pricing Period:: -------------------------------- --------------------------- Applicable Pricing Level Margin -------------------------------- --------------------------- -------------------------------- --------------------------- I 75 -------------------------------- --------------------------- -------------------------------- --------------------------- II 100 -------------------------------- --------------------------- -------------------------------- --------------------------- III 112.5 -------------------------------- --------------------------- -------------------------------- --------------------------- IV 125 -------------------------------- --------------------------- -------------------------------- --------------------------- V 150 -------------------------------- --------------------------- Any change in the Applicable Eurodollar Rate Margin based on a change in the Applicable Pricing Level shall be effective immediately after the receipt by the Administrative Agent of the Pricing Certificate relating to the Fiscal Quarter ending 55 days prior to the commencement of such Pricing Period; provided, that (i) in the event that the Borrowers do not deliver a Pricing Certificate with respect to any Fiscal Quarter within the time set forth in Section 7.1(b), then until (but only until) such Pricing Certificate is delivered the Applicable Pricing Level shall be Pricing Level V and (ii) if any Pricing Certificate is subsequently determined to be in error, then any resulting change in the Applicable Pricing Level shall be made retroactively to the beginning of the relevant Pricing Period. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of an Alternate Base Rate Loan and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Loan. "Applicable Pricing Level" means the pricing level set forth below opposite the Funded Debt Ratio as of the last day of the Fiscal Quarter most recently ended:
--------------------- --------------------------------------------------------------------------- Pricing Level Funded Debt Ratio --------------------- ---------------------------------------------------------------------------- --------------------- ---------------------------------------------------------------------------- I Less than or equal to 2.00 to 1.00 --------------------- ---------------------------------------------------------------------------- --------------------- ---------------------------------------------------------------------------- II Greater than 2.00 to 1.00, but less than or equal to 2.50 to 1.00 --------------------- ---------------------------------------------------------------------------- --------------------- ---------------------------------------------------------------------------- III Greater than 2.50 to 1.00, but less than or equal to 3.00 to 1.00 --------------------- ---------------------------------------------------------------------------- --------------------- ---------------------------------------------------------------------------- IV Greater than 3.00 to 1.00, but less than or equal to 3.50 to 1.00 --------------------- ---------------------------------------------------------------------------- --------------------- ---------------------------------------------------------------------------- V Greater than 3.50 to 1.00; --------------------- ----------------------------------------------------------------------------
provided that (i) in the event that the Borrowers do not deliver a Pricing Certificate with respect to any Fiscal Quarter within the time set forth in Section 7.1(b), then until (but only until) such Pricing Certificate is delivered the Applicable Pricing Level shall be Pricing Level V and (ii) if any Pricing Certificate is subsequently determined to be in error, then any resulting change in the Applicable Pricing Level shall be made retroactively to the beginning of the relevant Fiscal Quarter. "Applicable Standby Letter of Credit Fee Rate" means, as of any date of determination, the then effective Applicable Eurodollar Rate Margin. "Arranger" means Wells Fargo Bank, National Association. "Banking Day" means any Monday, Tuesday, Wednesday, Thursday or Friday, other than a day on which banks are authorized or required to be closed in California or New York. "Bidco" has the meaning set forth in the preamble hereto. "Bidco Loan Sublimit" means the aggregate amount necessary to purchase or otherwise acquire Target Shares pursuant to and in accordance with the terms of this Agreement. "Borrower Guaranties" means the collective reference to each Guaranty substantially in the form of Exhibit A executed by each of the Borrowers, delivered pursuant to Article 8 and, to the extent applicable, Section 5.11 by each Borrower, as the same may be amended, supplemented or otherwise modified from time to time. "Borrower" means each of Day Runner, Ultima and Bidco, and each additional Borrower pursuant to Section 5.11, and "Borrowers" is a collective reference to all of the Borrowers. "Capital Expenditure" means any expenditure by any Borrower or any of its Subsidiaries for or related to fixed assets or purchased intangibles that is treated as a capital expenditure under GAAP, including any amount which is required to be treated as an asset subject to a Capital Lease Obligation. "Capital Lease" means any leasing or similar arrangement which, in accordance with GAAP, is classified as a capital lease. "Capital Lease Obligations" means all monetary obligations of a Person under any Capital Lease. "Cash" means, when used in connection with any Person, all monetary and non-monetary items owned by that Person that are treated as cash in accordance with GAAP, consistently applied. "Cash Equivalents" means, when used in connection with any Person, that Person's Investments in: (a) Government Securities due within one year after the date of the making of the Investment; (b) readily marketable direct obligations of any State of the United States of America or any political subdivision of any such State or any public agency or instrumentality thereof given on the date of such Investment a credit rating of at least Aa by Moody's Investors Service, Inc. or AA by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.), in each case due within one year from the making of the Investment; (c) certificates of deposit issued by, bank deposits in, eurodollar deposits through, bankers' acceptances of, and repurchase agreements covering Government Securities executed by any Lender or any bank incorporated under the Laws of the United States of America, any State thereof or the District of Columbia and having on the date of such Investment combined capital, surplus and undivided profits of at least $250,000,000, or total assets of at least $5,000,000,000, in each case due within one year after the date of the making of the Investment; (d) certificates of deposit issued by, bank deposits in, eurodollar deposits through, bankers' acceptances of, and repurchase agreements covering Government Securities executed by any Lender or any branch or office located in the United States of America of a bank incorporated under the Laws of any jurisdiction outside the United States of America having on the date of such Investment combined capital, surplus and undivided profits of at least $500,000,000, or total assets of at least $15,000,000,000, in each case due within one year after the date of the making of the Investment; (e) readily marketable commercial paper or other debt securities issued by corporations doing business in and incorporated under the Laws of the United States of America or any State thereof or of any corporation that is the holding company for a bank described in clause (c) or (d) above given on the date of such Investment a credit rating of at least P-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.), in each case due within one year after the date of the making of the Investment; (f) a readily redeemable "money market mutual fund" sponsored by a bank described in clause (c) or (d) hereof, or a broker or dealer registered under Section 15(b) of the Securities Exchange Act of 1934, as amended, having on the date of the Investment capital of at least $50,000,000, that has and maintains an investment policy limiting its investments primarily to instruments of the types described in clauses (a) through (e) hereof and given on the date of such Investment a credit rating of at least Aa by Moody's Investors Service, Inc. and AA by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.); (g) corporate notes or bonds having an original term to maturity of not more than one year issued by a corporation incorporated under the Laws of the United States of America, or a participation interest therein; provided that (i) commercial paper issued by such corporation is given on the date of such Investment a credit rating of at least Aa by Moody's Investors Service, Inc. and AA by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.), (ii) the amount of all such Investments issued by the same issuer does not exceed $5,000,000 and (iii) the aggregate amount of all such Investments does not exceed $15,000,000; and (h) any security denominated in pounds sterling issued by or on behalf of the government of the United Kingdom or any other unsubordinated security, investment or instrument which is denominated in pounds sterling, has a maturity of less than one year, and is given on the date of such Investment a credit rating of at least P-1 by Moody's Investor's Service, Inc. or A-1 by Standard & Poor's Ratings Group (a division of McGraw-Hill, Inc.). "Certain Funds Period" means the period beginning on the Tender Offer Commencement Date and ending on (a) if the condition specified in Section 429(1) of the Companies Act for giving a notice under that sub-section in respect of any Target Shares is not satisfied at the end of the period of four months beginning with the date on which the offer document by which the Tender Offer is made is distributed to holders of Target Shares, the twenty-eighth day following the expiry of such four month period; or, as the case may be, (b) if such condition is satisfied within such four month period, the third Banking Day after the later of (i) the expiry of six weeks from the date on which such condition is satisfied and (ii) the Tender Offer Termination Date. If, following the Tender Offer Commencement Date, an offer to acquire the entire issued and to be issued share capital of Target is commenced by a party other than Day Runner or any of its Subsidiaries in competition with the Tender Offer, references in this definition of Certain Funds Period to a period of four months shall be deemed to be references to a period of seven months. "Certificate" means a certificate signed by a Senior Officer or Responsible Official (as applicable) of the Person providing the certificate. "Change in Control" means (a) any transaction or series of related transactions in which any Person or two or more Persons acting in concert (other than a Permitted Stockholder) acquire beneficial ownership (within the meaning of Rule 13d-3(a)(1) under the Securities Exchange Act of 1934, as amended), directly or indirectly, of 25% or more of the outstanding Day Runner Common Stock, (b) Day Runner consolidates with or merges into another Person or conveys, transfers or leases its properties and assets substantially as an entirety to any Person or any Person consolidates with or merges into Day Runner, in either event pursuant to a transaction in which the outstanding Day Runner Common Stock is changed into or exchanged for cash, securities or other property, with the effect that any Person becomes the beneficial owner, directly or indirectly, of 25% or more of Day Runner Common Stock or that the Persons who were the holders of Day Runner Common Stock immediately prior to the transaction hold less than 75% of the common stock of the surviving corporation after the transaction, or (c) during any period of 24 consecutive months, individuals who at the beginning of such period constituted the board of directors of Day Runner (together with any new or replacement directors whose election by the board of directors, or whose nomination for election, was approved by a vote of at least a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for reelection was previously so approved) cease for any reason to constitute a majority of the directors then in office. "Closing Date" means the time and Banking Day on which the conditions set forth in Section 8.1 are satisfied or waived. The Administrative Agent shall notify the Borrowers and the Lenders of the date that is the Closing Date. "Code" means the Internal Revenue Code of 1986, as amended or replaced and as in effect from time to time. "Commercial Letter of Credit" means each Letter of Credit issued to support the purchase of goods by a Borrower which is determined to be a commercial letter of credit by the Issuing Lender. "Commitment" means, subject to Section 2.8, the amounts set forth below for the indicated time periods:
-------------------------------- --------------------------------- Time Period Commitment -------------------------------- --------------------------------- -------------------------------- --------------------------------- Calendar Year 1998 $160,000,000 -------------------------------- --------------------------------- -------------------------------- --------------------------------- Calendar Year 1999 $160,000,000 -------------------------------- --------------------------------- -------------------------------- --------------------------------- Calendar Year 2000 $160,000,000 -------------------------------- --------------------------------- -------------------------------- --------------------------------- Calendar Year 2001 $140,000,000 -------------------------------- --------------------------------- -------------------------------- --------------------------------- Calendar Year 2002 $130,000,000 -------------------------------- --------------------------------- -------------------------------- --------------------------------- Calendar Year 2003 $120,000,000 -------------------------------- --------------------------------- -------------------------------- --------------------------------- Calendar Year 2004 $110,000,000 -------------------------------- --------------------------------- -------------------------------- --------------------------------- Nine Months Ended September $110,000,000 30, 2005 -------------------------------- ---------------------------------
"Commitment Reserve" means, at any time, the aggregate principal amount of any Tender Offer Notes then outstanding. "Commitments Assignment and Acceptance" means a commitment assignment and acceptance substantially in the form of Exhibit B. "Common Stock" means the common stock of any Borrower or its successor. "Companies Act" means the Companies Act 1985 of Great Britain. "Compliance Certificate" means a certificate in the form of Exhibit C, properly completed and signed by a Senior Officer of Day Runner. "Contractual Obligation" means, as to any Person, any provision of any outstanding security issued by that Person or of any material agreement, instrument or undertaking to which that Person is a party or by which it or any of its Property is bound. "Day Runner Common Stock" means the Common Stock of Day Runner or its successor. "Debtor Relief Laws" means the Bankruptcy Code of the United States of America, as amended from time to time, and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws from time to time in effect affecting the rights of creditors generally. "Default" means any event that, with the giving of any applicable notice or passage of time specified in Section 9.1, or both, would be an Event of Default. "Default Rate" means the interest rate prescribed in Section 3.9. "Designated Capital Expenditures" means Capital Expenditures that are either (i) financed directly or indirectly with the proceeds of a Loan or (ii) not financed by the relevant Borrower by any third party financing source. "Designated Deposit Account" means a deposit account to be maintained by each Borrower with Wells Fargo Bank, National Association or one of its Affiliates, as from time to time designated by such Borrower by written notification to the Administrative Agent. "Designated Eurodollar Market" means, with respect to any Eurodollar Rate Loan, the London Eurodollar Market. "Designated Foreign Currency Market" means, with respect to any Foreign Currency Loan, the Foreign Currency Market designated by the Administrative Agent as appropriate for that Foreign Currency Loan. "Designated Funded Debt" has the meaning set forth in Section 5.14. "Disqualified Stock" means any capital stock, warrants, options or other rights to acquire capital stock (but excluding any debt security which is convertible, or exchangeable, for capital stock), which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the Maturity Date. "Disposition" means the sale, transfer or other disposition in any single transaction or series of related transactions of any asset, or group of related assets, of any Borrower or any of its Subsidiaries other than (i) inventory or Cash Equivalents sold or otherwise disposed of in the ordinary course of business of such Borrower or such Subsidiary and (ii) equipment sold or otherwise disposed of where either (x) such equipment is obsolete or no longer useful in the ordinary course of business of such Borrower or such Subsidiary or (y) substantially similar equipment in replacement thereof has theretofore been acquired, or thereafter within 90 days is acquired, by such Borrower or such Subsidiary. "Distribution" means, with respect to any shares of capital stock or any warrant or option to purchase an equity security or other equity security issued by a Person, (a) any Stock Repurchase by such Person and (b) the declaration or (without duplication) payment by such Person of any dividend in Cash or in Property (except for Property constituting capital stock of such Person that is not Disqualified Stock) on or with respect to any such security. "Dollars" or "$" means United States of America dollars. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" next to its signature hereto, or such other office of such Lender as such Lender may from time to time specify to the Borrowers and to the Administrative Agent. "EBITDA" means, with respect to any period, the sum of (a) Net Income for that period, plus (b) any extraordinary loss included in such Net Income, minus (c) any extraordinary gain included in such Net Income, plus (d) Interest Expense of Day Runner and its Subsidiaries for that period, plus (e) the aggregate amount of taxes on or measured by income of Day Runner and its Subsidiaries for that period (whether or not payable during that period), plus (f) depreciation, amortization and all other non-cash expenses of Day Runner and its Subsidiaries for that period, plus (g) to the extent deducted in determining such Net Income, the amount of Tender Offer Transaction Expenses in such period, plus (h) for any period that includes fiscal periods ended on or prior to June 30, 1999, to the extent deducted in determining such Net Income, the aggregate amount of asset write downs with respect to Target recorded in any of such fiscal periods, in each case as determined in accordance with GAAP, consistently applied; provided, however, that, if any Person (or assets comprising substantially all of a business unit) is or are acquired by Day Runner or any of its Subsidiaries in a Permitted Acquisition that occurs during such period, such Permitted Acquisition shall be deemed to have occurred as of the first day of such period so long as the Administrative Agent has received financial information for such Person or business unit for such period that is substantially equivalent to the information described in Section 7.1; provided, further, that, with respect to any Disposition of a Subsidiary of Day Runner or division of a Borrower or such a Subsidiary, or any assets that constitute a business unit or segment of a Borrower or such a Subsidiary, that occurs during such period, such Disposition shall be deemed to have occurred as of the first day of such period. "ERISA" means the Employee Retirement Income Security Act of 1974, and any regulations issued pursuant thereto, as amended or replaced and as in effect from time to time. "ERISA Affiliate" means each Person (whether or not incorporated) which is required to be aggregated with Borrower pursuant to Section 414 of the Code. "Eurodollar Auction" means a solicitation of Money Market Quotations setting forth Money Market Margins based on the Eurodollar Rate pursuant to Section 2.2. "Eurodollar Banking Day" means any Banking Day on which dealings in Dollar deposits are conducted by and among banks in the Designated Eurodollar Market. "Eurodollar Lending Office" means, as to each Lender, its office or branch so designated by written notice to the Borrowers and the Administrative Agent as its Eurodollar Lending Office. If no Eurodollar Lending Office is designated by a Lender, its Eurodollar Lending Office shall be its office at its address for purposes of notices hereunder. "Eurodollar Market" means a regular established market located outside the United States of America by and among banks for the solicitation, offer and acceptance of Dollar deposits in such banks. "Eurodollar Obligations" means eurocurrency liabilities, as defined in Regulation D or any comparable regulation of any Governmental Agency having jurisdiction over any Lender. "Eurodollar Rate" means, with respect to any Eurodollar Rate Loan, the average of the interest rates per annum (rounded upward, if necessary, to the next 1/16 of 1%) at which deposits in Dollars are offered to Wells Fargo Bank, National Association in the Designated Eurodollar Market at or about 11:00 A.M. local time in the Designated Eurodollar Market, two (2) Eurodollar Banking Days before the first day of the applicable Eurodollar Period in an aggregate amount approximately equal to the amount of the Loan to be made by Wells Fargo Bank, National Association with respect to such Eurodollar Rate Loan and for a period of time comparable to the number of days in the applicable Eurodollar Period. "Eurodollar Rate Loan" means a Loan made hereunder and specified to be a Eurodollar Rate Loan in accordance with Article 2. "Eurodollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (as defined in Regulation D)) or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Loans is determined. "Event of Default" shall have the meaning provided in Section 9.1. "Existing Letters of Credit" means the letters of credit described on Schedule 1.1A issued under the Prior Loan Agreement. "Federal Funds Rate" means, as of any date of determination, the rate set forth in the daily statistical release designated as the Composite 3:30 P.M. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 P.M. Quotation") for such date under the caption "Federal Funds Effective Rate". If on any relevant date the appropriate rate for such date is not yet published in the Composite 3:30 P.M. Quotations, the rate for such date will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 A.M. (New York City time) on that date by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. For purposes of this Agreement, any change in the Alternate Base Rate due to a change in the Federal Funds Rate shall be effective as of the opening of business on the effective date of such change. "Fiscal Quarter" means the fiscal quarter of Borrowers ending on each March 31, June 30, September 30 and December 31. "Fiscal Year" means the fiscal year of Borrowers ending on each June 30. "Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal Quarter, the ratio of (a) EBITDA for the fiscal period consisting of the four (4) Fiscal Quarters ended on that date, minus Designated Capital Expenditures made by Day Runner and its Subsidiaries during such fiscal period, minus cash payments for federal, state, local and foreign taxes actually paid during such period by Day Runner and its Subsidiaries, minus cash dividends paid during such period by Day Runner and its Subsidiaries, minus the fair market value of any Stock Repurchases during such period to (b) the sum of (i) Interest Expense of Day Runner and its Subsidiaries for such fiscal period plus (ii) the principal portion of Capital Lease Obligations of Day Runner and its Subsidiaries during such fiscal period actually paid or required to be paid (without duplication) during such fiscal period plus (iii) any required principal repayments of Indebtedness of Day Runner and its Subsidiaries during such fiscal period (except respect to Intercompany Indebtedness), including without limitation required principal repayments with respect to the Obligations, minus (iv) the principal amount of any Indebtedness incurred by Day Runner and its Subsidiaries during such fiscal period (excluding any Intercompany Indebtedness) the proceeds of which is used during such period to refinance existing Indebtedness of Day Runner and its Subsidiaries during such period. "Foreign Currency" means, with respect to a Foreign Currency Loan or Foreign Currency Letter of Credit, the foreign currency applicable to that Foreign Currency Loan or Foreign Currency Letter of Credit. "Foreign Currency Banking Day" means any Banking Day on which dealings in deposits in the applicable Foreign Currency are conducted by and among banks in the Designated Foreign Currency Market. "Foreign Currency Equivalent" means, as of any date of determination, the equivalent amount in Dollars of a Foreign Currency Loan or a Foreign Currency Letter of Credit, as the case may be, using the currency exchange rate for such date for the applicable Foreign Currency in the New York City wholesale foreign currency exchange market in trading among banks in amounts of $1,000,000 or more, set at 11:00 A.M. London Time two (2) Foreign Currency Banking Days prior to the date of determination, or, if not so set for such date, as otherwise reasonably determined by the Administrative Agent. "Foreign Currency Letter of Credit" means a Letter of Credit issued or to be issued in (a) British pounds or Canadian dollars or (b) such other currency (other than Dollars) as may be acceptable to all of the Lenders in their sole and absolute discretion. "Foreign Currency Limitation" means, at any time, fifty percent (50%) of the Commitment in effect at such time. "Foreign Currency Loan" means a Loan made or to be made in (a) pounds sterling or Canadian dollars or (b) such other currency (other than Dollars) as may be acceptable to all of the Lenders in their sole and absolute discretion. "Foreign Currency Market" means a regular established market located outside the United States of America by and among banks for the solicitation, offer and acceptance of Foreign Currency deposits in such banks. "Foreign Currency Period" means, as to each Foreign Currency Loan, the period commencing on the date specified by the applicable Borrower pursuant to Section 2.3 and ending 1, 2, 3, 6 or 12 months (or, with the written consent of all of the Lenders, any other period) thereafter, as specified by the applicable Borrower in the applicable Notice of Syndicated Loan or Notice of Money Market Loan; provided that: (a) The first day of any Foreign Currency Period shall be a Foreign Currency Banking Day; (b) Any Foreign Currency Period that would otherwise end on a day that is not a Foreign Currency Banking Day shall be extended to the immediately succeeding Foreign Currency Banking Day unless such Foreign Currency Banking Day falls in another calendar month, in which case such Foreign Currency Period shall end on the immediately preceding Foreign Currency Banking Day; (c) No Foreign Currency Period shall extend beyond the Maturity Date. "Foreign Currency Rate" means, with respect to any Foreign Currency Rate Loan, the interest rate per annum at which deposits in that Foreign Currency are offered to the Administrative Agent in the Designated Foreign Currency Market at 11:00 A.M. (London time) two (2) Foreign Currency Banking Days before the first day of the applicable Foreign Currency Period in an aggregate amount approximately equal to the amount of the Loan to be made with respect to such Foreign Currency Rate Loan and for a period of time comparable to the number of days in the applicable Foreign Currency Period. "Foreign Subsidiary" means a Subsidiary of any Borrower that (a) is organized under the Laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia and (b) conducts all or substantially all of its business outside the United States of America. "Funded Debt" means, as to any Person (without duplication), (a) indebtedness of such Person for borrowed money or for the deferred purchase price of Property (excluding trade and other accounts payable in the ordinary course of business in accordance with ordinary trade terms), including any Guaranty Obligation for any such indebtedness, (b) all indebtedness of such Person evidenced by notes, bonds, debentures, debentures or other similar instruments, (c) indebtedness of such Person that is non-recourse to the credit of such Person but is secured by assets of such Person, to the extent of the fair market value of such assets as determined in good faith by such Person, (d) the principal portion of Capital Lease Obligations of such Person required under GAAP to be shown on the balance sheet of such Person, (e) indebtedness of such Person arising under bankers' acceptance facilities or under facilities for the discount of accounts receivable of such Person, and (f) any direct or contingent obligations of such Person under letters of credit issued for the account of such Person. "Funded Debt Ratio" means, as of the last day of any Fiscal Quarter, the ratio of (a) the principal amount of all Funded Debt of each Borrower and its Subsidiaries on that date to (b) EBITDA for the fiscal period consisting of the four (4) Fiscal Quarters ended on that date. "GAAP" means, as of any date of determination, accounting principles (a) set forth as generally accepted in then currently effective Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) set forth as generally accepted in then currently effective Statements of the Financial Accounting Standards Board or (c) that are then approved by such other entity as may be approved by a significant segment of the accounting profession in the United States of America. The term "consistently applied," as used in connection therewith, means that the accounting principles applied are consistent in all material respects with those applied at prior dates or for prior periods. "General Purpose Loan" means a Loan permitted hereunder that is not a Tender Offer Loan. "Government Securities" means readily marketable (a) direct full faith and credit obligations of the United States of America or obligations guaranteed by the full faith and credit of the United States of America and (b) obligations of an agency or instrumentality of, or corporation owned, controlled or sponsored by, the United States of America that are generally considered in the securities industry to be implicit obligations of the United States of America. "Governmental Agency" means (a) any international, foreign, federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, central bank, commission, department, instrumentality or public body or (c) any court or administrative tribunal of competent jurisdiction. "Guaranty Obligation" means, as to any Person, any (a) guarantee by that Person of Indebtedness of, or other obligation performable by, any other Person or (b) assurance given by that Person to an obligee of any other Person with respect to the performance of an obligation by, or the financial condition of, such other Person, whether direct, indirect or contingent, including any purchase or repurchase agreement covering such obligation or any collateral security therefor, any agreement to provide funds (by means of loans, capital contributions or otherwise) to such other Person, any agreement to support the solvency or level of any balance sheet item of such other Person or any "keep-well" or other arrangement of whatever nature given for the purpose of assuring or holding harmless such obligee against loss with respect to any obligation of such other Person; provided, however, that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation in respect of Indebtedness shall be deemed to be an amount equal to the maximum reasonably anticipated liability in respect thereof as determined by the Person in good faith. The amount of any other Guaranty Obligation shall be deemed to be zero unless and until the amount thereof has been (or in accordance with Financial Accounting Standards Board Statement No. 5 should be) quantified and reflected or disclosed in the consolidated financial statements (or notes thereto) of the applicable Borrower or Subsidiary of any Borrower. "Hazardous Materials" means substances defined as "hazardous substances" pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., or as "hazardous", "toxic" or "pollutant" substances or as "solid waste" pursuant to the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq., or as "friable asbestos" pursuant to the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq. or any other applicable Hazardous Materials Law, in each case as such Laws are amended from time to time. "Hazardous Materials Laws" means all Laws governing the treatment, transportation or disposal of Hazardous Materials applicable to any of the Real Property. "Indebtedness" means, as to any Person (without duplication), (a) any Funded Debt of such Person, (b) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock of or other ownership or profit interest in such Person or any other Person or any warrants, rights or options to acquire such capital stock, (c) all Indebtedness of others referred to in clauses (a) and (b) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Indebtedness against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (d) all Indebtedness referred to in clauses (a) through (c) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. "Initial Pricing Period" means the period from the Closing Date until December 22, 1998. "Intangible Assets" means assets that are considered intangible assets under GAAP, including customer lists, goodwill, covenants not to compete, copyrights, trade names, trademarks and patents. "Intercompany Indebtedness" means any Indebtedness owed (i) by Day Runner to any of its Subsidiaries, (ii) to any Day Runner Subsidiary by Day Runner, or (iii) by any Day Runner Subsidiary to any other Day Runner Subsidiary. "Interest Expense" means, with respect to Day Runner and its Subsidiaries as of the last day of any fiscal period, determined on a consolidated basis, the sum of (a) all interest, fees, charges and related expenses for that fiscal period by that Person to a lender in connection with borrowed money (including any obligations for fees, charges and related expenses payable to the issuer of any letter of credit) or the deferred purchase price of assets that in each case are considered "interest expense" under GAAP plus (b) the portion of rent paid or payable (without duplication) for that fiscal period by that Person under Capital Lease Obligations that should be treated as interest in accordance with Financial Accounting Standards Board Statement No. 13. "Interest Period" means: (1) with respect to each Eurodollar Rate Loan, the period commencing on the date specified by the applicable Borrower pursuant to Section 2.1(a) and ending 1, 2, 3 or 6 months thereafter, as specified by the applicable Borrower in the applicable Request for Loan; provided that: (a) The first day of any Interest Period shall be a Eurodollar Banking Day; (b) Any Interest Period that would otherwise end on a day that is not a Eurodollar Banking Day shall be extended to the immediately succeeding Eurodollar Banking Day unless such Eurodollar Banking Day falls in another calendar month, in which case such Eurodollar Period shall end on the immediately preceding Eurodollar Banking Day; and (c) No Interest Period shall extend beyond the Maturity Date; (2) with respect to each Money Market LIBOR Loan, the period commencing on the date of such Loan and ending such whole number of months thereafter as the applicable Borrower may elect in accordance with Section 2.2; provided that: (a)The first day of any Interest Period shall be a Eurodollar Banking Day; (b) Any Interest Period that would otherwise end on a day that is not a Eurodollar Banking Day shall be extended to the immediately succeeding Eurodollar Banking Day unless such Eurodollar Banking Day falls in another calendar month, in which case such Eurodollar Period shall end on the immediately preceding Eurodollar Banking Day; and (c) No Interest Period shall extend beyond the Maturity Date; (3) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of such Loan and ending such number of days thereafter (but not less than 7 days) as the applicable Borrower may elect in accordance with Section 2.2; provided that no interest period shall extend beyond the Maturity Date. "Interest Rate Protection Agreement" means a written agreement between any Borrower and one or more financial institutions providing for "swap", "cap", "collar" or other interest rate protection with respect to any Indebtedness. "Investment" means, when used in connection with any Person, any investment by or of that Person, whether by means of purchase or other acquisition of stock or other securities of any other Person or by means of a loan, advance creating a debt, capital contribution, guaranty or other debt or equity participation or interest in any other Person, including any partnership and joint venture interests of such Person. The amount of any Investment shall be the amount actually invested (minus any return of capital with respect to such Investment which has actually been received in Cash or has been converted into Cash or a Cash Equivalent), without adjustment for subsequent increases or decreases in the value of such Investment. "Issuing Lender" means Wells Fargo Bank, National Association. "Laws" means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents. "Lender" means each lender whose name is set forth in the signature pages of this Agreement and each lender which may hereafter become a party to this Agreement pursuant to Section 11.8. "Letters of Credit" means any of the Commercial Letters of Credit or Standby Letters of Credit issued by the Issuing Lender under the Commitment pursuant to Section 2.7, as the same may be supplemented, modified, amended, renewed, extended or supplanted. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, lien or charge of any kind, whether voluntarily incurred or arising by operation of Law or otherwise, affecting any Property, including any conditional sale or other title retention agreement, any lease in the nature of a security interest. "Loan" means a Syndicated Loan or a Money Market Loan (including without limitation any such Syndicated Loan or Money Market Loan that is also a Foreign Currency Loan) and "Loans" includes all of the foregoing. "Loan Documents" means, collectively, this Agreement, the Notes, the Borrower Guaranty, the Subsidiary Guaranty and any other agreements of any type or nature hereafter executed and delivered by any Borrower or any of their respective Subsidiaries to the Administrative Agent or to any Lender in any way relating to or in furtherance of this Agreement, in each case either as originally executed or as the same may from time to time be supplemented, modified, amended, restated, extended or supplanted. "Loan Sublimit" means, with respect to any Borrower, the amount set forth below opposite the name of such Borrower, which amount is the maximum amount of Obligations available to be extended to such Borrower:
------------------------------------------- ------------------------------ Borrower Sublimit ------------------------------------------- ------------------------------ ------------------------------------------- ------------------------------ Day Runner $160,000,000 ------------------------------------------- ------------------------------ ------------------------------------------- ------------------------------ Bidco Bidco Loan Sublimit ------------------------------------------- ------------------------------ ------------------------------------------- ------------------------------ Ultima Distribution Inc. $2,000,000 ------------------------------------------- ------------------------------
"Margin Stock" means "margin stock" as such term is defined in Regulation U. "Material Adverse Effect" means any circumstance or event, or series of circumstances or events which (a) has had or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Loan Document, (b) has been or could reasonably be expected to be material and adverse to the business, condition (financial or otherwise), operations, performance, Properties or prospects of Day Runner or Day Runner and its Subsidiaries, taken as a whole or (c) has materially impaired or could reasonably be expected to materially impair the ability of any Borrower to perform the Obligations. "Material Subsidiary" means a Subsidiary of Day Runner either (x) owning at least five percent (5%) of the consolidated assets of Day Runner and its Subsidiaries as of the end of the immediately prior Fiscal Quarter or (y) as of the last day of any Fiscal Quarter, generating at least five percent (5%) of the consolidated net sales of Day Runner and its Subsidiaries for the fiscal period consisting of the four (4) Fiscal Quarters ended on that date. "Maturity Date" means September 30, 2005. "Money Market Absolute Rate" has the meaning set forth in Section 2.2. "Money Market Absolute Rate Loan" means a loan made or to be made by a Lender pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Lender, its office or branch so designated by written notice to the Borrowers and the Administrative Agent; provided that any Lender may from time to time by notice to the Borrowers and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending office of such Lender shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan made or to be made by a Lender pursuant to a Eurodollar Auction. "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.2(d). "Money Market Quote" means an offer by a Lender to make a Money Market Loan in accordance with Section 2.2. "Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA to which any Borrower or any of its ERISA Affiliates contributes or is obligated to contribute. "Net Cash Issuance Proceeds" means, with respect to the issuance of any debt security or equity security by a Borrower or any of its Subsidiaries, the Cash proceeds received by or for the account of a Borrower or such Subsidiary in consideration of such issuance net of (a) underwriting discounts and commissions actually paid to any Person not an Affiliate of any Borrower and (b) reasonable professional fees and disbursements actually paid in connection therewith. "Net Cash Sales Proceeds" means, with respect to any Disposition, the sum of (a) the Cash proceeds received by or for the account of the Borrowers and their respective Subsidiaries from such Disposition plus (b) the amount of Cash received by or for the account of the Borrowers and their respective Subsidiaries upon the sale, collection or other liquidation of any proceeds that are not Cash from such Disposition, in each case net of (i) any amount required to be paid to any Person owning an interest in the assets disposed of, (ii) any amount applied to the repayment of Indebtedness secured by a Lien permitted under Section 6.9 on the asset disposed of, (iii) any transfer, income or other taxes payable as a result of such Disposition, (iv) reasonable professional fees and expenses, fees due to any Governmental Agency, broker's commissions and other out-of-pocket costs of sale actually paid to any Person that is not an Affiliate of any Borrower attributable to such Disposition and (v) any reserves established in accordance with GAAP in connection with such Disposition. "Net Income" means, with respect to any period, the consolidated net income of Day Runner and its Subsidiaries for that period, determined in accordance with GAAP, consistently applied; provided, however, for any such period for which net income of Target is included in such consolidated net income, the net income of Target shall be determined without giving effect to any increase in cost of goods sold attributable to any increase in the book value of Target's inventory in connection with the acquisition of Target. "Note" and "Notes" have the meanings set forth in Section 2.6(a). "Notice of Money Market Loan" has the meaning set forth in Section 2.2(f). "Notice of Syndicated Loan" has the meaning set forth in Section 2.1(b). "Obligations" means all present and future obligations of every kind or nature of the Borrowers or any of their respective Subsidiaries at any time and from time to time owed to the Administrative Agent or the Lenders or any one or more of them, under any one or more of the Loan Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, including obligations of performance as well as obligations of payment, and including interest that accrues after the commencement of any proceeding under any Debtor Relief Law by or against any Borrower or any of its Subsidiaries. "Opinions of Counsel" means the favorable written legal opinions of Orrick, Herrington & Sutcliffe and Skadden, Arps, Slate, Meagher & Flom, counsel to the Borrowers and their Subsidiaries, substantially in the forms of Exhibits D-1 and D-2. "Panel" means the U.K. Panel on Takeovers and Mergers. "Party" means any Person other than the Administrative Agent and the Lenders, which now or hereafter is a party to any of the Loan Documents. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereof established under ERISA. "Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, which is subject to Title IV of ERISA and is maintained by any Borrower or to which any Borrower contributes or has an obligation to contribute. "Permitted Acquisition" means (a) the Acquisition by Bidco of the Target Shares pursuant to the Tender Offer; (b) the Acquisition by Bidco of the Target Shares in accordance with the provisions of Sections 428-430F of the Companies Act; (c) the Acquisition by Bidco of Target Shares outside the Tender Offer; (d) the Acquisition by Day Runner of any Subsidiary of Day Runner (not being an Acquisition falling within sub-clauses (a) to (c) above), (e) the Acquisition of any existing Subsidiary of Day Runner by any Subsidiary Guarantor; (f) the Acquisition (not being an Acquisition falling within sub-clauses (a) to (c) above) by a Borrower or one of its Subsidiaries of a Person engaged in the same or a closely-related line of business as either Day Runner or such Borrower (provided that with respect to any Acquisition pursuant to this clause (f), after giving effect thereto, the aggregate Acquisition Purchase Prices paid by the Borrowers and their Subsidiaries do not exceed $15,000,000 for all Acquisitions made by the Borrowers and their Subsidiaries pursuant to this clause (f) during the preceding twelve (12) month period); provided, further, that with respect to any such Acquisition pursuant to clauses (d), (e), or (f), no Event of Default then exists or would result from such Acquisition); and (g) any other Acquisition approved in accordance with the terms hereof by the Requisite Lenders. "Permitted Encumbrances" means: (a) Inchoate Liens incident to construction on or maintenance of Property; or Liens incident to construction on or maintenance of Property now or hereafter filed of record for which adequate reserves have been set aside (or deposits made pursuant to applicable Law) and which are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that, by reason of nonpayment of the obligations secured by such Liens, no such Property is subject to a material impending risk of loss or forfeiture; (b) Liens for taxes and assessments on Property which are not yet delinquent; or Liens for taxes and assessments on Property for which adequate reserves have been set aside and are being contested in good faith by appropriate proceedings, provided that, by reason of nonpayment of the obligations secured by such Liens, no such Property is subject to a material impending risk of loss or forfeiture; (c) defects and irregularities in title to any Property which in the aggregate do not materially impair the fair market value or use of the Property for the purposes for which it is or may reasonably be expected to be held; (d) easements, exceptions, reservations, or other agreements for the purpose of pipelines, conduits, cables, wire communication lines, power lines and substations, streets, trails, walkways, drainage, irrigation, water, and sewerage purposes, dikes, canals, ditches, the removal of oil, gas, coal, or other minerals, and other like purposes affecting Property which in the aggregate do not materially burden or impair the fair market value or use of such Property for the purposes for which it is or may reasonably be expected to be held; (e) easements, exceptions, reservations, or other agreements for the purpose of facilitating the joint or common use of Property in or adjacent to a shopping center or similar project affecting Property which in the aggregate do not materially burden or impair the fair market value or use of such Property for the purposes for which it is or may reasonably be expected to be held; (f) rights reserved to or vested in any Governmental Agency to control or regulate, or obligations or duties to any Governmental Agency with respect to, the use of any Property; (g) rights reserved to or vested in any Governmental Agency to control or regulate, or obligations or duties to any Governmental Agency with respect to, any right, power, franchise, grant, license, or permit; (h) present or future zoning laws and ordinances or other laws and ordinances restricting the occupancy, use, or enjoyment of Property; (i) statutory Liens, other than those described in clauses (a) or (b) above, arising in the ordinary course of business with respect to obligations which are not delinquent or are being contested in good faith, provided that, if delinquent, adequate reserves have been set aside with respect thereto and, by reason of nonpayment, no Property is subject to a material impending risk of loss or forfeiture; (j) covenants, conditions, and restrictions affecting the use of Property which in the aggregate do not materially impair the fair market value or use of the Property for the purposes for which it is or may reasonably be expected to be held; (k) rights of tenants under leases and rental agreements covering Property entered into in the ordinary course of business of the Person owning such Property; (l) Liens consisting of pledges or deposits to secure obligations under workers' compensation laws or similar legislation, including Liens of judgments thereunder which are not currently dischargeable; (m) Liens consisting of pledges or deposits of Property to secure performance in connection with operating leases made in the ordinary course of business, provided the aggregate value of all such pledges and deposits in connection with any such lease does not at any time exceed 20% of the annual fixed rentals payable under such lease; (n) Liens consisting of deposits of Property to secure bids made with respect to, or performance of, contracts (other than contracts creating or evidencing an extension of credit to the depositor); (o) Liens consisting of any right of offset, or statutory bankers' lien, on bank deposit accounts maintained in the ordinary course of business so long as such bank deposit accounts are not established or maintained for the purpose of providing such right of offset or bankers' lien; (p)Liens consisting of deposits of Property to secure statutory obligations of a Borrower; and (q) Liens consisting of deposits of Property to secure (or in lieu of) surety, appeal or customs bonds. "Permitted Stockholder" means Jill Tate Higgins and her heirs, devisees and legatees, trusts for the sole benefit of such Persons, and Persons wholly-owned by such Persons. "Person" means any individual or entity, including a trustee, corporation, limited liability company, general partnership, limited partnership, joint stock company, trust, estate, unincorporated organization, business association, firm, joint venture, Governmental Agency, or other entity. "Pricing Certificate" means a certificate in the form of Exhibit E, properly completed and signed by a Senior Officer of Day Runner. "Pricing Period" means (a) the Initial Pricing Period, (b) the Second Pricing Period, and (c) on and after February 24, 1999, the period beginning 55 days after the end of each Fiscal Quarter and ending 55 days after the end of the subsequent Fiscal Quarter. "Prime Rate" means the rate of interest announced from time to time by the Administrative Agent in San Francisco, California (or other headquarters city of the Administrative Agent), as its "prime rate." The "prime rate" is one of several base rates used by the Administrative Agent and serves as the basis upon which effective rates of interest are calculated for loans and other credits making reference thereto. The "prime rate" is evidenced by the recording thereof after its announcement in such internal publication or publications as the Administrative Agent may designate. Any change in the Prime Rate shall take effect at the opening of business on the day such change is internally announced within the offices of the Administrative Agent. "Prior Loan Agreement" means that certain Loan Agreement dated as of February 1, 1998 (as heretofore amended) between Wells Fargo Bank, National Association and Day Runner. "Projections" means (i) the projected financial information dated August 18, 1998 prepared by Borrowers and (ii) any budget and projection delivered by Borrowers pursuant to Section 7.1(d). "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Pro Rata Share" means, with respect to each Lender, the percentage of the Commitments set forth opposite the name of that Lender on Schedule 1.1B, as such percentage may be increased or decreased pursuant to a Commitments Assignment and Acceptance executed in accordance with Section 11.8. "Quarterly Payment Date" means the last Banking Day of each March,June, September and December. "Real Property" means, as of any date of determination, all real property then or theretofore owned, leased or occupied by any of the Borrowers or their respective Subsidiaries. "Regulation D" means Regulation D, as at any time amended, of the Board of Governors of the Federal Reserve System, or any other regulation in substance substituted therefor. "Regulations G and U" means Regulations G and U, as at any time amended, of the Board of Governors of the Federal Reserve System, or any other regulations in substance substituted therefor. "Request for Letter of Credit" means a written request for a Letter of Credit substantially in the form of Exhibit F, signed by a Responsible Official of Day Runner and properly completed to provide all information required to be included therein. "Requirement of Law" means, as to any Person, the articles or certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any Law, or judgment, award, decree, writ or determination of a Governmental Agency, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Requisite Lenders" means (a) as of any date of determination if the Commitments are then in effect, Lenders having in the aggregate more than 50% of the Commitments then in effect and (b) as of any date of determination if the Commitments have then been suspended or terminated and there is then any Indebtedness evidenced by the Notes, Lenders holding Notes evidencing in the aggregate more than 50% of the aggregate Indebtedness then evidenced by the Notes. "Responsible Official" means (a) any Senior Officer of Day Runner and (b) any other responsible official of any Borrower so designated in a written notice thereof from a Senior Officer to the Administrative Agent. The Lenders shall be entitled to conclusively rely upon any document or certificate that is signed or executed by a Responsible Official of a Borrower or any of its Subsidiaries as having been authorized by all necessary corporate, partnership and/or other action on the part of such Borrower or such Subsidiary. "SEC Document" means any document, exhibit, report, form or other document filed by any Borrower or required to be filed by any Borrower with the Securities and Exchange Commission, including without limitation annual reports on Form 10-K and quarterly reports on Form 10-Q. "Second Pricing Period" means the period from December 22, 1998 to February 24, 1999. "Senior Officer" means (a) with respect to any Person, if, at any relevant time, such office exists and any person is then incumbent in such office, (i) the chairman, (ii) the chief executive officer, (iii) the president, (iv) any executive vice president, (v) the chief operating officer, (vi) the general counsel, (vii) the chief financial officer, (viii) the treasurer, or (ix) the controller of such Person and, in each case, if such office does not exist or no person is then incumbent in such office, any individual with comparable executive, management or financial responsibilities or functions and (b) with respect to each Subsidiary of Day Runner not organized under the laws of the United States of America, any other senior executive officer. "Solvent", when used with respect to any Person, means that at the time of determination: (i) the fair market value of its assets (including any rights of reimbursement and contribution) is in excess of the total amount of its liabilities (including, without limitation, contingent liabilities); and (ii) the present fair saleable value of its assets is greater than its probable liability on its existing debts as such debts become absolute and matured; and (iii) it is then able and expects to be able to pay its debts (including, without limitation, contingent debts and other commitments) as they mature; and (iv) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. For purposes of determining whether a Person is Solvent, the amount of any contingent liability shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Special Eurodollar Circumstance" means the application or adoption after the Closing Date of any Law or interpretation, or any change therein or thereof, or any change in the interpretation or administration thereof by any Governmental Agency, central bank or comparable authority charged with the interpretation or administration thereof, or compliance by any Lender or its Eurodollar Lending Office with any request or directive (whether or not having the force of Law) of any such Governmental Agency, central bank or comparable authority. "Standby Letter of Credit" means each Letter of Credit that is not a Commercial Letter of Credit. "Stock Repurchase" means, with respect to any Person, the retirement, redemption, purchase or other acquisition for Cash or for Property (except for Property constituting capital stock of such Person that is not Disqualified Stock) by such Person of any shares of capital stock or any warrant or option to purchase an equity security or other equity security issued by such Person. "Stockholders' Equity" means, as of any date of determination and with respect to any Person, the consolidated stockholders' equity of the Person as of that date determined in accordance with GAAP; provided that there shall be excluded from Stockholders' Equity any amount attributable to Disqualified Stock. "Subordinated Obligations" means any Indebtedness of a Borrower that (i) does not have any scheduled principal payment, mandatory principal prepayment or sinking fund payment due prior to December 31, 2005, (ii) is not secured by any Lien on any Property of any Borrower or any of its Subsidiaries, (iii) is not guarantied by any Subsidiary of any Borrower, (iv) is subordinated by its terms in right of payment to the Obligations pursuant to provisions acceptable to the Requisite Lenders, (v) is subject to such financial and other covenants and events of default as may be acceptable to the Requisite Lenders and (vi) is subject to customary payment blockage and delayed acceleration provisions as may be acceptable to the Requisite Lenders. "Subsidiary" means, as of any date of determination and with respect to any Person, any corporation, limited liability company or partnership (whether or not, in any case, characterized as such or as a "joint venture"), whether now existing or hereafter organized or acquired: (a) any Person which is required to be treated as a "consolidated subsidiary" under GAAP, or (b) any Person (i) in the case of a corporation or limited liability company, of which a majority of the securities having ordinary voting power for the election of directors or other governing body (other than securities having such power only by reason of the happening of a contingency) are at the time beneficially owned by such Person and/or one or more Subsidiaries of such Person, or (ii) in the case of a partnership, of which a majority of the partnership or other ownership interests are at the time beneficially owned by such Person and/or one or more of its Subsidiaries. "Subsidiary Guarantors" means all Subsidiaries of any Borrower that are or become parties to the Subsidiary Guaranty. "Subsidiary Guaranty" means the continuing guaranty of the Obligations to be executed and delivered pursuant to Article 8 and, to the extent applicable, Section 5.11 by each Subsidiary Guarantor, in the form of Exhibit G, either as originally executed or as it may from time to time be supplemented, modified, amended, extended or supplanted. "Swing Line" means the revolving line of credit established by the Swing Line Lender in favor of the Borrowers pursuant to Section 2.9. "Swing Line Documents" means the promissory note and any other documents executed by the Borrowers in favor of the Swing Line Lender in connection with the Swing Line. "Swing Line Lender" means Wells Fargo Bank, National Association. "Swing Line Loans" means loans made by the Swing Line Lender to the Borrowers pursuant to Section 2.9. "Swing Line Outstandings" means, as of any date of determination, the aggregate principal Indebtedness of all Borrowers on all Swing Line Loans then outstanding. "Syndicated Loan" means a loan made pursuant to Section 2.1 or Section 2.9(d). "Syndicated Loan" shall not include any Swing Line Loan or any Money Market Loan. "Takeover Code" means the UK City Code on Takeovers and Mergers. "Target" means Filofax Group plc, a public company incorporated with limited liability under the laws of England and Wales. "Target Shares" means ordinary shares of 5 pence each in the capital of Target. "Tender Offer" means an offer to be made by Wasserstein Perella & Co. Limited on behalf of Bidco to acquire the entire issued and to be issued share capital of Target, as such offer may be increased and/or revised and/or extended from time to time in accordance with the terms hereof. "Tender Offer Commencement Date" means the date on which Bidco publicly announces in accordance with the requirements of the Takeover Code its firm intention to make the Tender Offer. "Tender Offer Loan" means a Loan, the proceeds of which are used directly or indirectly (i) to purchase Target Shares pursuant to the Tender Offer, (ii) to acquire Target Shares in accordance with the provisions of Sections 428-430F of the Companies Act or (iii) to pay stamp duties and stamp duty reserve taxes in connection with the Target Shares purchased by Bidco pursuant to the Tender Offer. "Tender Offer Notes" means unsecured promissory notes made by Bidco and guaranteed, by unsecured guaranty, by Day Runner, such notes to be issued to holders of Target Shares who elect to receive such notes instead of all or part of the cash consideration to which such holders would otherwise be entitled under the Tender Offer. "Tender Offer Termination Date" means, in relation to the Tender Offer, the earliest date (as notified by the Borrower to the Administrative Agent in writing) on which all of the following have occurred: (a) all payments of cash and the issuance of any Tender Offer Notes in respect of acceptances of the Tender Offer have been made in full; (b) no further such acceptances are possible; and (c) all procedures pursuant to Sections 428 - 430(F) of the Companies Act which are capable of being implemented have been completed and all payments of cash and the issuance of any Tender Offer Notes pursuant thereto to or for the benefit of shareholders in the Target have been made in full. "Tender Offer Transaction Expenses" means the reasonable out-of-pocket costs and expenses of Day Runner and its Subsidiaries incurred in connection with the Tender Offer, including without limitation such reasonable and out-of-pocket fees and expenses of attorneys, accountants and other professional advisors to Day Runner and its Subsidiaries, and of attorneys to Wasserstein Perella & Co. Limited, for services rendered in connection with the Tender Offer. "to the best knowledge of" means, when modifying a representation, warranty or other statement of any Person, that the fact or situation described therein is known by the Person (or, in the case of a Person other than a natural Person, known by any Senior Officer of that Person) making the representation, warranty or other statement, or with the exercise of reasonable due diligence under the circumstances (in accordance with the standard of what a reasonable Person in similar circumstances would have done) would have been known by the Person (or, in the case of a Person other than a natural Person, would have been known by a Senior Officer of that Person). "type", when used with respect to any Loan, means the designation of whether such Loan is an Alternate Base Rate Loan or a Eurodollar Rate Loan. "Unconditional Date" means the date upon which the Tender Offer has become or has been declared unconditional in all respects. "Wholly-Owned Subsidiary" means a Subsidiary of any Borrower, 100% of the capital stock or other equity interest of which is owned, directly or indirectly, by any Borrower, except for director's qualifying shares required by applicable Laws. 1.2 Use of Defined Terms. Any defined term used in the plural shall refer to all members of the relevant class, and any defined term used in the singular shall refer to any one or more of the members of the relevant class. 1.3 Accounting Terms. All accounting terms not specifically defined in this Agreement shall be construed in conformity with, and all financial data required by this Agreement to be submitted by the Borrowers, or any of them, to the Administrative Agent or the Lenders, shall be prepared in conformity with, GAAP applied on a consistent basis, except as otherwise specifically prescribed herein. In the event that GAAP changes during the term of this Agreement such that the covenants contained in Sections 6.12 through 6.15, inclusive, would then be calculated in a different manner, (a) the Borrowers and the Lenders agree to negotiate in good faith to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating the Borrowers' financial condition to substantially the same criteria as were effective prior to such change in GAAP and (b) the Borrowers shall be deemed to be in compliance with the covenants contained in the aforesaid Sections if and to the extent that the Borrowers would have been in compliance therewith under GAAP as in effect immediately prior to such change, but shall have the obligation to deliver each officer's certificate set forth in Section 7.1 to the Administrative Agent and the Lenders, on the dates therein specified, with an attached detailed reconciliation demonstrating such compliance and setting forth the differences in calculation of such covenants under GAAP as amended as compared with GAAP as in effect immediately prior to such change. 1.4 Rounding. Any financial ratios required to be maintained by the Borrowers pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed in this Agreement and rounding the result up or down to the nearest number (with a round-up if there is no nearest number) to the number of places by which such ratio is expressed in this Agreement. 1.5 Exhibits and Schedules. All Exhibits and Schedules to this Agreement, either as originally existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference. 1.6 References to "Borrowers and their Subsidiaries". Any reference herein to "Borrowers and their Subsidiaries" or the like shall refer solely to the Borrowers during such times, if any, as the Borrowers shall have no Subsidiaries. 1.7 Miscellaneous Terms. The term "or" is disjunctive; the term "and" is conjunctive. The term "shall" is mandatory; the term "may" is permissive. Masculine terms also apply to females; feminine terms also apply to males. The term "including" is by way of example and not limitation. ARTICLE 2 LOANS AND LETTERS OF CREDIT 2.1 Syndicated Loans (a) Syndicated Loans. Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date through the Banking Day prior to the Maturity Date, each Lender shall, pro rata according to and limited by that Lender's Pro Rata Share of the Commitment as then in effect, make Syndicated Loans to each Borrower under the Commitment in such amounts as such Borrower may request that, after giving effect to any repayments of Loans and Letter of Credit reimbursement obligations and Tender Offer Notes made on the same Banking Day (or for which provision has been made for payment on the same Banking Day that is satisfactory to the Administrative Agent in its sole and absolute discretion) do not cause the sum of (i) the aggregate outstanding principal amount of the Loans plus (ii) the Aggregate Effective Amount of all outstanding Letters of Credit plus (iii) the Swing Line Outstandings to exceed the Commitment less the Commitment Reserve; provided, however, that at no time shall the sum with respect to a single Borrower of (i) the aggregate principal amount of the Loans to such Borrower plus (ii) the Aggregate Effective Amount of all outstanding Letters of Credit issued for the account of such Borrower plus (iii) as applicable, the Swing Line Outstandings to such Borrower exceed such Borrower's Loan Sublimit. Subject to the limitations set forth herein, each Borrower may borrow, repay and reborrow under the Commitment without premium or penalty. (b) Notice of Syndicated Loan. The applicable Borrower shall give the Administrative Agent a notice in the form set forth hereto as Exhibit H (a "Notice of Syndicated Loan") not later than (x) 9:00 A.M. (California time) on the date (which must be a Banking Day) of any requested Alternate Base Rate Loan, (y) 9:00 A.M. (California time) at least three Eurodollar Banking Days before the first day of the applicable Interest Period with respect to any Eurodollar Rate Loan and (z) 9:00 A.M. (California time) not later than four Foreign Currency Banking Days before the first day of the applicable Foreign Currency Period with respect to any Foreign Currency Loan. Such Notice of Syndicated Loan shall specify the requested (i) date of such Loan, which shall be a Banking Day in the case of an Alternate Base Rate Loan or a Eurodollar Banking Day in the case of a Eurodollar Rate Loan, (ii) type of Loan, (iii) amount of such Loan, (iv) in the case of a Eurodollar Rate Loan, the Interest Period for such Loan, (v) in the case of a Foreign Currency Loan, the Foreign Currency and the Foreign Currency Period for such Loan and (vi) whether such Loan is a Tender Offer Loan or a General Purpose Loan. A Notice of Syndicated Loan shall be irrevocable upon the Administrative Agent's receipt thereof. (c) Minimum Amounts with respect to Syndicated Loans. Each Alternate Base Rate Loan (other than a Swing Line Loan) shall be in a principal amount not less than $500,000 and in a multiple of $100,000. Each Eurodollar Rate Loan shall be in a principal amount not less than $3,000,000 and in a multiple of $1,000,000. Each Foreign Currency Loan shall be in a principal amount not less than the Foreign Currency Equivalent of $3,000,000 and in a multiple of $1,000,000. (d)Conversion/Continuation of Syndicated Eurodollar Rate Loans (i) Subject to Section 3.7, the Borrowers shall have the option (A) to convert at any time all or any part of outstanding Alternate Base Rate Loans (other than Swing Line Loans) to Eurodollar Rate Loans; (B) to convert all or any part of outstanding Eurodollar Rate Loans having Interest Periods which expire on the same date to Alternate Base Rate Loans on such expiration date; or (C) to continue all or any part of outstanding Eurodollar Rate Loans having Interest Periods which expire on the same date as Eurodollar Rate Loans, and the succeeding Interest Period of such continued Loans shall commence on such expiration date; provided, however, no such outstanding Loan may be continued as, or be converted into, a Eurodollar Rate Loan if an Event of Default or Default would occur or has occurred and is continuing. Any conversion into or continuation of Eurodollar Rate Loans under this Section 2.1(d) shall be in a minimum amount of $3,000,000 and in integral multiples of $1,000,000 in excess of that amount. (ii) To convert or continue a Loan under Section 2.1(d), the Borrowers shall deliver a Notice of Conversion/Continuation to the Administrative Agent no later than 9:00 A.M. (California time) at least three (3) Banking Days in advance of the proposed conversion/continuation date. A Notice of Conversion/Continuation shall specify (A) the proposed conversion/continuation date (which shall be a Banking Day), (B) the principal amount of the Loan to be converted/continued, (C) whether such Loan shall be converted and/or continued, and (D) in the case of a conversion to, or continuation of, a Eurodollar Rate Loan, the requested Interest Period. Promptly after receipt of a Notice of Conversion/Continuation under this Section 2.1(d)(ii), the Administrative Agent shall notify each Lender by telex or telecopy, or other similar form of transmission, of the proposed conversion/continuation. Any Notice of Conversion/Continuation for conversion to, or continuation of, a Loan shall be irrevocable, and the Borrowers shall be bound to convert or continue in accordance therewith. 2.2 Money Market Loans. (a) The Money Market Option. Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from December 22, 1998 through the last Banking Day that is at least seven (7) days prior to the Maturity Date, each Borrower may, as set forth in this Section, request the Lenders to make offers to make Money Market Loans to such Borrower, in such amounts as such Borrower may request that, after giving effect to any repayments of Loans and Letter of Credit reimbursement obligations and Tender Offer Notes made on the same Banking Day (or for which provision has been made for payment on the same Banking Day that is satisfactory to the Administrative Agent in its sole and absolute discretion), do not do not cause the sum of (i) the aggregate principal amount of the Loans plus (ii) the Aggregate Effective Amount of all outstanding Letters of Credit plus (iii) the Swing Line Outstandings to exceed the Commitment less the Commitment Reserve; provided, however, that at no time shall the sum with respect to a single Borrower of (i) the aggregate principal amount of the Loans plus (ii) the Aggregate Effective Amount of all outstanding Letters of Credit plus (iii) as applicable, the Swing Line Outstandings to such Borrower exceed such Borrower's Loan Sublimit. Each Lender may, but shall have no obligation to, make such offers and each Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When a Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit I hereto so as to be received no later than 9:00 A.M. (California time) on (x) the fifth Eurodollar Banking Day prior to the date of the Loan proposed therein, in the case of a Eurodollar Auction or (x) the Banking Day next preceding the date of the Loan proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the applicable Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first Eurodollar Auction or Absolute Rate Auction for which such change is to be effective), specifying: (i) the proposed date of the Loan, which shall be a Eurodollar Banking Day in the case of a Eurodollar Auction or a Banking Day in the case of an Absolute Rate Auction; (ii) the aggregate amount of such Loan, which shall be $3,000,000 or a larger multiple of $1,000,000; (iii) the duration of the Interest Period applicable thereto; (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate and (v) in the case of a Foreign Currency Loan, the Foreign Currency and the Foreign Currency Period for such Loan. Promptly upon transmission of such Money Market Quote Request, the applicable Borrower shall pay to the Administrative Agent a Money Market Quote Request processing fee of $1,500. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request from a Borrower, the Administrative Agent shall send to the Lenders by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit J hereto, which shall constitute an invitation by such Borrower to each Lender to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market Quotes. (1) Each Lender may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this Section (d) and must be submitted to the Administrative Agent by telex or facsimile transmission not later than (x) 11:00 A.M. (California time) on the fourth Eurodollar Banking Day prior to the proposed date of the Loan, in the case of a Eurodollar Auction or (y) 10:00 A.M. (California time) on the proposed date of the Loan, in the case of an Absolute Rate Auction; provided that Money Market Quotes submitted by the Administrative Agent in the capacity of a Lender may be submitted, and may only be submitted, if the Administrative Agent notifies the applicable Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Lenders, in the case of a Eurodollar Auction or (y) 15 minutes prior to the deadline for the other Lenders, in the case of an Absolute Rate Auction. Subject to Articles 8 and 9, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (2) Each Money Market Quote shall be substantially in the form of Exhibit K hereto and shall in any case specify: (A) the proposed date of the Loan, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (x) may be greater than or less than the Pro Rata Share of the Commitment of the quoting Lender, (x) must be $3,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Lender may be accepted, (C) in the case of a Eurodollar Auction, the margin above or below the applicable Eurodollar Rate (the "Money Market Margin") offered for such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Lender. A Money Market Quote may set forth up to five separate offers by the quoting Lender with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (3) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit K hereto or does not specify all of the information required by subsection (d)(2) above; (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(1) above. (e) Notice to Applicable Borrower. The Administrative Agent shall promptly notify the applicable Borrower of the terms of (x) any Money Market Quote submitted by a Lender that is in accordance with subsection (d) and (y) any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Lender with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent's notice to the applicable Borrower shall specify (1) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Applicable Borrower. Not later than (x) 9:00 A.M. (California time) on the third Eurodollar Banking Day prior to the proposed date of the Loan, in the case of a Eurodollar Auction or (y) 11:00 A.M. (California time) on the proposed date of the Loan, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the applicable Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first Eurodollar Auction or Absolute Rate Auction for which such change is to be effective), the applicable Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Loan"), in substantially the form attached hereto as Exhibit L, shall specify the aggregate principal amount of offers for each Interest Period that are accepted. Subject to the applicable limitation in subsection (a) of this Section, the Borrower initiating the Money Market Quote Request may accept any Money Market Quote Request in whole or in part; provided, that (1) the aggregate principal amount of each Money Market Loan may not exceed the applicable amount set forth in the related Money Market Quote Request, (2) the principal amount of each Money Market Loan must be $3,000,000 or a larger multiple of $1,000,000, (3) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the applicable Borrower may not accept any offer that is described in subsection (d)(3) or that otherwise fails to comply with the requirements of this Agreement. A Notice of Money Market Loan shall be irrevocable upon the Administrative Agent's receipt thereof. (g) Allocation by Administrative Agent. If offers are made by two or more Lenders with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Lenders as nearly as possible (in multiples of $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. (h) Notification of Lenders by Agent. Not later than (x) 9:30 A.M. (California time) on the third Eurodollar Banking Day prior to the proposed date of the Money Market LIBOR Loan, in the case of a Eurodollar Auction, or (y) 11:30 A.M. (California time) on the proposed date of the Money Market Absolute Rate Loan, in the case of an Absolute Rate Auction, the Administrative Agent shall notify each Lender that submitted a Money Market Quote with respect to such auction of the acceptance or non-acceptance of such Lender's Money Market Quote. No Lender whose Money Market Quote has been accepted pursuant to the terms hereof shall be relieved of its obligation to fund such Money Market Loan prior to the time the applicable Money Market Loan is funded. Any Lender whose Money Market Quote has been accepted shall, not later than 1:00 P.M. (California time) on the date specified for the making of such Money Market Loan, make the amount of such Money Market Loan available to the Administrative Agent in immediately available funds, for the account of the applicable Borrower. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the applicable Borrower promptly upon receipt by the Administrative Agent by depositing the same, in immediately available funds, in the Designated Deposit Account. (i) Maturity of Money Market Loans. Each Money Market Loan shall be due and payable in full on the last day of the Interest Period with respect thereto. No prepayment of any Money Market Loan shall be made without the consent of the Lender with respect to such Money Market Loan (which such consent may be given or withheld in the sole discretion of such Lender). 2.3 Foreign Currency Loans. Subject to the limitations contained in Sections 2.1 and 2.2 above, Loans in an aggregate principal amount up to the Foreign Currency Equivalent of the Foreign Currency Limitation shall be available under the Commitment, at the election of the Borrowers, in the form of one or more Foreign Currency Loans. With respect to Foreign Currency Loans: (a) All principal of, and interest on, any Foreign Currency Loan shall be payable in the same currency as that Foreign Currency Loan; (b) Each Foreign Currency Loan shall be due and payable on the earlier of (A) the last day of the related Foreign Currency Period or (B) the Maturity Date; (c) Determination of credit availability under Section 2.1(a) and 2.1(b), as of any date, if there are then any outstanding Foreign Currency Loans or Foreign Currency Letters of Credit, shall be based on the Foreign Currency Equivalent thereof as of such date; (d) The Requisite Lenders may suspend the obligation of the Lenders to make Foreign Currency Loans with respect to a particular Foreign Currency if the Requisite Lenders determine that current or reasonably expected market conditions for that Foreign Currency are unusually unstable or make it unlawful, impossible or impracticable for the Lenders to fund or hedge their obligations with respect to a Foreign Currency Loan; (e) Concurrently with any Notice of Syndicated Loan with respect to a Foreign Currency Loan, the requesting Borrower shall pay to the Administrative Agent, for the account of the Lenders pro rata in accordance with their Pro Rata Share of the Commitment, a processing fee of $2,500; (f) Unless the Administrative Agent and the Requisite Lenders otherwise consent, no more than ten (10) Foreign Currency Periods and Interest Periods with respect to Eurodollar Loans shall exist at any one time; (g) the applicable Borrower shall execute and deliver, to any Lender requesting it, a promissory note payable in the applicable Foreign Currency in a form consistent with this Agreement covering that Lender's Pro Rata Share of any Foreign Currency Loan that is a Syndicated Loan; and (h) the applicable Borrower shall execute and deliver, to any Lender to which it is an obligor pursuant to a Money Market Loan that is a Foreign Currency Loan, upon the request of such Lender, a promissory note payable in the applicable Foreign Currency in a form consistent with this Agreement. 2.4 Type of Loans. (a) If no Notice of Syndicated Loan has been made within the requisite notice period set forth in Section 2.1 prior to the end of the Interest Period for any outstanding Eurodollar Rate Loan, then on the last day of such Interest Period, such Loan shall be automatically converted into an Alternate Base Rate Loan in the same amount. (b) Each Syndicated Loan (other than a Foreign Currency Loan) shall constitute an Alternate Base Rate Loan unless properly designated as a Eurodollar Rate Loan pursuant to the provisions of Section 2.1. (c) With respect to any Eurodollar Rate Loan or Money Market LIBOR Loan, on the date which is two (2) Eurodollar Banking Days before the first day of the applicable Interest Period, the Administrative Agent shall confirm its determination of the applicable Eurodollar Rate (which determination shall be conclusive in the absence of manifest error) and promptly shall give notice of the same to the applicable Borrower and the Lenders by telephone or telecopier (and if by telephone, promptly confirmed by telecopier). (d) Nothing contained herein shall require any Lender to fund any Loan in the Designated Eurodollar Market. 2.5 Funding of Loans. (a) Promptly following receipt of a Notice of Syndicated Loan or a Notice of Money Market Loan, the Administrative Agent shall notify each Lender participating in such Loan by telephone or telecopier (and if by telephone, promptly confirmed by telecopier) of the date and type of the Loan, the applicable Foreign Currency, the applicable Interest Period or Foreign Currency Period, and that Lender's share of the Loan. (b) Not later than 11:00 A.M., California time, on the date specified for any Loan (which must be a Banking Day), each Lender participating therein shall make available its share of such Loan, in immediately available funds (if a Foreign Currency Loan, in the applicable Foreign Currency) available to the Administrative Agent at the Administrative Agent's Office. Upon satisfaction or waiver of the applicable conditions set forth in Article 8, the Administrative Agent shall (i) apply the funds so received from the Lenders to repay all Swing Line Loans (if any) then outstanding, together with interest accrued thereon, and (ii) credit the remainder of such funds to the Designated Deposit Account or disburse such remainder as may be directed by the applicable Borrower. (c) Unless the Administrative Agent shall have been notified by any Lender no later than 11:00 A.M. on the Banking Day of the proposed funding by the Administrative Agent of any Loan that such Lender does not intend to make available to the Administrative Agent such Lender's portion of the total amount of such Loan, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on the date of the Loan and the Administrative Agent may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. If the Administrative Agent has made funds available to the applicable Borrower based on such assumption and such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent promptly shall notify the applicable Borrower and the applicable Borrower shall pay such corresponding amount to the Administrative Agent. The Administrative Agent also shall be entitled to recover from such Lender interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to such Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to the daily Federal Funds Rate. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its share of the Commitments or to prejudice any rights which the Administrative Agent or the applicable Borrower may have against any Lender as a result of any default by such Lender hereunder. 2.6 Notes. (a) Each Borrower's obligation to repay the Syndicated Loans of each Lender shall be evidenced by a single note payable to the order of such Lender. Each reference in this Agreement to a "Note" or the "Notes" of such Lender shall be deemed to refer to and include any or all of such Notes, as the context may require. (b) Each Lender may, by notice to the applicable Borrower and the Administrative Agent, request that its Alternate Base Rate Loans, its Eurodollar Rate Loans or its Money Market Loans be evidenced by a separate Note. Each such Note shall be substantially in the form of Exhibit M hereto, with appropriate modifications to reflect the fact that it evidences solely the relevant kind of Loans. Unless a Lender has received a separate promissory note evidencing its share of a Foreign Currency Loan pursuant to Section 2.3, the Loans made by each Lender as part of a Foreign Currency Loan shall be evidenced by that Lender's Note, with the references therein to "Dollars" being deemed references to the Foreign Currency which is the subject of such Foreign Currency Loan. Each reference in this Agreement to a "Note" or the "Notes" of such Lender shall be deemed to refer to and include any or all of such Notes, as the context may require. 2.7 Letters of Credit. (a) Subject to the terms and conditions hereof, at any time and from time to time from the Closing Date through the Banking Date that is 30 days prior to the Maturity Date, the Issuing Lender shall issue such Letters of Credit under the Commitment as each Borrower may request by a Request for Letter of Credit; provided that (i) after giving effect to such Letter of Credit and any repayments of Loans made, or satisfaction of Obligations in respect of Letters of Credit made, on the same Banking Day, (x) the sum of (A) the aggregate principal amount outstanding under the Notes, plus (B) the Aggregate Effective Amount of all outstanding Letters of Credit, plus (C) the Swing Line Outstandings do not exceed the then applicable Commitment less the Commitment Reserve and (y) with respect to any single Borrower, the sum of (A) the aggregate principal amount of the Loans to such Borrower plus (ii) the Aggregate Effective Amount of all outstanding Letters of Credit issued for the account of such Borrower plus (iii) as applicable, the Swing Loan Outstandings to such Borrower do not exceed such Borrower's Loan Sublimit, (ii) the Aggregate Effective Amount under all outstanding Letters of Credit shall not exceed $15,000,000; and (iii) with respect to a Request for Letter of Credit with respect to a Foreign Currency Letter of Credit, the Issuing Lender shall not be obligated to issue the Foreign Currency Letter of Credit with respect to a particular Foreign Currency if and so long as the Issuing Lender determines that current or reasonably expected market conditions for that Foreign Currency are unusually unstable or would make it unlawful, impossible or impracticable for the Issuing Lender to fund or hedge its obligations under the Foreign Currency Letter of Credit. For purposes of the foregoing, the aggregate principal amount outstanding under the Notes and the Aggregate Effective Amount of outstanding Letters of Credit, to the extent consisting of Foreign Currency Loans and Foreign Currency Letters of Credit, respectively, shall be based on the Foreign Currency Equivalents thereof as of the Banking Day immediately preceding the date of the Request for Letter of Credit. Each Letter of Credit shall be in a form acceptable to the Issuing Lender. Unless all the Lenders otherwise consent in a writing delivered to the Administrative Agent, the term of any Letter of Credit shall not exceed one (1) year (subject to extension in accordance with the terms thereof; provided that all conditions precedent to issuance of a Letter of Credit are satisfied in connection with any such extension) or extend beyond the Maturity Date. As of the Closing Date, each Existing Letter of Credit shall constitute, for all purposes of this Agreement and the other Loan Documents, a Letter of Credit issued and outstanding hereunder and shall be deemed to be issued hereunder on the Closing Date. (b) Each Request for Letter of Credit shall be submitted to the Issuing Lender, with a copy to the Administrative Agent, at least two (2) Banking Days prior to the date upon which the related Letter of Credit is proposed to be issued. The Administrative Agent shall promptly notify the Issuing Lender whether such Request for Letter of Credit, and the issuance of a Letter of Credit pursuant thereto, conforms to the requirements of this Agreement. Upon issuance of a Letter of Credit, the Issuing Lender shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify the Lenders, of the amount and terms thereof. (c) Upon the issuance of a Letter of Credit, each Lender shall be deemed to have purchased a pro rata participation in such Letter of Credit from the Issuing Lender in an amount equal to that Lender's Pro Rata Share of the maximum amount available for drawing thereunder. Without limiting the scope and nature of each Lender's participation in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed by Borrowers for any payment required to be made by the Issuing Lender under any Letter of Credit, each Lender shall, pro rata according to its Pro Rata Share, reimburse the Issuing Lender through the Administrative Agent promptly upon demand for the amount of such payment. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the applicable Borrower to reimburse the Issuing Lender for the amount of any payment made by the Issuing Lender under any Letter of Credit together with interest as hereinafter provided. (d) Each Borrower agrees to pay to the Issuing Lender through the Administrative Agent an amount equal to any payment made by the Issuing Lender with respect to each Letter of Credit with respect to such Borrower within one (1) Banking Day after demand made by the Issuing Lender therefor, together with interest on such amount from the date of any payment made by the Issuing Lender at the rate applicable to Alternate Base Rate Loans for two (2) Banking Days after demand and thereafter at the Default Rate. The principal amount of any such payment shall be used to reimburse the Issuing Lender for the payment made by it under the Letter of Credit and, to the extent that the Lenders have not reimbursed the Issuing Lender pursuant to Section 2.7(c), the interest amount of any such payment shall be for the account of the Issuing Lender. Each Lender that has reimbursed the Issuing Lender pursuant to Section 2.7(c) for its Pro Rata Share of any payment made by the Issuing Lender under a Letter of Credit shall thereupon acquire a pro rata participation, to the extent of such reimbursement, in the claim of the Issuing Lender against the applicable Borrower for reimbursement of principal and interest under this Section 2.7(d) and shall share, in accordance with that pro rata participation, in any principal payment made by the applicable Borrower with respect to such claim and in any interest payment made by the applicable Borrower (but only with respect to periods subsequent to the date such Lender reimbursed the Issuing Lender) with respect to such claim. (e) Each Borrower may, pursuant to a Notice of Syndicated Loan, request that Loans be made pursuant to Section 2.1(a) to provide funds for the payment required by Section 2.7(d) and, for this purpose, the conditions precedent set forth in Article 8 shall not apply. The proceeds of such Loans shall be paid directly to the Issuing Lender to reimburse it for the payment made by it under the Letter of Credit. (f) If a Borrower fails to make the payment required by Section 2.7(d) within the time period therein set forth, in lieu of the reimbursement to the Issuing Lender under Section 2.7(c) the Issuing Lender may (but is not required to), without notice to or the consent of such Borrower, instruct the Administrative Agent to cause Loans to be made by the Lenders under the Commitment in an aggregate amount equal to the amount paid by the Issuing Lender with respect to that Letter of Credit and, for this purpose, the conditions precedent set forth in Article 8 shall not apply. The proceeds of such Loans shall be paid directly to the Issuing Lender to reimburse it for the payment made by it under the Letter of Credit. (g) The issuance of any supplement, modification, amendment, renewal, or extension to or of any Letter of Credit shall be treated in all respects the same as the issuance of a new Letter of Credit. (h) The obligation of each Borrower to reimburse to the Issuing Lender the amount of any payment made by the Issuing Lender under any Letter of Credit shall be absolute, unconditional, and irrevocable. Without limiting the foregoing, each Borrower's obligations shall not be affected by any of the following circumstances: (i) any lack of validity or enforceability prior to its stated expiration date of the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto; (ii) any amendment or waiver of or any consent to departure from the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, with or without the consent of such Borrower; (iii) the existence of any claim, setoff, defense, or other rights which such Borrower may have at any time against the Issuing Lender, the Administrative Agent or any Lender, any beneficiary of the Letter of Credit (or any persons or entities for whom any such beneficiary may be acting) or any other Person, whether in connection with the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, or any unrelated transactions; (iv) any demand, statement, or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) the existence, character, quality, quantity, condition, value or delivery of any Property purported to be represented by documents presented in connection with any Letter of Credit or any difference between any such Property and the character, quality, quantity, condition, or value of such Property as described in such documents; (vi) the time, place, manner, order or contents of shipments or deliveries of Property as described in documents presented in connection with any Letter of Credit or the existence, nature and extent of any insurance relative thereto; (vii) the solvency or financial responsibility of any party issuing any documents in connection with a Letter of Credit; (viii) any failure or delay in notice of shipments or arrival of any Property; (ix) any error in the transmission of any message relating to a Letter of Credit,or any delay or interruption in any such message; (x) any error, neglect or default of any correspondent of the Issuing Lender in connection with a Letter of Credit; (xi) any consequence arising from acts of God, war, insurrection, civil unrest, disturbances, labor disputes, emergency conditions or other causes beyond the control of the Issuing Lender; (xii) the form, accuracy, genuineness or legal effect of any contract or document referred to in any document submitted to the Issuing Lender in connection with a Letter of Credit; and (xiii) where the Issuing Lender has acted in good faith and observed general banking usage, any other circumstances whatsoever. (i) The Issuing Lender shall be entitled to the protection accorded to the Administrative Agent pursuant to Section 10.6. (j) The Uniform Customs and Practice for Documentary Credits, as published in its most current version by the International Chamber of Commerce, shall be deemed a part of this Section and shall apply to all Letters of Credit to the extent not inconsistent with applicable Law. (k) No action taken or omitted in good faith by the Issuing Lender under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall put such Issuing Bank under any resulting liability to any Lender, any Borrower, any of the Borrowers' Subsidiaries or, so long as it is not issued in violation of Section 2.7(a), relieve any Lender of its obligations hereunder to such Issuing Lender. Solely as between the Issuing Lender and the Lenders, in determining whether to pay under any Letter of Credit, the Issuing Lender shall have no obligation to the Lenders other than to confirm that any documents required to be delivered under a Letter of Credit appear to have been delivered and that they appear on their face to comply with the requirements of such Letter of Credit. 2.8 Voluntary Reduction of Commitments. Each Borrower shall have the right, at any time and from time to time, without penalty or charge, upon at least five (5) Banking Days' prior written notice by a Responsible Official of such Borrower to the Administrative Agent, voluntarily to reduce, permanently and irrevocably, in aggregate principal amounts in an integral multiple of $1,000,000 but not less than $5,000,000, or to terminate, all or a portion of the then undisbursed portion of the Commitments. The Administrative Agent shall promptly notify the Lenders of any reduction or termination of the Commitments under this Section. 2.9 Swing Line Loans. (a) The Swing Line Lender shall from time to time from the Closing Date through the day prior to the Maturity Date make Swing Line Loans to Day Runner in such amounts as Day Runner may request, provided that (a) after giving effect to such Swing Line Loan, the Swing Line Outstandings do not exceed $10,000,000, (b) without the consent of all of the Lenders, no Swing Line Loan may be made during the continuation of a Default or an Event of Default. Day Runner may borrow, repay and reborrow under this Section. Unless notified to the contrary by the Swing Line Lender, borrowings under the Swing Line may be made in amounts which are integral multiples of $100,000 upon telephonic request by a Responsible Official of Day Runner made to the Administrative Agent not later than 1:00 P.M., California time, on the Banking Day of the requested borrowing (which telephonic request shall be promptly confirmed in writing by telecopier by transmission of a Notice of Swingline Loan in the form attached hereto as Exhibit N). Promptly after receipt of such a request for borrowing, the Administrative Agent shall provide telephonic verification to the Swing Line Lender that, after giving effect to such request, availability for Loans will exist under Section 2.1(a) (and such verification shall be promptly confirmed in writing by telecopier). Unless notified to the contrary by the Swing Line Lender, each repayment of a Swing Line Loan shall be in an amount which is an integral multiple of $100,000. If Day Runner instructs the Swing Line Lender to debit its demand deposit account at the Swing Line Lender in the amount of any payment with respect to a Swing Line Loan, or the Swing Line Lender otherwise receives repayment, after 3:00 P.M., California time, on a Banking Day, such payment shall be deemed received on the next Banking Day. The Swing Line Lender shall promptly notify the Administrative Agent of the Swing Loan Outstandings each time there is a change therein. (a) Swing Line Loans shall bear interest at a fluctuating rate per annum equal to the Alternate Base Rate. Interest shall be payable on such dates, not more frequent than quarterly, as may be specified by the Swing Line Lender and in any event on the Maturity Date. The Swing Line Lender shall be responsible for invoicing Day Runner for such interest. The interest payable on Swing Line Loans is solely for the account of the Swing Line Lender (subject to clause (d) below). (b) Each Swing Line Loan shall be repayable on the earlier of (i) ten (10) Banking Days after such Loan is made, (ii) on demand made by the Swing Line Lender and (iii) the Maturity Date. (c) Upon the making of a Swing Line Loan, each Lender shall be deemed to have purchased from the Swing Line Lender a participation therein in an amount equal to that Lender's Pro Rata Share of the Commitment times the amount of the Swing Line Loan. Within one (1) Banking Day after demand made by the Swing Line Lender, each Lender shall, according to its Pro Rata Share of the Commitment, promptly provide to the Swing Line Lender its purchase price therefor in an amount equal to its participation therein. The obligation of each Lender to so provide its purchase price to the Swing Line Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default or Event of Default; provided that no Lender shall be obligated to purchase its Pro Rata Share of (i) Swing Line Loans to the extent that Swing Line Outstandings are in excess of $10,000,000 and (ii) any Swing Line Loan made (absent the consent of all of the Lenders) during the continuation of an Event of Default. Each Lender that has provided to the Swing Line Lender the purchase price due for its participation in Swing Line Loans shall thereupon acquire a pro rata participation, to the extent of such payment, in the claim of the Swing Line Lender against Day Runner for principal and interest and shall share, in accordance with that pro rata participation, in any principal payment made by Day Runner with respect to such claim and in any interest payment made by Day Runner (but only with respect to periods subsequent to the date such Lender paid the Swing Line Lender its purchase price) with respect to such claim. (d) Upon any demand for payment of the Swing Line Outstandings by the Swing Line Lender (unless Day Runner has made other arrangements reasonably acceptable to the Swing Line Lender to reduce the Swing Line Outstandings to $0), Day Runner shall request a Loan pursuant to Section 2.1(a) sufficient to repay all Swing Line Outstandings (and, for this purpose, Section 2.1(c) shall not apply). In each case, the Administrative Agent shall automatically provide the responsive Loans made by each Lender to the Swing Line Lender (which the Swing Line Lender shall then apply to the Swing Line Outstandings). In the event that Day Runner fails to request a Loan within the time specified by Section 2.1 on any such date, the Administrative Agent may, but is not required to, without notice to or the consent of any Borrower, cause Loans to be made by the Lenders under the Commitment in amounts which are sufficient to reduce the Swing Line Outstandings as required above. The conditions precedent set forth in Article 8 shall not apply to Loans to be made by the Lenders pursuant to the three preceding sentences. The proceeds of such Loans shall be paid directly to the Swing Line Lender for application to the Swing Line Outstandings. 2.10 Guaranty. The Obligations shall be guaranteed pursuant to the Subsidiary Guaranty and the Borrower Guaranty. ARTICLE 3 PAYMENTS AND FEES 3.1 Interest. (a) Interest shall be payable on the outstanding principal amount of each Loan from the date thereof until payment in full is made and shall accrue and be payable at the rates set forth or provided for herein before and after Default, before and after maturity, before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law, with interest on overdue interest at the Default Rate to the fullest extent permitted by applicable Laws. (b) Interest accrued on each Alternate Base Rate Loan shall be due and payable on each Quarterly Payment Date. Except as otherwise provided in Section 3.9, the unpaid principal amount of any Alternate Base Rate Loan shall bear interest at a fluctuating rate per annum equal to the Alternate Base Rate plus the Applicable Base Rate Margin. Each change in the interest rate under this Section 3.1(b) due to a change in the Alternate Base Rate shall take effect simultaneously with the corresponding change in the Alternate Base Rate. Each change in the interest rate under this Section 3.1(b) due to a change in the Applicable Base Rate Margin shall take effect simultaneously with the corresponding change in the Applicable Base Rate Margin. (c) Interest accrued on each Eurodollar Rate Loan which is for a term of three months or less shall be due and payable on the last day of the related Interest Period. Interest accrued on each other Eurodollar Rate Loan shall be due and payable on the date which is three months after the date such Eurodollar Rate Loan was made (and, in the event that the applicable Interest Period is longer than six months, every three months thereafter through the last day of the Interest Period) and on the last day of the related Interest Period. Except as otherwise provided in Section 3.9, the unpaid principal amount of any Eurodollar Rate Loan shall bear interest at a rate per annum equal to the Adjusted Eurodollar Rate for that Eurodollar Rate Loan plus the Applicable Eurodollar Rate Margin. Each change in the interest rate under this Section 3.1(c) due to a change in the Eurodollar Reserve Percentage shall take effect simultaneously with the corresponding change in the Eurodollar Reserve Percentage. Each change in the interest rate under this Section 3.1(c) due to a change in the Applicable Eurodollar Rate Margin shall take effect simultaneously with the corresponding change in the Applicable Eurodollar Rate Margin. (d) Subject to Section 3.9, each Money Market LIBOR Loan (except for such Loans that are Foreign Currency Loans) shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Adjusted Eurodollar Rate for such Interest Period plus (or minus) the Money Market Margin quoted by the Lender making such Loan in accordance with Section 2.2. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. (e) Subject to Section 3.9, each Money Market Absolute Rate Loan (except for such Loans that are Foreign Currency Loans) shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Lender making such Loan in accordance with Section 2.2. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. (f) Interest accrued on each Foreign Currency Loan which is for a term of three months or less shall be due and payable on the last day of the related Foreign Currency Period. Interest accrued on each other Foreign Currency Loan shall be due and payable on the date which is three months after the date such Foreign Currency Loan was made (and, in the event that the applicable Foreign Currency Period is longer than six months, every three months thereafter through the last day of the Foreign Currency Period) and on the last day of the related Foreign Currency Period. Subject to Section 3.9, each Foreign Currency Loan shall bear interest at a rate per annum equal to the Foreign Currency Rate for that Foreign Currency Loan plus the Applicable Eurodollar Rate Margin. 3.2 Principal. (a) If not sooner paid, the principal Indebtedness evidenced by the Notes shall be payable as follows: (i) the amount, if any, by which the sum of (A) the principal Indebtedness evidenced by the Notes plus (B) the Aggregate Effective Amount of all outstanding Letters of Credit plus (C) the Swing Line Outstandings at any time exceeds the then applicable Commitment (as adjusted pursuant to the definition thereof) shall be payable immediately (with the aggregate principal amount outstanding under the Notes and Aggregate Effective Amount of outstanding Letters of Credit, to the extent consisting of Foreign Currency Loans and Foreign Currency Letters of Credit, respectively, being based on the Foreign Currency Equivalents thereof as of the last Banking Day in each calendar month); and (ii) each Money Market Loan shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable thereto; and (iii) the principal Indebtedness evidenced by the Notes shall in any event be payable on the Maturity Date. (b) The principal Indebtedness evidenced by the Notes may, at any time and from time to time, voluntarily be paid or prepaid in whole or in part without premium or penalty, except that with respect to any voluntary prepayment under this subsection, (i) any partial prepayment shall be not less than $3,000,000, and shall be an integral multiple of $1,000,000, in the case of any Eurodollar Rate Loan, (ii) any partial prepayment shall be not less than $500,000, and shall be an integral multiple of $100,000, in the case of any Alternate Base Rate Loan other than a Swing Line Loan, (iii) any partial prepayment shall be not less than $100,000 in the case of any Swing Line Loan, (iv) the Administrative Agent shall have received written notice of any prepayment by 9:00 A.M. California time on the date that is one (1) Banking Day before the date of prepayment (which must be a Banking Day) in the case of an Alternate Base Rate Loan, and, in the case of a Eurodollar Rate Loan, three (3) Banking Days before the date of prepayment, which notice shall identify the date and amount of the prepayment and the Loan(s) being prepaid, (v) each prepayment of principal on any Eurodollar Rate Loan shall be accompanied by payment of interest accrued to the date of payment on the amount of principal paid and (vi) any payment or prepayment of all or any part of any Eurodollar Rate Loan or Money Market LIBOR Loan on a day other than the last day of the applicable Interest Period shall be subject to Sections 3.7 and 3.8. 3.3 Commitment Fee. From the Closing Date through the Maturity Date, the Borrowers shall pay to the Administrative Agent, for the ratable accounts of the Lenders pro rata according to their Pro Rata Share of the Commitments, a commitment fee equal to the sum of (a) the daily Applicable Commitment Fee Rate per annum times the average daily amount by which the Commitment exceeds the sum of (i) the average daily principal Indebtedness constituting Syndicated Loans evidenced by the Notes plus (ii) the average daily Aggregate Effective Amount of all outstanding Letters of Credit. The average daily principal indebtedness evidenced by the Notes, in the case of Foreign Currency Loans, and the average daily Aggregate Effective Amount of outstanding Letters of Credit, in the case of Foreign Currency Letters of Credit, shall be determined for this purpose for each calendar month of each Fiscal Quarter based on the Foreign Currency Equivalents thereof as of the last Banking Day in each such calendar month. The commitment fee shall be payable quarterly in arrears on each Quarterly Payment Date and on the Maturity Date. 3.4 Administrative Agent's Fees. The Borrowers shall pay to the Administrative Agent an arrangement fee and an agency fee in such amounts and at such times as heretofore agreed upon by letter agreement dated September 4, 1998 between Day Runner and the Administrative Agent. The arrangement fee and the agency fee paid to the Administrative Agent are solely for its own account and are nonrefundable. 3.5 Letter of Credit Fees. With respect to each Letter of Credit, each Borrower shall pay the following fees: (a) to the Administrative Agent for the ratable account of the Lenders in accordance with their Pro Rata Share of the Commitment, a standby letter of credit fee in an amount equal to the Applicable Standby Letter of Credit Fee as of the date of the issuance of such Letter of Credit times the face amount of such Standby Letter of Credit through the termination or expiration of such Standby Letter of Credit, payable quarterly in advance, which the Administrative Agent shall promptly pay to the Lenders; and (b) concurrently with each issuance, negotiation, drawing or amendment of each Letter of Credit, to the Issuing Lender for the sole account of the Issuing Lender, issuance, negotiation, drawing and amendment fees in the amounts set forth from time to time as the Issuing Lender's published scheduled fees for such services. All fees with respect to a Foreign Currency Letter of Credit shall be payable in Dollars based on the Foreign Currency Equivalent as of the Banking Day immediately preceding the date of the Request for Letter of Credit. Each of the fees payable with respect to Letters of Credit under this Section is earned when due and is nonrefundable. 3.6 Increased Commitment Costs. If any Lender shall determine in good faith that the introduction after the Closing Date of any applicable law, rule, regulation or guideline regarding capital adequacy, or any change therein or any change in the interpretation or administration thereof by any central bank or other Governmental Agency charged with the interpretation or administration thereof, or compliance by such Lender (or its Eurodollar Lending Office) or any corporation controlling such Lender, with any request, guideline or directive regarding capital adequacy (whether or not having the force of Law) of any such central bank or other authority not imposed as a result of such Lender's or such corporation's failure to comply with any other Laws, affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy and such Lender's desired return on capital) determines in good faith that the amount of such capital is increased, or the rate of return on capital is reduced, in an amount deemed material by such Lender in its sole discretion, as a consequence of its obligations under this Agreement, then, within five (5) Banking Days after demand of such Lender, the Borrowers shall pay to such Lender, from time to time as specified in good faith by such Lender, additional amounts sufficient to compensate such Lender in light of such circumstances, to the extent reasonably allocable to such obligations under this Agreement; provided, that, before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such designation would avoid the need for, or materially reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. provided that such Borrower shall not be obligated to pay any such amount which arose prior to the date which is one hundred and eighty (180) days preceding the date of such demand or is attributable to periods prior to the date which is one hundred and eighty (180) days preceding the date of such demand. Each Lender's determination of such amounts shall be conclusive in the absence of manifest error. 3.7 Eurodollar Costs and Related Matters. (a) In the event that any Governmental Agency imposes on any Lender any reserve or comparable requirement (including any emergency, supplemental or other reserve) with respect to the Eurodollar Obligations hereunder of that Lender, the Borrowers shall pay that Lender within five (5) Banking Days after demand all amounts necessary to compensate such Lender (determined as though such Lender's Eurodollar Lending Office had funded 100% of its Eurodollar Rate Loan in the Designated Eurodollar Market) in respect of the imposition of such reserve requirements. The Lender's determination of such amount shall be conclusive in the absence of manifest error. (b) If, after the date hereof, the existence or occurrence of any Special Eurodollar Circumstance: (1) shall subject any Lender or its Eurodollar Lending Office to any tax, duty or other charge or cost with respect to any Eurodollar Rate Loan or any Money Market LIBOR Loan, any of its Notes evidencing Eurodollar Rate Loans or Money Market LIBOR Loans or its obligation to make Eurodollar Rate Loans or Money Market LIBOR Loans, or shall change the basis of taxation of payments to any Lender attributable to the principal of or interest on any Eurodollar Rate Loan or any Money Market LIBOR Loan or any other amounts due under this Agreement in respect of any Eurodollar Rate Loan or any Money Market LIBOR Loan, any of its Notes evidencing Eurodollar Rate Loans or Money Market LIBOR Loans or its obligation to make Eurodollar Rate Loans or Money Market LIBOR Loans, excluding (i) taxes imposed on or measured in whole or in part by its overall net income or net worth by any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Eurodollar Lending Office and (ii) any withholding taxes imposed by the United States of America for any period with respect to which it has failed to provide the Borrowers with the appropriate form or forms required by Section 11.21, to the extent such forms are then required by applicable Laws; (2) shall impose, modify or deem applicable any reserve not applicable or deemed applicable on the date hereof (including any reserve imposed by the Board of Governors of the Federal Reserve System, special deposit, capital or similar requirements against assets of, deposits with or for the account of, or credit extended by, any Lender or its Eurodollar Lending Office); or (3) shall impose on any Lender or its Eurodollar Lending Office or the Designated Eurodollar Market any other condition affecting any Eurodollar Rate Loan or Money Market LIBOR Loan, any of its Notes evidencing Eurodollar Rate Loans or Money Market LIBOR Loans, its obligation to make Eurodollar Rate Loans or this Agreement, or shall otherwise affect any of the same; and the result of any of the foregoing, as determined in good faith by such Lender, increases the cost in a material amount to such Lender or its Eurodollar Lending Office of making or maintaining any Eurodollar Rate Loan or Money Market LIBOR Loan or in respect of any Eurodollar Rate Loan or Money Market LIBOR Loan, any of its Notes evidencing Eurodollar Rate Loans or Money Market LIBOR Loans or its obligation to make Eurodollar Rate Loans or reduces the amount of any sum received or receivable by such Lender or its Eurodollar Lending Office with respect to any Eurodollar Rate Loan or any Money Market LIBOR Loan, any of its Notes evidencing Eurodollar Rate Loans or Money Market LIBOR Loans or its obligation to make Eurodollar Rate Loans or Money Market LIBOR Loans (assuming such Lender's Eurodollar Lending Office had funded 100% of its Eurodollar Rate Loan or Money Market LIBOR Loan in the Designated Eurodollar Market), then, within five (5) Banking Days after demand by such Lender (with a copy to the Administrative Agent), the applicable Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction (determined as though such Lender's Eurodollar Lending Office had funded 100% of its Eurodollar Rate Loan or Money Market LIBOR Loan in the Designated Eurodollar Market); provided, that the applicable Borrower shall not be obligated to pay any such amount which arose prior to the date which is one hundred and eighty (180) days preceding the date of such demand or is attributable to periods prior to the date which is one hundred and eighty (180) days preceding the date of such demand. A statement of any Lender claiming compensation under this subsection shall be conclusive in the absence of manifest error. (c) If, after the date hereof, the existence or occurrence of any Special Eurodollar Circumstance shall, in the good faith opinion of any Lender, make it unlawful or impossible for such Lender or its Eurodollar Lending Office to make, maintain or fund its portion of any Eurodollar Rate Loan or Money Market LIBOR Loan, or materially restrict the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the Designated Eurodollar Market, or to determine or charge interest rates based upon the Eurodollar Rate, and such Lender shall so notify the Administrative Agent, then such Lender's obligation to make Eurodollar Rate Loans shall be suspended for the duration of such illegality or impossibility and the Administrative Agent forthwith shall give notice thereof to the other Lenders and the Borrowers. Upon receipt of such notice, the outstanding principal amount of such Lender's Eurodollar Rate Loans and Money Market LIBOR Loans, together with accrued interest thereon, automatically shall be converted to Alternate Base Rate Loans on either (1) the last day of the Eurodollar Period(s) applicable to such Loans if such Lender may lawfully continue to maintain and fund such Loans to such day(s) or (2) immediately if such Lender may not lawfully continue to fund and maintain such Loans to such day(s), provided that in such event the conversion shall not be subject to payment of a prepayment fee under Section 3.7(e). Each Lender agrees to endeavor promptly to notify the applicable Borrower of any event of which it has actual knowledge, occurring after the Closing Date, which will cause that Lender to notify the Administrative Agent under this Section, and agrees to designate a different Eurodollar Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be disadvantageous to such Lender. In the event that any Lender is unable, for the reasons set forth above, to make, maintain or fund its portion of any Eurodollar Rate Loan, such Lender shall fund such amount as an Alternate Base Rate Loan for the same period of time, and such amount shall be treated in all respects as an Alternate Base Rate Loan. Any Lender whose obligation to make Eurodollar Rate Loans has been suspended under this Section shall promptly notify the Administrative Agent and the Borrowers of the cessation of the Special Eurodollar Circumstance which gave rise to such suspension. (d) If, with respect to any proposed Eurodollar Rate Loan or Money Market LIBOR Loan: (1) the Administrative Agent reasonably determines that, by reason of circumstances affecting the Designated Eurodollar Market generally that are beyond the reasonable control of the Lenders, deposits in Dollars (in the applicable amounts) are not being offered to any Lender in the Designated Eurodollar Market for the applicable Interest Period; or (2) the Requisite Lenders advise the Administrative Agent that the Eurodollar Rate as determined by the Administrative Agent (i) does not represent the effective pricing to such Lenders for deposits in Dollars in the Designated Eurodollar Market in the relevant amount for the applicable Interest Period, or (ii) will not adequately and fairly reflect the cost to such Lenders of making the applicable Eurodollar Rate Loans or Money Market LIBOR Loans; then the Administrative Agent forthwith shall give notice thereof to the Borrowers and the Lenders, whereupon until the Administrative Agent notifies the Borrowers that the circumstances giving rise to such suspension no longer exist, the obligation of the Lenders to make any future Eurodollar Rate Loans shall be suspended. (e) Upon payment of any Eurodollar Rate Loan or Money Market LIBOR Loan (including as the result of a conversion required under Section 3.7(c)) on a day other than the last day in the applicable Interest Period (whether voluntarily, involuntarily, by reason of acceleration, or otherwise), or upon the failure of a Borrower to borrow on the date or in the amount specified for a Eurodollar Rate Loan in any Notice of Syndicated Loan or for a Money Market LIBOR Loan in any Notice of Money Market Loan, such Borrower shall pay to the appropriate Lender within five (5) Banking Days after demand a fee (determined as though 100% of the Eurodollar Rate Loan or Money Market LIBOR Loan, as the case may be, had been funded in the Designated Eurodollar Market) equal to the sum of: (1) the present value of the excess, if any, of (i) the additional interest that would have accrued on the amount prepaid or not borrowed at the applicable Eurodollar Rate if that amount had remained or been outstanding through the last day of the applicable Interest Period over (ii) the interest that the Lender could recover by placing such amount on deposit in the Designated Eurodollar Market for a period beginning on the date of the prepayment or failure to borrow and ending on the last day of the applicable Interest Period (or, if no deposit rate quotation is available for such period, for the most comparable period for which a deposit rate quotation may be obtained), discounted at the Federal Funds Rate; plus (2) all out-of-pocket expenses incurred by the Lender reasonably attributable to such payment, prepayment or failure to borrow. Each Lender's determination of the amount of any prepayment fee payable under this Section shall be conclusive in the absence of manifest error. (f) Each Lender agrees to endeavor promptly to notify the Borrowers of any event of which it has actual knowledge, occurring after the Closing Date, which will entitle such Lender to compensation pursuant to clause (a) or clause (b) of this Section, and agrees to designate a different Eurodollar Lending Office if such designation will avoid the need for or reduce the amount of such compensation and will not, in the good faith judgment of such Lender, otherwise be disadvantageous to such Lender. Any request for compensation by a Lender under this Section shall set forth the basis upon which it has been determined that such an amount is due from the applicable Borrower, a calculation of the amount due, and a certification that the corresponding costs have been incurred by the Lender. 3.8 Foreign Currency Costs and Related Matters. (a) In the event that any Governmental Agency imposes on any Lender any reserve or comparable requirement with respect to the Foreign Currency Loans hereunder of that Lender, the Borrowers shall pay that Lender within five (5) Banking Days after demand all amounts necessary to compensate such Lender in respect of the imposition of such requirements. The Lender's determination of such amount shall be conclusive in the absence of manifest error. (b) If, after the date hereof, the adoption of any Law or any change in the interpretation of administration of any Law (including, without limitation, the imposition of any currency exchange control or restriction): (1) shall subject any Lender or its Applicable Lending Office to any tax, duty or other charge or cost with respect to any Foreign Currency Loan, any of its Notes evidencing Foreign Currency Loans or its obligation to make Foreign Currency Loans, or shall change the basis of taxation of payments to any Lender attributable to the principal of or interest on any Foreign Currency Loan or any other amounts due under this Agreement in respect of any Foreign Currency Loan, any of its Notes evidencing Foreign Currency Loans or its obligation to make Foreign Currency Loans; (2) shall impose on any Lender or its Applicable Lending Office or the Designated Foreign Currency Market any other condition affecting any Foreign Currency Loan, any of its Notes evidencing Foreign Currency Loans, or its obligation to make Foreign Currency Loans or this Agreement, or shall otherwise affect any of the same; and the result of any of the foregoing, as determined in good faith by such Lender, increases the cost to such Lender or its Applicable Lending Office, in an amount deemed by it to be material, of making or maintaining any Foreign Currency Loan or in respect of any Foreign Currency Loan, any of its Notes evidencing Foreign Currency Loans or its obligation to make Foreign Currency Loans or reduces the amount of any sum received or receivable by such Lender or its Applicable Lending Office with respect to any Foreign Currency Loan, any of its Notes evidencing Foreign Currency Loans or its obligation to make Foreign Currency Loans, then, within five (5) Banking Days after demand by such Lender (with a copy to the Administrative Agent), the applicable Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction; provided, that the applicable Borrower shall not be obligated to pay any such amount which arose prior to the date which is one hundred and eighty (180) days preceding the date of such demand or is attributable to periods prior to the date which is one hundred and eighty (180) days preceding the date of such demand. A statement of any Lender claiming compensation under this subsection shall be conclusive in the absence of manifest error. (c) If, after the date hereof, the adoption of any Law or any change in the interpretation of administration of any Law (including, without limitation, the imposition of any currency exchange control or restriction) shall, in the good faith opinion of any Lender, make it unlawful or impracticable for such Lender or its Applicable Lending Office to make, maintain or fund its portion of any Foreign Currency Loan, or materially restrict the authority of such Lender to purchase or sell, or to take deposits of, the relevant Foreign Currency in the Designated Foreign Currency Market, or to determine or charge interest rates based upon the Foreign Currency Rate, and such Lender shall so notify the Administrative Agent, then such Lender's obligation to make Foreign Currency Rate Loans shall be suspended for the duration of such illegality or impracticability and the Administrative Agent forthwith shall give notice thereof to the other Lenders and the Borrowers. Upon receipt of such notice, the outstanding principal amount of such Lender's Foreign Currency Loans shall be repaid, together with accrued interest thereon, on either (1) the last day of the Foreign Currency Period(s) applicable to such Loans if such Lender may lawfully continue to maintain and fund such Loans to such day(s) or (2) immediately if such Lender may not lawfully continue to fund and maintain such Loans to such day(s), provided that in such event the conversion shall not be subject to payment of a prepayment fee under Section 3.7(f). Each Lender agrees to endeavor promptly to notify the applicable Borrower of any event of which it has actual knowledge, occurring after the Closing Date, which will cause that Lender to notify the Administrative Agent under this Section, and agrees to designate a different Applicable Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be disadvantageous to such Lender. In the event that any Lender is unable, for the reasons set forth above, to make, maintain or fund its portion of any Foreign Currency Rate Loan, such Lender shall fund such amount as an Alternate Base Rate Loan for the same period of time, and such amount shall be treated in all respects as an Alternate Base Rate Loan. Any Lender whose obligation to make Foreign Currency Rate Loans has been suspended under this Section shall promptly notify the Administrative Agent and the Borrowers of the cessation of the Special Foreign Currency Circumstance which gave rise to such suspension. (d) If, with respect to any proposed Foreign Currency Loan: (1) the Administrative Agent reasonably determines that, by reason of circumstances affecting the Designated Foreign Currency Market generally that are beyond the reasonable control of the Lenders, deposits in the applicable Foreign Currency (in the applicable amounts and for the applicable periods) are not being offered to any Lender in the Designated Foreign Currency Market for the applicable Interest Period; or (2) the Requisite Lenders advise the Administrative Agent that the Foreign Currency Rate as determined by the Administrative Agent (i) does not represent the effective pricing to such Lenders for deposits in the applicable Foreign Currency in the Designated Foreign Currency Market in the relevant amount for the applicable Interest Period, or (ii) will not adequately and fairly reflect the cost to such Lenders of making the applicable Foreign Currency Loans; then the Administrative Agent forthwith shall give notice thereof to the Borrowers and the Lenders, whereupon until the Administrative Agent notifies the Borrowers that the circumstances giving rise to such suspension no longer exist, the obligation of the Lenders to make any future Foreign Currency Loans shall be suspended. (e) Upon payment of any Foreign Currency Loan (including as the result of a conversion required under Section 3.8(c)) on a day other than the last day in the applicable Interest Period (whether voluntarily, involuntarily, by reason of acceleration, or otherwise), or upon the failure of a Borrower to borrow on the date or in the amount specified for a Foreign Currency Rate Loan in any Notice of Syndicated Loan or Notice of Money Market Loan, such Borrower shall pay to the appropriate Lender within five (5) Banking Days after demand a fee equal to the sum of: (1) the present value of the excess, if any, of (i) the additional interest that would have accrued on the amount prepaid or not borrowed at the applicable Foreign Currency Rate if that amount had remained or been outstanding through the last day of the applicable Interest Period over (ii) the interest that the Lender could recover by placing such amount on deposit in the Designated Foreign Currency Market for a period beginning on the date of the prepayment or failure to borrow and ending on the last day of the applicable Interest Period (or, if no deposit rate quotation is available for such period, for the most comparable period for which a deposit rate quotation may be obtained), discounted at the Federal Funds Rate; plus (2) all out-of-pocket expenses incurred by the Lender reasonably attributable to such payment, prepayment or failure to borrow. Each Lender's determination of the amount of any prepayment fee payable under this Section shall be conclusive in the absence of manifest error. (f) Each Lender agrees to endeavor promptly to notify the Borrowers of any event of which it has actual knowledge, occurring after the Closing Date, which will entitle such Lender to compensation pursuant to clause (a) or clause (b) of this Section, and agrees to designate a different Applicable Lending Office if such designation will avoid the need for or reduce the amount of such compensation and will not, in the good faith judgment of such Lender, otherwise be disadvantageous to such Lender. Any request for compensation by a Lender under this Section shall set forth the basis upon which it has been determined that such an amount is due from the applicable Borrower, a calculation of the amount due, and a certification that the corresponding costs have been incurred by the Lender. 3.9 Late Payments. If any installment of principal is not paid when due, or interest is not paid within five (5) days after the date on which it is due, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the sum of the Alternate Base Rate plus 2%, to the fullest extent permitted by applicable laws. Accrued and unpaid interest on past due amounts (including, without limitation, interest on past due interest) shall be compounded monthly, on the last day of each calendar month, to the fullest extent permitted by applicable Laws. 3.10 Computation of Interest and Fees. (a) Interest based on the Alternate Base Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed, unless the Alternate Base Rate is determined by reference to the Federal Funds Rate, in which case the Alternate Base Rate shall be computed on the basis of a year of 360 days. All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed. Interest shall accrue on each Loan for the day on which the Loan is made; interest shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid. Any Loan that is repaid on the same day on which it is made shall bear interest for one day. Notwithstanding anything in this Agreement to the contrary, interest in excess of the maximum amount permitted by applicable laws shall not accrue or be payable hereunder or under the Notes, and any amount paid as interest hereunder or under the Notes which would otherwise be in excess of such maximum permitted amount shall instead be treated as a payment of principal. (b) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder and each Commitment Fee Rate and Applicable Standby Letter of Credit Fee applicable hereunder. The Administrative Agent shall give prompt notice to each Borrower and the relevant Lenders of each interest rate, Commitment Fee Rate and Applicable Standby Letter of Credit Fee so determined, and its determination thereof shall be conclusive in the absence of manifest error. 3.11 Non-Banking Days. If any payment to be made by a Borrower or any other Party under any Loan Document shall come due on a day other than a Banking Day, payment shall instead be considered due on the next succeeding Banking Day and the extension of time shall be reflected in computing interest and fees. 3.12 Manner and Treatment of Payments. (a) Each payment hereunder (except payments pursuant to Sections 3.6, 3.7, 3.8, 11.3, 11.11 and 11.22) or on the Notes or under any other Loan Document shall be made to the Administrative Agent at the Administrative Agent's Office for the account of each of the Lenders or the Administrative Agent, as the case may be, in immediately available funds not later than 11:00 A.M. California time, on the day of payment (which must be a Banking Day). All payments received after such time, on any Banking Day, shall be deemed received on the next succeeding Banking Day. The amount of all payments received by the Administrative Agent for the account of each Lender shall be immediately paid by the Administrative Agent to the applicable Lender in immediately available funds and, if such payment was received by the Administrative Agent by 11:00 A.M., California time, on a Banking Day and not so made available to the account of a Lender on that Banking Day, the Administrative Agent shall reimburse that Lender for the cost to such Lender of funding the amount of such payment at the Federal Funds Rate. All payments shall be made in lawful money of the United States of America, except that payments of principal and interest on Foreign Currency Loans, and reimbursement payments in respect of Foreign Currency Letters of Credit, shall be made in the Foreign Currency of that Foreign Currency Loan or Foreign Currency Letter of Credit. (b) Each Borrower hereby authorizes the Administrative Agent to debit such Borrower's Designated Deposit Account as of the date any payment of principal, interest, commitment fee or other amount payable by such Borrower under this Agreement is due in an amount equal to such payment. Each Borrower hereby agrees to take such steps as are necessary to assure that its Designated Deposit Account will, on each such date, have a credit balance in immediately available funds at least equal to the amount of such payment. (c) Each payment or prepayment on account of any Loan shall be applied pro rata according to the outstanding Loans made by each Lender comprising such Loan. (d) Each Lender shall use its best efforts to keep a record (in writing or by an electronic data entry system) of Loans made by it and payments received by it with respect to each of its Notes and such record shall, as against the Borrowers, be presumptive evidence of the amounts owing. Notwithstanding the foregoing sentence, the failure by any Lender to keep such a record shall not affect Borrower's obligation to pay the Obligations. (e) Each payment of any amount payable by any Borrower or any other Party under this Agreement or any other Loan Document shall be made free and clear of, and without reduction by reason of, any taxes, assessments or other charges imposed by any Governmental Agency, central bank or comparable authority, excluding (i) taxes imposed on or measured in whole or in part by its overall net income, net worth or the like by any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Eurodollar Lending Office and (ii) any withholding taxes imposed by the United States of America for any period with respect to which it has failed to provide the Borrowers with the appropriate form or forms required by Section 11.21, to the extent such forms are then required by applicable Laws (all such non-excluded taxes, assessments or other charges being hereinafter referred to as "Taxes"). To the extent that a Borrower is obligated by applicable Laws to make any deduction or withholding on account of Taxes from any amount payable to any Lender under this Agreement, such Borrower shall (i) make such deduction or withholding and pay the same to the relevant Governmental Agency and (ii) pay such additional amount to that Lender as is necessary to result in that Lender's receiving a net after-Tax amount equal to the amount to which that Lender would have been entitled under this Agreement absent such deduction or withholding. If and when receipt of such payment results in an excess payment or credit to that Lender on account of such Taxes, that Lender shall promptly refund such excess to the applicable Borrower. 3.13 Funding Sources. Nothing in this Agreement shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner. 3.14 Failure to Charge Not Subsequent Waiver. Any decision by the Administrative Agent or any Lender not to require payment of any interest (including interest arising under Section 3.9), fee, cost or other amount payable under any Loan Document, or to calculate any amount payable by a particular method, on any occasion shall in no way limit or be deemed a waiver of the Administrative Agent's or such Lender's right to require full payment of any interest (including interest arising under Section 3.9), fee, cost or other amount payable under any Loan Document, or to calculate an amount payable by another method that is not inconsistent with this Agreement, on any other or subsequent occasion. 3.15 Administrative Agent's Right to Assume Payments Will be Made. Unless the Administrative Agent shall have been notified by a Borrower prior to the date on which any payment to be made by such Borrower hereunder is due that such Borrower does not intend to remit such payment, the Administrative Agent may, in its discretion, assume that each Borrower has remitted such payment when so due and the Administrative Agent may, in its discretion and in reliance upon such assumption, make available to each Lender on such payment date an amount equal to such Lender's share of such assumed payment. If a Borrower has not in fact remitted such payment to the Administrative Agent, each Lender shall forthwith on demand repay to the Administrative Agent the amount of such assumed payment made available to such Lender, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent at the Federal Funds Rate. 3.16 Fee Determination Detail. The Administrative Agent, and any Lender, shall provide reasonable detail to each Borrower regarding the manner in which the amount of any payment to the Administrative Agent and the Lenders, or that Lender, under Article 3 has been determined, concurrently with demand for such payment. 3.17 Survivability. All of each Borrower's obligations under Sections 3.6, 3.7 and 3.8 shall survive for the ninety (90) day period following the date on which the Commitments are terminated and all Loans hereunder are fully paid, and each Borrower shall remain obligated thereunder for all claims under such Sections made by any Lender to such Borrower prior to the expiration of such period. ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrowers, jointly and severally, represent and warrant to the Lenders that: 4.1 Existence and Qualification; Power; Compliance With Laws. Each Borrower is a corporation duly formed and validly existing under the Laws of its jurisdiction of incorporation. Each Borrower incorporated under the Laws of a jurisdiction within the United States is in good standing under the Laws of such jurisdiction of incorporation. Schedule 4.1 hereto correctly sets forth the names, form of legal entity, number of shares of capital stock (or other applicable unit of equity interest) issued and outstanding, and the record owner thereof and jurisdictions of organization of all Borrowers. Each Borrower is duly qualified or registered to transact business and is in good standing in each other jurisdiction in which the conduct of its business or the ownership or leasing of its Properties makes such qualification or registration necessary, except where the failure so to qualify or register and to be in good standing would not constitute a Material Adverse Effect. Each Borrower has all requisite power and authority to conduct its business, to own and lease its Properties and to execute and deliver each Loan Document to which it is a Party and to perform its Obligations. All outstanding shares of capital stock of each Borrower are duly authorized, validly issued, fully paid and non-assessable, and no holder thereof has any enforceable right of rescission under any applicable state or federal securities Laws. Each Borrower is in compliance with all Laws and other legal requirements applicable to its business, has obtained all authorizations, consents, approvals, orders, licenses and permits from, and has accomplished all filings, registrations and qualifications with, or obtained exemptions from any of the foregoing from, any Governmental Agency that are necessary for the transaction of its business, except where the failure so to comply, obtain authorizations, etc., file, register, qualify or obtain exemptions does not constitute a Material Adverse Effect. 4.2 Authority; Compliance With Other Agreements and Instruments and Government Regulations. The execution, delivery and performance by each Borrower and the Subsidiary Guarantors of the Loan Documents to which each is a Party have been duly authorized by all necessary corporate action, and do not and will not: (a) Require any consent or approval not heretofore obtained of any partner, director, stockholder, security holder or creditor of such Party; (b) Violate or conflict with any provision of such Party's charter, articles of incorporation or bylaws, as applicable; (c) Result in or require the creation or imposition of any Lien (other than pursuant to the Loan Documents) upon or with respect to any Property now owned or leased or hereafter acquired by such Party; (d) Violate any Requirement of Law applicable to such Party; (e) Result in a breach of or constitute a default under, or cause or permit the acceleration of any obligation owed under, any indenture or loan or credit agreement or any other Contractual Obligation to which such Party is a party or by which such Party or any of its Property is bound or affected; and such Party is not in violation of, or default under, any Requirement of Law or Contractual Obligation, including without limitation the provisions of any indenture, loan or credit agreement described in Section 4.2(e). 4.3 No Governmental Approvals Required. Except as previously obtained or made, no authorization, consent, approval, order, license or permit from, or filing, registration or qualification with, any Governmental Agency is or will be required to authorize or permit under applicable Laws the execution, delivery and performance by each Borrower or any Subsidiary Guarantor of the Loan Documents to which it is a Party. 4.4 Subsidiaries. (a) Schedule 4.4 hereto correctly sets forth the names, form of legal entity, number of shares of capital stock (or other applicable unit of equity interest) issued and outstanding, and the record owner thereof and jurisdictions of organization of all Subsidiaries of each Borrower as of the date hereof. Unless otherwise indicated in Schedule 4.4, all of the outstanding shares of capital stock, or all of the units of equity interest, as the case may be, of each such Subsidiary are owned of record and beneficially by a Borrower, there are no outstanding options, warrants or other rights to purchase capital stock of any such Subsidiary, and all such shares or equity interests so owned are duly authorized, validly issued, fully paid and non- assessable, and were issued in compliance with all applicable state and federal securities and other Laws, and are free and clear of all Liens and Rights of Others, except for Permitted Encumbrances. (b) Each Subsidiary is a corporation duly formed and validly existing under the Laws of its jurisdiction of organization. Each Subsidiary incorporated under the Laws of a jurisdiction within the United States is in good standing under the Laws of such jurisdiction of incorporation. Each Subsidiary is duly qualified to do business as a foreign organization and is in good standing as such in each jurisdiction in which the conduct of its business or the ownership or leasing of its Properties makes such qualification necessary (except where the failure to be so duly qualified and in good standing does not constitute a Material Adverse Effect), and has all requisite power and authority to conduct its business and to own and lease its Properties. (c) Each Subsidiary is in compliance with all Laws and other requirements applicable to its business and has obtained all authorizations, consents, approvals, orders, licenses, and permits from, and each such Subsidiary has accomplished all filings, registrations, and qualifications with, or obtained exemptions from any of the foregoing from, any Governmental Agency that are necessary for the transaction of its business, except where the failure to be in such compliance, obtain such authorizations, consents, approvals, orders, licenses, and permits, accomplish such filings, registrations, and qualifications, or obtain such exemptions, does not constitute a Material Adverse Effect. 4.5 Financial Statements. Day Runner has furnished to the Administrative Agent (a) the audited consolidated financial statements of Day Runner and its Subsidiaries for the Fiscal Year ended June 30, 1998 and (b) the unaudited consolidated balance sheet and statement of operations of Day Runner and its Subsidiaries for the Fiscal Quarter ended June 30, 1998. The financial statements described in clause (a) fairly present in all material respects the financial condition, statement of cash flows and changes in financial position, and the balance sheet and statement of operations described in clause (b) fairly present in all material respects the financial condition and results of operations of Day Runner and its Subsidiaries as of such dates and for such periods in conformity with GAAP consistently applied, subject only, in the case of clause (b), to normal year-end accruals and audit adjustments and footnotes. 4.6 No Other Liabilities; No Material Adverse Changes. Each Borrower and its Subsidiaries do not have any material liability or material contingent liability required under GAAP to be reflected or disclosed, and not reflected or disclosed, in the balance sheet described in Section 4.5(a), other than liabilities and contingent liabilities arising in the ordinary course of business since the date of such financial statements. Schedule 4.6 sets forth all Funded Debt of Day Runner and its Subsidiaries as of the Closing Date. As of the Closing Date, no circumstance or event has occurred that constitutes a Material Adverse Effect since June 30, 1998. 4.7 Title to Property. Each Borrower and its Subsidiaries have valid title to the Property (other than assets which are the subject of a Capital Lease Obligation) reflected in the balance sheet described in Section 4.5(a), other than items of Property or exceptions to title which are in each case immaterial and Property subsequently sold or disposed of in the ordinary course of business. Such Property is free and clear of all Liens, other than Liens described in Schedule 4.7 and Permitted Encumbrances. 4.8 Intangible Assets. Each Borrower and its Subsidiaries own, or possess the right to use to the extent necessary in their respective businesses, all material trademarks, trade names, copyrights, patents, patent rights, computer software, licenses and other Intangible Assets that are used in the conduct of their businesses as now operated, and no such Intangible Asset, conflicts with the valid trademark, trade name, copyright, patent, patent right or Intangible Asset of any other Person to the extent that such conflict constitutes a Material Adverse Effect. 4.9 Public Utility Holding Company Act. No Borrower nor any Subsidiary of any Borrower is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.10 Litigation. There are no actions, suits, proceedings or investigations pending as to which any Borrower or any of its Subsidiaries have been served or have received notice or, to the best knowledge of any Borrower, threatened against or affecting any Borrower or any of its Subsidiaries or any Property of any of them before any Governmental Agency, which such actions, suits, proceedings or investigations, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 4.11 Binding Obligations. Each of the Loan Documents to which any Borrower or any of the Subsidiary Guarantors is a Party will, when executed and delivered by such Borrower or such Subsidiary Guarantor, constitute the legal, valid and binding obligation of such Borrower or such Subsidiary Guarantor, enforceable against such Borrower or such Subsidiary Guarantor in accordance with its terms, except as enforcement may be limited by Debtor Relief Laws or equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion. 4.12 No Default. No event has occurred and is continuing that is a Default or Event of Default. ---------- 4.13 ERISA. (a) With respect to each Pension Plan: (i) Pension Plan complies in all material respects with ERISA and any other applicable Laws to the extent that noncompliance could reasonably be expected to have a Material Adverse Effect; (ii) such Pension Plan has not incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA) that could reasonably be expected to have a Material Adverse Effect; (iii) no "reportable event" (as defined in Section 4043 of ERISA, but excluding such events as to which the PBGC has by regulation waived the requirement therein contained that it be notified within thirty days of the occurrence of such event) has occurred that could reasonably be expected to have a Material Adverse Effect; and (iv) none of the Borrowers nor any of their respective Subsidiaries has engaged in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code) that could reasonably be expected to have a Material Adverse Effect. (b) None of the Borrowers nor any of their respective Subsidiaries has incurred or expects to incur any withdrawal liability to any Multiemployer Plan that could reasonably be expected to have a Material Adverse Effect. 4.14 Regulations U and X; Investment Company Act. No part of the proceeds of any Loan hereunder will be used to purchase or carry, or to extend credit to others for the purpose of purchasing or carrying, any Margin Stock in violation of Regulations U and X. None of the Borrowers nor any of their respective Subsidiaries is or is required to be registered as an "investment company" under the Investment Company Act of 1940. 4.15 Disclosure. No information, exhibit or report furnished by any Borrower or any Subsidiary Guarantor in connection with the negotiation of the Loan Documents, pursuant to the terms of the Loan Documents, or in connection with any Loan as of the date thereof contained any untrue statement of a material fact or omitted a material fact necessary to make the statement made not misleading in light of all the circumstances existing at the date the statement was made. No SEC Document filed by any Borrower since December 1, 1997 contained any untrue statement of a material fact or omitted a material fact necessary to make the statement made not misleading in light of all the circumstances existing at the date the statement was made. 4.16 Tax Liability. Each Borrower and its Subsidiaries have filed all tax returns which are required to be filed, and have paid, or made provision for the payment of, all taxes with respect to the periods, Property or transactions covered by said returns, or pursuant to any assessment received by any Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established and maintained. 4.17 Projections. The assumptions set forth in the Projections are reasonable and consistent with each other and with all facts known to the Borrowers and the Subsidiaries of the Borrowers, and the Projections are reasonably based on such assumptions. The Projections were prepared in good faith and represent management's opinion of the projected financial performance of the Borrowers and their respective Subsidiaries based upon the information available to the Borrowers at the time so furnished. 4.18 Environmental Matters. (a) Except as described in Schedule 4.18, to the knowledge of the Borrowers and each Subsidiary of each Borrower, (i) each Borrower and each Subsidiary of each Borrower is in compliance with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of any Borrower's or any such Subsidiary's operations and/or properties, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time, (ii) none of the operations of any Borrower or any of its Subsidiaries is the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any Hazardous Material and (iii) none of the Borrowers and none of their respective Subsidiaries have any contingent liability in connection with any release of any Hazardous Materials, in each case, where such lack of compliance, investigation or contingent liability could reasonably be expected to have a Material Adverse Effect. (b) As of the Closing Date (a) neither Borrower nor any of its Subsidiaries at any time has disposed of, discharged, released or threatened the release of any Hazardous Materials on, from or under the Real Property in violation of any Hazardous Materials Law that would individually or in the aggregate constitute a Material Adverse Effect, (b) to the best knowledge of the Borrowers, no condition exists that violates any Hazardous Material Law affecting any Real Property except for such violations that would not individually or in the aggregate constitute a Material Adverse Effect, (c) no Real Property or any portion thereof is or has been utilized by any Borrower or any of its Subsidiaries as a site for the manufacture of any Hazardous Materials and (d) to the extent that any Hazardous Materials are used, generated or stored by any Borrower or any of its Subsidiaries on any Real Property, or transported to or from such Real Property by any Borrower or any of its Subsidiaries, such use, generation, storage and transportation are in compliance with all Hazardous Materials Laws except for such non-compliance that would not constitute a Material Adverse Effect or be materially adverse to the interests of the Lenders. 4.19 Solvency. Day Runner and its Subsidiaries, taken as a whole, are Solvent. As of the Closing Date, Day Runner, its Subsidiaries and the Target, taken as a whole and determined on a pro forma basis on the Closing Date as if the Target were a Subsidiary of Day Runner on such date, are Solvent (provided, that, with respect to the Target, at all times prior to the Tender Offer Termination Date, the representation contained in this sentence is made to the best knowledge of Day Runner based on publicly available information relating to Target). 4.20 Year 2000 Matters. Each Borrower will perform all acts reasonably necessary to ensure that (a) each Borrower and any business in which such Borrower holds a substantial interest (including without limitation any Subsidiary of such Borrower), and (b) to the extent reasonably practicable, all customers, suppliers and vendors that are material to the business of such Borrower, become Year 2000 Compliant in a timely manner. Such acts shall include, without limitation, performing a comprehensive review and assessment of all of such Borrower's systems and adopting a detailed plan, with an itemized budget, for the remediation, monitoring and testing of such systems. As used herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all material software, hardware, firmware, equipment, goods or systems utilized by or material to the business operations or financial condition of such entity will properly perform date sensitive functions before, during and after the year 2000. Each Borrower shall, immediately upon request, provide to the Administrative Agent such certifications or other evidence of such Borrower's compliance with the terms hereof as the Administrative Agent may from time to time require. ARTICLE 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING REQUIREMENTS) So long as any Loan remains unpaid, or any other Obligation remains unpaid, or any portion of the Commitments remains in force, each Borrower shall, and shall cause its Subsidiaries to, unless the Administrative Agent (with the written approval of the Requisite Lenders) otherwise consents: 5.1 Payment of Taxes and Other Potential Liens. Pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon any of them, upon their respective Property or any part thereof and upon their respective income or profits or any part thereof, except that each Borrower and its Subsidiaries shall not be required to pay or cause to be paid any tax, assessment, charge or levy that is not yet delinquent, or is being contested in good faith by appropriate proceedings so long as the relevant entity has established and maintains adequate reserves for the payment of the same. 5.2 Preservation of Existence. Preserve and maintain their respective existences in the jurisdiction of their formation and all material authorizations, rights, franchises, privileges, consents, approvals, orders, licenses, permits, or registrations from any Governmental Agency that are necessary for the transaction of their respective business and qualify and remain qualified to transact business in each jurisdiction in which such qualification is necessary in view of their respective business or the ownership or leasing of their respective Properties except (a) a merger permitted by Section 6.3 or (b) where the failure to so preserve, maintain, qualify or remain qualified would not constitute a Material Adverse Effect. 5.3 Maintenance of Properties. Maintain, preserve and protect all of their respective Properties in good order and condition, subject to wear and tear in the ordinary course of business, and not permit any waste of their respective Properties, provided, that the failure to so maintain, preserve or protect a particular item or items of Property shall not constitute a violation of this covenant if such failure is not reasonably likely to cause a Material Adverse Effect. 5.4 Maintenance of Insurance. Maintain liability, casualty and other insurance (subject to customary deductibles and retentions) with responsible insurance companies in such amounts and against such risks as is carried by responsible companies engaged in similar businesses and owning similar assets in the general areas in which each Borrower and its Subsidiaries operate. 5.5 Compliance With Laws. Comply with all Requirements of Law, noncompliance with which could constitute a Material Adverse Effect. 5.6 Inspection Rights. Upon reasonable notice, at any time during regular business hours and as often as reasonably requested (but not so as to materially interfere with the business of any Borrower or any of its Subsidiaries) permit the Administrative Agent or any Lender, or any authorized employee, agent or representative thereof, to examine, audit and make copies and abstracts from the records and books of account of, and to visit and inspect the Properties of, any Borrower and its Subsidiaries and to discuss the affairs, finances and accounts of any Borrower and its Subsidiaries with any of their officers, key employees or (with prior coordination through such Borrower) independent accountants. 5.7 Keeping of Records and Books of Account. Keep adequate records and books of account reflecting all financial transactions in conformity with GAAP, consistently applied (provided, that the records and books of account of Bidco and Target shall be kept in accordance with generally accepted accounting principles as in effect in the United Kingdom), and in material conformity with all applicable requirements of any Governmental Agency having regulatory jurisdiction over each Borrower and its Subsidiaries. 5.8 Compliance With Agreements. Promptly and fully comply with all Contractual Obligations to which any one or more of them is a party, except for any such Contractual Obligations the non-performance of which would cause either (a) a Default or (b) a Material Adverse Effect. 5.9 Use of Proceeds. (a) Use the proceeds of all Tender Offer Loans (1) for the acquisition of Target Shares (i) in the Tender Offer, (ii) outside the Tender Offer or (iii) pursuant to the provisions of Sections 428-430F of the Companies Act and (2) for the payment of any Tender Offer Transaction Expenses, and (b) use the proceeds of all General Purpose Loans for working capital and general corporate purposes of each Borrower, including (x) repayment of the Prior Credit Facility, (y) funding of Permitted Acquisitions and (z) the making of Distributions permitted by Section 6.6 (including without limitation any Stock Repurchases permitted under Section 6.6). 5.10 Hazardous Materials Laws. Keep and maintain all Real Property and each portion thereof in compliance in all material respects with all applicable Hazardous Materials Laws and promptly notify the Administrative Agent in writing (attaching a copy of any pertinent written material) of (a) any and all material enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened in writing by a Governmental Agency pursuant to any applicable Hazardous Materials Laws, (b) any and all material claims made or threatened in writing by any Person against any Borrower relating to damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials and (c) discovery by any Responsible Official of any Borrower of any material occurrence or condition on any real Property adjoining or in the vicinity of such Real Property that could reasonably be expected to cause such Real Property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of such Real Property under any applicable Hazardous Materials Laws. 5.11 Additional Borrowers and Additional Subsidiaries. (a) On or before October 30, 1998, Ultima shall deliver to the Administrative Agent the documentation set forth in Section 8.1(a)(4). After the delivery of such documentation, if such documentation is in form and substance satisfactory to the Agent in its sole discretion, the Loan Sublimit for Ultima shall be increased to Five Million Dollars ($5,000,000), with such increase to be evidenced by a written notice to such effect from the Administrative Agent to Day Runner and Ultima. If such documentation is not delivered by October 30, 1998, the Loan Sublimit for Ultima automatically shall be decreased to zero as of such date. (b) Each Borrower shall cause each of its Material Subsidiaries existing on the Closing Date to become a Subsidiary Guarantor as of the Closing Date. Each such Subsidiary Guarantor, by November 15, 1998, shall provide to the Administrative Agent and its counsel such legal opinions, certificates and other documents as shall be reasonably satisfactory to the Administrative Agent and its counsel. (c) Day Runner shall be entitled to designate any of its Material Subsidiaries existing on the Closing Date or any Subsidiary Guarantor as an additional Borrower pursuant to this Agreement, provided that (i) no Default or Event of Default shall then exist and be continuing or shall result therefrom, (ii) such additional Borrower shall be jointly and severally liable, with all other Borrowers, for all Obligations under this Agreement, (iii) the Administrative Agent, in its sole discretion, shall agree with such additional Borrower on an appropriate sublimit for such Borrower with respect to the Commitments, (iv) such additional Borrower shall provide to the Administrative Agent such related documentation, including certificates and a legal opinion, all in form and substance reasonably acceptable to the Administrative Agent, and (v) such additional Borrower shall execute a joinder agreement with respect to this Agreement in form and substance reasonably acceptable to the Administrative Agent. (d) Subject to any applicable Requirement of Law, including, without limitation, the requirements of Sections 151-158 of the Companies Act, each Borrower shall cause each Subsidiary of such Borrower, whether currently existing or hereafter acquired, that becomes a Material Subsidiary after the Closing Date to (i) become a Subsidiary Guarantor and (ii) provide to the Administrative Agent and its counsel in connection therewith such legal opinions, certificates and other documents as shall be satisfactory to the Administrative Agent and its counsel, in each case within ninety (90) Banking Days of the date such Subsidiary becomes a Material Subsidiary; provided, however, that each of Day Runner and Bidco shall use their respective best efforts to cause Target to become a Subsidiary Guarantor as soon as practicable after the Tender Offer Termination Date. 5.12 Syndication Process. After the earlier of (i) the Tender Offer Commencement Date and (ii) December 31, 1998, cooperate in such respects as may be reasonably requested by the Arranger in connection with the syndication of the credit facilities under this Agreement, including the provision of information for inclusion in written materials furnished to prospective syndicate members and the participation by Senior Officers in meetings with prospective syndicate members. 5.13 Tender Offer. (a) Promptly upon the occurrence of the Tender Offer Termination Date Day Runner shall give notice to the Administrative Agent (who shall notify the Lenders) that the same has occurred. (b) Promptly upon satisfaction of the condition specified in Section 429 of the Companies Act for giving a notice under that sub-section in respect of any Target Shares and the Tender Offer becoming or being declared wholly unconditional, Day Runner shall if it is entitled to do so cause Bidco to implement the procedures set out in Section 429 of the Companies Act and use its reasonable endeavors to acquire 100 per cent of the Target Shares promptly upon the expiry of six (6) weeks after its implementation of such procedure. (c) Each Borrower covenants and agrees that without the prior written agreement of the Administrative Agent, no Borrower or any Subsidiary of any Borrower will (i) issue or cause to be issued (or permit any other Affiliate of Day Runner to issue) any press release or other publicity, the relevant portion of the text of which has not been previously approved by the Administrative Agent (which such approval shall not be unreasonably withheld nor delayed), which makes reference to this Agreement or to some or all of the Lenders unless the publicity is required by applicable Law, the Takeover Code or any stock exchange (in which case Day Runner shall notify the Administrative Agent and the Lenders as soon as practicable upon becoming aware that the publicity is required) (provided that the Administrative Agent and the Lenders acknowledge that, pursuant to the Takeover Code, (x) the terms of this Agreement will be disclosed in the offer document by which the Tender Offer is made, provided that such disclosure of such terms shall be subject to prior approval by the Administrative Agent, which approval shall not unreasonably be withheld or delayed, and (y) this Agreement will be available for public inspection while the Tender Offer remains open for acceptance) or (ii) take or permit to be taken any step as a result of which the offer price stated in the offer document by which the Tender Offer is made is, or may be required to be, increased beyond the level agreed between Day Runner and the Administrative Agent from time to time; or (d) Each of Day Runner and Bidco covenants and agrees that, in respect of the Tender Offer, it will comply with the Takeover Code (subject to any applicable waivers by the Panel), the Financial Services Act 1986, the Companies Act 1985 and all other applicable Laws, if the failure to comply therewith, individually or in the aggregate, could have a Material Adverse Effect; (e) Each of Day Runner and Bidco covenants and agrees that if it shall become aware of a circumstance or occurrence or information which constitutes or reflects a material breach of any of the conditions of the Tender Offer which could reasonably be expected to entitle Bidco to cause the Tender Offer to lapse (a "Relevant Event"), it will promptly inform the Administrative Agent and (i) if the Administrative Agent shall so request, it will make all reasonable efforts to lapse the Tender Offer (including seeking the approval of the Panel, if so required, to permit the condition in respect of such Relevant Event to be invoked) (provided, that the failure to satisfy the condition of the Tender Offer requiring valid acceptances to be received in respect of 90 percent in nominal value of the Target Shares to which the Tender Offer relates on any date shall not constitute a Relevant Event provided that Bidco and/or its Wholly Owned Subsidiaries shall, on such date, have acquired or agreed to acquire, whether pursuant to the Tender Offer or otherwise, Target Shares carrying in aggregate more than 50 percent of the voting rights then exercisable at a general meeting of Target) and (ii) it will obtain the written consent of the Administrative Agent prior to declaring the Tender Offer unconditional, which such consent shall not unreasonably be withheld or delayed, unless the Panel would not allow the condition in respect of such Relevant Event to be invoked to lapse the Tender Offer, in which case no such consent shall be required. (f) Day Runner covenants and agrees that it will keep the Administrative Agent informed as to the status and progress of the Tender Offer and, in particular, will from time to time and promptly on request give to the Administrative Agent reasonable details as to the current level of acceptances of the Tender Offer (including a copy of every certificate delivered by the receiving agent to Bidco, Day Runner or their respective advisers pursuant to the Takeover Code) and such other matters relevant to the Tender Offer as the Administrative Agent may reasonably request. 5.14 Funded Debt. Within 30 days after the Closing Date, all Funded Debt of Day Runner and its Subsidiaries under the heading "Designated Funded Debt" on Schedule 4.6 ("Designated Funded Debt") shall have been paid in full and the commitments, if any, agreements and instruments relating to such Funded Debt shall have been terminated. Within a commercially reasonable time thereafter, all Liens of Day Runner and any of its Subsidiaries relating to the Designated Funded Debt of Ultima shall be terminated. Without limiting the foregoing, within 30 days after the Closing Date, all Indebtedness outstanding under the Prior Credit Agreement shall have been paid and the same shall have been terminated. ARTICLE 6 NEGATIVE COVENANTS So long as any Loan remains unpaid, or any other Obligation remains unpaid, or any portion of the Commitments remains in force, each Borrower shall not, and shall not permit any of its Subsidiaries to, unless the Administrative Agent (with the written approval of the Requisite Lenders or, if required by Section 11.2, of all of the Lenders) otherwise consents: 6.1 Payment of Subordinated Obligations. Pay any principal (including sinking fund payments) with respect to any Subordinated Obligation, or purchase or redeem (or offer to purchase or redeem) any Subordinated Obligation, or deposit any monies, securities or other Property with any trustee or other Person to provide assurance that the principal or any portion thereof of any Subordinated Obligation will be paid when due or otherwise to provide for the defeasance of any Subordinated Obligation. 6.2 Disposition of Property. Make any Disposition of its Property, whether now owned or hereafter acquired, except (a) a Disposition by a Borrower to another Borrower that is not a Foreign Subsidiary, (b) a Disposition by a Subsidiary of a Borrower to such Borrower, or (c) a Disposition of Property other than any Intangible Asset that is material to the business of Day Runner or any of its Subsidiaries for reasonably equivalent value, provided that, with respect to any such Disposition pursuant to this clause (c), the aggregate value of all such Dispositions in any Fiscal Year shall not exceed the greater of (i) $10,000,000 or (ii) five percent (5%) of the value of the total assets of Day Runner and its Subsidiaries as of the last day of the immediately preceding Fiscal Year. 6.3 Mergers. Merge or consolidate with or into any Person, except (a) a merger or consolidation of a Subsidiary of a Borrower into any Borrower or any Subsidiary Guarantor, (b) (c) a merger or consolidation of a Borrower into any other Borrower; or (d) a merger or consolidation constituting a Permitted Acquisition; provided, that (i) in the case of any merger or consolidation to which Day Runner is a party, Day Runner is the surviving Person, (ii) a Borrower or a Subsidiary Guarantor is the surviving entity, (iii) no Default or Event of Default then exists or would result therefrom and (iv) each Borrower and each of its Subsidiaries execute such amendments to the Loan Documents as the Administrative Agent may reasonably determine are appropriate as a result of such merger; provided, further, for the avoidance of doubt that nothing in this Section 6.3 shall be deemed to prevent or in any way restrict the acquisition of Target Shares by Bidco (a) in the Tender Offer, (b) outside the Tender Offer or (c) pursuant to the provisions of Sections 428-430F of the Companies Act. 6.4 Hostile Acquisitions. Directly or indirectly use the proceeds of any Loan in connection with the acquisition of a voting interest of five percent (5%) or more in any corporation or other business entity (other than the Target) if such acquisition is opposed by the board of directors or comparable governing body of such corporation or business entity. 6.5 Acquisitions. Make any Acquisition, except a Permitted Acquisition. 6.6 Distributions. Make any Distribution, whether from capital, income or otherwise, and whether in Cash or other Property, except: (a) Distributions by any Subsidiary of a Borrower to such Borrower; (b) Stock Repurchases by Day Runner of an aggregate of up to the number of shares authorized by the Board of Directors of Day Runner prior to September 1, 1998 and not so repurchased prior to the date hereof, as certified to the Administrative Agent by a Senior Officer of Day Runner on or prior to the Closing Date, of Day Runner Common Stock; provided that no Default or Event of Default then exists or would result therefrom; and (c) After the Tender Offer Termination Date, Stock Repurchases by Day Runner of an aggregate amount during any Fiscal Year of (i) thirty percent (30%) of the Net Income of Day Runner for the prior Fiscal Year minus (ii) the consideration paid during such Fiscal Year with respect to Stock Repurchases, if any, under Section 6.6(b); provided, that (i) no Default or Event of Default then exists or would result therefrom; (ii) Net Income of Day Runner shall have been positive during the immediately preceding Fiscal Quarter prior to each such Stock Repurchase. 6.7 ERISA. At any time, permit any Pension Plan to: (i) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (ii) fail to comply with ERISA or any other applicable Laws; (iii) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA); or (iv) terminate in any manner, which, with respect to each event listed above, could reasonably be expected to result in a Material Adverse Effect or (b) withdraw, completely or partially, from any Multiemployer Plan if to do so could reasonably be expected to result in a Material Adverse Effect. 6.8 Change in Nature of Business. Make any material change in the nature of the business of Day Runner and its Subsidiaries, taken as a whole; provided, for the avoidance of doubt that nothing in this Section 6.8 shall be deemed to prevent or in any way restrict the acquisition of Target Shares by Bidco (a) in the Tender Offer, (b) outside the Tender Offer or (c) pursuant to the provisions of Sections 428-430F of the Companies Act. 6.9 Liens and Sale Leasebacks. Create, incur, assume or suffer to exist any Lien of any nature upon or with respect to any of their respective Properties, or sell or factor any accounts receivable or engage in any sale and leaseback transaction with respect to any of their respective Properties, whether now owned or hereafter acquired, except: (a) Liens existing on the Closing Date and disclosed in Schedule 4.7 and any renewals/extensions or amendments thereof, provided that the obligations secured or benefited thereby are not increased; (b) Liens under the Loan Documents; (c) Permitted Encumbrances; (d) Liens on Property acquired by any Borrower or any of its Subsidiaries, provided that such Liens were in existence at the time of the acquisition of such Property and were not created in contemplation of such acquisition, and Liens on Property that secure Indebtedness permitted pursuant to Section 6.10(d); provided that the aggregate Indebtedness secured by Liens pursuant to this Section is not in excess of $5,000,000 in principal amount; and (e) Dispositions of real Property permitted by Section 6.2 and the leaseback of the real Property which is the subject thereof. 6.10 Indebtedness and Guaranty Obligations. Create, incur or assume any Indebtedness or Guaranty Obligation except: (a) Indebtedness and Guaranty Obligations existing on the Closing Date and disclosed in Schedule 6.10, and refinancings, renewals, extensions or amendments that do not increase the amount thereof; (b) Indebtedness and Guaranty Obligations under the Loan Documents; (c) Indebtedness and Guaranty Obligations owed to any Borrower or any of the Subsidiary Guarantors; provided, that any such Indebtedness owing by Day Runner to any Subsidiary of Day Runner constitutes Subordinated Obligations; (d) Indebtedness consisting of Capital Lease Obligations, or otherwise incurred to finance the purchase or construction of capital assets (which shall be deemed to exist if the Indebtedness is incurred at or within 180 days before or after the purchase or construction of the capital asset), or to refinance any such Indebtedness, provided that the aggregate principal amount of such Indebtedness outstanding at any time does not exceed $5,000,000; (e) Indebtedness consisting of Interest Rate Protection Agreements entered into in order to manage existing or anticipated interest rate risks and not for speculative purposes and subordinated to the rights of the Lenders hereunder in a manner that is acceptable to the Requisite Lenders; (f) Indebtedness constituting Subordinated Obligations; provided that the aggregate principal amount thereof does not exceed $25,000,000 at any time outstanding; (g) the Tender Offer Notes; and (h) other Indebtedness that is not secured by a Lien on any Property of any Borrower or any of the Subsidiaries of any Borrower; provided that the aggregate principal amount thereof does not exceed $2,000,000 at any time. 6.11 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of any Borrower or any Affiliate of any Subsidiary of any Borrower other than (a) salary, bonus, employee stock option and other compensation arrangements with directors or officers in the ordinary course of business; and (b) transactions on overall terms at least as favorable to the applicable Borrower or its Subsidiary as would be the case in an arm's-length transaction between unrelated parties of equal bargaining power. 6.12 Funded Debt Ratio. Permit the Funded Debt Ratio, as of the last day of any Fiscal Quarter, to be greater than the ratio set forth below opposite the period during which such Fiscal Quarter ends:
--------------------------------------------- ------------------------- Period Ratio --------------------------------------------- ------------------------- --------------------------------------------- ------------------------- Closing Date through June 30, 1999 3.75 to 1.00 --------------------------------------------- ------------------------- --------------------------------------------- ------------------------- July 1, 1999 through June 30, 2000 3.25 to 1:00 --------------------------------------------- ------------------------- --------------------------------------------- ------------------------- July 1, 2000 through June 30, 2001 2.75 to 1.00 --------------------------------------------- ------------------------- --------------------------------------------- ------------------------- July 1, 2001 and thereafter 2.50 to 1.00 --------------------------------------------- -------------------------
6.13 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio, as of the last day of any Fiscal Quarter, to be less than 2.00 to 1.00. 6.14 Stockholders' Equity. Permit Stockholders' Equity, as of the last day of any Fiscal Quarter, to be less than the sum of (a) the greater of (i) $67,000,000 and (ii) 80% of Stockholders' Equity as of March 31, 1999, in either case plus (b) 50% of Net Income in the Fiscal Quarter ending September 30, 1998 and each Fiscal Quarter thereafter (with no deduction for a net loss in any such Fiscal Quarter), plus (c) 75% of Net Cash Issuance Proceeds subsequent to the Closing Date. 6.15 Investments. Make or suffer to exist any Investment, other than: (a) Investments in existence on the Closing Date and disclosed on Schedule 6.15; (b) Investments consisting of Cash Equivalents; (c) Investments in a Person that is the subject of a Permitted Acquisition; (d) Investments consisting of advances to officers, directors and employees of Borrowers and their Subsidiaries in the ordinary course of business not to exceed $1,000,000 at any time outstanding; (e) Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of disputes with customers and suppliers arising in the ordinary course of business; (f)Investments of any Borrower in any Borrower or any Subsidiary Guarantor; (g) Investments of a Borrower in any Subsidiary of such Borrower that is not a Subsidiary Guarantor; provided that the aggregate amount of all such Investments shall not exceed $1,500,000; and (h) Investments of Bidco in Target Shares, including, for the avoidance of doubt, purchases of Target Shares pursuant to the Tender Offer, purchases of Target Shares outside the Tender Offer and the acquisition of Target Shares pursuant to the provisions of Sections 428-430F of the Companies Act. 6.16 Capital Expenditures. The Borrowers shall not, and shall not permit any of their respective Subsidiaries to, make any Capital Expenditures in any Fiscal Year, if, after giving effect thereto, the aggregate amount of all Capital Expenditures made by the Borrowers and their Subsidiaries in such Fiscal Year would exceed the amount set forth below for such Fiscal Year:
------------------------- ------------------------------------------------------ Fiscal Year Ending Maximum Aggregate Capital Expenditures ------------------------- ------------------------------------------------------ ------------------------- ------------------------------------------------------ June 30, 1999 $11,000,000 ------------------------- ------------------------------------------------------ ------------------------- ------------------------------------------------------ June 30, 2000 $12,000,000 ------------------------- ------------------------------------------------------ ------------------------- ------------------------------------------------------ June 30, 2001 $13,000,000 ------------------------- ------------------------------------------------------ ------------------------- ------------------------------------------------------ June 30, 2002 $14,000,000 ------------------------- ------------------------------------------------------ ------------------------- ------------------------------------------------------ June 30, 2003 $15,000,000 ------------------------- ------------------------------------------------------ ------------------------- ------------------------------------------------------ June 30, 2004 $16,000,000 ------------------------- ------------------------------------------------------ ------------------------- ------------------------------------------------------ June 30, 2005 $17,000,000 ------------------------- ------------------------------------------------------
6.17 Payment Restrictions Affecting Subsidiaries. Enter into, or permit any of its Subsidiaries to enter into, any agreement, instrument or other document which directly or indirectly prohibits or restricts in any manner, or would have the effect of prohibiting or restricting in any material manner, the ability of any of the Borrower's Subsidiaries to (i) pay dividends or make any other distributions in respect of its capital stock or any other equity interest or participation in its profits owned by the Borrower or any of its Subsidiaries, or pay or repay any Indebtedness owed to the Borrower or any of its Subsidiaries, (ii) make loans or advances to any of the Borrowers or any of their Subsidiaries, or (iii) transfer any of its properties or assets to the Borrowers or any of their Subsidiaries 6.18 Lease Obligations. The Borrowers shall not, and shall not permit any of their respective Subsidiaries to, incur any obligations with respect to any lease that is not a Capital Lease in any Fiscal Year, if, after giving effect thereto, the aggregate amount of all obligations of the Borrowers and their Subsidiaries with respect to leases that are not Capital Leases would exceed $10,000,000 in any Fiscal Year. ARTICLE 7 INFORMATION AND REPORTING REQUIREMENTS 7.1 Financial and Business Information. So long as any Loan remains unpaid, or any other Obligation remains unpaid, or any portion of the Commitments remains in force, Day Runner shall, unless the Administrative Agent (with the written approval of the Requisite Lenders) otherwise consents, at Day Runner's sole expense, deliver to each Lender: (a) As soon as practicable, and in any event within 55 days after the end of each Fiscal Quarter (other than the fourth Fiscal Quarter in any Fiscal Year), the consolidated balance sheet of Day Runner and its Subsidiaries as at the end of such Fiscal Quarter and the consolidated statements of operations and cash flows for such Fiscal Quarter, and the portion of the Fiscal Year ended with such Fiscal Quarter, all in reasonable detail. Such financial statements shall be certified by the chief financial officer of Day Runner as fairly presenting in all material respects the financial condition, results of operations and cash flows of Day Runner and its Subsidiaries in accordance with GAAP (other than footnote disclosures), consistently applied, as at such date and for such periods, subject only to normal year-end accruals and audit adjustments; (b) As soon as practicable, and in any event within 55 days after the end of each Fiscal Quarter (i) a Pricing Certificate setting forth a calculation of the Funded Debt Ratio as of the last day of such Fiscal Quarter, and providing reasonable detail as to the calculation thereof, which calculations in the case of the fourth Fiscal Quarter in any Fiscal Year shall be based on the preliminary unaudited financial statements of such Borrower and its Subsidiaries for such Fiscal Quarter, and as soon as practicable thereafter, in the event of any material variance in the actual calculation of the Funded Debt Ratio from such preliminary calculation, a revised Pricing Certificate setting forth the actual calculation thereof and (ii) a certificate of a Senior Officer of Day Runner stating that the representations and warranties in Article 4 hereof are true and correct in all material respects as of the date of such certificate and that no Event of Default has occurred and is continuing or, if an Event of Default has occurred and is continuing, a statement as to the nature thereof and the action that Day Runner has taken and proposes to take with respect thereto; (c) As soon as practicable, and in any event within 100 days after the end of each Fiscal Year, the consolidated balance sheet of Day Runner and its Subsidiaries as at the end of such Fiscal Year and the consolidated statements of operations, stockholders' equity and cash flows, in each case of Day Runner and its Subsidiaries for such Fiscal Year, with all related consolidating financial statements prepared by Day Runner, all in reasonable detail. Such consolidated financial statements shall be prepared in accordance with GAAP, consistently applied, and shall be accompanied by a report of Deloitte & Touche LLP or other independent public accountants of recognized standing selected by Day Runner and reasonably satisfactory to the Requisite Lenders, which report shall be prepared in accordance with generally accepted auditing standards as at such date, and shall not be subject to any qualifications or exceptions. Such accountants' report shall be accompanied by a certificate stating that, in making the examination pursuant to generally accepted auditing standards necessary for the certification of such financial statements and such report, such accountants have obtained no knowledge of any Event of Default then existing relating to the breach by any Borrower of any of Sections 6.1, 6.2, 6.6, 6.9, 6.10, 6.12, 6.13, 6.14 and 6.16 of this Agreement or, if, in the opinion of such accountants, any such Event of Default shall exist, stating the nature and status of such Event of Default; (d) As soon as practicable, and in any event within one hundred (100) days after the commencement of each Fiscal Year, a budget and projection by Fiscal Quarter for that Fiscal Year and by Fiscal Year for the next four succeeding Fiscal Years, including for the first such Fiscal Year, projected consolidated balance sheets, statements of operations and statements of cash flow and, for succeeding Fiscal Years, projected consolidated condensed balance sheets and statements of operations and cash flows of each Borrower and its Subsidiaries, all in reasonable detail (it being understood that any projections provided hereunder shall be were prepared in good faith and will represent management's opinion of the projected financial performance of the Borrowers and their respective Subsidiaries based upon the information available to the Borrowers at the time so furnished); (e) Promptly after request by the Administrative Agent or the Requisite Lenders, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of any Borrower by independent accountants in connection with the accounts or books of such Borrower or any of its Subsidiaries, or any audit of any of them; (f) (i) As soon as practicable, and in any event within 55 days after the end of each Fiscal Quarter, a copy of the Form 10-Q for such Fiscal Quarter filed with the Securities and Exchange Commission by any Borrower; (ii) as soon as practicable, and in any event within 100 days after the end of each Fiscal Quarter a copy of the Form 10-K for such Fiscal Quarter filed with the Securities and Exchange Commission by any Borrower; and (iii) promptly after the same are available, and in any event within two (2) Banking Days after filing with the Securities and Exchange Commission, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of any Borrower, and copies of all annual, regular, periodic and special reports and registration statements which any Borrower may file or be required to file with the Securities and Exchange Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and not otherwise required to be delivered to the Lenders pursuant to the other provisions of this Section 7.1; (g) Promptly after request by the Administrative Agent or any Lender, copies of any other report or other document that was filed by any Borrower with any Governmental Agency; (h) Promptly upon a Senior Officer of any Borrower becoming aware, and in any event within five (5) Banking Days after becoming aware, of the occurrence of any (i) "reportable event" (as such term is defined in Section 4043 of ERISA, but excluding such events as to which the PBGC has by regulation waived the requirement therein contained that it be notified within thirty days of the occurrence of such event) or (ii) non-exempt "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) involving any Pension Plan or any trust created thereunder, telephonic notice specifying the nature thereof, and, no more than two (2) Banking Days after such telephonic notice, written notice again specifying the nature thereof and specifying what action the applicable Borrower is taking or proposes to take with respect thereto, and, when known, any action taken by the Internal Revenue Service with respect thereto; (i) As soon as practicable, and in any event within two (2) Banking Days after a Senior Officer becomes aware of the existence of any condition or event which constitutes a Default or Event of Default, telephonic notice specifying the nature and period of existence thereof, and, no more than two (2) Banking Days after such telephonic notice, written notice again specifying the nature and period of existence thereof and specifying what action the Borrowers are taking or propose to take with respect thereto; (j) Promptly upon a Senior Officer of any Borrower becoming aware that (i) any Person has commenced a legal proceeding with respect to a claim against any Borrower that such Borrower reasonably believes is $5,000,000 or more in excess of the amount thereof that is fully covered by insurance or indemnification agreement of a financially responsible Person, (ii) any creditor under a credit agreement involving Indebtedness of $1,000,000 or more or any lessor under a material lease involving aggregate rent of $2,000,000 per year or more has asserted a material default thereunder on the part of any Borrower or, (iii) any Person has commenced a legal proceeding with respect to a claim against any Borrower under a contract that is not a credit agreement or material lease with respect to a claim of in excess of $2,000,000 or which otherwise may reasonably be expected to result in a Material Adverse Effect, a written notice describing the pertinent facts relating thereto and what action the applicable Borrower is taking or proposes to take with respect thereto; and (k) Such other data and information as from time to time may be reasonably requested by the Administrative Agent, any Lender (through the Administrative Agent) or the Requisite Lenders. 7.2 Compliance Certificates. So long as any Loan remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of the Commitments remains outstanding, Day Runner shall, at Day Runner's sole expense, deliver to each Lender concurrently with the financial statements required pursuant to Sections 7.1(a) and 7.1(c), a Compliance Certificate signed by a Senior Officer of Day Runner. ARTICLE 8 CONDITIONS 8.1 Closing Date and Effectiveness of Commitments. The occurrence of the Closing Date, and the obligations of each Lender pursuant to the Commitment, are subject to the following conditions precedent, each of which shall be satisfied on or prior to the Closing Date: (a) The Administrative Agent shall have received all of the following, each of which shall be originals unless otherwise specified, each properly executed by a Responsible Official of each party thereto, each dated as of the Closing Date and each in form and substance reasonably satisfactory to the Administrative Agent and its legal counsel (unless otherwise specified or, in the case of the date of any of the following, unless the Administrative Agent otherwise agrees or directs): (1) at least one (1) executed counterpart of this Agreement, together with arrangements satisfactory to the Administrative Agent for additional executed counterparts, sufficient in number for distribution to the Lenders and Borrowers; (2) Notes executed by each Borrower in favor of each Lender, each in a principal amount equal to that Lender's Pro Rata Share of the Commitment; (3) the Subsidiary Guaranty executed by each Subsidiary Guarantor and the Borrower Guaranty executed by each Borrower; (4) with respect to each Borrower (subject, in the case of Ultima, to Section 5.11(a)), such documentation as the Administrative Agent may reasonably require to establish the due organization, valid existence and good standing of such Borrower, qualification to engage in business in each material jurisdiction in which each such Borrower is engaged in business or required to be so qualified, such Borrower's authority to execute, deliver and perform the Loan Documents to which it is a Party, the identity, authority and capacity of each Responsible Official thereof authorized to act on such Borrower's behalf, including certified copies of articles of incorporation and amendments thereto, bylaws and amendments thereto, certificates of good standing and/or qualification to engage in business, tax clearance certificates, certificates of corporate resolutions, incumbency certificates, Certificates of Responsible Officials, and the like, in each case to the extent applicable in the relevant jurisdiction; (5) the Opinions of Counsel; (6) a Certificate of the chief financial officer of Day Runner certifying that the representations contained in Article 4 are true and correct in all material respects; and (7) such other assurances, certificates, documents, consents or opinions as the Administrative Agent or the Requisite Lenders reasonably may require. (b) The Administrative Agent's fees payable pursuant to Section 3.4 shall have been paid. (c) No material action, suit, proceeding or investigation shall be pending against any Borrower; no law, regulation, judgment or court order shall be applicable that restrains, prevents or imposes materially adverse conditions upon the Tender Offer or the making of the Loans; and each Borrower and Subsidiary Guarantor shall have received all governmental and material third party approvals necessary for such Party's execution of the Loan Documents to which it is a party; (d) No circumstance or event shall have occurred that constitutes a Material Adverse Effect since June 30, 1998. (e) The reasonable costs and expenses of the Administrative Agent in connection with the preparation of the Loan Documents payable pursuant to Section 11.3, and invoiced with supporting detail to the Borrowers prior to the Closing Date, shall have been paid. (f) The representations and warranties of each Borrower contained in Article 4 shall be true and correct in all material respects. (g) Borrowers and any other Parties shall be in compliance with all the terms and provisions of the Loan Documents, and after giving effect to the initial Loan, no Default or Event of Default shall have occurred and be continuing. (h) All legal matters relating to the Loan Documents shall be reasonably satisfactory to Gibson, Dunn & Crutcher LLP, special counsel to the Administrative Agent. 8.2 Tender Offer Loans. The obligation of each Lender to make any Tender Offer Loan is subject to the Closing Date having occurred, and to the following conditions precedent, each of which shall be satisfied prior to the making of any Tender Offer Loan (unless all of the Lenders, in their sole and absolute discretion, shall agree otherwise): (a) Prior to or contemporaneously with such Tender Offer Loan, Day Runner shall have acquired and/or agreed to acquire, whether pursuant to the Tender Offer or otherwise, Target Shares carrying in aggregate more than fifty percent (50%) of the voting rights then exercisable at a general meeting of Target; (b) No Default or Event of Default pursuant to Section 9.1(j) shall have occurred and be continuing; (c) (i) No Event of Default shall exist with respect to Section 5.13(b), 5.13(d) or 5.13(e), and (ii) if required pursuant to Section 5.13(e), the Administrative Agent's written consent to Day Runner's declaration of the Tender Offer as wholly unconditional shall have been granted (such consent not to be unreasonably withheld or delayed); (d) No Borrower shall have engaged in any Distribution after the Closing, except that Day Runner may have repurchased not more than 375,000 shares of its common stock after September 4, 1998 and a Borrower may have made Distributions to Day Runner; (e) The price payable per share of Target common stock pursuant to the Tender Offer shall not have been increased above a price per share agreed to in writing by the Administrative Agent; and (f) The Tender Offer Commencement Date shall have occurred prior to December 31, 1998. 8.3 General Purpose Loans. The obligation of each Lender to make any General Purpose Loan, and the obligation of the Issuing Lender to issue any Letter of Credit, is subject to the Closing Date having occurred, and to the following conditions precedent (unless the Requisite Lenders or, in any case where the approval of all of the Lenders is required pursuant to Section 11.2, all of the Lenders, in their sole and absolute discretion, shall agree otherwise): (a) Except for representations and warranties which expressly speak as of a particular date, the representations and warranties contained in Article 4 shall be true and correct in all material respects on and as of the date of the Loan as though made on that date; (b) No Default or Event of Default shall have occurred and be continuing; (c) No circumstance or event shall have occurred that constitutes a Material Adverse Effect since the Closing Date. ARTICLE 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT 9.1 Events of Default. The existence or occurrence and continuation of any one or more of the following events, whatever the reason therefor and under any circumstances whatsoever, shall constitute an Event of Default: (a) A Borrower fails to pay any principal on any of the Notes, or any portion thereof, on the date when due; or (b) A Borrower fails to pay any interest on any of the Notes, or any fees under Sections 3.3, 3.4 or 3.5, or any portion thereof, within three (3) Banking Days after the date when due; or fails to pay any other fee or amount payable to the Lenders under any Loan Document, or any portion thereof, within ten (10) Banking Days after demand therefor; or (c) A Borrower fails to comply with any of the covenants contained in Article 6 or with Sections 5.2, 5.5, 5.13 or 7.1; or (d) A Borrower or any other Party fails to perform or observe any other covenant or agreement (not specified in clause (a), (b), (c) or (d) above) contained in any Loan Document on its part to be performed or observed within sixty days after the occurrence thereof; or (e) Any representation or warranty of any Borrower or any Subsidiary Guarantor made in any Loan Document, or in any certificate or other writing delivered by any Borrower or any Subsidiary Guarantor pursuant to any Loan Document, proves to have been incorrect when made or reaffirmed in any material respect; or (f) A Borrower (i) fails to pay the principal, or any principal installment, of any present or future Indebtedness of $5,000,000 or more, or any guaranty of present or future Indebtedness of $5,000,000 or more, on its part to be paid, when due (or within any stated grace period), whether at the stated maturity, upon acceleration, by reason of required prepayment or otherwise or (ii) fails to perform or observe any other term, covenant or agreement on its part to be performed or observed, or suffers any event of default to occur, in connection with any present or future Indebtedness of $5,000,000 or more, or of any guaranty of present or future Indebtedness of $5,000,000 or more, if as a result of such failure or sufferance any holder or holders thereof (or an agent or trustee on its or their behalf) has the right to declare such Indebtedness due before the date on which it otherwise would become due or the right to require a Borrower to redeem or purchase, or offer to redeem or purchase, all or any portion of such Indebtedness; or (g) Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement or action (or omission to act) of the Administrative Agent or the Lenders or satisfaction in full of all the Obligations, ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect which is materially adverse to the interests of the Lenders; or any Party thereto denies in writing that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind same; or (h) Any Change in Control occurs; or (i) A final judgment against any Borrower or any Subsidiary Guarantor is entered for the payment of money in excess of $5,000,000 (not covered by insurance or for which an insurer has reserved its rights) and, absent procurement of a stay of execution, such judgment remains unsatisfied for thirty (30) calendar days after the date of entry of judgment, or in any event later than five (5) days prior to the date of any proposed sale thereunder; or any writ or warrant of attachment or execution or similar process is issued or levied against the Property of any such Person and is not released, vacated or fully bonded within thirty (30) calendar days after its issue or levy; or (j) A Borrower or any Subsidiary Guarantor institutes or consents to the institution of any proceeding under a Debtor Relief Law relating to it or to all or any material part of its Property, or is unable or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its Property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of that Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under a Debtor Relief Law relating to any such Person or to all or any part of its Property is instituted without the consent of that Person and continues undismissed or unstayed for sixty (60) calendar days; or (k) The occurrence of an Event of Default (as such term is or may hereafter be specifically defined in any other Loan Document) under any other Loan Document; or (l) Any Pension Plan maintained by any Borrower is finally determined by the PBGC to have a material "accumulated funding deficiency" as that term is defined in Section 302 of ERISA in excess of an amount equal to 5% of the consolidated total assets of such Borrower as of the most-recently ended Fiscal Quarter. 9.2 Remedies Upon Event of Default. Without limiting any other rights or remedies of the Administrative Agent or the Lenders provided for elsewhere in this Agreement, or the other Loan Documents, or by applicable Law, or in equity, or otherwise: (a) Subject to Section 9.3, upon the occurrence, and during the continuance, of any Event of Default other than an Event of Default described in Section 9.1(j): (1) the Administrative Agent shall at the request, or may with the consent, of the Requisite Lenders, by written notice to the Borrowers, declare that all or any portion of the Commitments to make Loans and all other obligations of the Administrative Agent and the Lenders under the Commitments and all rights of the Borrowers and any other Parties under the Loan Documents are terminated; (2) the Issuing Lender shall at the request, or may with the consent, of the Requisite Lenders, demand immediate payment by each Borrower of an amount equal to the aggregate amount of all outstanding Letters of Credit to be held by the Issuing Lender in an interest-bearing cash collateral account as collateral hereunder; and (3) the Requisite Lenders may request the Administrative Agent to, and the Administrative Agent thereupon shall, declare all or any part of the unpaid principal of all Notes, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents to be forthwith due and payable, and shall notify each Borrower thereof, whereupon the same shall become and be forthwith due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by each Borrower. (b) Upon the occurrence of any Event of Default described in Section 9.1(j): (1) the Commitments to make Loans and all other obligations of the Administrative Agent or the Lenders and all rights of the Borrowers and any other Parties under the Loan Documents shall terminate without notice to or demand upon any Borrower, which are expressly waived by each Borrower, except that all of the Lenders may waive the Event of Default or, without waiving, determine, upon terms and conditions satisfactory to all the Lenders, to reinstate the Commitments and such other obligations and rights and make further Loans, which determination shall apply equally to, and shall be binding upon, all the Lenders; (2) an amount equal to the aggregate amount of all outstanding Letters of Credit shall be immediately due and payable to the Issuing Lender without notice to or demand upon any Borrower, which are expressly waived by each Borrower, to be held by the Issuing Lender in an interest-bearing cash collateral account as collateral hereunder; and (3) the unpaid principal of all Notes, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents shall be forthwith due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by each Borrower. (c) Subject to Section 9.3, upon the occurrence and during the continuation of any Event of Default, the Lenders and the Administrative Agent, or any of them, without notice to (except as expressly provided for in any Loan Document) or demand upon any Borrower, which are expressly waived by each Borrower, may proceed (but only with the consent of the Requisite Lenders) to protect, exercise and enforce their rights and remedies under the Loan Documents against each Borrower and any other Party and such other rights and remedies as are provided by Law or equity. (d) Subject to Section 9.3, the order and manner in which the Lenders' rights and remedies are to be exercised shall be determined by the Requisite Lenders in their sole discretion, and all payments received by the Administrative Agent and the Lenders, or any of them, during the continuation of an Event of Default, shall be applied first to the costs and expenses (including reasonable attorneys' fees and disbursements and the reasonably allocated costs of attorneys employed by the Administrative Agent or by any Lender) of the Administrative Agent and of the Lenders, and thereafter paid pro rata to the Lenders in the same proportions that the aggregate Obligations owed to each Lender under the Loan Documents bear to the aggregate Obligations owed under the Loan Documents to all the Lenders, without priority or preference among the Lenders. Regardless of how each Lender may treat payments for the purpose of its own accounting, for the purpose of computing Borrower's Obligations hereunder and under the Notes, payments during the continuation of an Event of Default shall be applied first, to the costs and expenses of the Administrative Agent and the Lenders, as set forth above, second, to the payment of accrued and unpaid interest due under any Loan Documents to and including the date of such application (ratably, and without duplication, according to the accrued and unpaid interest due under each of the Loan Documents), and third, to the payment of all other amounts (including principal and fees) then owing to the Administrative Agent or the Lenders under the Loan Documents. No application of payments will cure any Event of Default, or prevent acceleration, or continued acceleration, of amounts payable under the Loan Documents, or prevent the exercise, or continued exercise, of rights or remedies of the Lenders hereunder or thereunder or at Law or in equity. 9.3 Certain Funds Period. To assist Bidco in meeting its obligations to ensure it has sufficient funds available to fulfill its obligations under the Tender Offer, the Administrative Agent and the Lenders agree that the provisions of Section 9.2(a), 9.2(c) and 9.2(d) shall be suspended during the Certain Funds Period with respect to Tender Offer Loans, except to the extent that, at any time during such period, an Event of Default based upon a violation of Section 5.13(b), 5.13(d) or 5.13(e) has occurred and is continuing. ARTICLE 10 THE ADMINISTRATIVE AGENT 10.1 Appointment and Authorization. Subject to Section 10.8, each Lender hereby irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Administrative Agent by the terms thereof or are reasonably incidental, as determined by the Administrative Agent, thereto. This appointment and authorization is intended solely for the purpose of facilitating the servicing of the Loans and does not constitute appointment of the Administrative Agent as trustee for any Lender or as representative of any Lender for any other purpose and, except as specifically set forth in the Loan Documents to the contrary, the Administrative Agent shall take such action and exercise such powers only in an administrative and ministerial capacity. 10.2 Administrative Agent and Affiliates. Wells Fargo Bank, National Association (and each successor Administrative Agent) has the same rights and powers under the Loan Documents as any other Lender and may exercise the same as though it were not the Administrative Agent, and the term "Lender" or "Lenders" includes Wells Fargo Bank, National Association in its individual capacity. Wells Fargo Bank, National Association (and each successor Administrative Agent) and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with any Borrower, any Subsidiary thereof, or any Affiliate of any Borrower or any Subsidiary thereof, as if it were not the Administrative Agent and without any duty to account therefor to the Lenders. Wells Fargo Bank, National Association (and each successor Administrative Agent) need not account to any other Lender for any monies received by it for reimbursement of its costs and expenses as Administrative Agent hereunder, or (subject to Section 11.10) for any monies received by it in its capacity as a Lender hereunder. The Administrative Agent shall not be deemed to hold a fiduciary relationship with any Lender and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. 10.3 Lenders' Credit Decisions. Each Lender agrees that it has, independently and without reliance upon the Administrative Agent, any other Lender or the directors, officers, agents, employees or attorneys of the Administrative Agent or of any other Lender, and instead in reliance upon information supplied to it by or on behalf of the Borrowers and upon such other information as it has deemed appropriate, made its own independent credit analysis and decision to enter into this Agreement. Each Lender also agrees that it shall, independently and without reliance upon the Administrative Agent, any other Lender or the directors, officers, agents, employees or attorneys of the Administrative Agent or of any other Lender, continue to make its own independent credit analyses and decisions in acting or not acting under the Loan Documents. 10.4 Action by Administrative Agent. (a) Absent actual knowledge of the Administrative Agent of the existence of a Default, the Administrative Agent may assume that no Default has occurred and is continuing, unless the Administrative Agent (or the Lender that is then the Administrative Agent) has received notice from a Borrower stating the nature of the Default or has received notice from a Lender stating the nature of the Default and that such Lender considers the Default to have occurred and to be continuing. (b) The Administrative Agent has only those obligations under the Loan Documents as are expressly set forth therein. (c) Except for any obligation expressly set forth in the Loan Documents and as long as the Administrative Agent may assume that no Event of Default has occurred and is continuing, the Administrative Agent may, but shall not be required to, exercise its discretion to act or not act, except that the Administrative Agent shall be required to act or not act upon the instructions of the Requisite Lenders (or of all the Lenders, to the extent required by Section 11.2) and those instructions shall be binding upon the Administrative Agent and all the Lenders, provided that the Administrative Agent shall not be required to act or not act if to do so would be contrary to any Loan Document or to applicable Law or would result, in the reasonable judgment of the Administrative Agent, in substantial risk of liability to the Administrative Agent. (d) If the Administrative Agent has received a notice specified in clause (a), the Administrative Agent shall immediately give notice thereof to the Lenders and shall act or not act upon the instructions of the Requisite Lenders (or of all the Lenders, to the extent required by Section 11.2), provided that the Administrative Agent shall not be required to act or not act if to do so would be contrary to any Loan Document or to applicable Law or would result, in the reasonable judgment of the Administrative Agent, in substantial risk of liability to the Administrative Agent, and except that if the Requisite Lenders (or all the Lenders, if required under Section 11.2) fail, for five (5) Banking Days after the receipt of notice from the Administrative Agent, to instruct the Administrative Agent, then the Administrative Agent, in its sole discretion, may act or not act as it deems advisable for the protection of the interests of the Lenders. (e) The Administrative Agent shall have no liability to any Lender for acting, or not acting, as instructed by the Requisite Lenders (or all the Lenders, if required under Section 11.2), notwithstanding any other provision hereof. 10.5 Liability of Administrative Agent. Neither the Administrative Agent nor any of its directors, officers, agents, employees or attorneys shall be liable for any action taken or not taken by them under or in connection with the Loan Documents, except for their own gross negligence or willful misconduct. Without limitation on the foregoing, the Administrative Agent and its directors, officers, agents, employees and attorneys: (a) May treat the payee of any Note as the holder thereof until the Administrative Agent receives notice of the assignment or transfer thereof, in form satisfactory to the Administrative Agent, signed by the payee, and may treat each Lender as the owner of that Lender's interest in the Obligations for all purposes of this Agreement until the Administrative Agent receives notice of the assignment or transfer thereof, in form satisfactory to the Administrative Agent, signed by that Lender; (b) May consult with legal counsel (including in-house legal counsel), accountants (including in-house accountants) and other professionals or experts selected by it, or with legal counsel, accountants or other professionals or experts for Borrowers and/or their Subsidiaries or the Lenders, and shall not be liable for any action taken or not taken by it in good faith in accordance with any advice of such legal counsel, accountants or other professionals or experts; (c) Shall not be responsible to any Lender for any statement, warranty or representation made in any of the Loan Documents or in any notice, certificate, report, request or other statement (written or oral) given or made in connection with any of the Loan Documents; (d) Except to the extent expressly set forth in the Loan Documents, shall have no duty to ask or inquire as to the performance or observance by the Borrowers or their respective Subsidiaries of any of the terms, conditions or covenants of any of the Loan Documents or to inspect any collateral or any Property, books or records of the Borrowers or their Subsidiaries; (e) Will not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, effectiveness, sufficiency or value of any Loan Document, any other instrument or writing furnished pursuant thereto or in connection therewith, or any collateral; (f) Will not incur any liability by acting or not acting in reliance upon any Loan Document, notice, consent, certificate, statement, request or other instrument or writing believed in good faith by it to be genuine and signed or sent by the proper party or parties; and (g) Will not incur any liability for any arithmetical error in computing any amount paid or payable by any Borrower or any Subsidiary or Affiliate thereof or paid or payable to or received or receivable from any Lender under any Loan Document, including, without limitation, principal, interest, commitment fees, Loans and other amounts; provided that, promptly upon discovery of such an error in computation, the Administrative Agent, the Lenders and (to the extent applicable) any Borrower and/or its Subsidiaries or Affiliates shall make such adjustments as are necessary to correct such error and to restore the parties to the position that they would have occupied had the error not occurred. 10.6 Indemnification. Each Lender shall, ratably in accordance with its Pro Rata Share of the Commitments (if the Commitments are then in effect) or in accordance with its proportion of the aggregate Indebtedness then evidenced by the Notes (if the Commitments have then been terminated), indemnify and hold the Administrative Agent and its directors, officers, agents, employees and attorneys harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including reasonable attorneys' fees and disbursements and allocated costs of attorneys employed by the Administrative Agent) that may be imposed on, incurred by or asserted against it or them in any way relating to or arising out of the Loan Documents (other than losses incurred by reason of the failure of any Borrower to pay the Indebtedness represented by the Notes) or any action taken or not taken by it as Administrative Agent thereunder, except such as result from its own gross negligence or willful misconduct. Without limitation on the foregoing, each Lender shall reimburse the Administrative Agent upon demand for that Lender's Pro Rata Share of any out-of-pocket cost or expense incurred by the Administrative Agent in connection with the negotiation, preparation, execution, delivery, amendment, waiver, restructuring, reorganization (including a bankruptcy reorganization), enforcement or attempted enforcement of the Loan Documents, to the extent that any Borrower or any other Party is required by Section 11.3 to pay that cost or expense but fails to do so upon demand. Nothing in this Section 10.6 shall entitle the Administrative Agent or any indemnitee referred to above to recover any amount from the Lenders if and to the extent that such amount has theretofore been recovered from a Borrower or any of its Subsidiaries. To the extent that the Administrative Agent or any indemnitee referred to above is later reimbursed such amount by a Borrower or any of its Subsidiaries, it shall return the amounts paid to it by the Lenders in respect of such amount. 10.7 Successor Administrative Agent. The Administrative Agent may, and at the request of the Requisite Lenders shall, resign as Administrative Agent upon reasonable notice to the Lenders and each Borrower effective upon acceptance of appointment by a successor Administrative Agent. If the Administrative Agent shall resign as Administrative Agent under this Agreement, the Requisite Lenders shall appoint from among the Lenders a successor Administrative Agent for the Lenders, which successor Administrative Agent shall be approved by each Borrower (and such approval shall not be unreasonably withheld or delayed). If no successor Administrative Agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and each Borrower, a successor Administrative Agent from among the Lenders. Upon the acceptance of its appointment as successor Administrative Agent hereunder, such successor Administrative Agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor Administrative Agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article 10, and Sections 11.3, 11.11 and 11.22, shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. Notwithstanding the foregoing, if (a) the Administrative Agent has not been paid its agency fees under Section 3.5 or has not been reimbursed for any expense reimbursable to it under Section 11.3, in either case for a period of at least one (1) year and (b) no successor Administrative Agent has accepted appointment as Administrative Agent by the date which is thirty (30) days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Requisite Lenders appoint a successor Administrative Agent as provided for above. 10.8 No Obligations of Borrowers. Nothing contained in this Article 10 shall be deemed to impose upon any Borrower any obligation in respect of the due and punctual performance by the Administrative Agent of its obligations to the Lenders under any provision of this Agreement, and no Borrower shall have liability to the Administrative Agent or any of the Lenders in respect of any failure by the Administrative Agent or any Lender to perform any of its obligations to the Administrative Agent or the Lenders under this Agreement. Without limiting the generality of the foregoing, where any provision of this Agreement relating to the payment of any amounts due and owing under the Loan Documents provides that such payments shall be made by a Borrower to the Administrative Agent for the account of the Lenders, such Borrower's obligations to the Lenders in respect of such payments shall be deemed to be satisfied upon the making of such payments to the Administrative Agent in the manner provided by this Agreement. ARTICLE 11 MISCELLANEOUS 11.1 Cumulative Remedies; No Waiver. The rights, powers, privileges and remedies of the Administrative Agent and the Lenders provided herein or in any Note or other Loan Document are cumulative and not exclusive of any right, power, privilege or remedy provided by Law or equity. No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power, privilege or remedy may be, or may be deemed to be, a waiver thereof; nor may any single or partial exercise of any right, power, privilege or remedy preclude any other or further exercise of the same or any other right, power, privilege or remedy. The terms and conditions of Article 10 (other than Section 10.8) hereof are inserted for the sole benefit of the Administrative Agent and the Lenders; the same may be waived in whole or in part, with or without terms or conditions, in respect of any Loan without prejudicing the Administrative Agent's or the Lenders' rights to assert them in whole or in part in respect of any other Loan. 11.2 Amendments; Consents. No amendment, modification, supplement, extension, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder (other than a consent relating to a matter expressly stated by this Agreement to require only the Administrative Agent's consent), and no consent to any departure by any Borrower or any other Party therefrom, may in any event be effective unless in writing signed by the Administrative Agent with the written approval of the Requisite Lenders (and, in the case of any amendment, modification or supplement of or to any Loan Document to which a Borrower is a Party, signed by such Borrower, and, in the case of any amendment, modification or supplement to Article 10, signed by the Administrative Agent), and then only in the specific instance and for the specific purpose given; and, without the approval in writing of all the Lenders, no amendment, modification, supplement, termination, waiver or consent (other than a consent relating to a matter expressly stated by this Agreement to require only the Administrative Agent's consent) may be effective. (a) To amend or modify the principal of, or the amount of principal, principal prepayments or the rate of interest payable on, any Note, or the amount of the Commitments or the Pro Rata Share of any Lender or the amount of any commitment fee payable to any Lender, or any other fee or amount payable to any Lender under the Loan Documents or to waive an Event of Default consisting of the failure of any Borrower to pay when due principal, interest or any fee due to the Lenders or the Issuing Bank; (b) To postpone any date fixed for any payment of principal of, prepayment of principal of or any installment of interest on, any Note or any installment of any fee due to the Lenders or the Issuing Bank, or to extend the term of the Commitments; (c) To amend the provisions of the definition of "Requisite Lenders" or "Maturity Date"; or (d) To release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty; or (e) To amend or waive Article 8 or this Section 11.2; or (f) To amend any provision of this Agreement that expressly requires the consent or approval of all the Lenders. Any amendment, modification, supplement, termination, waiver or consent pursuant to this Section 11.2 shall apply equally to, and shall be binding upon, all the Lenders and the Administrative Agent. 11.3 Costs, Expenses and Taxes. Borrowers, jointly and severally, shall pay within ten (10) Banking Days after demand, accompanied by an invoice therefor, the reasonable costs and expenses of the Administrative Agent in connection with the negotiation, preparation, syndication, execution and delivery of the Loan Documents and any amendment thereto or waiver thereof. Borrowers, jointly and severally, shall also pay on demand, accompanied by an invoice therefor, the reasonable costs and expenses of the Administrative Agent and the Lenders in connection with the restructuring, reorganization (including a bankruptcy reorganization of any Borrower or any of their respective Subsidiaries) and enforcement or attempted enforcement of the Loan Documents, and any matter related thereto. The foregoing costs and expenses shall include any applicable filing fees, recording fees, search fees, and other out-of-pocket expenses and the reasonable fees and out-of-pocket expenses of any legal counsel (including reasonably allocated costs of legal counsel employed by the Administrative Agent or any Lender), independent public accountants and other outside experts retained by the Administrative Agent or any Lender, whether or not such costs and expenses are incurred or suffered by the Administrative Agent or any Lender in connection with or during the course of any bankruptcy or insolvency proceedings of any Borrower or any Subsidiary thereof. Borrowers, jointly and severally, shall pay any and all documentary and other taxes, excluding (i) taxes imposed on or measured in whole or in part by a Lender's overall net income or net worth imposed on it by (A) any jurisdiction (or political subdivision thereof) in which it is organized or maintains its principal office or Eurodollar Lending Office or (B) any jurisdiction (or political subdivision thereof) in which it is "doing business" or (ii) any withholding taxes or other taxes based on gross income imposed by the United States of America for any period with respect to which it has failed to provide Borrowers with the appropriate form or forms required by Section 11.21, to the extent such forms are then required by applicable Laws, and all costs, expenses, fees and charges payable or determined to be payable in connection with the filing or recording of this Agreement, any other Loan Document or any other instrument or writing to be delivered hereunder or thereunder, or in connection with any transaction pursuant hereto or thereto, and shall reimburse, hold harmless and indemnify on the terms set forth in 11.11 the Administrative Agent and the Lenders from and against any and all loss, liability or legal or other expense with respect to or resulting from any delay in paying or failure to pay any such tax, cost, expense, fee or charge or that any of them may suffer or incur by reason of the failure of any Party to perform any of its Obligations. 11.4 Nature of Lenders' Obligations. The obligations of the Lenders hereunder are several and not joint or joint and several. Nothing contained in this Agreement or any other Loan Document and no action taken by the Administrative Agent or the Lenders or any of them pursuant hereto or thereto may, or may be deemed to, make the Lenders a partnership, an association, a joint venture or other entity, either among themselves or with the Borrowers or any Affiliate of any of the Borrowers. A default by any Lender will not increase the Pro Rata Share of the Commitments attributable to any other Lender. Any Lender not in default may, if it desires, assume in such proportion as the nondefaulting Lenders agree the obligations of any Lender in default, but is not obligated to do so. The Administrative Agent agrees that it will use its best efforts either to induce promptly the other Lenders to assume the obligations of a Lender in default or to obtain promptly another Lender, reasonably satisfactory to the Borrowers, to replace such a Lender in default. 11.5 Survival of Representations and Warranties. All representations and warranties contained herein or in any other Loan Document, or in any certificate or other writing delivered by or on behalf of any one or more of the Parties to any Loan Document, will survive the making of the Loans hereunder and the execution and delivery of the Notes, and have been or will be relied upon by the Administrative Agent and each Lender, notwithstanding any investigation made by the Administrative Agent or any Lender or on their behalf. 11.6 Notices. Except as otherwise expressly provided in the Loan Documents, all notices, requests, demands, directions and other communications provided for hereunder or under any other Loan Document must be in writing and must be mailed, telegraphed, telecopied, dispatched by commercial courier or delivered to the appropriate party at the address set forth on the signature pages of this Agreement or other applicable Loan Document or, as to any party to any Loan Document, at any other address as may be designated by it in a written notice sent to all other parties to such Loan Document in accordance with this Section. Except as otherwise expressly provided in any Loan Document, if any notice, request, demand, direction or other communication required or permitted by any Loan Document is given by mail it will be effective on the earlier of receipt or the fourth Banking Day after deposit in the United States mail with first class or airmail postage prepaid; if given by telegraph or cable, when delivered to the telegraph company with charges prepaid; if given by telecopier, when sent; if dispatched by commercial courier, on the scheduled delivery date; or if given by personal delivery, when delivered. 11.7 Execution of Loan Documents. Unless the Administrative Agent otherwise specifies with respect to any Loan Document, (a) this Agreement and any other Loan Document may be executed in any number of counterparts and any party hereto or thereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which counterparts of this Agreement or any other Loan Document, as the case may be, when taken together will be deemed to be but one and the same instrument and (b) execution of any such counterpart may be evidenced by a telecopier transmission of the signature of such party. The execution of this Agreement or any other Loan Document by any party hereto or thereto will not become effective until counterparts hereof or thereof, as the case may be, have been executed by all the parties hereto or thereto. 11.8 Binding Effect; Assignment. (a) This Agreement and the other Loan Documents to which each Borrower is a Party will be binding upon and inure to the benefit of Borrowers, the Administrative Agent, each of the Lenders, and their respective successors and assigns, except that no Borrower may assign its rights hereunder or thereunder or any interest herein or therein without the prior written consent of all the Lenders. Any Lender may at any time pledge any of its Notes or any other instrument evidencing its rights as a Lender under this Agreement to a Federal Reserve Bank, but no such pledge shall release that Lender from its obligations hereunder or grant to such Federal Reserve Bank the rights of a Lender hereunder absent foreclosure of such pledge. (b) From time to time following the Closing Date, each Lender may assign to one or more Persons all or any portion of its Pro Rata Share of the Commitments; provided that (i) such Person, if not then a Lender or an Affiliate of the assigning Lender, shall be approved by the Administrative Agent and (if no Event of Default then exists) the Borrowers (neither of which approvals shall be unreasonably withheld or delayed), (ii) such assignment shall be evidenced by a Commitments Assignment and Acceptance, a copy of which shall be furnished to the Administrative Agent as hereinbelow provided, (iii) except in the case of an assignment to an Affiliate of the assigning Lender, to another Lender or of the entire remaining Commitments of the assigning Lender, the assignment shall not assign a Pro Rata Share of the Commitments that is equivalent to less than $5,000,000 and (iv) the effective date of any such assignment shall be as specified in the Commitments Assignment and Acceptance, but not earlier than the date which is five (5) Banking Days after the date the Administrative Agent has received the Commitments Assignment and Acceptance. Upon the effective date of such Commitments Assignment and Acceptance, the Person named therein shall be a Lender for all purposes of this Agreement, with the Pro Rata Share of the Commitments therein set forth and, to the extent of such Pro Rata Share, the assigning Lender shall be released from its further obligations under this Agreement. Each Borrower agrees that it shall execute and deliver (against delivery by the assigning Lender to each Borrower of its Note) to such assignee Lender, Notes evidencing that assignee Lender's Pro Rata Share of the Commitments, and to the assigning Lender, Notes evidencing the remaining balance Pro Rata Share retained by the assigning Lender. (c) By executing and delivering a Commitments Assignment and Acceptance, the Person constituting the assignee thereunder acknowledges and agrees that: (i) other than the representation and warranty that it is the legal and beneficial owner of the Pro Rata Share of the Commitments being assigned thereby free and clear of any adverse claim, the assigning Lender has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of this Agreement or any other Loan Document; (ii) the assigning Lender has made no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or the performance by the Borrowers of the Obligations; (iii) it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.1 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Commitments Assignment and Acceptance; (iv) it will, independently and without reliance upon the Administrative Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) it appoints and authorizes the Administrative Agent to take such action and to exercise such powers under this Agreement as are delegated to the Administrative Agent by this Agreement; and (vi) it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent shall maintain at the Administrative Agent's Office a copy of each Commitments Assignment and Acceptance delivered to it and a register (the "Register") of the name and address of each of the Lenders and the Pro Rata Share of the Commitments held by each Lender, giving effect to each Commitments Assignment and Acceptance. The Register shall be available during normal business hours for inspection by any Borrower or any Lender upon reasonable prior notice to the Administrative Agent. After receipt of a completed Commitments Assignment and Acceptance executed by any Lender and an assignee, and receipt of an assignment fee of $3,500 from such Lender or assignee, the Administrative Agent shall, promptly following the effective date thereof, provide to the Borrowers and the Lenders a revised Schedule 1.1 giving effect thereto. Each Borrower, the Administrative Agent and the Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the Pro Rata Share of the Commitments listed therein for all purposes hereof, and no assignment or transfer of any such Pro Rata Share of the Commitments shall be effective, in each case unless and until a Commitments Assignment and Acceptance effecting the assignment or transfer thereof shall have been accepted by the Administrative Agent and recorded in the Register as provided above. Prior to such recordation, all amounts owed with respect to the applicable Pro Rata Share of the Commitments shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Pro Rata Share of the Commitments. (e) Each Lender may from time to time grant participations to one or more banks or other financial institutions in a portion of its Pro Rata Share of the Commitments; provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other financial institutions shall not be a Lender hereunder for any purpose except, if the participation agreement so provides, for the purposes of Sections 3.6, 3.7, 3.8, 11.11 and 11.22 but only to the extent that the cost to the Borrowers does not exceed the cost which the Borrowers would have incurred in respect of such Lender absent the participation, (iv) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) the participation interest shall be expressed as a percentage of the granting Lender's Pro Rata Share of the Commitments as it then exists and shall not restrict an increase in the Commitments, or in the granting Lender's Pro Rata Share of the Commitments, so long as the amount of the participation interest is not affected thereby and (vi) the consent of the holder of such participation interest shall not be required for amendments or waivers of provisions of the Loan Documents other than those which (A) extend the Maturity Date or any other date upon which any payment of money is due to the Lenders, (B) reduce the rate of interest on the Notes, any fee or any other monetary amount payable to the Lenders, (C) reduce the amount of any installment of principal due under the Notes or (D) release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty. 11.9 Right of Setoff. If an Event of Default has occurred and is continuing, the Administrative Agent or any Lender (but in each case only with the consent of the Requisite Lenders) may exercise its rights under applicable Laws and, to the extent permitted by applicable Laws, apply any funds in any deposit account maintained with it by any Borrower and/or any Property of any Borrower in its possession against the Obligations. 11.10 Sharing of Setoffs. Each Lender severally agrees that if it, through the exercise of any right of setoff, banker's lien or counterclaim against any Borrower, or otherwise, receives payment of the Obligations held by it that is ratably more than any other Lender, through any means, receives in payment of the Obligations held by that Lender, then, subject to applicable Laws: (a) the Lender exercising the right of setoff, banker's lien or counterclaim or otherwise receiving such payment shall purchase, and shall be deemed to have simultaneously purchased, from each of the other Lenders a participation in the Obligations held by the other Lenders and shall pay to the other Lenders a purchase price in an amount so that the share of the Obligations held by each Lender after the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment shall be in the same proportion that existed prior to the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment; and (b) such other adjustments and purchases of participations shall be made from time to time as shall be equitable to ensure that all of the Lenders share any payment obtained in respect of the Obligations ratably in accordance with each Lender's share of the Obligations immediately prior to, and without taking into account, the payment; provided that, if all or any portion of a disproportionate payment obtained as a result of the exercise of the right of setoff, banker's lien, counterclaim or otherwise is thereafter recovered from the purchasing Lender by any Borrower or any Person claiming through or succeeding to the rights of such Borrower, the purchase of a participation shall be rescinded and the purchase price thereof shall be restored to the extent of the recovery, but without interest. Each Lender that purchases a participation in the Obligations pursuant to this Section 11.10 shall from and after the purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased. Each Borrower expressly consents to the foregoing arrangements and agrees that any Lender holding a participation in an Obligation so purchased pursuant to this Section 11.10 may exercise any and all rights of setoff, banker's lien or counterclaim with respect to the participation as fully as if the Lender were the original owner of the Obligation purchased. 11.11 Indemnity by Borrowers. Borrowers jointly and severally agree to indemnify, save and hold harmless the Administrative Agent and each Lender and their respective directors, officers, agents, attorneys and employees (collectively the "Indemnitees") from and against: (a) any and all claims, demands, actions or causes of action if the claim, demand, action or cause of action arises out of or relates to any act or omission (or alleged act or omission) of any Borrower, its Affiliates or any of its officers, directors or stockholders relating to the Commitments, the use or contemplated use of proceeds of any Loan, or the relationship of the Borrowers and the Lenders under this Agreement; (b) any administrative or investigative proceeding by any Governmental Agency arising out of or related to a claim, demand, action or cause of action described in clause (a) above; and (c) any and all liabilities, losses, costs or expenses (including reasonable attorneys' fees and the reasonably allocated costs of attorneys employed by any Indemnitee and disbursements of such attorneys and other professional services) that any Indemnitee suffers or incurs as a result of the assertion of any foregoing claim, demand, action or cause of action; provided that no Indemnitee shall be entitled to indemnification for any loss caused by its own gross negligence or willful misconduct. If any claim, demand, action or cause of action is asserted against any Indemnitee, such Indemnitee shall promptly notify the Borrowers, but the failure to so promptly notify the Borrowers shall not affect the Borrowers' obligations under this Section unless such failure materially prejudices the Borrowers' right to participate in the contest of such claim, demand, action or cause of action, as hereinafter provided. Such Indemnitee may (and shall, if requested by the Borrowers in writing) contest the validity, applicability and amount of such claim, demand, action or cause of action and shall permit the Borrowers to participate in such contest. Any Indemnitee that proposes to settle or compromise any claim or proceeding for which the Borrowers may be liable for payment of indemnity hereunder shall give the Borrowers written notice of the terms of such proposed settlement or compromise reasonably in advance of settling or compromising such claim or proceeding and shall obtain the Borrowers' prior written consent (which shall not be unreasonably withheld or delayed). In connection with any claim, demand, action or cause of action covered by this Section 11.11 against more than one Indemnitee, all such Indemnitees shall be represented by the same legal counsel (which may be a law firm engaged by the Indemnitees or attorneys employed by an Indemnitee or a combination of the foregoing) selected by the Indemnitees and reasonably acceptable to the Borrowers; provided, that if such legal counsel determines in good faith that representing all such Indemnitees would or is reasonably likely to result in a conflict of interest under Laws or ethical principles applicable to such legal counsel, then to the extent reasonably necessary to avoid such a conflict of interest or to permit unqualified assertion of such a defense or counterclaim, each affected Indemnitee shall be entitled to separate representation by legal counsel selected by that Indemnitee and reasonably acceptable to the Borrowers, with all such legal counsel using reasonable efforts to avoid unnecessary duplication of effort by counsel for all Indemnitees; and further provided that the Administrative Agent (as an Indemnitee) shall at all times be entitled to representation by separate legal counsel (which may be a law firm or attorneys employed by the Administrative Agent or a combination of the foregoing). Any obligation or liability of the Borrowers to any Indemnitee under this Section 11.11 shall survive the expiration or termination of this Agreement and the repayment of all Loans and the payment and performance of all other Obligations owed to the Lenders. 11.12 Nonliability of the Lenders. Each Borrower acknowledges and agrees that: (a) Any inspections of any Property of any Borrower made by or through the Administrative Agent or the Lenders are for purposes of administration of the Loan only and such Borrower is not entitled to rely upon the same (whether or not such inspections are at the expense of such Borrower); (b) By accepting or approving anything required to be observed, performed, fulfilled or given to the Administrative Agent or the Lenders pursuant to the Loan Documents, neither the Administrative Agent nor the Lenders shall be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by the Administrative Agent or the Lenders; (c) The relationship between the Borrowers and the Administrative Agent and the Lenders is, and shall at all times remain, solely that of borrowers and lenders; neither the Administrative Agent nor the Lenders shall under any circumstance be construed to be partners or joint venturers of the Borrowers or their Affiliates; neither the Administrative Agent nor the Lenders shall under any circumstance be deemed to be in a relationship of confidence or trust or a fiduciary relationship with the Borrowers or their Affiliates, or to owe any fiduciary duty to the Borrowers or their Affiliates; neither the Administrative Agent nor the Lenders undertake or assume any responsibility or duty to the Borrowers or their Affiliates to select, review, inspect, supervise, pass judgment upon or inform the Borrowers or their Affiliates of any matter in connection with their Property or the operations of the Borrowers or their Affiliates; the Borrowers and their Affiliates shall rely entirely upon their own judgment with respect to such matters; and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by the Administrative Agent or the Lenders in connection with such matters is solely for the protection of the Administrative Agent and the Lenders and neither the Borrowers nor any other Person is entitled to rely thereon; and (d) The Administrative Agent and the Lenders shall not be responsible or liable to any Person for any loss, damage, liability or claim of any kind relating to injury or death to Persons or damage to Property caused by the actions, inaction or negligence of any Borrower and/or its Affiliates and each Borrower hereby indemnifies and holds the Administrative Agent and the Lenders harmless on the terms set forth in Section 11.11 from any such loss, damage, liability or claim. 11.13 No Third Parties Benefited. This Agreement is made for the purpose of defining and setting forth certain obligations, rights and duties of the Borrowers, the Administrative Agent and the Lenders in connection with the Loans, and is made for the sole benefit of the Borrowers, the Administrative Agent and the Lenders, and the Administrative Agent's and the Lenders' successors and assigns. Except as provided in Sections 11.8 and 11.11, no other Person shall have any rights of any nature hereunder or by reason hereof. 11.14 Confidentiality. Each Lender agrees to hold any confidential information that it may receive from the Borrowers pursuant to this Agreement in confidence, except for disclosure: (a) to other Lenders or Affiliates of a Lender; (b) to legal counsel and accountants for the Borrowers or any Lender; (c) to other professional advisors to the Borrowers or any Lender, provided that the recipient has accepted such information subject to a confidentiality agreement substantially similar to this Section 11.14; (d) to regulatory officials having jurisdiction over that Lender; (e) as required by Law or legal process, provided that each Lender agrees to notify the Borrowers of any such disclosures unless prohibited by applicable Laws, or in connection with any legal proceeding to which that Lender and the Borrowers are adverse parties; and (f) to another financial institution in connection with a disposition or proposed disposition to that financial institution of all or part of that Lender's interests hereunder or a participation interest in its Notes. For purposes of the foregoing, "confidential information" shall mean all Projections, information relating to acquisitions, information relating to the Borrowers' businesses and any other information respecting the Borrowers or their Subsidiaries reasonably considered by the Borrowers to be confidential, other than (i) information previously filed with any Governmental Agency and available to the public, (ii) information previously published in any public medium from a source other than, directly or indirectly, that Lender, and (iii) information previously disclosed by the Borrowers to any Person not associated with the Borrowers which does not owe a professional duty of confidentiality to the Borrowers or which has not executed an appropriate confidentiality agreement with the Borrowers. Nothing in this Section shall be construed to create or give rise to any fiduciary duty on the part of the Administrative Agent or the Lenders to the Borrowers. 11.15 Further Assurances. The Borrowers shall, at their expense and without expense to the Lenders or the Administrative Agent, do, execute and deliver such further acts and documents as the Requisite Lenders or the Administrative Agent from time to time reasonably require for the assuring and confirming unto the Lenders or the Administrative Agent of the rights hereby created or intended now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Document. 11.16 Integration. This Agreement, together with the other Loan Documents and the letter agreement referred to in Sections 3.2, 3.4 and 3.5, comprises the complete and integrated agreement of the parties on the subject matter hereof and supersedes all prior agreements, written or oral, on the subject matter hereof. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control and govern; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 11.17 Governing Law. Except to the extent otherwise provided therein, each Loan Document shall be governed by, and construed and enforced in accordance with, the Laws of California applicable to contracts made and performed in California. 11.18 Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable or invalid as to any party or in any jurisdiction shall, as to that party or jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions or the operation, enforceability or validity of that provision as to any other party or in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 11.19 Headings. Article and Section headings in this Agreement and the other Loan Documents are included for convenience of reference only and are not part of this Agreement or the other Loan Documents for any other purpose. 11.20 Time of the Essence. Time is of the essence of the Loan Documents. 11.21 Foreign Lenders and Participants. Each Lender that is incorporated or otherwise organized under the Laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia shall deliver to the Borrowers (with a copy to the Administrative Agent), on or before the Closing Date (or on or before accepting an assignment or receiving a participation interest herein pursuant to Section 11.8, if applicable) two duly completed copies, signed by a Responsible Official, of either Form 1001 (relating to such Lender and entitling it to a complete exemption from withholding on all payments to be made to such Lender by the Borrowers pursuant to this Agreement) or Form 4224 (relating to all payments to be made to such Lender by the Borrowers pursuant to this Agreement) of the United States Internal Revenue Service or such other evidence (including, if reasonably necessary, Form W-9) satisfactory to the Borrowers and the Administrative Agent that no withholding under the federal income tax laws is required with respect to such Lender. Thereafter and from time to time, each such Lender shall (a) promptly submit to the Borrowers (with a copy to the Administrative Agent), such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to the Borrowers and the Administrative Agent of any available exemption from, United States withholding taxes in respect of all payments to be made to such Lender by the Borrowers pursuant to this Agreement and (b) take such steps as shall not be disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Eurodollar Lending Office, if any) to avoid any requirement of applicable Laws that any Borrower make any deduction or withholding for taxes from amounts payable to such Lender. 11.22 Joint and Several Liability. (a) Each Borrower, whether a party to this Agreement on the Closing Date or thereafter becoming a Borrower pursuant to the provisions of Section 5.11, shall be jointly and severally liable for all of the Obligations. (b) Each Borrower hereby agrees that its Obligations hereunder shall not be discharged or otherwise affected as a result of (a) the invalidity or unenforceability of any of the other Borrowers' obligations under this Agreement or any other Loan Document or any other agreement or instrument relating thereto, or any guaranty of the Obligations, (b) the absence of any attempt to collect the Obligations from any of the other Borrowers or other action to enforce the same; (c) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding commenced by or against any of the other Borrowers (other than such Borrower), including without limitation, any discharge of, or bar or stay against collecting, all or any of the Obligations (or any interest thereon) in or as a result of any such proceeding; (d) failure by the Administrative Agent, any Lender, or the Issuing Lender to file or enforce a claim against any other Borrower or its estate in any bankruptcy or insolvency case or proceeding; (e) any action taken by the Administrative Agent, any Lender, or the Issuing Lender that is authorized hereby; or (f) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor or any other third party obligor on any Obligations, other than the payment in full of the Obligations. Each Borrower hereby waives (a) diligence, presentment, demand of payment (except as expressly required hereunder), filing of claims with a court in the event of receivership or bankruptcy of the other Borrowers, protest or notice with respect to the Obligations, and all presentments, demands for performance, notices of nonperformance (except to the extent expressly required hereunder), protests, notices of protest, notices of dishonor and notices of acceptance of this Agreement and the Obligations, the benefits of all statutes of limitation, and all other demands (except as expressly required hereunder) whatsoever (and shall not require that the same be made on the other Borrowers as a condition precedent to its Obligations hereunder), (b) all notices of the existence, creation or incurring of new or additional indebtedness, arising either from additional loans extended to the other Borrowers or otherwise, (c) all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the Obligations is due (except as expressly required hereunder), (d) notices of any and all proceedings to collect from the maker, any endorser or any other guarantor of all or any part of the Obligations, or from any other Person, (e) any requirement of marshalling or any other principle of election of remedies and all rights and defenses arising out of an election of remedies by any Lender, (f) any defense based upon any Requirement of Law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal and (g) without limiting the generality of the foregoing or any other provision hereof, all rights and benefits under California Civil Code Sections 2808, 2809, 810, 2811, 2819, 2839, 2845, 2849, 2850 and 3433. 11.23 Removal of a Lender. Borrowers shall have the right to remove a Lender as a party to this Agreement if such Lender is paid a material amount by Borrowers pursuant to Section 3.6 or Section 3.7. Upon notice from Borrowers, such Lender shall execute and deliver a Commitments Assignment and Acceptance covering that Lender's Pro Rata Share of the Commitments in favor of such Person as Borrowers may designate, subject to payment in full by such Person of all principal, interest and fees owing to such Lender through the date of assignment and the agreement of such Person to indemnify such Lender with respect to all then outstanding Letters of Credit. The Administrative Agent shall, if requested by the Borrowers, use reasonable efforts to identify Persons willing to accept such an assignment from such Lender. 11.24 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 11.25 Purported Oral Amendments. EACH BORROWER EXPRESSLY ACKNOWLEDGES THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 11.2. EACH BORROWER AGREES THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF THE ADMINISTRATIVE AGENT OR ANY LENDER THAT DOES NOT COMPLY WITH SECTION 11.2 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. DAY RUNNER, INC. By: /s/ DENNIS K. MARQUARDT ----------------------------------- Dennis K. Marquardt Address: 15295 Alton Parkway Irvine, California 92618 Facsimile: 714-441-4848 ULTIMA DISTRIBUTION INC. By: /s/ STAN LITTLEY ------------------------------------- Stan Littley Address: 2690 Plymouth Drive Oakville, Ontario Canada L6H 5R6 DAY RUNNER UK plc By:/s/ DENNIS K. MARQUARDT --------------------------------- Dennis K. Marquardt Address: Day Runner UK plc 30-32 Gildredge Road Eastbourne East Sussex BN21 45H WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and a Lender By: /s/ FRANK PIZZO ----------------------------------- Frank Pizzo Address: WELLS FARGO BANK, N.A., as Agent Commercial Bank Loan Center Agency Dept., 2840 201 3rd Street, 8th Floor San Francisco, CA 94103 Attn: Manager Telephone: 415-477-5319 Facsimile: 415-512-9408 and WELLS FARGO BANK, N.A., as Agent Regional Commercial Banking Office 333 South Grand Avenue, 3rd Floor Los Angeles, CA 90071 Attn: Regional Vice President Telephone: 213-253-6126 Facsimile: 213-628-9694 Payment Instructions: WELLS FARGO, N.A. San Francisco, CA ABA # 1210-00248 For Acct.: 4081656654 Acct. Name: SYNDIC/WFBCORP/DAY RUNNER Ref.: Day Runner EX-27 3 FDS --
5 This schedule contains summary financial information extracted from the consolidated balance sheet and the consolidated statement of income filed as part of the report on Form 8-K and is qualified in its entirety by reference to such report on Form 8-K. 0000853102 Day Runner, Inc. 1,000 Year Jun-30-1998 Jun-30-1997 Jun-30-1998 2,923 0 42,484 9,942 37,610 84,569 26,972 15,084 101,179 26,594 0 0 0 14 74,518 101,179 167,841 167,841 80,663 80,663 61,609 0 (172) 25,741 9,833 15,908 0 0 0 15,908 1.38 1.27
EX-99 4 FISCAL 1998 AUDITED FINANCIAL STATEMENTS EXHIBIT 99.1 INDEPENDENT AUDITORS' REPORT Day Runner, Inc.: We have audited the accompanying consolidated balance sheets of Day Runner, Inc. and subsidiaries (the "Company") as of June 30, 1998 and 1997, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended June 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Day Runner, Inc. and subsidiaries as of June 30, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1998 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP /s/ DELOITTE & TOUCHE LLP Los Angeles, California August 17, 1998 (September 24, 1998 as to Note 20)
DAY RUNNER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) ASSETS June 30, 1998 1997 --------- ------ Current assets: Cash and cash equivalents...................................................... $ 2,923 $15,550 Accounts receivable (less allowance for doubtful accounts and sales returns and other allowances of $9,942 and $8,664 at June 30, 1998 and 1997, respectively)....................................... 32,542 22,303 Inventories.................................................................... 37,610 23,406 Prepaid expenses and other current assets...................................... 1,670 2,409 Income taxes receivable........................................................ 2,606 Deferred income taxes.......................................................... 7,218 6,386 --------- ------- Total current assets........................................................ 84,569 70,054 Property and equipment, net ....................................................... 11,888 8,688 Other assets (net of accumulated amortization of $196,000 at June 30, 1998)........ 4,722 138 --------- ------- Total assets....................................................................... $101,179 $78,880 ========= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Lines of credit................................................................ $ 2,716 $ 452 Accounts payable............................................................... 9,969 8,320 Accrued expenses............................................................... 13,876 9,500 Income taxes payable........................................................... 1,049 Current portion of capital lease obligations................................... 33 23 --------- ------- Total current liabilities................................................... 26,594 19,344 --------- ------- Long-term liabilities: Capital lease obligations...................................................... 53 52 --------- ------- Commitments and contingencies Stockholders' equity: Preferred stock (1,000,000 shares authorized; $0.001 par value, no shares issued or outstanding) Common stock (29,000,000 shares authorized; $0.001 par value; 13,677,386 shares issued and 11,955,598 outstanding at June 30, 1998; 12,728,858 shares issued and 11,702,658 outstanding at June 30, 1997)........ 14 13 Additional paid-in capital..................................................... 34,445 23,752 Retained earnings.............................................................. 65,076 49,168 Cumulative translation adjustment.............................................. 102 92 Treasury stock - At cost (1,721,788 and 1,026,200 shares, at June 30, 1998 and 1997, respectively).......................................................... (25,105) (13,541) --------- -------- Total stockholders' equity.................................................. 74,532 59,484 --------- ------- Total liabilities and stockholders' equity......................................... $101,179 $78,880 ========= ======= See accompanying notes to consolidated financial statements.
DAY RUNNER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) Years Ended June 30, 1998 1997 1996 --------- ---------- -------- Net sales................................................... $ 167,841 $ 127,376 $125,126 Cost of goods sold.......................................... 80,663 60,452 59,920 --------- --------- --------- Gross profit................................................ 87,178 66,924 65,206 --------- --------- --------- Operating expenses: Selling, marketing and distribution..................... 43,193 31,673 29,878 General and administrative.............................. 18,416 14,451 16,376 Costs incurred in pursuing acquisitions................. 1,451 --------- --------- Total operating expenses............................. 61,609 47,575 46,254 --------- --------- --------- Income from operations...................................... 25,569 19,349 18,952 --------- --------- --------- Interest (income) expense: Interest income......................................... (390) (1,431) (823) Interest expense........................................ 218 130 117 --------- --------- --------- Net interest income.................................. (172) (1,301) (706) --------- --------- --------- Income before provision for income taxes.................... 25,741 20,650 19,658 Provision for income taxes.................................. 9,833 8,102 7,840 --------- --------- --------- Net income.................................................. $ 15,908 $ 12,548 $ 11,818 ========= ========= ========= Earnings per common share: Basic................................................ $ 1.38 $ 1.01 $ 0.95 ========= ========= ========= Diluted.............................................. $ 1.27 $ 0.95 $ 0.89 ========= ========= ========= Weighted average number of common shares outstanding: Basic................................................ 11,533 12,432 12,468 ========= ========= ========= Diluted.............................................. 12,523 13,182 13,252 ========= ========= =========
See accompanying notes to consolidated financial statements.
DAY RUNNER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in thousands) Number Additional Cumulative of Shares Common Paid-In Retained Translation Treasury Outstanding Stock Capital Earnings Adjustment Stock Total ----------- --------------- ---------------- -------- ---------- ---------- ------ Balance, July 1, 1995..................... 12,251,594 $ 12 $ 19,936 $ 24,802 $ 37 $44,787 Exercise of options......................... 357,948 1,475 1,475 Tax benefit of options...................... 1,452 1,452 Cumulative translation adjustment .......... (34) (34) Net income.................................. 11,818 11,818 ---------- ------ -------- ------ ------ -------- ------- Balance, June 30, 1996...................... 12,609,542 12 22,863 36,620 3 59,498 Exercise of warrants........................ 11,000 22 22 Exercise of options......................... 108,316 1 660 661 Tax benefit of options...................... 157 157 Compensation cost associated with warrant grant........................... 50 50 Cumulative translation adjustment........... 89 89 Treasury stock.............................. (1,026,200) $(13,541) (13,541) Net income.................................. 12,548 12,548 ---------- ------- ----------- -------- ----- --------- -------- Balance, June 30, 1997...................... 11,702,658 13 23,752 49,168 92 ( 13,541) 59,484 Exercise of warrants........................ 278,000 673 673 Exercise of options......................... 670,528 1 4,579 4,580 Tax benefit of options...................... 5,208 5,208 Compensation cost associated with warrant grant........................... 233 233 Cumulative translation adjustment........... 10 10 Treasury stock.............................. (695,588) (11,564) (11,564) Net income.................................. 15,908 15,908 ---------- ------- --------- --------- ------ -------- -------- Balance, June 30, 1998...................... 11,955,598 $ 14 $ 34,445 $ 65,076 $ 102 $(25,105) $74,532 ========== ===== ========= ========= ===== ======== ======== See accompanying notes to consolidated financial statements.
DAY RUNNER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Years Ended June 30, 1998 1997 1996 --------- ---------- ------- Cash flows from operating activities: Net income.............................................. $ 15,908 $ 12,548 $11,818 Adjustments to reconcile net income to net cash provided by(used in) operating activities: Depreciation and amortization......................... 5,517 3,869 2,548 Provision for losses on accounts receivable........... 381 810 Write-off of barter credits........................... 200 520 Utilization of barter credits......................... 100 Compensation expense related to issuance of warrants.. 233 50 Deferred income tax benefit........................... (832) (1,186) (26) Changes in operating assets and liabilities, net of effects from purchase of businesses: Accounts receivable................................ (8,100) (1,220) (2,884) Inventories ...................................... (11,050) (3,294) 6,543 Prepaid expenses and other current assets.......... 595 (689) (87) Income taxes receivable............................ 2,087 1,930 (1,930) Accounts payable................................... (725) 225 (1,028) Accrued expenses................................... 3,755 (872) 3,606 Income taxes payable............................... (453) 1,206 (1,247) -------- -------- ------- Net cash provided by operating activities........... 7,035 13,148 18,643 -------- -------- ------- Cash flows from investing activities: Acquisition of property and equipment................... (7,175) (4,972) (4,393) Purchase of businesses...................................... (4,626) Other assets............................................ (110) 5 (8) --------- ---------- ---------- Net cash used in investing activities................... (11,911) (4,967) (4,401) --------- ---------- ---------- Cash flows from financing activities: Net borrowings under line of credit..................... (338) 452 Payment of long-term debt............................... (990) (141) Payment of capital lease obligations.................... (58) (13) (23) Exercise of warrants.................................... 673 22 Exercise of options......................................... 4,580 661 1,475 Repurchase of common stock.............................. (11,564) (13,541) -------- -------- Net cash (used in) provided by financing activities..... (7,697) (12,419) 1,311 -------- -------- ------- Effect of exchange rate changes on cash and cash equivalents (54) 23 (57) --------- --------- --------- Net (decrease) increase in cash and cash equivalents........ (12,627) (4,215) 15,496 Cash and cash equivalents, beginning of year................ 15,550 19,765 4,269 --------- -------- --------- Cash and cash equivalents, end of year...................... $ 2,923 $ 15,550 $19,765 ======== ======== ========= See accompanying notes to consolidated financial statements.
DAY RUNNER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Day Runner, Inc. and subsidiaries (the "Company") is a developer, manufacturer and marketer of paper-based organizers for the retail market. The Company also develops, manufactures and markets a number of related organizing products, including telephone/address books, spiral dated goods, executive accessories, products for children and students, organizing and other wall boards and planners. A substantial portion of the Company's sales is to office products superstores, wholesalers and dealers and to mass market retailers throughout the United States and abroad. The Company grants credit to substantially all of its customers. Consolidation. The consolidated financial statements include the accounts of Day Runner, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. Foreign Currency Translation. Assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at the exchange rate prevailing at the balance sheet date and, where appropriate, at historical rates of exchange. Income and expense accounts are translated at the weighted average rate in effect during the year. The aggregate effect of translating the financial statements of the foreign subsidiaries is included as a separate component of stockholders' equity. Foreign exchange gains (losses) were not significant during the years ended June 30, 1998, 1997 and 1996. Cash Equivalents. The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Fair Value of Financial Instruments. The Company's financial instruments consist primarily of cash, accounts receivable and payable, and debt instruments. The book values of financial instruments, other than the debt instruments, are representative of their fair values due to their short-term maturity. The book value of the Company's debt instruments is considered to approximate its fair value because the interest rate of these instruments is based on current rates offered to the Company. Property and Depreciation. Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for over the estimated useful lives of the respective assets, using the straight-line method. Estimated useful lives range from three to seven years. Vehicles and equipment under capital leases and leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful life of the asset or the life of the lease. Other Assets. Other assets consist primarily of goodwill and non-competition agreements that arose as a result of the Company's acquisitions during fiscal 1998. Goodwill is being amortized using the straight-line method over a period of 20 years, and the non-competition agreements are being amortized using the straight-line method over a period of five years. Impairment of Long-Lived Assets. Long-lived assets are reviewed for impairment, based on cash flows undiscounted without interest charges, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Impairment losses would be recognized if the carrying amount of the asset exceeds the fair value of the assets. Income Taxes. Deferred taxes are determined based on temporary differences between the financial reporting and income tax bases of assets and liabilities at the balance sheet date multiplied by the applicable tax rates. Net Sales. Revenue is recognized upon shipment of product to the customer, with appropriate allowances for estimated returns, rebates and other allowances. Significant Customers. In 1998, sales to four customers accounted for 28%, 16%, 15% and 14% of the Company's sales. In 1997, sales to four customers accounted for 25%, 15%, 14% and 11% of the Company's sales. In 1996, sales to three customers accounted for 17%, 15% and 12% of the Company's sales. New Accounting Standards. In June 1997, the Financial Accounting Standards Board (the "Board") issued Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, and SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. These statements are effective for financial statements issued for periods beginning after December 15, 1997. In June 1998, the Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement is effective for financial statements issued for periods beginning after June 15, 1999. The Company is evaluating what, if any, additional disclosures may be required upon implementation of SFAS Nos. 130, 131 and 133. Reclassifications. Certain reclassifications were made to the prior year financial statements to conform to the current presentation. 2. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out basis. Inventories consist of the following (in thousands): June 30, 1998 1997 ---------- ------- Raw materials................. $ 14,087 $ 10,204 Work in process............... 831 426 Finished goods................ 22,692 12,776 --------- -------- Total................ $ 37,610 $ 23,406 ========= ======== 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following (in thousands): June 30, 1998 1997 -------- ------- Displays................................. $ 9,003 $ 6,094 Data processing equipment and software... 8,785 5,863 Machinery and equipment.................. 6,705 4,222 Leasehold improvements................... 2,229 1,838 Vehicles................................. 250 214 -------- --------- Total................................ 26,972 18,231 Accumulated depreciation and amortization...................... (15,084) (9,543) --------- --------- Property and equipment - net.. ..... $ 11,888 $ 8,688 ======== ========= 4. ACCRUED EXPENSES Accrued expenses consist of the following (in thousands): June 30, 1998 1997 -------- ------- Accrued sales and promotion costs........ $ 7,473 $ 5,223 Accrued payroll and related costs........ 2,955 2,128 Other.................................... 3,448 2,149 -------- --------- Total............................ $ 13,876 $ 9,500 ======== ========= 5. LINES OF CREDIT Effective February 1, 1998, the Company entered into a new credit agreement with a bank to allow the Company to borrow up to $15,000,000 under a line of credit through February 1, 2000 and open commercial or standby letters of credit up to $10,000,000, with the aggregate of borrowings and letters of credit not to exceed $15,000,000. Commercial letters of credit shall be issued for a term not to exceed 180 days, provided, however, that no letters of credit shall have an expiration date subsequent to May 1, 2000. At June 30, 1998, the Company had $1,253,000 outstanding under this line of credit and had outstanding letters of credit totaling approximately $1,050,000. (See Note 20). Under this new credit agreement, borrowings bear interest at the Company's election either at the bank's prime rate (8.50% at June 30, 1998) less certain margins, which range from .50% to 1.00%, or at LIBOR (5.66% at June 30, 1998) plus certain margins, which range from .75% to 1.25%, with the margins dependent upon the Company's meeting certain funded debt-to-EBITDA ratios. The credit agreement requires the Company to: maintain a current ratio of not less than 1.50 to 1.00, maintain tangible net worth of not less than $45,000,000, and maintain a funded debt-to-EBITDA ratio of less than 1.50 to 1.00. The Company also is required to obtain the bank's approval to declare or pay dividends in excess of $200,000. Each of the Company's two Canadian subsidiaries has a credit agreement with a Canadian bank. The aggregate borrowings under these lines of credit, which are guaranteed by the Company and are used for working capital by these subsidiaries, may not exceed Canadian $3,000,000 (approximately US $2,039,000), bear interest at the bank's prime rate (6.50% at June 30, 1998) and are due and payable on demand. At June 30, 1998, approximately Canadian $2,155,000 (approximately US $1,463,000) was outstanding under these lines of credit. These borrowings were collateralized by substantially all of the two Canadian subsidiaries' assets. Total borrowings under the new credit agreement and the two Canadian credit agreements bore interest at an average interest rate of 7.00% and 8.50% for the years ended June 30, 1998 and 1997, respectively. The Company had no borrowings outstanding under its lines of credit during the year ended June 30, 1996. 6. LEASES The Company has four noncancelable operating leases for its principal operating facilities and its corporate headquarters. The leases expire through 2005. The leases include renewal options that, if exercised, would extend the lease terms through 2011, and the leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. The Company also has entered into leases for certain production, warehouse, computer and office equipment under noncancelable operating leases that expire through August 2002.
The Company also leases certain vehicles and equipment under agreements that meet the criteria for classification as capital leases. Future minimum lease payments under these capital leases, and the future minimum lease payments under the operating leases at June 30, 1998, are summarized as follows (in thousands): Capital Operating Years Ending June 30, Leases Leases --------------------- --------- --------- 1999.................................................... $ 33 $ 4,525 2000.................................................... 24 3,626 2001.................................................... 12 3,014 2002.................................................... 13 1,478 2003.................................................... 4 1,137 Thereafter.............................................. 836 --------- -------- Total minimum lease payments............................ 86 $ 14,616 ======== Less current portion of capital lease obligations....... 33 --------- Long-term portion of capital lease obligations.......... $ 53 =========
Included in property and equipment at June 30, 1998 and 1997 are vehicles and equipment under capital leases with a cost of $157,000 and $88,000 and accumulated depreciation of $47,000 and $43,000, respectively. Rent expense was $4,025,000, $3,841,000 and $3,927,000 for the years ended June 30, 1998, 1997 and 1996, respectively. 7. INCOME TAXES
The components of income before provision for income taxes were (in thousands): Years Ended June 30, 1998 1997 1996 --------- --------- --------- United States......................... $ 22,856 $ 18,765 $ 18,029 Other................................. 2,885 1,885 1,629 --------- --------- --------- Total.............................. $ 25,741 $ 20,650 $ 19,658 ========= ========= ========= The provision for income taxes consists of the following (in thousands): Years Ended June 30, 1998 1997 1996 ---------- --------- --------- Current: Federal............................... $ 8,565 $ 7,076 $ 6,051 State................................. 1,477 1,825 1,473 Foreign............................... 623 387 342 --------- --------- --------- Total current........................... 10,665 9,288 7,866 --------- --------- --------- Deferred: Federal............................... (920) (961) (37) State................................. 88 (225) 11 --------- --------- --------- Total deferred.......................... (832) (1,186) (26) --------- --------- --------- Total provision for income taxes........ $ 9,833 $ 8,102 $ 7,840 ========= ========= =========
Differences between the total income tax provision and the amount computed by applying the statutory federal income tax rate to income before provision for income taxes are as follows (in thousands): Years Ended June 30, 1998 1997 1996 ---------- ----------- ------- Computed tax expense using the statutory federal income tax rate..... $ 9,009 $ 7,228 $ 6,880 Increase (decrease) in taxes arising from: State taxes, net of federal benefit... 769 1,000 980 Foreign earnings taxed at other than federal statutory rate......... (387) (273) (229) Other................................. 442 147 209 --------- --------- --------- Total................................. $ 9,833 $ 8,102 $ 7,840 ========= ========= ========= Effective income tax rate............... 38% 39% 40% ========= ========= =========
Total deferred tax assets and deferred tax liabilities consist of the following (in thousands): June 30, 1998 1997 ------------ ------------ Allowance for sales returns............................ $ 2,918 $ 2,490 Inventory obsolescence reserve......................... 1,220 1,394 Allowance for doubtful accounts........................ 1,074 1,147 State taxes............................................ 615 615 Sales programs......................................... 608 374 Other deferred tax assets.............................. 1,368 1,117 ------ -------- Total deferred tax assets.............................. 7,803 7,137 Deferred tax liabilities............................... (585) (751) ------- -------- Total.................................................. $7,218 $ 6,386 ======= ========
Cumulative undistributed earnings of foreign subsidiaries for which no deferred taxes have been provided approximated $4,153,000 at June 30, 1998. The additional taxes payable on the earnings of foreign subsidiaries, if remitted, would be offset by U.S. tax credits for foreign taxes paid. 8. EARNINGS PER SHARE The Company adopted SFAS No. 128, Earnings Per Share, which requires the Company to present basic and diluted earnings per share on the face of the income statement. Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of common shares outstanding for the period plus the assumed exercise of all dilutive securities. The following reconciles the numerator and denominator of the basic and diluted per share computations for net income (in thousands, except per share amounts):
Years Ended June 30, 1998 1997 1996 ------------ ----------- ---------- Net Income $ 15,908 $ 12,548 $ 11,818 ========== =========== ========== Basic Weighted Average Shares Weighted average number of common shares outstanding 11,533 12,432 12,468 Effect of Dilutive Securities Additional shares from the assumed exercise of options and warrants 3,093 2,757 2,295 Shares assumed to be repurchased under the treasury stock method (2,103) (2,007) (1,511) ---------- ----------- ---------- Diluted Weighted Average Shares Weighted average number of common shares outstanding and common share equivalents 12,523 13,182 13,252 ========== =========== ========== Basic $ 1.38 $ 1.01 $ 0.95 ========== =========== ========== Diluted $ 1.27 $ 0.95 $ 0.89 ========== ============ ==========
9. STOCK OPTION PLANS Under the Company's 1995 Stock Option Plan (the "Plan"), an aggregate of 1,550,000 shares of common stock is reserved for issuance to key employees, including officers and directors, and consultants of the Company. Both incentive stock options and nonstatutory stock options are authorized for issuance under the Plan. The terms of the options are determined at the time of grant. Pursuant to the Plan, the per share option price of incentive stock options may not be less than the fair market value of a share of common stock at the date of grant, and no options may be granted after December 2005. The outstanding options typically become exercisable over a period of five years from the date of issuance and have terms of up to ten years. The Company also authorized the issuance of up to 3,450,000 shares of the Company's common stock under its Amended and Restated 1986 Stock Option Plan. Such options typically become exercisable ratably over a period of five years from the date of issuance and have terms of six to ten years. As of June 30, 1998, options covering 2,406,564 shares have been exercised and options covering 1,027,186 shares remain outstanding. No additional options will be granted under this plan. During the years ended June 30, 1998, 1997 and 1996, certain officers and employees exercised options to purchase an additional 651,414, 74,300 and 328,050 shares, respectively, of the Company's common stock for an aggregate of $4,278,000, $381,000 and $1,214,000, respectively (see Note 10). In connection with the exercise of nonstatutory stock options and the sale of shares purchased pursuant to incentive stock options, the Company realized a reduction in its current tax liability during the years ended June 30, 1998, 1997 and 1996. This reduction totaled $5,208,000, $157,000 and $1,452,000, respectively, and was credited to additional paid-in capital.
A summary of option activity is as follows: Weighted Weighted Average Average Number of Exercise Options Exercise Options Price Exercisable Price ------- ----- ----------- ----- Outstanding, July 1, 1995............... 1,733,450 $ 5.96 Granted.......................... 336,750 8.38 Exercised........................ (328,050) 3.69 Cancelled........................ (10,000) 7.65 ------------ Outstanding, June 30, 1996.......... 1,732,150 6.85 753,774 $ 6.22 Granted.......................... 465,000 13.00 Exercised........................ (74,300) 5.13 Cancelled........................ (31,250) 11.96 ------------ Outstanding, June 30, 1997.......... 2,091,600 8.20 1,102,314 6.90 Granted.......................... 565,000 17.10 Exercised........................ (651,414) 6.57 ------------ Outstanding, June 30, 1998.......... 2,005,186 11.24 933,648 8.61
============
At June 30, 1998, the range of option prices for shares under options and the weighted average remaining contractual life is as follows: Options Outstanding Options Exercisable ------------------- ------------------- Weighted Weighted Average Weighted Average Remaining Average Number of Exercise Contractual Number Exercise Range of Option Exercise Price Options Price Life Exercisable Price ------------------------------ ------------ -------- ------------ ----------- -------- $ 5.13 - $8.38 818,636 $ 6.69 5.80 601,098 $ 6.32 9.75 - 13.00 623,550 11.91 7.42 253,050 11.41 16.88 - 20.63 563,000 17.10 9.16 79,500 17.00
The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for stock option awards. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant dates for awards under those plans as required by SFAS No. 123, Accounting for Stock-Based Compensation, the Company's net income and earnings per common and common equivalent shares would have been reduced to the pro forma amounts indicated below:
Years Ended June 30, 1998 1997 1996 ---------- ---------- -------- Net income: As reported $ 15,908 $ 12,548 $ 11,818 Pro forma $ 12,617 $ 11,094 $ 11,294 Earnings per common and common equivalent shares: As reported: Basic $ 1.38 $ 1.01 $ 0.95 Diluted $ 1.27 $ 0.95 $ 0.89 Pro forma: Basic $ 1.09 $ 0.89 $ 0.91 Diluted $ 1.01 $ 0.84 $ 0.85
The fair values of the options granted under the plans during 1998, 1997 and 1996 were estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average fair value of the options at the date of grant were $9.03, $14.53 and $10.10, during fiscal 1998, 1997 and 1996, respectively. The following weighted average assumptions for 1998, 1997 and 1996, respectively, were used: no dividend yield; volatility of 57.21%, 53.28% and 56.26%; risk-free interest rates of 5.24% to 6.21%, 5.41% to 6.95% and 5.69% to 6.40%; and expected option lives of one to four years for all periods. Pro forma compensation cost of options granted under the Employee Stock Purchase Plan is measured based on the discount from market value (see Note 10). On August 17, 1998, the Company issued options to key employees to purchase 375,000 shares of the Company's common stock at $18.75 per share. The options vest over a period of five years and expire in 2008. 10. EMPLOYEE STOCK PURCHASE PLAN During 1992, the Company adopted an Employee Stock Purchase Plan under which 350,000 shares of common stock were authorized for issuance to employees. Under the plan, eligible employees may purchase, through payroll deductions withheld during an offering period, an amount of common stock not to exceed approximately 5% of the employee's annual compensation. The purchase price per share is the lower of 85% of the fair market value of a share of common stock on the first day of the offering period or on the last day of the offering period. There are two offering periods during each year. During the years ended June 30, 1998, 1997 and 1996, employees purchased an aggregate of 19,114, 34,016 and 29,898 shares of common stock for $302,000, $280,000 and $261,000, respectively, under this plan. These amounts are included in the amounts shown for exercise of options on the consolidated statements of stockholders' equity (see Note 9). 11. WARRANTS During the years ended June 30, 1998, 1997 and 1996, the Board of Directors approved the issuance of warrants to purchase an aggregate of 565,000 shares of the Company's common stock. Such warrants are exercisable at prices ranging from $9.50 to $20.625 per share, vest over periods up to 48 months and expire at various times through April 2008. During fiscal 1998 and 1997, certain directors exercised warrants to purchase 278,000 and 11,000 shares, respectively, of the Company's common stock for an aggregate of $673,000 and $22,000, respectively. No warrants were exercised during the year ended June 30, 1996. Included in the issuance of warrants to purchase 565,000 aggregate shares of the Company's common stock is a warrant to purchase 50,000 shares that was issued to a director under the terms of a consulting agreement during fiscal 1997. Such issuance was accounted for under SFAS No. 123 using the Black-Scholes option pricing model, which resulted in the recording of $233,000 and $50,000 in compensation cost during the years ended June 30, 1998 and 1997, respectively.
A summary of warrant activity is as follows: Weighted Weighted Average Average Number of Exercise Options Exercise Warrants Price Exercisable Price -------- ----- ----------- ----- Outstanding, July 1, 1995........... 427,000 $ 3.84 Granted.......................... 50,000 9.50 ------------ Outstanding, June 30, 1996.......... 477,000 4.44 449,916 $4.13 Granted.......................... 300,000 11.95 Exercised........................ (11,000) 2.00 ------------ Outstanding, June 30, 1997.......... 766,000 7.42 493,082 4.91 Granted.......................... 215,000 17.31 Exercised........................ (278,000) 2.42 ------------ Outstanding, June 30, 1998.......... 703,000 12.42 482,166 12.20 ============
At June 30, 1998, the range of warrant prices for shares under warrants and the weighted average remaining contractual life is as follows: Warrants Outstanding Warrants Exercisable -------------------- -------------------- Weighted Weighted Average Weighted Average Remaining Average Number of Exercise Contractual Number Exercise Range of Warrant Exercise Price Warrants Price Life Exercisable Price ------------------------------- ---------- -------- ------------ ----------- --------- $ 6.00 - 9.50 200,000 $ 7.81 5.83 200,000 $ 7.81 11.78 - 12.81 288,000 11.96 6.01 92,166 12.11 16.88 - 20.63 215,000 17.31 9.22 190,000 16.88
12. STOCK SPLIT At a Special Meeting of the Company's stockholders held on March 17, 1998, the Company's stockholders approved an amendment to the Company's Certificate of Incorporation to (i) effect a two-for-one split of each of the outstanding shares of common stock of the Company and (ii) increase the number of authorized shares of all classes of stock of the Company from 15,000,000 to 30,000,000, consisting of 29,000,000 shares of common stock, $0.001 par value per share, and 1,000,000 shares of preferred stock, $0.001 par value per share. Both actions were effective March 18, 1998. All share and per share data has been retroactively restated to reflect the two-for-one stock split. 13. TREASURY STOCK In fiscal 1997, the Board of Directors authorized the purchase of up to 1,200,000 shares of the Company's common stock, which may be used to meet the Company's common stock requirements for its stock benefit plans. In fiscal 1998, the Board of Directors increased the number of shares of common stock that the Company is authorized to repurchase under this plan by 200,000 shares and authorized the purchase of up to 720,000 shares of the Company's common stock from officers and directors. During fiscal 1998 and 1997, the Company repurchased 695,588 and 1,026,200 shares, respectively, at an average per share cost of $16.625 and $13.195, respectively. All the shares repurchased in fiscal 1998 were from officers and directors at a per share cost equal to the closing price of the stock on the day of the repurchase. 14. ACQUISITIONS On July 29, 1997, the Company purchased the stock of Ultima Distribution Inc. ("Ultima"), which was the distributor of the Company's products in Canada, for approximately $130,000. The Company also entered into non-competition agreements with certain of Ultima's former stockholders. In addition, contingent payments may be paid over the two years following the acquisition based on Ultima's operating performance during that period. On October 1, 1997, the Company purchased substantially all the operating assets of Ram Manufacturing, Inc. ("Ram"), an Arkansas based developer, manufacturer and marketer of wall boards. The purchase price was approximately $2,400,000, of which approximately $1,950,000 had been paid as of June 30, 1998. The Company also assumed certain liabilities totaling approximately $3,000,000. In addition, contingent payments may be paid over the three years following the acquisition based upon Ram's operating performance during that period. The owner of Ram, who now works for the Company, entered into a non-competition agreement with the Company. On February 1, 1998, the Company purchased the stock of Timeposters Inc. ("Timeposters"), a Canadian developer, manufacturer and marketer of planning and presentation products, including flexible planners, planning boards, other wall boards and easels, and entered into certain non-competition agreements with the founders, who continue to work for Timeposters. The purchase price was approximately $2,546,000. In addition, contingent payments may be paid over the two years following the acquisition based on Timeposters' operating performance during that period. The following table presents summarized unaudited pro forma operating results assuming that the Company had acquired these three companies on July 1, 1996 (in thousands, except per share amounts): Years Ended June 30, 1998 1997 ------------- ----------- Net Sales $ 172,168 $ 138,475 Income from operations $ 25,667 $ 19,616 Net income $ 15,959 $ 12,574 Earnings per share: Basic $ 1.38 $ 1.01 Diluted $ 1.27 $ 0.95 Weighted average shares outstanding: Basic 11,533 12,432 Diluted 12,523 13,182 15. OTHER TRANSACTIONS During 1995 and 1993, the Company entered into barter agreements whereby it delivered $132,000 and $1,098,000, respectively, of its inventory in exchange for future advertising credits and other items. The credits, which expire in October 1999, are valued at the lower of the Company's cost or market value of the inventory transferred. The Company has recorded barter credits of $15,000 and $36,000 in prepaid expenses and other current assets at June 30, 1998 and 1997, respectively. At June 30, 1997, other assets include $79,000 of such credits. No amounts were included in other assets at June 30, 1998. Under the terms of the agreement, the Company is required to pay cash equal to a negotiated amount of the bartered advertising, or other items, and use the barter credits to pay the balance. These credits are charged to expense as they are used. During the year ended June 30, 1998, approximately $100,000 was charged to expense for barter credits used. No amounts were charged to expense for barter credits used during the years ended June 30, 1997 and 1996. The Company assesses the recoverability of barter credits periodically. Factors considered in evaluating the recoverability include management's plans with respect to advertising and other expenditures for which barter credits can be used. Any impairment losses are charged to operations as they are determinable. During the years ended June 30, 1997 and 1996, the Company charged $200,000 and $520,000, respectively, to operations for such impairment losses. No such impairment losses were charged to operations during the year ended June 30, 1998. 16. PROFIT-SHARING AND BONUS PLANS In January 1991, the Company established a 401(k) profit-sharing plan in which eligible employees may contribute up to 15% of their eligible earnings. The Company may contribute to the plan at the discretion of the Board of Directors, subject to applicable regulations. In the years ended June 30, 1998, 1997 and 1996, the Board elected to contribute an amount equal to 25% of the first 6% of eligible earnings. Participants vest in the Company's contributions at a rate of 20% after two years of plan participation and 20% each year thereafter until fully vested. During the years ended June 30, 1998, 1997 and 1996, the Company's matching contributions were $156,000, $133,000 and $128,000, respectively. The Company has an executive bonus plan and incentive compensation arrangements for key employees based on an earnings formula. Compensation expense recorded under these plans was $628,000 and $1,120,000 during the years ended June 30, 1998 and 1996, respectively. No amounts were recorded under these plans during the year ended June 30, 1997. 17. OPERATIONS IN FOREIGN COUNTRIES
The following is a summary of the financial activity of the Company by geographical area (in thousands): Year Ended June 30, 1998 United States Other Eliminations Total ------------- ----- ------------ ----- Net sales to unaffiliated entities $ 152,938 $ 14,903 $ 167,841 Transfers between geographic areas 2,348 2,125 $ (4,473) ------------- --------- ----------- ---------- Net sales $ 155,286 $ 17,028 $ (4,473) $ 167,841 ============= ========= =========== ========== Income from operations $ 31,883 $ 2,671 $ (8,985) $ 25,569 ============= ========= =========== ========== Identifiable assets $ 88,818 $ 13,096 $ (735) $ 101,179 ============= ========= =========== ========== Year Ended June 30, 1997 United States Other Eliminations Total ------------- ----- ------------ ----- Net sales to unaffiliated entities $ 122,618 $ 4,758 $ 127,376 Transfers between geographic areas 490 1,621 $ (2,111) ------------- --------- ---------- ---------- Net sales $ 123,108 $ 6,379 $ (2,111) $ 127,376 ============= ========= ========== ========== Income from operations $ 23,927 $ 1,834 $ (6,412) $ 19,349 ============= ========= ========== ========== Identifiable assets $ 74,050 $ 4,968 $ (138) $ 78,880 ============= ========= ========== ========== Year Ended June 30, 1996 United States Other Eliminations Total ------------- ----- ------------ ----- Net sales to unaffiliated entities $ 120,519 $ 4,607 $ 125,126 Transfers between geographic areas 443 1,302 $ (1,745) ------------- --------- ---------- --------- Net sales $ 120,962 $ 5,909 $ (1,745) $ 125,126 ============= ========= ========== ========== Income from operations $ 22,022 $ 1,675 $ (4,745) $ 18,952 ============= ========= =========== ========== Identifiable assets $ 73,940 $ 4,061 $ (70) $ 77,931 ============= ========= ========== ==========
18. CONTINGENCIES In the normal course of business, the Company and certain of its subsidiaries are defendants in various lawsuits. After consultation with counsel, management is of the opinion that these various lawsuits, individually or in the aggregate, will not have a materially adverse effect on the consolidated financial statements. 19. SUPPLEMENTAL CASH FLOW INFORMATION Disclosure of cash flow information (in thousands): Years Ended June 30, 1998 1997 1996 -------- -------- -------- Cash paid during the period for: Interest....................... $ 91 $ 130 $ 24 Income taxes........................ $ 8,862 $6,026 $ 9,988 In fiscal 1998, the Company purchased all of the capital stock of Ultima Distribution Inc. and Timeposters Inc. The Company also purchased certain of the assets of Ram Manufacturing, Inc. In conjunction with these acquisitions, net cash expended was as follows (in thousands) (see Note 14): Fair value of assets acquired $ (11,809) Liabilities assumed 7,183 --------- Cash paid $ (4,626) ========== Disclosure of noncash investing and financing activities: Capital lease obligations totaling $88,000 were incurred in 1997 when the Company entered into leases to acquire certain vehicles. The Company realized a reduction in its current tax liability during 1998, 1997 and 1996 in the amount of $5,208,000, $157,000 and $1,452,000, respectively. Such amounts were credited to additional paid-in capital (see Note 9). 20. SUBSEQUENT EVENTS On September 15, 1998, the Board of Directors of the Company approved the Non-Employee Director Stock Option Plan. Under this plan, an aggregate of 150,000 shares of common stock is reserved for issuance to members of the Board of Directors who are not employees of the Company. In accordance with the plan, the per share option price must equal the fair market value of a share of common stock at the date of grant. The outstanding options become exercisable over a period of one year from the date of issuance and have terms of 10 years. The plan is subject to final approval by the stockholders of the Company. On September 23, 1998, Day Runner, Inc., a Delaware corporation (the "Registrant"), and Day Runner UK, plc, a corporation organized under the laws of the United Kingdom and a wholly-owned subsidairy of the Registrant (the "Purchaser"), entered into a Revolving Loan Agreement (the "Loan Agreement") with a bank. The Loan Agreement provides for borrowings through September 30, 2005 (the "Maturity Date"). Borrowings will bear interest either at fixed rates based on the higher of the bank's prime rate and the Federal Funds Rate published by the Federal Reserve Bank of New York or at floating rates calculated by reference to the interest rates at which the bank offers deposits in US dollars in amounts approximately equal to the amount of the relevant Loan and for a period of time comparable to the number of days the relevant Loan will remain outstanding, together with a margin. The maximum amount that may be outstanding under the Loan Agreement is $160,000,000 through December 31, 2000. Thereafter, the maximum amount of borrowings that may be outstanding under the Loan Agreement is reduced by $10,000,000 in each of the following calendar years up to the Maturity Date. On September 24, 1998, Registrant announced a cash offer (the "Offer") for Filofax Group plc ("Filofax"), a UK-based company traded on the London Stock Exchange. The offer is for (pound)2.00 (approximately US $3.36) per share for a total of approximately US$80,500,000. The acquisition is being made pursuant to a tender offer by Purchaser to purchase all of the outstanding ordinary shares of stock of Filofax. The Offer has not been recommended by Filofax's Board of Directors. The proposed acquisition will be funded by bank debt pursuant to the Loan Agreement. Consummation of the Company's Offer is subject to, among other things, the acceptance of Filofax's stockholders, regulatory approvals and the satisfaction or waiver of various other conditions. There can be no assurance that the acquisition will be consummated, or as to the terms on which it may be consummated. EX-99 5 PRESS RELEASE (US VERSION) FOR IMMEDIATE RELEASE EXHIBIT 99.2 CONTACT: Day Runner, Inc. Judy Tucker Vice President, Business Development 714/680-3500, Ext. 3171 Jenifer Kirtland Director, Investor Relations 714/680-3500, Ext. 3697 DAY RUNNER ANNOUNCES CASH TENDER OFFER FOR FILOFAX IRVINE, CA, September 24, 1998. Day Runner, Inc. (Nasdaq/DAYR), a marketer of broad-based personal organizing products to broad consumer audiences through retail distribution and the leading producer of paper-based organizers for the U.S. retail market, today announced a cash tender offer for Filofax, a UK-based company traded on the London Stock Exchange. The offer is for (pound)2.00 (approximately US$3.36) per share for a total of approximately US$80.5 million. The offer represents a trailing p/e of 13.3 on earnings from continuing operations and a premium of 42.9% over the September 23rd closing mid-market price, which represented a trailing p/e of 9.3. The offer has not been recommended by Filofax's Board of Directors. The proposed acquisition will be funded by bank debt. Filofax is a manufacturer and supplier of stationery products, including Filofax, Lefax and Microfile brand personal organizers. In addition to its core personal organizer business, Filofax markets business forms and high-end pens. Filofax has wholly owned sales subsidiaries in France, Germany, Hong Kong, Scandinavia, the UK and the U.S. and sells primarily through retail distribution channels in each market. Filofax's sales from continuing operations for fiscal 1998 were (pound)37.7 million (approximately US$63.3 million), with 86%, or approximately US$54.6 million, to markets outside the U.S. In commenting on the offer, Day Runner chairman Mark Vidovich stated, "We're confident that our solid financial position, management depth and the healthy state of our existing business make this offer a sound and timely move for Day Runner. We believe that the acquisition of an established presence in a number of overseas markets combined with our ability to develop brands and build sales of organizers and other personal organizing products can provide excellent long-term value to our stockholders." In discussing the effect of the proposed acquisition on Day Runner's profitability, Mr. Vidovich said, "Filofax's sales are seasonal, with the six months from January through June accounting for only approximately 31% of its fiscal 1998 sales. We do not expect the acquisition to be completed in time to enjoy the benefit of more than a small part of Filofax's current calendar year-end busy season. Therefore, we expect the acquisition to be dilutive for our current fiscal year ending June 30, 1999, but to enhance our earnings for fiscal 2000." Commenting on why Day Runner moved forward in the absence of a recommendation from Filofax's Board, Mr. Vidovich stated, "We believe this offer provides Filofax's stockholders with an attractive exit. Filofax's sales have stagnated, growing at a compound annual rate of less than 1% per year since 1996. We believe that the Filofax brand name is gradually becoming devalued and that reinvigorating this brand will take the kind of marketing and product development leadership that Day Runner has shown it is able to provide." Filofax's sales from continuing operations for fiscal 1998 declined 0.7% to (pound)37.7 million (approximately US$63.3 million), compared with (pound)37.9 million (approximately US$63.7 million) for fiscal 1997. Excluding a loss on disposal of a discontinued operation, operating income was (pound)6.1 million (approximately US$10.3 million), up 8% from (pound)5.7 million (approximately US$9.6 million) for the prior year, and net income before dividends was (pound)4.3 million (approximately US$7.2 million) for fiscal 1998, up 9% compared with (pound)4.0 million (approximately US$6.6 million) for fiscal 1997. Day Runner's sales for the fiscal year ended June 30, 1998 were $167.8 million, up 31.8% from $127.4 million for fiscal 1997. Day Runner reported fiscal 1998 operating income of $25.6 million, up 32.1% from $19.3 million for fiscal 1997 and net income of $15.9 million, up 26.8%. A total of $12.2 million, or 7.3%, of Day Runner's fiscal 1998 sales were to markets outside the U.S. As is usual under UK takeover practice, the Offer is subject to an 'acceptance condition' to the effect that Day Runner must acquire not less than 90% of the Filofax shares (or such lesser percentage down to 50% as Day Runner may decide) either through acceptances of the Offer or by purchases outside the Offer. The Offer will be open for acceptance for a minimum of 20 business days, although this period may be extended by Day Runner for up to 60 days in total. The Offer is also subject to anti-trust and other usual conditions that must be satisfied (unless waived by Day Runner) no later than 21 days after the acceptance condition is satisfied. Accordingly, the outcome of the Offer is likely to be determined in Day Runner's fiscal 1999 second quarter ending December 31, 1998. With the exception of actual reported financial results and statements of historical fact, the statements made in this news release or other statements that may be made about the transaction, including, without limitation the effect of the acquisition of Filofax on Day Runner's earnings, are forward looking, reflect Day Runner's current expectations and involve certain risks and uncertainties. There can be no assurance that the Company's actual future performance will meet its expectations. As discussed in the Company's fiscal 1997 Annual Report on Form 10-K, the Company's future operating results are difficult to predict and subject to significant fluctuations. Factors that may cause future results to differ materially from the Company's current expectations include, among others: the timing and size of orders from large customers, timing and size of orders for new products, large customers' inventory management, competition, general economic conditions, the health of the retail environment, supply constraints and supplier performance. In addition, unanticipated events and circumstances may render the acquisition of Filofax by Day Runner less beneficial than expected, and the differences may be significant. Day Runner is a marketer of personal organizing products to broad-based consumer audiences through retail distribution. The Company is the leading developer, manufacturer and marketer of paper-based organizers for the U.S. retail market and also develops, manufactures and markets a number of related organizing products, including telephone/address books, appointment books, executive accessories, products for children and students, organizing and other wall boards and flexible, laminated wall planners, among others. Day Runner's products are carried by more than 20,000 retail stores across the U.S. and are available in a number of countries in North America, Europe and the Asia-Pacific region. This announcement does not constitute an offer or an invitation to purchase any securities, directly or indirectly, in Canada, Australia or Japan. Further, this release is not for distribution in Canada, Australia or Japan. # # # # Day Runner is a registered trademark of Day Runner, Inc. All other trademarks remain the property of their respective companies. EX-99 6 PRESS RELEASE (UK VERSION) EXHIBIT 99.3 PRESS RELEASE 24 September 1998 FOR IMMEDIATE RELEASE Not for release, publication or distribution in or into Canada, Australia or Japan Day Runner UK plc (a wholly owned subsidiary of Day Runner, Inc.) Cash offer for Filofax Group plc Summary The Board of Day Runner announces a cash offer to acquire the entire issued and to be issued ordinary share capital of Filofax. The Offer is being made by Wasserstein Perella on behalf of Day Runner UK, a wholly owned subsidiary of Day Runner. Cazenove is broker to the Offer. The Offer: is 200 pence in cash for each Filofax Share values the entire issued ordinary share capital of Filofax at approximately (pound)47.9 million represents a premium of approximately 42.9 per cent. over yesterday's closing middle market price of 140 pence per Filofax Share is higher than any daily closing price since Filofax's profit warning in July 1996 represents a multiple of 13.3x Filofax's 1998 earnings per share, before the loss attributable to Henry Ling Day Runner markets personal organising products to broad-based consumer audiences through retail distribution channels. It is the leading producer of paper-based personal organisers for the US retail market and also supplies a number of related organising products. Through a careful strategy of building its brand, Day Runner has seen sales increase at a compound annual growth rate of over 18 per cent. over the last five years to US$167.8 million for the year ended 30 June 1998. In the same period Day Runner's net income increased at a compound annual growth rate of over 27 per cent. This performance is attributable almost entirely to organic growth. Day Runner has closely followed Filofax and observed how in recent years Filofax has struggled to find a way forward, failed to develop the Filofax brand and failed to deliver value: it has been ex-growth since 1996 its share price has underperformed the FTSE All-Share Index by over 59 per cent since 1 January 1996 its diversification strategy has failed it has had reorganisations and reviews but has not delivered results its talks with third parties earlier this year did not deliver value it has itself recently pointed towards reduced growth expectations Commenting on the Offer, Mark Vidovich, Chairman of Day Runner, said today: "We are offering a serious price for an underperforming company that lacks direction. Filofax needs Day Runner's skills to develop the brand further and take the business forward." Press Enquiries: Day Runner Mark Vidovich Tel: 0171 404 5959 Judy Tucker Tel: 0171 404 5959 Wasserstein Perella Howard Covington Tel: 0171 446 8000 Karen Dodd Tel: 0171 446 8000 Cazenove Julian Cazalet Tel: 0171 825 9350 Ed Byers Tel: 0171 825 9113 Brunswick James Bradley Tel: 0171 404 5959 Lucas van Praag Tel: 0171 404 5959 The Offer is not being made, directly or indirectly, in or into, or by use of the mails of, or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facilities of a national securities exchange of, Canada, Australia or Japan and the Offer will not be capable of acceptance by any such use, means, instrumentality or facilities or from within Canada, Australia or Japan, except pursuant to any applicable exemption. The Loan Notes which may be issued pursuant to the Offer have not been, and will not be, registered under the Securities Act or under any of the relevant securities laws of any State of the United States, Canada, Australia or Japan. Accordingly, unless an exemption under the Securities Act or such relevant securities laws is applicable, the Loan Notes may not be offered, sold, resold, delivered or distributed, directly or indirectly, in or into the United States, Canada, Australia or Japan and will not be available to US Persons. Wasserstein Perella, which is regulated in the UK by The Securities and Futures Authority Limited, is acting for Day Runner and Day Runner UK and no one else in connection with the Offer and will not be responsible to anyone other than Day Runner and Day Runner UK for providing the protections afforded to customers of Wasserstein Perella nor for giving advice in relation to the Offer. This summary should be read in conjunction with the attached announcement. PRESS RELEASE 24 September 1998 FOR IMMEDIATE RELEASE Not for release, publication or distribution in or into Canada, Australia or Japan Day Runner UK plc (a wholly owned subsidiary of Day Runner, Inc.) Cash offer for Filofax Group plc Introduction The Board of Day Runner announces the terms of a cash offer for Filofax. The Offer is being made by Wasserstein Perella on behalf of Day Runner UK, a wholly owned subsidiary of Day Runner, for the entire issued and to be issued ordinary share capital of Filofax. Cazenove is broker to the Offer. The Offer The Offer is being made on the following basis: For each Filofax Share 200 pence in cash The Offer values Filofax's issued share capital at approximately (pound)47.9 million. The Offer represents a premium of approximately 42.9 per cent. to yesterday's closing middle market price of 140 pence per Filofax Share and a multiple of 13.3x Filofax's 1998 earnings per share, before the loss attributable to Henry Ling. It is also a higher price than any daily closing price since Filofax's profit warning in July 1996 The Offer will be subject to the conditions and on the terms set out in Appendix I and on the further terms to be set out in the Offer Document. Filofax Shares will be acquired pursuant to the Offer fully paid and free from all liens, equities, charges, encumbrances and other interests and together with all rights now or hereafter attaching thereto, including, without limitation, the right to receive and retain all dividends and other distributions announced, declared, made or paid after 31 March 1998, save for the final ordinary dividend of 2.42 pence per Filofax Share payable on 30 October 1998. The Offer will extend to all existing issued Filofax Shares and any Filofax Shares which are unconditionally allotted or issued prior to the date on which the Offer closes (or such earlier date not (without the consent of the Panel) being earlier than the date on which the Offer becomes or is declared unconditional as to acceptances or, if later, the first closing date of the Offer, as Day Runner UK may decide) as a result of the exercise of options under the Filofax Share Schemes or otherwise. Background to and reasons for the Offer Day Runner has closely followed Filofax and observed how in recent years Filofax has struggled to find a way forward, failed to develop the Filofax brand and failed to deliver value: it has been ex-growth since 1996 its share price has underperformed the FTSE All-Share Index by over 59 per cent. since 1 January 1996 its diversification strategy has failed it has had reorganisations and reviews but has not delivered results its talks with third parties earlier this year did not deliver value it has itself recently pointed towards reduced growth expectations Day Runner has believed for some time that a combination of Day Runner and Filofax would create a much stronger platform to develop the Filofax brand and so create value for both sets of shareholders. In many ways Day Runner is the logical international partner for Filofax. Day Runner and Filofax are complementary both in geographical coverage and in distribution channels. In November 1997, Filofax announced that it had initiated a review of the strategic opportunities open to it. This led to talks with a number of parties regarding strategic alliances, joint ventures and the sale of the group. Day Runner was astounded that despite this apparently far reaching review, Filofax made no attempt during this period to develop a dialogue with Day Runner. Filofax's talks came to nothing and failed to deliver value for Filofax's Shareholders. Against this background, Day Runner believes it is in the interests of the business and its shareholders for Day Runner to make a public case for a combination. Day Runner is prepared to offer a full cash price for Filofax despite the current uncertainties in financial markets and the world economy and is confident in its ability to develop the Filofax brand in a way that current management has been unable to do. Information on Day Runner UK Day Runner UK is an indirect wholly owned subsidiary of Day Runner, and has been established in order to implement the Offer. To date, Day Runner UK has engaged in no activities other than those incidental to its incorporation and the making of the Offer. Information on Day Runner Day Runner markets personal organising products to broad-based consumer audiences through retail distribution channels. It is the leading producer of paper-based personal organisers for the US retail market and also supplies a number of related organising products. Day Runner is headquartered in Irvine, California. Its shares are quoted on The Nasdaq Stock Market in the US (ticker symbol "DAYR"), and it has a market capitalisation of approximately US$ 229 million ((pound)136 million). Through a careful strategy of building its brand, Day Runner has seen sales increase at a compound annual growth rate of over 18 per cent. over the last five years. In the same period Day Runner's net income increased at a compound annual growth rate of over 27 per cent. This performance is attributable almost entirely to organic growth. In the year ended 30 June 1998, Day Runner reported audited consolidated operating profit of US$25.6 million ((pound) 15.2 million) on sales of US$167.8 million ((pound) 99.9 million). This represented sales growth of 31.8 per cent. over the prior year. At 30 June 1998, Day Runner had shareholders' funds of US$74.5 million ((pound) 44.4 million). Day Runner has established a strong retail distribution network in the US, where its products are carried by more than 20,000 retail stores. During its fiscal year ended 30 June 1998, Day Runner sold more than 6 million organisers and approximately 20 million refills, which include calendars, other pages and accessories. A key element of Day Runner's strategy has been to identify and cultivate new sources of demand for organisers by creating organisers and planners designed to appeal to distinct consumer segments, from business and professional people to students and housewives. All of these products have been internally developed. Suggested retail prices for Day Runner's organisers range from US$4 to $150 (approximately (pound) 2.38 to (pound) 89.29). Organiser lines include: Day Runner(R) System, the original Day Runner time management system PRO Business System(R), designed for business and professional people FactCentre(TM), aimed at budget-conscious consumers 4-1-1(TM) Student Planners Perennials(TM), designed to appeal to young women Licensed products featuring DILBERT(TM), The Mickey Unlimited Brand of the Walt Disney Co., THE FAR SIDE(R) and Warner Bros. Looney Tunes(TM) classic cartoon characters To leverage its brand name and strong retail distribution, Day Runner also develops, manufactures and markets a number of related organising products. Sales of related organising products grew by 221 per cent. in the year ended 30 June 1998 and represented 19.6 per cent. of Day Runner's total turnover. Internally developed related organising products, virtually all of which have been introduced since March 1995, include telephone/address books, appointment books, business accessories, pocket calendars, desk calendars and several lines of organising wallboards, among others. Day Runner's student planners have established Day Runner as a supplier of back-to-school products. Day Runner's success at building its back-to-school business since 1994 has been the primary factor in reducing the seasonality of Day Runner's sales by lessening its dependence on calendar year-end purchasing and establishing a second strong selling season. Day Runner's sales in the quarter ended 30 June, the primary quarter for back-to-school shipments, have grown from US$14.0 million in 1993, the year before Day Runner introduced 4-1-1 Student Planners, to US$50.9 million in 1998. Information on Filofax Filofax is a manufacturer and supplier of stationery products. Filofax's core business is the supply of ring binder organisers under the Filofax, Microfile and Lefax brands. Other products include time management systems, business forms and telephone message pads and up-market writing instruments. In the year ended 31 March 1998, Filofax's consolidated turnover was (pound)42.2 million ((pound)37.7 million for continuing operations) and operating profit was (pound)4.3 million ((pound)6.1 million for continuing operations). Net assets at 31 March 1998 were (pound)10.5 million. The Loan Note Alternative Instead of some or all of the cash consideration which would otherwise be receivable by them under the Offer, Filofax Shareholders (other than persons who are citizens or residents of the United States and certain other overseas persons) accepting the Offer will be entitled to elect to receive Loan Notes on the following basis: for each (pound)1 of cash consideration under the Offer (pound)1 nominal of Loan Notes The Loan Notes will be unsecured obligations of Day Runner UK and will be issued, credited as fully paid, in amounts and integral multiples of (pound)1 nominal value; all fractional entitlements will be disregarded and not paid. The Loan Notes will bear interest (from the date of issue to the relevant holder of Loan Notes) at a rate of 1.0 per cent. per annum below LIBOR. Interest on the Loan Notes will be payable annually in arrears on 30 September (or, if not a business day in any year, on the first business day thereafter), commencing 30 September 1999. The Loan Notes will be redeemable at the option of the holders on each interest payment date from and including 30 September 1999 (or, if not a business day, on the first business day thereafter ). Unless previously redeemed or purchased, the Loan Notes will be redeemed on 30 September 2003 or, if not a business day, on the first business day thereafter. The Loan Notes will, subject to certain conditions, be transferable but no application is intended to be made for the Loan Notes to be listed, or dealt in, on any stock exchange. Payment of principal of and interest on the Loan Notes will be guaranteed by Day Runner. The Loan Notes have not been, and will not be, registered under the Securities Act or under any other securities laws and should not be offered, sold, resold, delivered or distributed, directly or indirectly, in or into the United States, Canada, Australia or Japan and will not be available to US Persons (except in transactions exempt from or not subject to the registration requirements of the Securities Act or the relevant securities laws of any State of the United States, Canada, Japan or Australia). The Loan Note Alternative will be conditional on the Offer becoming or being declared unconditional in all respects and will remain open for so long as the Offer remains open for acceptance. No Loan Notes will be issued unless, by the time the Offer becomes or is declared wholly unconditional, valid elections from accepting Filofax Shareholders have been received for at least (pound)5 million nominal value of Loan Notes (or such lesser value as Day Runner UK may decide). If insufficient elections are received, Filofax Shareholders who validly elect for the Loan Note Alternative will instead receive cash in accordance with the terms of the Offer. Details of the principal terms of the Loan Notes will be contained in the Offer Document. Financing for the Offer Day Runner will finance the Offer out of medium term credit facilities which it has put in place both for this purpose and to provide working capital for the Day Runner Group in future. Employees The Board of Day Runner has confirmed that the existing employment rights, including pension rights, of the employees of Filofax will be fully safeguarded. Filofax Share Schemes The Offer extends to any Filofax Shares unconditionally allotted or issued prior to the date on which the Offer closes (or such earlier date as Day Runner UK may determine) as a result of the exercise of options granted under the Filofax Share Schemes. To the extent that such options are not or cannot be exercised in full, it is intended that appropriate proposals will be made to option holders under the Filofax Shares Schemes in due course, once the Offer has become unconditional in all respects. General Neither Day Runner nor Day Runner UK, nor any of their respective directors nor, so far as Day Runner UK is aware, any person acting in concert with Day Runner or Day Runner UK, owns or controls any Filofax Shares or has any option to acquire any Filofax Shares, or has entered into any derivative referenced to securities of Filofax which remains outstanding. The Offer Document, setting out details of the Offer (including the Loan Note Alternative) and the Form of Acceptance will be posted to Filofax Shareholders as soon as practicable. The Offer will be open for at least twenty business days from the date of the Offer Document. The availability of the Offer and any election thereunder to persons outside the UK may be affected by the laws of the relevant jurisdiction. Such persons should inform themselves about and observe any applicable requirements. This announcement does not constitute an offer or an invitation to purchase any securities. Certain terms used in this announcement are defined in Appendix II. Day Runner and PRO Business System are registered trademarks, and FactCentre, 4-1-1 and Perennials are trademarks of Day Runner, Inc. (C)Disney. DILBERT is a trademark of United Feature Syndicate, Inc. THE FAR SIDE is a registered trademark of FarWorks, Inc. LOONEY TUNES, characters, names and all related indicia are trademarks of Warner Bros. All other trademarks remain the property of their respective companies. Press Enquiries: Day Runner Mark Vidovich Tel: 0171 404 5959 Judy Tucker Tel: 0171 404 5959 Wasserstein Perella Howard Covington Tel: 0171 446 8000 Karen Dodd Tel: 0171 446 8000 Cazenove Julian Cazalet Tel: 0171 825 9350 Ed Byers Tel: 0171 825 9113 Brunswick James Bradley Tel: 0171 404 5959 Lucas van Praag Tel: 0171 404 5959 Wasserstein Perella, which is regulated in the UK by The Securities and Futures Authority Limited, is acting for Day Runner and Day Runner UK and no one else in connection with the Offer and will not be responsible to anyone other than Day Runner and Day Runner UK for providing the protections afforded to customers of Wasserstein Perella nor for giving advice in relation to the Offer. The Offer is not being made, directly or indirectly, in or into, or by use of the mails of, or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facilities of a national securities exchange of, Canada, Australia or Japan and the Offer will not be capable of acceptance by any such use, means, instrumentality or facilities or from within Canada, Australia or Japan except pursuant to any applicable exemption. The Loan Notes which may be issued pursuant to the Offer have not been, and will not be, registered under the Securities Act or under any of the relevant securities laws of any State of the United States, Canada, Australia or Japan. Accordingly, unless an exemption under the Securities Act or such relevant securities laws is applicable, the Loan Notes may not be offered, sold, resold, delivered or distributed, directly or indirectly, in or into the United States, Canada, Australia or Japan and will not be available to US Persons. Appendix I Conditions and certain further terms of the Offer The Offer, which is being made by Wasserstein Perella on behalf of Day Runner UK, will comply with the applicable rules of the London Stock Exchange and the Code and with US federal securities laws (except to the extent that exemptive relief has been granted by the SEC). In addition, the Offer (which includes the Loan Note Alternative) will be subject to the following conditions: (i) valid acceptances being received (and not, where permitted, withdrawn) by not later than 3.00 pm (London time) on the first closing date of the Offer (or such later time(s) and/or date(s) as Day Runner UK may, subject to the rules of the Code, decide) in respect of not less than 90 per cent. (or such lesser percentage as Day Runner UK may decide) in nominal value of the Filofax Shares to which the Offer relates, provided that this condition shall not be satisfied unless Day Runner UK and/or its wholly owned subsidiaries shall have acquired or agreed to acquire, whether pursuant to the Offer or otherwise, Filofax Shares carrying in aggregate more than 50 per cent. of the voting rights then exercisable at a general meeting of Filofax. For the purposes of this condition: (a) to the extent, if any, required by the Panel, Filofax Shares that are unconditionally allotted but not issued before the Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise, shall be deemed to carry the voting rights they will carry upon issue; and (b) the expression "Filofax Shares to which the Offer relates" shall be construed in accordance with Sections 428 to 430F of the Companies Act; (ii) an announcement being made indicating in terms satisfactory to Day Runner UK that it is not the intention of the Secretary of State for Trade and Industry to refer the proposed acquisition of Filofax by Day Runner UK, or any matters arising therefrom, to the Monopolies and Mergers Commission; (iii) the expiry or early termination of all applicable waiting periods under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations made thereunder; (iv) no relevant authority having intervened in a way that would or might reasonably be expected to: (a) make the Offer or its implementation or the acquisition or proposed acquisition by any member of the Wider Day Runner Group of any Filofax Shares, or the acquisition of control of any member of the Wider Filofax Group by any member of the Wider Day Runner Group, void, unenforceable and/or illegal or directly or indirectly restrain, restrict, prohibit, delay or otherwise interfere with the implementation thereof, or impose additional conditions or obligations with respect thereto, or otherwise challenge or hinder the Offer or its implementation or the acquisition or proposed acquisition of any Filofax Shares, or the acquisition of control of any member of the Wider Filofax Group by any member of the Wider Day Runner Group; (b) require, prevent or delay the divestiture or alter the terms of any proposed divestiture by any member of the Wider Day Runner Group or the Wider Filofax Group of all or any part of their respective businesses, assets or properties or impose any limitation on the ability of any of them to conduct any of their respective businesses or to own any of their respective assets or properties or any part thereof; (c) impose any limitation on, or result in a delay in, the ability of any member of the Wider Day Runner Group or of any member of the Wider Filofax Group, directly or indirectly, to acquire or hold or exercise effectively any rights of ownership of shares or loans or securities convertible into shares or any other securities (or the equivalent) in any member of the Wider Filofax Group or to exercise management control over any such member of the Wider Filofax Group; (d) require any member of the Wider Day Runner Group or the Wider Filofax Group to acquire or to offer to acquire any shares or other securities (or the equivalent) or interest in any member of the Wider Day Runner Group or the Wider Filofax Group or any asset owned by any third party or to sell, or to offer to sell, any shares or other securities (or the equivalent) or interest in or any asset owned by any member of the Wider Day Runner Group or the Wider Filofax Group; (e) result in a delay in the ability of any member of the Wider Day Runner Group, or render any member of the Wider Day Runner Group unable, to acquire some or all of the shares or other securities (or the equivalent) or interest in, or control of, any member of the Wider Filofax Group or require or prevent or delay divestiture by any member of the Wider Day Runner Group or the Wider Filofax Group of the same; (f) impose any limitation on the ability of any member of the Wider Day Runner Group or the Wider Filofax Group to co-ordinate all or any part of its business with all or any part of the business of any other member of the Wider Day Runner Group or the Wider Filofax Group; or (g) otherwise adversely affect the business, assets, profits or prospects of any member of the Wider Day Runner Group or Wider Filofax Group, and all applicable waiting and other time periods during which any relevant authority could have intervened, in respect of the Offer or the acquisition or proposed acquisition of any shares or other securities (or the equivalent) or interest in, or control of, any member of the Wider Filofax Group by any member of the Wider Day Runner Group, having expired, lapsed or terminated; (v) all necessary notifications and filings having been made, all regulatory and statutory obligations having been complied with, all appropriate waiting or other time periods under any applicable legislation or regulations in any jurisdiction having expired, lapsed or terminated in each case in respect of the Offer or the acquisition or proposed acquisition of any shares or other securities (or the equivalent) or interest in, or control of, any member of the Wider Filofax Group by any member of the Wider Day Runner Group and all authorisations and determinations necessary or appropriate in any jurisdiction for or in respect of the Offer or the acquisition or proposed acquisition of any shares or other securities (or the equivalent) or interest in, or control of, any member of the Wider Filofax Group by any member of the Wider Day Runner Group or in relation to the affairs of any member of the Wider Filofax Group having been obtained in terms and in a form satisfactory to Day Runner UK from all relevant authorities or (without prejudice to the generality of the foregoing) from any persons or bodies with whom any member of the Wider Filofax Group or the Wider Day Runner Group has entered into contractual arrangements and such authorisations and determinations together with all authorisations and determinations necessary or appropriate for any member of the Wider Filofax Group to carry on its business remaining in full force and effect at the time at which the Offer becomes otherwise unconditional in all respects and all filings necessary for such purpose having been made and there being no notice of any intention to revoke, suspend, restrict, modify or not renew any of the same having been received; (vi) there being no provision of any agreement, arrangement, licence, permit or other instrument to which any member of the Wider Filofax Group is a party or by or to which any such member or any of its assets may be bound, entitled or subject which would, could or might reasonably be expected to, as a result of (i) the Offer, (ii) the proposed acquisition by any member of the Wider Day Runner Group of the shares or other securities (or the equivalent) or interest in any member of the Wider Filofax Group or any of them, or (iii) a change in the control or management of any member of the Wider Filofax Group, result in: (a) any moneys borrowed by, or any other indebtedness, actual or contingent, of or any grant available to any such member being or becoming repayable or capable of being declared repayable immediately or prior to its stated maturity, or the ability of any such member to borrow moneys or incur any indebtedness being withdrawn or inhibited; (b) any such agreement, arrangement, licence, permit or other instrument being terminated or modified or any obligation or liability arising or any action being taken or arising thereunder; (c) the rights, liabilities, obligations or interests of any such member under any such agreement, arrangement, licence, permit or instrument or the interests or business of any such member in or with any other person, firm, company or body (or any arrangements relating to any such interests or business) being terminated or modified or affected; (d) any such member ceasing to be able to carry on its business under any name under which it at present does so or ceasing to be able to use in its business any names, trademarks or other intellectual property rights which it at present uses, in each case on the same basis and terms as at present apply; (e) any assets or interests of any such member being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged; (f) the creation of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any such member or any such security interest (whenever and wherever arising or having arisen) becoming enforceable; (g) the value of, or financial or trading position or prospects of, any such member being prejudiced or adversely affected; or (h) the creation of any liability, actual or contingent, by any such member; and no event having occurred which, under any provision of any agreement, arrangement, licence, permit or other instrument to which any member of the Wider Filofax Group is a party or by or to which any such member or any of its assets may be bound, entitled or subject, could or might reasonably be expected to result in any of the events or circumstances as are referred to in subparagraphs (a) to (h) of this condition (vi); (vii) no member of the Wider Filofax Group having since 31 March 1998 (save as disclosed in the annual report and accounts of Filofax for the year ended 31 March 1998 or otherwise announced on or before 23 September 1998 by Filofax on the London Stock Exchange (information which has been disclosed or announced in such manner and on or before such date being "publicly announced")): (a) (save as between Filofax and members of the Wholly owned Filofax Group or upon the exercise of rights to subscribe for Filofax Shares pursuant to the exercise of options granted under any of the Filofax Share Schemes on or prior to 31 March 1998) issued or allotted or agreed to issue or allot or authorised or proposed the issue or allotment of additional shares of any class, or of securities convertible into, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities; (b) recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution other than to a member of the Wholly owned Filofax Group, save for the final ordinary dividend of 2.42 pence per Filofax Share payable on 30 October 1998; (c) acquired or disposed of or transferred, mortgaged or charged or created any security interest over any assets or any rights, title or interest in any asset (including shares and trade investments) or merged with or demerged any body corporate or authorised or proposed or announced any intention to propose any such merger, demerger, acquisition, disposal, transfer, mortgage, charge or security interest; (d) made or authorised or proposed or announced an intention to propose any change in its share or loan capital (save for any Filofax Shares allotted upon exercise of options granted on or before 31 March 1998 under the Filofax Share Schemes); (e) issued, authorised or proposed the issue of any debentures or incurred or increased any indebtedness or contingent liability; (f) purchased, redeemed or repaid or proposed the redemption or repayment of any of its own shares or other securities (or the equivalent) or reduced or proposed the reduction of any of its share or loan capital; (g) entered into any contract, reconstruction, amalgamation, commitment or other transaction or arrangement otherwise than in the ordinary course of business or entered into or varied, or announced its intention to enter into or vary, any contract with or in relation to any of the directors or senior executives or consultants of the Wider Filofax Group; (h) entered into or varied or authorised or proposed any contract, transaction or commitment (whether in respect of capital expenditure or otherwise) which is of a long-term, onerous or unusual nature or magnitude or which involves or could involve an obligation of such a nature or magnitude; (i) entered into any contract, transaction or arrangement which consents to or may result in the restriction of the scope of the business of any member of the Wider Filofax Group or of the Wider Day Runner Group and no member of the Wider Filofax Group being a party to or otherwise affected by any such contract, transaction or arrangement whether the same was entered into before or after 31 March 1998; (j) waived or compromised any claim; (k) taken any corporate action or had any legal proceedings started or threatened against it for its winding-up, dissolution or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of all or any of its assets or revenues or any analogous proceedings or appointment in any jurisdiction or had any such person appointed; (l) made or agreed or consented to any significant change to the terms of the trust deeds constituting the pension schemes established for its directors, employees or their dependents or the benefits which accrue, or to the pensions which are payable, thereunder, or to the basis on which qualifications for, or accrual or entitlement to, such benefits or pensions are calculated or determined or to the basis upon which the liabilities (including pensions) of such pension schemes are funded or made, or agreed or consented to any change to the trustees involving the appointment of a trust corporation or allowed any deficit (actual or contingent) to arise or persist in relation to the funding of any such scheme; (m) been unable or admitted in writing that it is unable, to pay its debts or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or substantial part of any business; (n) made any alteration to its memorandum or articles of association, or other incorporation documents; or (o) entered into an agreement, contract, arrangement or commitment or passed any resolution or made any offer (which remains open for acceptance) or proposal with respect to any of the circumstances or events, referred to in this condition (vii); (viii) since 31 March 1998, and save as publicly announced: (a) no adverse change or deterioration having occurred in the business, assets, financial or trading position or profits or prospects of Filofax or any other member of the Wider Filofax Group; (b) no litigation or arbitration proceedings, prosecution or other legal proceedings to which any member of the Wider Filofax Group is or may become a party (whether as plaintiff or defendant or otherwise) or which may otherwise affect any such member having been announced, instituted or threatened by or against or remaining outstanding by or against any member of the Wider Filofax Group or which may otherwise affect any such member and no investigation by any relevant authority against or in respect of or affecting any member of the Wider Filofax Group having been threatened, announced or instituted or remaining outstanding and which in any such case might adversely affect any member of the Wider Filofax Group; (c) there having been no receiver, administrator, administrative receiver, trustee or similar officer appointed over any of the assets or revenues of any member of the Wider Filofax Group or any analogous proceedings or steps having taken place under the laws of any jurisdiction and there having been no petition presented for the administration of any member of the Wider Filofax Group or any analogous proceedings or any steps having taken place under the laws of any other jurisdictions; and (d) no contingent or other liability having arisen or become apparent or increased that might be likely to have an adverse effect on any member of the Wider Filofax Group; (ix) Day Runner UK not having discovered that: (a) any financial, business or other information concerning Filofax or the Wider Filofax Group that has been publicly disclosed at any time by or on behalf of any member of the Wider Filofax Group is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make the information contained therein not misleading and which was not corrected by subsequent public announcement made on the London Stock Exchange on or before 23 September 1998; or (b) any member of the Wider Filofax Group or any partnership in which any member of the Wider Filofax Group has a significant economic interest having any liability (contingent or otherwise) that is not publicly announced; (x) Day Runner UK not having discovered that: (a) any past or present member of the Wider Filofax Group has not complied with all applicable legislation or regulations of any jurisdiction with regard to the storage, carriage, disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health, which non-compliance or any other disposal, discharge, spillage, leak or emission which has occurred would be likely to give rise to any liability (whether actual or contingent) on the part of any member of the Wider Filofax Group; or (b) there has been a disposal, discharge, spillage, emission or leak of waste or any hazardous substance or any substance likely to impair the environment or harm human health on or about, or there has been an emission or discharge of any waste or any hazardous substance or any substance likely to impair the environment or harm human health from, any land or other asset owned, occupied or made use of by any member of the Wider Filofax Group, or in which any such member may have an interest, which would be likely to give rise to any liability or cost (whether actual or contingent) on the part of any member of the Wider Filofax Group; or (c) there is or is likely to be any liability (whether contingent or otherwise) to make good, repair, reinstate or clean up any property now or previously owned, occupied or made use of by any past or present member of the Wider Filofax Group, or in which any such member may now or previously have had or be deemed to have or have had an interest, under any environmental legislation, regulation, notice, circular or order of any relevant authority, or to contribute to the cost thereof or associated therewith or indemnify any person in relation thereto; or (d) circumstances exist whereby a person or class of persons would be likely to have any claim or claims in respect of any product, by-product or process of manufacture or service or materials used therein now or previously manufactured, supplied, sold or carried out or in any way dealt with or handled by any past or present member of the Wider Filofax Group which claim or claims would be likely adversely to affect any member of the Wider Filofax Group. For the purposes of these conditions: (a) "relevant authority" means any government, government department or governmental, quasi-governmental, supranational, statutory or regulatory body, court, trade agency, professional association or institution or environmental body or any other body or person in any jurisdiction; (b) a relevant authority shall be regarded as having "intervened" if it has instituted, implemented, threatened or communicated its intention to take any action, proceedings, suit, investigation, inquiry or reference, or made, enacted or proposed any statute, regulation, decision or order, or taken any measures or other steps or otherwise having indicated that it may do any of the foregoing and "intervene" shall be construed accordingly; (c) "authorisations" means authorisations, orders, grants, recognitions, determinations, confirmations, consents, licences, clearances, permissions, exemptions and approvals; (d) "the Wider Filofax Group" means Filofax and its subsidiary undertakings, associated undertakings and any other undertakings in which Filofax and such undertakings (aggregating their interests) have a substantial interest and "the Wider Day Runner Group" means Day Runner, any holding company and any subsidiary undertaking, associated undertakings and any other undertaking in which Day Runner and such undertakings (aggregating their interests) have a substantial interest and, for these purposes, "holding company", "subsidiary undertaking", "associated undertaking" and "undertaking" have the meanings given by the Companies Act (but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A to the Companies Act) and "substantial interest" means a direct or indirect interest in 15 per cent. or more of the equity or voting capital of an undertaking; and (e) "the Wholly owned Filofax Group" means Filofax and those of its subsidiaries in which it has a direct or indirect interest in 100 per cent. of the equity and voting capital. Day Runner UK reserves the right to waive all or any of the above conditions, in whole or in part, except condition (i). The Offer will lapse unless all the above conditions have been satisfied or (if capable of waiver) waived, or, where appropriate, have been determined by Day Runner UK in its reasonable opinion to be or remain satisfied, by midnight on the day which is 21 days after the later of the first closing date of the Offer and the date on which the Offer becomes or is declared unconditional as to acceptances, or such later date as Day Runner UK may, with the consent of the Panel, decide, provided that Day Runner UK shall be under no obligation to waive or treat as satisfied any of conditions (ii) to (x) inclusive by a date earlier than the latest date specified or referred to above for the satisfaction thereof notwithstanding that any such condition or the other conditions of the Offer may at such earlier date have been waived or satisfied and that there are at such earlier date no circumstances indicating that any of such conditions may not be capable of being satisfied. The Offer will lapse if the acquisition of Filofax is referred to the Monopolies and Mergers Commission before the later of 3.00 pm (London time) on the first closing date of the Offer and the date on which the Offer becomes or is declared unconditional as to acceptances. In such circumstances, the Offer will cease to be capable of further acceptance and Day Runner UK and accepting Filofax Shareholders shall thereupon cease to be bound by forms of acceptance submitted at or before the time when the Offer so lapses. If Day Runner UK is required by the Panel to make an offer for Filofax Shares under the provisions of Rule 9 of the Code, Day Runner UK may make such alterations to the terms and conditions of the Offer as are necessary to comply with the provisions of that Rule. Appendix II Definitions The following definitions apply throughout this document, unless the context requires otherwise: "business day" any day, other than a Saturday or Sunday or a US federal holiday or UK Bank Holiday and consisting of the time period from 12.01 am until and including 12.00 (midnight) (New York City time); "Cazenove" Cazenove & Co.; "Code" The City Code on Takeovers and Mergers; "Companies Act" the Companies Act 1985, as amended; "Daily Official List" the Daily Official List of the London Stock Exchange; "Day Runner" Day Runner, Inc.; "Day Runner Group" the group of companies of which Day Runner is the ultimate holding company; "Day Runner UK" or the Day Runner UK plc, a wholly owned subsidiary of Day Runner; "Offeror" "Filofax" Filofax Group plc; "Filofax Group" the group of companies of which Filofax is the ultimate holding company; "Filofax Share Schemes" the Filofax Employee Sharesave Scheme, the Filofax approved Executive Share Option Scheme and the Filofax unapproved Executive Share Option Scheme; "Filofax Shareholders" holders of Filofax Shares; "Filofax Shares" the existing unconditionally allotted or issued and fully paid ordinary shares of 5 pence each in the capital of Filofax and any further such shares that are unconditionally allotted or issued at or prior to the time at which the Offer ceases to be open for acceptance (or, subject to the provisions of the Code, such earlier time and/or date as Day Runner UK may decide); "Form of Acceptance" the Form of Acceptance, Authority and Election for use by Filofax Shareholders in connection with the Offer; "Henry Ling" the company formerly named Henry Ling & Son (London) Limited and renamed Elijo (London) Limited on 9 April 1998; "LIBOR" London Interbank Offered Rate for one year sterling deposits; "Loan Note Alternative" the alternative whereby Filofax Shareholders (other than certain overseas persons) validly accepting the Offer may elect to receive Loan Notes instead of all or part of the cash consideration to which they would otherwise be entitled under the Offer; "Loan Note Instrument" the loan note instrument constituting the Loan Notes; "Loan Notes" the floating rate, guaranteed, unsecured loan notes to be issued by Day Runner UK pursuant to the Loan Note Alternative; "London Stock Exchange" the London Stock Exchange Limited; "Offer" the offer by Wasserstein Perella on behalf of Day Runner UK to acquire the Filofax Shares other than those already owned by Day Runner UK on the terms and subject to the conditions to be set out in the Offer Document and the Form of Acceptance including, where the context so requires, any subsequent revision, variation, extension or renewal of such offer; "Offer Document" the document by means of which the Offer is made; "Panel" The Panel on Takeovers and Mergers; "SEC" the US Securities and Exchange Commission; "Securities Act" the US Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; "UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland; "United States, US or USA" the United States of America, its territories and possessions, any State of the United States of America and the District of Columbia, and all other areas subject to its jurisdiction; "US$" or "US dollar" the lawful currency of the US; "US Person" as defined in Regulation S under the Securities Act; "Wasserstein Perella" Wasserstein Perella & Co. Limited. Bases of calculation in this document FX rate (pound)1 = $1.68 The loss of value of over 59 per cent. against the FTSE All-Share Index is calculated as [1 - (a/b)] where: a = Filofax's closing share price of 140 pence on 23 September 1998; b = the value of the FTSE All-Share Index on 23 September 1998, having rebased the index to Filofax's share price on 1 January 1996. -----END PRIVACY-ENHANCED MESSAGE-----