-----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, FgBOAq0rNh/ia6+QUFlF+7uBkuH5gZjtQiea8jeF3hfusU30sg6ap9FgddizI3ZC 167nL6YwBZ9zVw/C0PAtKg== 0000950136-02-001388.txt : 20020509 0000950136-02-001388.hdr.sgml : 20020509 ACCESSION NUMBER: 0000950136-02-001388 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20020424 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLTRISTA CORP CENTRAL INDEX KEY: 0000895655 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351828377 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13665 FILM NUMBER: 02639320 BUSINESS ADDRESS: STREET 1: 5875 CASTLE CREEK PARKWAY, NORTH DRIVE STREET 2: SUITE 440 CITY: INDIANAPOLIS STATE: IN ZIP: 46250-4330 BUSINESS PHONE: 3175775000 MAIL ADDRESS: STREET 1: 5875 CASTLE CREEK PARKWAY, NORTH DRIVE STREET 2: SUITE 440 CITY: INDIANAPOLIS STATE: IN ZIP: 46250-4330 8-K 1 file001.txt 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) April 24, 2002 -------------- Alltrista Corporation ---------------------- (Exact name of registrant as specified in its charter) Delaware 0-21052 35-1828377 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 555 Theodore Fremd Avenue, Rye, New York 10580 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (914) 967-9400 -------------- (Former name or former address, if changed since last report.) Item 2. Acquisition of Assets On April 24, 2002, Alltrista Corporation ("Alltrista") acquired the business of Tilia International, Inc., and its subsidiaries, Tilia, Inc. and Tilia Canada, Inc. (collectively, "Tilia") pursuant to an asset purchase agreement. The purchase price consisted of approximately (a) $135 million in cash, with certain closing adjustments, (b) $10 million in cash to be held in escrow, (c) $15 million in the form of subordinated seller notes, and (d) up to $25 million contingent upon the future performance of the business and operations of Tilia. The asset purchase agreement provides, among other things: o that the $135 million cash portion of the purchase price will be reduced to reflect certain adjustments related primarily to transaction costs; o that of the $10 million of the purchase price to be held in escrow, $5 million will be held until March 31, 2003 and $5 million will be held until June 30, 2005, to provide a fund for the payment of any successful indemnification claims against Tilia under the asset purchase agreement; o that the $15 million of the purchase price to be paid in the form of subordinated seller notes will consist of (1) a $10 million subordinated seller note due and payable on March 31, 2003 (without interest) and (2) a $5 million subordinated seller note due and payable on April 24, 2004 (together with interest at a rate equal to the effective interest rate on our Credit Facility (see "Other Events - New Credit Facility") compounding semi-annually and payable at maturity into the escrow account described above); and o that the contingent consideration of up to $25 million will be paid in 2005 and will be determined as follows: o if the Average Annual Business EBITDA (as defined in the asset purchase agreement) of Tilia is less than $40 million, no amount is required to be paid; o if the Average Annual Business EBITDA of Tilia is between $40 million and $46 million, an amount between $10 million and $25 million is required to be paid; and o if the Average Annual Business EBITDA of Tilia is greater than $46 million, an amount of $25 million is required to be paid. We may, at our option, elect to pay such contingent consideration, if any, either in cash or in shares of our common stock; provided that we may pay such contingent consideration in stock only if (a) the average closing price per share of our common stock on the New York Stock Exchange for the 10 consecutive trading days ending on the second trading day prior to the date of payment is at least $5.00 per share and (b) the product obtained by multiplying the average trading volume for this same period by the price per share (as such number is determined pursuant to clause (a) above) is at least $250,000. We may only pay the contingent consideration in cash to the extent that we will be in compliance with the Credit Facility after giving effect to such payment and there will be at least $20 million of availability remaining under our Credit Facility. To the extent contingent consideration is not paid in cash pursuant to the preceding sentence, it will be paid in shares of our common stock, without restriction for trading price or volume. Also in April 2002, we issued $150 million of 9 3/4% Senior Subordinated Notes to qualified institutional buyers in a private placement pursuant to Rule 144A under the Securities Act of 1933. See "Other Events - 9 3/4% Senior Subordinated Notes." The net proceeds from this offering of approximately $143.5 million, together with initial borrowings under our Credit Facility (see "Other Events - New Credit Facility"), were used principally to acquire the business of Tilia, to repay the outstanding indebtedness under our prior credit facility, to pay related fees and expenses and for cash on hand. Item 5. Other Events NEW CREDIT FACILITY On April 24, 2002, we refinanced our existing senior indebtedness with a new $100 million senior secured credit facility (the "Credit Facility") pursuant to the terms of a Credit Agreement (the "Credit Agreement"), with Bank of America, N.A., as Administrative Agent, Swing Line Lender, and L/C Issuer, Canadian Imperial Bank of Commerce, as Syndication Agent, National City Bank of Indiana, as Documentation Agent, and the other Lenders party thereto, including The Bank of New York, Fleet National Bank, Harris Trust and Savings Bank, U.S. Bank National Association, Allfirst Bank, Transamerica Business Capital Corporation, and Union Federal Bank of Indianapolis. The Credit Agreement, among other things, provides for a new senior credit facility for up to $100 million of senior secured loans, consisting of a $50 million five-year revolving credit facility (the "Revolving Credit Facility") and a $50 million five-year term loan facility (the "Term Loan Facility"). The Revolving Credit Facility includes up to an aggregate of $10 million in standby and commercial letters of credit and up to an aggregate of $10 million in swing line loans. As of April 24, 2002, Alltrista had not drawn any of the $50 million available under the Revolving Credit Facility, although Alltrista used some availability in connection with pre-existing letters of credit. The Term Loan Facility was drawn in full, in the amount of $50 million, at the closing of the Credit Facility. Principal and interest under the Term Loan Facility are payable quarterly, in accordance with a specified amortization schedule, with the final payment of all amounts outstanding thereunder being due on April 24, 2007. The Revolving Credit Facility and the Term Loan Facility bear interest at a rate equal to (i) the Eurodollar Rate (as determined by the Administrative Agent) pursuant to an agreed formula or (ii) a Base Rate equal to the higher of (a) the Bank of America prime rate and (b) the 2 federal funds rate plus .50%, plus, in each case, an applicable margin ranging from .75% to 1.50% for Base Rate loans and from 2.00% to 2.75% for Eurodollar Rate loans. The Credit Agreement contains certain restrictions on the conduct of our business, including, among other things, restrictions, generally, on: o incurring debt; o disposing of certain assets; o making investments; o exceeding certain agreed capital expenditures; o creating or suffering liens on Alltrista's assets; o completing certain mergers, consolidations, and with permitted exceptions, Acquisitions; o declaring dividends; o redeeming or prepaying other debt; and o transactions with affiliates. The Credit Agreement also requires Alltrista to maintain certain financial covenants, including a minimum fixed charge ratio, a maximum total leverage ratio, a maximum senior leverage ratio, and a minimum consolidated net worth. The occurrence of certain events or conditions described in the Credit Agreement (subject to grace periods in certain cases) constitutes an event of default. If an event of default occurs, the Administrative Agent may, at the request or consent of the Lenders, among other things, declare the entire outstanding balance of principal and interest of all outstanding loans to be immediately due and payable. The events of default include, among other things: o our failure to pay any principal, interest, or other fees when due; o any material judgment or order entered against Alltrista; o any inaccuracy in the representations and warranties; o failure to observe certain covenants under the Credit Agreement (including, e.g., the financial covenants); o bankruptcy, insolvency or receivership proceedings with respect to Alltrista; and o a change of control of Alltrista. The Credit Agreement provides that Alltrista shall make certain required prepayments of the Term Loan and Revolving Loan upon the happening of certain specified events including, among other things, the sale of Equity Securities and proceeds received from Dispositions, each with permitted exceptions. In connection with entering into the Credit Agreement, all of our direct and indirect domestic subsidiaries, including Hearthmark, Inc., Alltrista Plastics Corporation, Alltrista Newco Corporation, Alltrista Zinc Products, L.P., Penn Video, Inc., Lafayette Steel & Aluminum Corporation, Caspers Tin Plate Company, Unimark Plastics, Inc., LumenX Corporation, Alltrista 3 Unimark, Inc., TriEnda Corporation, Tilia, Inc. (formerly known as Alltrista Acquisition I, Inc.), Tilia Direct, Inc. (formerly known as Alltrista Acquisition II, Inc.), and Tilia International, Inc. (formerly known as Alltrista Acquisition III, Inc.), and Quoin Corporation (collectively, the "Domestic Subsidiaries"), have agreed to guarantee the obligations of Alltrista under the Credit Agreement. Pursuant to the Securities Pledge Agreement, all obligations under the Credit Agreement are secured by a security interest in all of the capital stock or other equity interests of each of our existing or future direct or indirect domestic subsidiaries, and 65% of the voting capital stock or other equity interests and 100% of the nonvoting stock or other equity interests of each of our (or any of our direct or indirect domestic subsidiaries') existing or future direct foreign subsidiaries. Pursuant to the terms of a Security Agreement and an Intellectual Property Security Agreement, the obligations under the Credit Agreement are also secured by a security interest in substantially all of the assets and properties of Alltrista and the Domestic Subsidiaries. The foregoing is a summary of the material provisions of the Credit Agreement and certain of the documents entered into by Alltrista and the Domestic Subsidiaries in connection therewith. Attached hereto as exhibits are copies of the Credit Agreement and certain documents entered into by Alltrista which contain the actual terms of such documents, and which are incorporated herein by reference. 9 3/4% SENIOR SUBORDINATED NOTES On April 24, 2002, we issued 9 3/4 % senior subordinated notes (the "Notes") to qualified institutional buyers in the aggregate principal amount of $150 million under an Indenture among Alltrista, the Domestic Subsidiaries, and The Bank of New York, as trustee, in a private transaction that is not subject to the registration requirements of the Securities Act of 1933, as amended. The net proceeds from this offering were approximately $143.5 million. We may issue additional Notes under the Indenture from time to time. All Notes issued under the Indenture are treated as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. We issued the Notes in denominations of $1,000 and integral multiples of $1,000. The Notes will mature on May 1, 2012. Interest on the Notes accrues at the rate of 9 3/4 % per annum and is payable semi-annually in arrears on May 1 and November 1, commencing on November 1, 2002. We will make each interest payment to the holders of record on the immediately preceding April 15 and October 15. The Notes are unconditionally guaranteed on a senior subordinated basis by the Domestic Subsidiaries. The Notes and the guarantees will be unsecured senior subordinated obligations. Accordingly, they will rank: o junior to all of Alltrista and the Domestic Subsidiaries' existing and future senior 4 debt, including the Credit Facility; o equally with all of Alltrista and the Domestic Subsidiaries' existing and future unsecured senior subordinated obligations that do not expressly provide that they are subordinated to the Notes; and o senior to any of Alltrista and the Domestic Subsidiaries' future debt that expressly provides that it is subordinated to the Notes. The obligations under the Notes and the related guarantees are subordinated to the obligations under the Credit Facility. On or after May 1, 2007, we may redeem all or part of the Notes at any time at a redemption price ranging from 100% to 104.875% of the principal amount, plus accrued and unpaid interest and liquidated damages, if any. Prior to May 1, 2005, we may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds from certain public equity offerings at a redemption price of 109.750% of the principal amount, plus accrued and unpaid interest and liquidated damages, if any. If a change of control of Alltrista occurs, we must offer to repurchase the Notes at a price of 101% of the principal amount, plus accrued and unpaid interest and liquidated damages, if any. The Indenture governing the Notes will, among other things, limit the ability of Alltrista and certain of its subsidiaries to: o incur additional indebtedness; o pay dividends or distributions on, or redeem or repurchase, capital stock; o make investments; o engage in transactions with affiliates; o incur liens; o transfer or sell assets; and o consolidate, merge or transfer all or substantially all of our assets. The occurrence of certain events or conditions (subject to grace periods in certain cases) constitutes an event of default under the Notes. If an event of default occurs, the trustee or holders of at least 25% of the aggregate principal amount of the then outstanding Notes may, among other things, declare the entire outstanding balance of principal and interest of all outstanding loans to be immediately due and payable. The events of default include, among other things: o our failure to pay any principal, interest, or other fees when due under the Notes; o failure to pay certain judgments entered against Alltrista or certain of its subsidiaries; o failure to observe certain covenants under the Notes; o certain bankruptcy events with respect to Alltrista or certain of its subsidiaries; and o a default under certain other indebtedness. 5 Under a Registration Rights Agreement, Alltrista and the Domestic Subsidiaries agreed to: o file a registration statement within 60 days after the issue date of the Notes enabling the holders of the Notes to exchange the Notes for publicly registered Notes with identical terms; o use their best efforts to cause the registration statement to become effective within 180 days after the issue date of the Notes; o consummate the exchange offer within 30 business days after the effective date of the registration statement for the Notes; o file a shelf registration statement for the resale of the Notes if Alltrista cannot effect an exchange offer and in certain other circumstances; o use its best efforts to cause the shelf registration statement to be declared effective; and o keep the shelf registration statement effective for a period of at least two years subject to certain provisions of the Registration Rights Agreement. If we do not comply with certain of our obligations under the registration rights agreement, we have agreed to pay liquidated damages. The Notes are eligible for trading in The PORTAL(SM) Market. Alltrista does not intend to list the Notes on any securities exchange. The foregoing is a summary of the material provisions of the Indenture, the Notes, and the Registration Rights Agreement. Attached hereto as exhibits are copies of the Indenture, the form of Notes, and the Registration Rights Agreement which contain the actual terms of such documents, and which are incorporated herein by reference. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired. Audited consolidated balance sheets of Tilia as of December 31, 2000 and 2001 and related consolidated statements of operations, shareholders' equity and cash flows for each of the years ended December 31, 1999, 2000 and 2001. See "Index to Financial Statements." (b) Pro Forma Financial Information. Unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2001 of Alltrista which gives effect to the acquisition of Tilia as if it had occurred on January 1, 2001. See "Index to Financial Statements." (c) Exhibits. The following Exhibits are filed herewith as part of this report: 6 Exhibit Description - ------- ----------- 4.1 Indenture, dated as of April 24, 2002, among Alltrista, the Domestic Subsidiaries, and The Bank of New York, as trustee, and form of Note attached as Exhibit A thereto 10.1 Credit Agreement, dated as of April 24, 2002, among Alltrista, Bank of America, N.A., as Administrative Agent, Swing Line Lender, and L/C Issuer, Canadian Imperial Bank of Commerce, as Syndication Agent, National City Bank of Indiana, as Documentation Agent, and the other Lenders party thereto, including The Bank of New York, Fleet National Bank, Harris Trust and Savings Bank, U.S. Bank National Association, Allfirst Bank, Transamerica Business Capital Corporation, and Union Federal Bank of Indianapolis 10.2 Guaranty Agreement, dated as of April 24, 2002, by the Domestic Subsidiaries to Bank of America, NA., as administrative agent 10.3 Security Agreement, dated as of April 24, 2002, among Alltrista, the Domestic Subsidiaries, and Bank of America, N.A., as administrative agent 10.4 Intellectual Property Security Agreement, dated as of April 24, 2002, among Alltrista, the Domestic Subsidiaries and Bank of America, N.A., as administrative agent 10.5 Securities Pledge Agreement, dated as of April 24, 2002, among Alltrista, Quoin Corporation, Alltrista Newco Corporation, Caspers Tin Plate Company, and Bank of America, NA., as administrative agent 10.6 Asset Purchase Agreement, dated as of March 27, 2002, among Alltrista, Tilia International, Inc., Tilia, Inc., Tilia Canada, Inc., and Andrew Schilling 10.7 Amendment No. 1 to the Asset Purchase Agreement, dated as of April 24, 2002, among Alltrista, Tilia International, Inc., Tilia, Inc., Tilia Canada, Inc., and Andrew Schilling 10.8 Unsecured Subordinated Note, dated as of April 24, 2002, by Alltrista in favor of Tilia International, Inc. in the principal amount of $5,000,000 10.9 Unsecured Subordinated Note, dated as of April 24, 2002, by Alltrista in favor of Tilia International, Inc. in the principal amount of $10,000,000 10.10 Escrow Agreement, dated as of April 24, 2002, among Alltrista, Tilia International, Inc., Tilia, Inc., Tilia Canada, Inc., Andrew Schilling, and J. P. Morgan Trust Company, National Association, as escrow agent 7 Exhibit Description - ------- ----------- 10.11 Long Term Escrow Agreement, dated as of April 24, 2002, among Alltrista, Tilia International, Inc., Andrew Schilling, and J. P. Morgan Trust Company, National Association, as escrow agent 10.12 Purchase Agreement, dated as of April 10, 2002, Alltrista, the Domestic Subsidiaries, and Banc of America Securities LLC, CIBC World Markets Corp., and NatCity Investments, Inc., a representatives of the several initial purchasers 10.13 Registration Rights Agreement, dated as of April 24, 2002, among Alltrista, the Domestic Subsidiaries, and Banc of America Securities LLC, CIBC World Markets Corp., and NatCity Investments, Inc., a representatives of the several initial purchasers 23.1 Consent of Arthur Andersen LLP 99.1 Press Release of Alltrista, dated April 24, 2002 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: May 8, 2002 ALLTRISTA CORPORATION By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Vice Chairman, Chief Financial Officer, and Secretary 9 INDEX TO FINANCIAL STATEMENTS Audited Consolidated Financial Statements Report of Independent Public Accountants.................................... F-2 Consolidated Statements of Operations for the Years Ended December 31, 1999, 2000 and 2001........................ F-3 Consolidated Balance Sheets as of December 31, 2000 and 2001................ F-4 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 2000 and 2001........................ F-5 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1999, 2000 and 2001........................ F-6 Notes to Consolidated Financial Statements.................................. F-7 Unaudited Pro Forma Condensed Financial Statements Pro Forma Condensed Consolidated Statements of Operations for the Year Ended December 31, 2001........................................F-18 F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Tilia International, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Tilia International, Inc. (a Cook Islands Corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity and cash flows for the years ended December 31, 2001, 2000 and 1999. 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit 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, the financial statements referred to above present fairly, in all material respects, the financial position of Tilia International, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for the years ended December 31, 2001, 2000 and 1999 in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP San Francisco, California January 30, 2002 F-2 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, -------------------------------------------------- 2001 2000 1999 --------------- --------------- -------------- Net sales ..................................... $183,825,138 $132,079,478 $ 79,996,637 Cost of goods sold ............................ 89,668,207 59,896,104 32,655,501 ------------ ------------ ------------ Gross profit .................................. 94,156,931 72,183,374 47,341,136 ------------ ------------ ------------ Operating expenses Sales and marketing .......................... 43,567,390 34,111,543 20,763,454 Product development and engineering .......... 2,267,751 1,860,911 994,116 General and administrative ................... 15,196,506 10,217,678 6,137,069 Depreciation and amortization ................ 1,361,526 872,760 744,304 Bad debts (reserve reversal) expense ......... (427,041) 771,380 254,127 Noncash stock compensation expense ........... 198,501 157,342 -- ------------ ------------ ------------ Total operating expenses ................... 62,164,633 47,991,614 28,893,070 ------------ ------------ ------------ Income from operations ........................ 31,992,298 24,191,760 18,448,066 Other (expense) income ........................ (700,767) 226,653 428,869 ------------ ------------ ------------ Net income before income tax .................. 31,291,531 24,418,413 18,876,935 Provision for income tax ...................... 8,512,529 7,385,799 4,998,982 ------------ ------------ ------------ Net income .................................... $ 22,779,002 $ 17,032,614 $ 13,877,953 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. F-3 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, -------------------------------- 2001 2000 --------------- -------------- ASSETS Current assets Cash and cash equivalents ................................ $ 18,914,934 $ 374,989 Accounts receivable, net ................................. 22,981,731 20,193,828 Inventory, net ........................................... 22,088,654 22,733,265 Prepaid inventory ........................................ 2,363,965 1,663,197 Prepaid income taxes ..................................... -- 726,438 Prepaid media and other expenses ......................... 1,675,540 1,178,216 Deferred tax asset ....................................... 5,632,150 4,654,389 Deposits and other current assets ........................ 212,387 106,273 ------------ ----------- Total current assets ................................... 73,869,361 51,630,595 ------------ ----------- Property and equipment, net ............................... 3,266,982 2,606,797 Long-term note receivable, net ............................ 546,000 -- Long-term deferred tax asset .............................. 122,084 -- Intellectual property, net ................................ 600,000 800,000 ------------ ----------- Total assets ............................................. $ 78,404,427 $55,037,392 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable ......................................... $ 3,535,528 $ 6,170,601 Accrued liabilities ...................................... 13,761,415 10,086,977 Income taxes payable ..................................... 3,543,120 -- Bank loan payable ........................................ -- 4,335,000 ------------ ----------- Total current liabilities .............................. 20,840,063 20,592,578 ------------ ----------- Shareholders' Equity Series A preferred stock, no par value, 2,860,000 shares authorized, issued and outstanding ..................... 4,468,058 4,468,058 Common stock, no par value, 30,000,000 shares authorized, 6,041,734 and 5,845,355 shares issued and outstanding in 2001 and 2000, respectively ............................ 3,305,902 2,911,022 Stock subscriptions receivable ........................... (237,000) (182,668) Retained earnings ........................................ 50,027,404 27,248,402 ------------ ----------- Total shareholders' equity ................................ 57,564,364 34,444,814 ------------ ----------- Total liabilities and shareholders' equity ............. $ 78,404,427 $55,037,392 ============ ===========
All shares and amounts, except for Series A preferred stock, have been restated to retroactively reflect the five for one stock split in October 2000. The accompanying notes are an integral part of these consolidated financial statements. F-4 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, -------------------------------------------------- 2001 2000 1999 --------------- --------------- -------------- OPERATING ACTIVITIES: Net income .............................................. $ 22,779,002 $ 17,032,614 $ 13,877,953 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................ 1,611,900 872,760 744,304 Gain on sale of property and equipment ............... (4,241) (673) (376) Bad debts (reserve reversal) expense ................. (427,041) 771,380 254,127 Noncash stock compensation expense ................... 198,501 157,342 -- Deferred income taxes ................................ (1,099,845) (2,155,009) (2,499,380) Utilization of prior years' net operating losses ..... -- -- 1,226,425 Changes in current assets and liabilities: Accounts receivable .................................... (2,360,862) (11,673,037) (6,351,239) Inventory .............................................. 644,611 (13,384,628) (7,159,527) Prepaid inventory ...................................... (700,768) 105,025 (1,581,861) Prepaid income taxes ................................... 726,438 (726,438) -- Prepaid media and other expenses ....................... (497,324) (160,177) (485,725) Deposits and other current assets ...................... (106,114) 1,022,160 (1,077,815) Accounts payable and accrued liabilities ............... 1,039,365 8,592,276 5,750,799 Income taxes payable ................................... 3,543,120 (1,596,685) 1,253,701 ------------ ------------- ------------ Net cash provided by (used in) operating activities ..... 25,346,742 (1,143,090) 3,951,386 ------------ ------------- ------------ INVESTING ACTIVITIES: Net payments for purchase of property and equipment ............................... (1,983,980) (2,535,966) (622,932) Issuance of long-term note receivable .................. (629,864) -- -- ------------ ------------- ------------ Net cash used in investing activities ................... (2,613,844) (2,535,966) (622,932) ------------ ------------- ------------ FINANCING ACTIVITIES: Dividend payment ....................................... -- (1,436,775) (1,993,940) Net (payment of) proceeds from bank loan ............... (4,335,000) 4,335,000 (459,536) Purchase of treasury stock ............................. -- (200,000) -- Net proceeds from issuance of common stock ............. 96,379 100 64,487 Proceeds from payment of subscriptions receivable....... 45,668 -- -- ------------ ------------- ------------ Net cash (used in) provided by financing activities ..... (4,192,953) 2,698,325 (2,388,989) ------------ ------------- ------------ Net change in cash ...................................... 18,539,945 (980,731) 939,465 Cash and cash equivalents at beginning of year .......... 374,989 1,355,720 416,255 ------------ ------------- ------------ Cash and cash equivalents at end of year ................ $ 18,914,934 $ 374,989 $ 1,355,720 ============ ============= ============ Supplemental cash flow information Cash paid during the year for Interest ............................................. $ 370,327 $ 105,980 $ 15,727 Income taxes, net of refund .......................... $ 5,342,816 $ 11,863,931 $ 5,018,235 Non-cash Dividends declared, not paid ......................... $ -- $ -- $ 908,398
The accompanying notes are an integral part of these consolidated financial statements. F-5 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NUMBER OF SHARES ---------------------------------------- SERIES A SERIES B SERIES A PREFERRED PREFERRED COMMON PREFERRED STOCK STOCK STOCK STOCK ----------- --------------- ------------ -------------- Balance at January 1, 1999 ...... 2,860,000 3,700,000 -- $ 4,468,058 Net income ............ Utilization of prior years' net operating losses and realization of deferred tax assets ............... Exercise of stock options .............. 1,612,185 Dividends declared..... Balance at December 31, 1999 ................. 2,860,000 3,700,000 1,612,185 $ 4,468,058 Net income ............ Exercise of stock options .............. 2,500 Additional shares issued ............... 730,670 Noncash stock compensation expense .............. Conversion to common ............... (3,700,000) 3,700,000 Purchase of treasury stock ....... (200,000) Dividends declared..... Balance at December 31, 2000 ................. 2,860,000 -- 5,845,355 $ 4,468,058 Net income ............ Exercise of stock options .............. 196,379 Noncash stock compensation expense .............. Payment of subscriptions receivable ........... Balance at December 31, 2001 ................. 2,860,000 -- 6,041,734 $ 4,468,058 ========= ========== ========= =========== SERIES B STOCK PREFERRED COMMON SUBSCRIPTIONS RETAINED TOTAL STOCK STOCK RECEIVABLE EARNINGS EQUITY -------------- -------------- --------------- ---------------- ---------------- Balance at January 1, 1999 ...... $ 1,480,000 $ -- $ -- $ (459,617) $ 5,488,441 Net income ............ 13,877,953 13,877,953 Utilization of prior years' net operating losses and realization of deferred tax assets ............... 1,226,425 1,226,425 Exercise of stock options .............. 64,487 64,487 Dividends declared..... (2,674,171) (2,674,171) ------------ ------------ Balance at December 31, 1999 ................. $ 1,480,000 $ 1,290,912 $ -- $ 10,744,165 $ 17,983,135 Net income ............ 17,032,614 17,032,614 Exercise of stock options .............. 100 100 Additional shares issued ............... 182,668 (182,668) -- Noncash stock compensation expense .............. 157,342 157,342 Conversion to common ............... (1,480,000) 1,480,000 -- Purchase of treasury stock ....... (200,000) (200,000) Dividends declared..... (528,377) (528,377) ------------ ------------ Balance at December 31, 2000 ................. $ -- $ 2,911,022 $ (182,668) $ 27,248,402 $ 34,444,814 Net income ............ 22,779,002 22,779,002 Exercise of stock options .............. 196,379 (100,000) 96,379 Noncash stock compensation expense .............. 198,501 198,501 Payment of subscriptions receivable ........... 45,668 45,668 ----------- ------------ Balance at December 31, 2001 ................. $ -- $ 3,305,902 $ (237,000) $ 50,027,404 $ 57,564,364 ============ =========== =========== ============ ============
All shares and amounts, except for Series A preferred stock, have been restated to retroactively reflect the five for one stock split in October 2000. The accompanying notes are an integral part of these consolidated financial statements. F-6 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 1. BUSINESS AND BASIS OF PRESENTATION: Tilia International, Inc., a Cook Islands Corporation, develops and markets patented vacuum packaging systems for home use, primarily for food storage. The accompanying consolidated financial statements include the accounts of Tilia International, Inc. and its wholly owned subsidiaries, Tilia Cyprus, Tilia Hungary, Tilia Canada, Inc. and Tilia, Inc. (collectively, the "Company"). All intercompany transactions have been eliminated in consolidation. A Tilia vacuum packaging system employs a patented vacuum-sealing appliance combined with a patented, technologically advanced plastic bag or with an array of accessories such as canisters, lids and bottle stoppers. The appliance removes air from the bag or other container before creating an airtight seal, resulting in protection unlike other household food storage bags and containers on the market. The Company's patented bags are also sold as separate, replaceable supplies, resulting in a recurring stream of revenue. The systems are sold under the FoodSaver trademark. Tilia, Inc., the U.S. subsidiary, manages operations and sales worldwide. Product manufacturing is concentrated in the Far East using third party manufacturers. Sales are concentrated in the United States, representing 96% of 2001 revenue. Tilia's products are sold through independent sales representatives to national and regional retail chains. The Company also sells directly to the consumer through television infomercials, the Internet and other direct to consumer promotions. In addition to generating direct sales, the infomercial serves as an advertising tool creating awareness and demand at retail for the product line. Sales fall into two distinct categories. These are the retail business and the direct-to-consumer business. In 2001, retail revenue was $138.1 million, up from $86.9 million in 2000 and $39.8 million in 1999. Bag revenue (excluding bags in kits) was 25%, 24% and 27% of retail revenue in 2001, 2000 and 1999, respectively. Retail sales accounted for 75%, 66% and 50% of the Company's revenues in 2001, 2000 and 1999, respectively. In the direct-to-consumer category, the Company sells a significant volume through television infomercials. In 2001, infomercial revenue was $40.9 million, compared to $43.3 million and $38.3 million in 2000 and 1999, respectively, accounting for 22%, 33% and 48% of the Company's revenues in 2001, 2000 and 1999, respectively. Bag revenue was 10%, 12% and 12% of infomercial revenue in 2001, 2000 and 1999, respectively. For the infomercial business, the Company receives the revenue for the full consumer price (including shipping and handling charges), ships directly to the end-user and pays variable fees for third party services and airtime. In addition, the Company recognized $4.8 million in other direct-to-consumer (phone and internet orders) revenue or 3% of total 2001 revenue. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES The Company is subject to risks associated with dependence on a single type of product, dependence on key individuals, dependence on a select few third party manufacturers, competition from other companies and products, the reliance on a few key customers, the high number of bankruptcies in the retail market, the requirement for continued successful development and marketing of its products and the availability of supplies. Currently, each appliance has either one or two manufacturing sources and all are manufactured in the Far East. The Company has two bag suppliers, one in Korea and one in the United States. Third parties in the Far East and the United States manufacture accessories such as canisters, universal lids and bottle stoppers. The Company has various patents due to expire in the years 2005 to 2018, making the Company subject to risks associated with competition from other companies and products. F-7 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 CASH AND CASH EQUIVALENTS The Company invests excess cash in investments with original maturities of less than three months. The investments consist of time deposits and money market funds and are stated at cost, which approximates market value. The Company considers such investments to be cash equivalents for purposes of the financial statements. ACCOUNTS RECEIVABLE Accounts receivable are recorded net of reserves for doubtful accounts and returns and discounts of $2.9 million and $2.7 million as of December 31, 2001 and 2000, respectively. Amounts due from four customers accounted for 66% of the Company's receivables as of December 31, 2001. INVENTORIES Inventories are stated at the lower of average cost (which approximates first-in first-out cost) or market. Inventories consist of the following:
In thousands 2001 2000 - ------------ ------- ------- Appliance and system kits .......... $11,144 $12,380 Supplies and accessories ........... 11,344 11,026 ------- ------- Subtotal ........................... 22,488 23,406 Inventory reserve .................. (399) (673) ------- ------- Net inventory ...................... $22,089 $22,733 ======= =======
PREPAID INVENTORY The Company has agreements with certain suppliers to pay deposits in advance of shipment for purchase orders. These deposits range from 20 to 100 percent of purchases that are expected to be received within a timeframe that ranges from a week to a month. As of December 31, 2001, the Company has prepaid for $2.4 million of inventory. PREPAID MEDIA AND OTHER EXPENSES Direct advertising costs (primarily media expenses) related to infomercial sales are recorded as prepaid assets when paid in advance. The expense is recognized at the time that the corresponding infomercial revenues are booked, which is normally within a week after the costs are incurred. The amount of prepaid media was $0.6 million and $0.8 million as of December 31, 2001 and 2000, respectively. Total media expenses incurred amounted to $20.9 million, $18.2 million and $11.9 million for the years ended December 31, 2001, 2000 and 1999, respectively. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets ranging from two to five years. Molds and tooling owned by the Company and used by third party manufacturers are amortized on a straight-line basis over a three-year period. Leasehold improvements are amortized over the lesser of five years or the life of the lease. Computer equipment is depreciated over two years. F-8 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 Property and equipment consists of the following:
In thousands 2001 2000 - ------------ ---- ---- Computer equipment ...................... $ 1,711 $ 1,415 Equipment and furniture ................. 1,724 897 Leasehold improvements .................. 211 129 Molds and tooling ....................... 3,022 2,351 -------- -------- Total ................................... 6,668 4,792 Less: accumulated depreciation .......... (3,401) (2,185) -------- -------- Net property and equipment .............. $ 3,267 $ 2,607 ======== ========
INTELLECTUAL PROPERTY Intellectual property was recorded when the Company was reorganized in 1994 and relates to the business of developing, manufacturing, producing, distributing and selling vacuum products and consists of patents, plans, prototypes, and trademarks. Amortization is computed using the straight-line method over the estimated useful life of the asset (ten years). Intellectual property consists of the following:
In thousands 2001 2000 - ------------ ---- ---- Intellectual property ............. $ 2,000 $ 2,000 Accumulated amortization .......... (1,400) (1,200) -------- -------- Net ............................... $ 600 $ 800 ======== ========
The realization of these assets is dependent upon continued successful operations of the Company. The Company periodically reviews the realizability of its intangible assets. ACCOUNTING FOR STOCK-BASED COMPENSATION The Company has elected to follow Accounting Principles Board (APB) No. 25, "Accounting for Stock Issued to Employees", and related interpretations to account for employee stock options and restricted stock. Under APB 25, when the market price of the underlying stock on the date of grant is greater than the exercise price of employee stock options, stock compensation expense is recorded as the difference between the market price of the underlying stock and the exercise price. The Company has adopted the disclosure only provision of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation". CUSTOMER WARRANTIES The Company has warranties associated with its appliances. The standard warranty period is one year. The Company has recorded a reserve for these warranties. ACCRUED RETAIL ALLOWANCES The Company has agreements with customers to reimburse them for advertising costs. The Company also provides volume incentive rebates to certain customers. Included in accrued liabilities are reserves for expected advertising costs and volume incentive rebates totaling $1.4 million and $0.9 million as of December 31, 2001 and 2000, respectively. F-9 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 REVENUE RECOGNITION Revenues from sales are recognized upon shipment. Revenues for sales made on consignment are recognized when the products are sold by the third party distributor to an end-user. Approximately $176.8 million, $126.6 million, and $77.3 million, or 96% for each year of the Company's revenues were recognized from sales in the United States for the years 2001, 2000 and 1999, respectively. Direct infomercial sales amounted to 22%, 33% and 48% of total sales in 2001, 2000 and 1999, respectively. Sales to the three largest retail customers accounted for 39%, 36% and 26% of consolidated revenues in 2001, 2000 and 1999, respectively. Reserves are established for anticipated returns and discounts based on past experience. SHIPPING AND HANDLING FEES AND COSTS Amounts billed to a customer for shipping and handling are classified as revenue. Costs incurred by the Company for shipping and handling are classified in cost of goods sold. VOLUME INCENTIVE REBATE COSTS Costs related to volume incentive rebates are recorded as a reduction of revenue at the time the sale is recorded. FREE PRODUCT COSTS Costs associated with free products (gifts with purchase) shipped to certain customers are included in sales and marketing expenses. The Company does not record revenue related to these items. INCOME TAXES The Company follows SFAS No. 109 "Accounting for Income Taxes". SFAS No. 109 requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided against deferred tax assets that are not likely to be realizable. OTHER (EXPENSE) INCOME Other (expense) income consists of the following:
In thousands 2001 2000 1999 - ------------ ---- ---- ---- (Payments for) proceeds from legal settlement .......... ($ 266) $ 140 $ 300 Foreign exchange loss .................................. (129) (50) 11 Interest income ........................................ 26 193 60 Interest expense ....................................... (370) (106) (17) Rental income .......................................... -- 7 68 Miscellaneous .......................................... 39 43 7 ----- ------ ----- Net (expense) income ................................... ($ 700) $ 227 $ 429 ===== ====== =====
USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the F-10 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 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 during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS Certain 2000 and 1999 balances have been reclassified to conform to the 2001 financial statement presentation. 3. INCOME TAXES: The Company files tax returns in Hong Kong, Canada, Cyprus and Hungary based on the earnings of Tilia International, Tilia Canada, Inc., Tilia Cyprus, and Tilia Hungary, respectively, and in the United States for federal and state purposes. Taxable income in Hungary is the result of an intercompany royalty of $11.0 million, $7.9 million and $4.8 million paid to Tilia Hungary during the years 2001, 2000 and 1999, respectively, for licensing of marketing and manufacturing intangibles. This revenue is offset by the amortization of intangible assets held by Tilia Hungary, which for tax purposes have a basis of $34.5 million and are being amortized over eight years. Additionally, there is no tax liability in either Hong Kong or Cyprus due to tax losses in these jurisdictions. The provision for income taxes consists of the following:
In thousands 2001 2000 1999 - ------------ ---- ---- ---- Federal: Current ........................... $7,098 $ 7,445 $4,697 Deferred .......................... (872) (1,626) (900) ------ -------- ------ Subtotal .......................... 6,226 5,819 3,797 ------ -------- ------ State: Current ........................... 2,005 2,135 1,575 Deferred .......................... (228) (568) (373) ------ -------- ------ Subtotal .......................... 1,777 1,567 1,202 ------ -------- ------ International ...................... 510 -- -- ------ -------- ------ Provision for income taxes ......... $8,513 $ 7,386 $4,999 ====== ======== ======
The federal statutory rate is reconciled to the effective rate as follows:
2001 2000 1999 ---------- ---------- ---------- Income tax provision at federal statutory rate .......... 35.0% 35.0% 35.0% State income taxes, net of federal income tax benefit ................................................ 3.7 4.1 4.2 Utilization of net operating losses generated subsequent to reorganization ........................... -- -- (3.5) Foreign taxes at rates other than U.S. .................. (10.8) (10.4) (7.3) Reversal of valuation allowance on deferred tax assets created subsequent to reorganization ............ -- -- (1.4) Other ................................................... (0.7) 1.6 (0.5) ----- ----- ---- Provision for income taxes .............................. 27.2% 30.3% 26.5% ===== ===== ====
F-11 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 The components of the net deferred tax asset of the Company as of December 31, 2001 and 2000 were as follows:
In thousands 2001 2000 - ------------ ---- ---- Depreciation and amortization .......... $ 122 $ 7 Inventory reserve ...................... 163 275 Bad debt reserve ....................... 242 562 Warranty reserve ....................... 98 103 Sales returns reserve .................. 921 547 Accrued retail allowance ............... 557 364 Unicap ................................. 902 1,373 Accrued vacation ....................... 85 54 Other accrued liabilities .............. 1,845 1,108 Other .................................. 819 261 ------ ------ Deferred tax asset ..................... $5,754 $4,654 ====== ======
4. RELATED PARTY TRANSACTIONS: As of December 31, 2001 and 2000, subscriptions receivable of $237,000 and $182,668, respectively (included in Shareholders' Equity) are due from officers of the Company (See Note 10). 5. LONG-TERM NOTE RECEIVABLE: In May 2001, the Company entered into a loan agreement with one of its bag suppliers. The Company loaned amounts totaling $0.63 million, the proceeds of which were used by the supplier to purchase certain machines and equipment to improve the processing of the products. In accordance with the agreement, the supplier is to repay the loan in increments, based on the volume of orders received from the Company, and therefore, not specifying an exact date. The loan is secured by the equipment. As of December 31, 2001, the Company is carrying the Note Receivable as a long-term asset on its balance sheet for a net amount of $0.55 million. This amount represents the original loan amount of $0.63 million net of amortization of $0.08 million. The Company is reserving the loan receivable on a straight-line basis over a five-year period (the useful life of the equipment purchased) due to the uncertainty of the timeframe of the repayment of the loan. The amortization cost is classified as Cost of Goods Sold in the consolidated statement of operations. 6. COMMITMENTS AND CONTINGENCIES: LEASES The Company has operating lease commitments for facilities and certain equipment. At December 31, 2001, future minimum annual rental payments under operating leases are as follows: F-12 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
In thousands - ------------ 2002 ................................................................ $1,789 2003 ................................................................ 1,748 2004 ................................................................ 1,682 2005 ................................................................ 1,620 2006 ................................................................ 1,487 2007 ................................................................ 114 ------ Totals .............................................................. $8,440 ======
During 2001, 2000 and 1999, rent expense was $2.4 million, $0.88 million, and $0.46 million respectively. The Company has committed to vacate certain buildings in February 2002 and has signed a lease agreement for new office space prior to the expiration of the lease. The 2001 rent expense includes $0.31 million of rent due on office buildings in 2002 after the space is vacated. EMPLOYMENT CONTRACTS The President and Chief Executive Officer of Tilia, Inc., who is also a Director and shareholder of the Company, is employed under a contract with Tilia, Inc. Severance payments for termination without cause are equal to nine months of compensation. Under continued employment, the President and CEO is also entitled to specific mandatory annual bonuses from 2001 through 2004 up to a total of $110,231. The Vice President of International Sales and Marketing and the Senior Vice President of Finance and Administration are also employed under contracts with Tilia, Inc. Severance payments for termination without cause for each are equal to six months of compensation. Under continued employment, the Senior Vice President of Finance and Administration is entitled to specific mandatory annual bonuses from 2001 through 2004 up to a total of $101,815. PURCHASE COMMITMENTS As of December 31, 2001, the Company has committed to purchase $15 million of inventory from various vendors in the year 2002. LETTERS OF CREDIT As of December 31, 2001, the Company had $1.57 million of outstanding letters of credit issued. Of this amount, $0.57 million represents outstanding standby letters of credit issued to three vendors to guarantee payment of its obligations. The Company also had an outstanding commercial letter of credit issued to two suppliers totaling $1.0 million for inventory purchases. These amounts outstanding reduced the credit line availability as of December 31, 2001. LEGAL ACTIONS From time to time and in the normal course of business, the Company is involved in legal actions relating to its operations. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on the financial position, results of operations or cash flows of the Company. 7. CAPITAL STOCK: STOCK SPLIT In October 2000, the Company approved a five-for-one split of the outstanding common stock. All shares, except for Series A preferred stock, have been retroactively restated in the financial statements to reflect the stock split. F-13 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 COMMON STOCK In 1999, the Company had authorized 20 million shares of Common Stock, of which 18 million shares were reserved for conversion of Series A and B Preferred Stock. As discussed below, all Series B Preferred Stock converted to 3.7 million shares of Common Stock in 2000. The remaining 2 million shares of Common Stock were held for issuance in accordance with the employee and management stock option and incentive programs (See Note 10). Of these available shares, 1.6 million option shares had been exercised and converted to Common Stock as of December 31, 2001 and 2000. In 2000 the Company increased the authorized shares of common stock to 30 million shares, of which 2.5 million shares of Common Stock were held for additional issuance of stock options pursuant to the terms of the 2000 Stock Incentive Plan (See Note 10). SERIES A PREFERRED STOCK The Company has 2.86 million shares of Series A Preferred Stock authorized and outstanding. All shares of Series A Preferred Stock are convertible into Common Stock on a one to one basis, adjusted for any stock splits including the stock split in October 2000 mentioned above, and shall be entitled to vote on a fully converted basis. Series A Preferred Stock has a liquidation preference on all of the Company's assets other than the intellectual property. SERIES B PREFERRED STOCK At the end of 1999, the Company had 3.7 million shares of Series B Preferred Stock authorized and outstanding. On a quarterly basis, holders of Series B Preferred Stock were entitled to receive cumulative dividends, calculated as 3.5% of the Company's consolidated quarterly net revenue. The aggregate of all dividends to be paid to Series B Preferred Stockholders was not to exceed $4.95 million (Dividend Limit), which was reached during the first quarter of 2000. All Series B Preferred Stock (recorded at $1.48 million) converted to common stock upon full payment of the Dividend Limit in 2000. Dividends paid during 2000, which were declared in 1999, amounted to $1.4 million. Cumulative dividends paid through the end of 2000 amounted to $4.95 million. No dividends were paid in 2001. 8. RETIREMENT PLAN: Tilia, Inc. has established a defined contribution retirement plan qualified under the Internal Revenue Code 401(k) for all full time employees. Under the 401(k) plan, Tilia, Inc. makes matching contributions equal to 50% of the contributions of the employee, not exceeding 3% of the employee's earnings. Contributions to the 401(k) plan by Tilia, Inc. were $191,239, $79,446 and $24,042 for 2001, 2000 and 1999, respectively. Additionally, Tilia, Inc. made a payment under the profit sharing provisions of the 401(k) plan, contributing a minimum of 3% of every qualifying employee's income. This contribution was $157,403, $84,785 and $0 in 2001, 2000 and 1999, respectively. 9. LINE OF CREDIT: In 2000, the Company had a loan agreement with United California Bank (formerly Sanwa Bank) that provided a revolving credit facility not to exceed $7.0 million. As of December 31, 2000, the outstanding loan amount was $4.3 million. In January 2001, the credit facility was increased from $7.0 million to $10.0 million. The minimum effective tangible net worth requirement was increased from $13.75 million to $26.8 million. All other terms and conditions of the original credit agreement remain unchanged. F-14 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 In March 2001, the credit facility was further increased to $12 million. The loan expired in June 2001 but was extended to November 2001. After the United California Bank loan agreement expired, the Company obtained an $18 million credit facility with Union Bank of California. The new loan expiration date is September 30, 2003. The loan is secured by virtually all of the Company's assets and includes covenants and restrictions under which the Company is required to comply with certain financial ratios and submit periodic financial statements and reports. These include maintaining a minimum effective tangible net worth of $36 million; a minimum quick ratio of 1.00:1.00; and an annual minimum net positive profit before tax at each quarter and fiscal year end. As of December 31, 2001, the Company was in compliance with all covenants. Interest on this line of credit is calculated at a variable rate per annum of 0.625% below Reference rate, or London InterBank Offering Rate (LIBOR) plus 1.7% per annum. A commitment fee of 0.125% per year is charged quarterly on the unused portion of the revolving loan. The fee will be waived if average usage for the quarter exceeds 34% of the line of credit. The loan agreement includes a Letter of Credit Sub-Facility wherein the bank agrees to issue commercial and/or standby letters of credit on behalf of the Company of up to $5 million. At no time, however, shall the total principal amount of the advances outstanding under the line of credit, together with the total face amount of all letters of credit outstanding, less any partial draws paid by the bank, exceed the line of credit. As of December 31, 2001, no loan amount was outstanding while the outstanding commercial and standby letters of credit totaled $1.57 million (see Note 6 above). 10. RESTRICTED STOCK AND STOCK OPTION PLANS: Effective March 2000, the Company issued 0.73 million shares of common stock to two officers. The shares vest ratably over a four-year period. This agreement granted the Company the right, exercisable at any time during the ninety day period following the date that the shareholder fails to be employed by the Company, for any reason or no reason at all, to repurchase all or any portion of the shares that are not vested at their fair market value but not less than $0.25 per share (the purchase price of the shares). In connection with the issuance of these restricted shares, the Company issued four-year full recourse promissory notes to the officers for a total of $0.18 million (the purchase price of the restricted shares). The notes bear interest at 6.21%. Each holder is required to make principal and interest payments annually on the anniversary date of the stock issuance. In January 2001, an officer exercised 0.1 million of stock options in exchange for a secured promissory note for $0.1 million. The note bears interest at 5.9%. The Company had originally reserved 2 million shares of Common Stock for issuance to employees under an employee stock option plan. In August 1996, the Company implemented the 1996 Executive Stock Option Plan and the 1996 Employee Stock Option Plan and awarded 1.87 million Common Stock options under these plans. In October 2000, the Company reserved an additional 2.5 million shares of common stock for issuance to employees under a second employee stock option plan, and implemented the 2000 Stock Option plan, under which an additional 1.5 million common stock options were awarded. The Company does not intend to grant any additional options under the 1996 plans. Under the terms of the Option Plans, options granted may be either nonqualified or incentive stock options and the exercise price is determined by the Board of Directors of the Company. Options may be exercised in installments, however no options may be exercised within one year from the vesting commencement or later than ten years from the date of grant. The options fully vest in 48 months from the vesting commencement date. Vesting commencement on options granted in F-15 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 August 1996 was retroactive to the hire date of the employee while those granted in October 2000 was retroactive to August 1, 1999 for employees hired before that date and on actual hire dates for employees hired thereafter. The options granted under the October 2000 plan are subject to repurchase by the Company at the Company's option, exercisable at any time during the ninety day period following the date that the shareholder fails to be employed by the Company for any reason or no reason at all, at the fair market value. In October 2000, the Company repurchased 0.2 million common shares from an employee who had exercised his options in 1999 and left the Company in 2000, at a price of $1 per share or $0.2 million. Activity under the plan is summarized as follows:
WEIGHTED AVERAGE EXERCISE OPTIONS PRICE ------------- --------- IN THOUSANDS Outstanding at January 1, 2000 ........... 29 $ 0.04 Exercised ................................ (3) 0.04 Expired .................................. (10) 0.04 Granted .................................. 1,252 1.00 ------ ------- Outstanding December 31, 2000 ............ 1,268 $ 0.99 Exercised ................................ (196) 1.00 Expired .................................. (81) 1.09 Granted .................................. 235 1.64 ------ ------- Outstanding at December 31, 2001 ......... 1,226 $ 1.10 Exercisable at December 31, 2001 ......... 576 $ 1.10 ====== =======
The following summarizes information about stock options outstanding at December 31, 2001:
OPTIONS WEIGHTED AVERAGE EXERCISE OUTSTANDING AT REMAINING PRICE DECEMBER 31, 2001 CONTRACTUAL LIFE ----- ----------------- ---------------- IN THOUSANDS $.04 13 4.8 1.00 996 8.2 1.56 110 8.9 1.70 68 8.9 1.79 39 9.0 ----- ----- --- $1.10 1,226 8.0 ===== ===== ===
The Company accounts for these plans in accordance with APB Opinion No. 25 under which compensation cost is recorded as the difference between the fair value and the exercise price of the shares at the date of grant and is recorded on a straight-line basis over the vesting period of four years for both the options and the restricted stock. The Board of Directors estimated the fair value of the shares at the date of grant and compensation expense of $198,501, $157,342 and $0 was recognized during 2001, 2000 and 1999, respectively, related to the issuance of stock options and restricted stock issued below this price. F-16 TILIA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 Had compensation cost for the stock options and restricted stock granted been based on the estimated fair value at the award dates, as prescribed by SFAS No. 123, the Company's proforma net income would have been as follows:
In thousands 2001 2000 1999 - ------------ ---- ---- ---- As reported .......... $22,779 $17,033 $13,878 Pro-forma ............ 22,702 16,951 13,878 ======= ======= =======
The fair value determination under SFAS 123 was calculated using the Black-Scholes option pricing model to value all restricted stock and stock options granted in 2000 and 2001, using the following range of assumptions, and assuming no dividends:
RISK FREE EXPECTED EXPECTED INTEREST RATE VOLATILITY LIFE OF OPTIONS ------------- ---------- --------------- 5.75% -- 6.55% 0% 5 years ============= = =======
F-17 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma financial information as of and for the year ended December 31, 2001 has been derived from our audited consolidated financial statements as of such date and for such period and gives pro forma effect to (1) as if they had been consummated as of January 1, 2001, (a) the November 2001 sale of the assets of Alltrista's Triangle, TriEnda and Synergy World divisions (the "TPD Assets"), including the receipt in January 2002 of a $15.7 million federal income tax refund relating to the sale of the TPD Assets, and the receipt in March 2002 of a $22.2 million federal income tax refund and the anticipated receipt of an additional $0.6 million federal income tax refund resulting from the enactment, in March 2002, of the Job Creation and Workers' Assistance Act of 2002, and the use of such funds to reduce debt (collectively, the "Tax Refunds"), (b) the November 2001 sale of our majority interest in Microlin, LLC (c) the offering of the Notes, (d) the Credit Facility ,and (e) the use of the proceeds from the offering of the Notes, together with initial borrowings under the Credit Facility and cash on hand, to acquire the business of Tilia, to repay the outstanding indebtedness under our previous credit facility and to pay related fees and expenses; and (2) the Tax Refunds and the Transactions as if they had been consummated as of December 31, 2001, in the case of balance sheet data. The unaudited pro forma financial information is not necessarily indicative of Alltrista's results of operations or financial position had the events reflected herein actually been consummated at the assumed dates, nor is it necessarily indicative of Alltrista's results of operations or financial position for any future period. The unaudited pro forma condensed consolidated statements of operations should be read in conjunction with our consolidated financial statements and the related notes thereto filed with our Form 10-K for the year ended December 31, 2001, and the consolidated financial statements of Tilia included herein. The pro forma adjustments related to the purchase price allocation and financing of the acquisition of Tilia are preliminary and based on information obtained to date and are subject to revision as additional information becomes available. Revisions to the preliminary purchase price allocation and financing of the acquisition may have a significant impact on the unaudited pro forma information. F-18 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2001
DISPOSITIONS- RELATED ALLTRISTA PRO FORMA AS REPORTED ADJUSTMENTS ------------- --------------------- (DOLLARS IN THOUSANDS) ASSETS Current assets Cash and cash equivalents ................. $ 6,376 Accounts receivable, net .................. 13,986 Income taxes receivable ................... 16,252 $ (15,700) (a) Inventories, net .......................... 26,994 Deferred taxes on income .................. 4,832 (4,832)(a) Other current assets ...................... 3,134 --------- ----------- Total current assets ..................... 71,574 (20,532) --------- ----------- Property, plant and equipment, net ......... 43,543 Goodwill, net .............................. 15,487 Deferred taxes on income ................... 25,417 (17,968)(a) Other assets ............................... 5,282 --------- ----------- Total assets ............................... $ 161,303 $ (38,500) ========= =========== LIABILITIES AND EQUITY Current liabilities Short-term and current portion of long-term debt ........................... $ 28,500 $ (23,500)(a) Accounts payable .......................... 14,197 Other current liabilities ................. 20,842 --------- ----------- Total current liabilities ................ 63,539 (23,500) --------- ----------- Noncurrent liabilities Long-term debt ............................ 56,375 (15,000)(a) Other noncurrent liabilities .............. 6,260 --------- ----------- Total noncurrent liabilities ............. 62,635 (15,000) Equity ..................................... 35,129 --------- ----------- Total liabilities and equity ............... $ 161,303 $ (38,500) ========= =========== ACQUISITION- RELATED ALLTRISTA TILIA PRO FORMA PRO FORMA PRO FORMA AS REPORTED ADJUSTMENTS COMBINED ----------- ------------- ------------------- ------------ (DOLLARS IN THOUSANDS) ASSETS Current assets Cash and cash equivalents ................. $ 6,376 $ 18,915 $ (4,221)(b) $ 21,070 Accounts receivable, net .................. 13,986 22,982 36,968 Income taxes receivable ................... 552 -- 552 Inventories, net .......................... 26,994 24,453 51,447 Deferred taxes on income .................. -- 5,632 5,632 Other current assets ...................... 3,134 1,888 5,022 --------- ---------- ---------- --------- Total current assets ..................... 51,042 73,870 (4,221) 120,691 --------- ---------- ---------- --------- Property, plant and equipment, net ......... 43,543 3,267 46,810 Goodwill, net .............................. 15,487 -- 100,935(c) 116,422 Deferred taxes on income ................... 7,449 122 7,571 Other assets ............................... 5,282 1,146 12,000(d) 18,214 (214)(e) --------- ---------- ---------- --------- Total assets ............................... $ 122,803 $ 78,405 $ 108,500 $ 309,708 ========= ========== ========== ========= LIABILITIES AND EQUITY Current liabilities Short-term and current portion of long-term debt ........................... $ 5,000 $ -- $ (5,000)(f) $ -- Accounts payable .......................... 14,197 3,535 17,732 Other current liabilities ................. 20,842 17,305 38,147 --------- ---------- ---------- --------- Total current liabilities ................ 40,039 20,840 (5,000) 55,879 --------- ---------- ---------- --------- Noncurrent liabilities Long-term debt ............................ 41,375 -- (41,375)(f) 212,654 50,000(g) 15,000(h) 147,654(i) Other noncurrent liabilities .............. 6,260 -- 6,260 --------- ---------- ---------- --------- Total noncurrent liabilities ............. 47,635 -- 171,279 218,914 Equity ..................................... 35,129 57,565 (57,565)(j) 34,915 (214)(e) --------- ---------- ---------- --------- Total liabilities and equity ............... $ 122,803 $ 78,405 $ 108,500 $ 309,708 ========= ========== =========== =========
F-19 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER OPERATING DATA YEAR ENDED DECEMBER 31, 2001
DISPOSITIONS- RELATED ALLTRISTA PRO FORMA AS REPORTED ADJUSTMENTS ------------- --------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales ........................................ $ 304,978 $ (62,588)(k) (711)(l) Costs and expenses Cost of sales ................................... 233,676 (60,901)(k) Selling, general and administrative expenses..... 52,212 (9,061)(k) (1,670)(l) Goodwill amortization ........................... 5,153 (4,044)(k) Special charges (credits) and reorganization expenses ....................................... 4,978 345(k) Loss on divestitures of assets .................. 122,887 (122,426)(m) ---------- ------------- Income (loss) before interest, taxes and minority interest ............................... (113,928) 134,458 Interest expense, net ............................ 11,791 (3,602)(n) ---------- ------------- Income (loss) before taxes and minority interest ........................................ (125,719) 138,060 Income tax provision (benefit) ................... (40,443) 44,352(o) Minority interest in loss of consolidated subsidiary ...................................... 153 (153)(p) ---------- ------------- Net income (loss) ................................ $ (85,429) $ 93,861 ========== ============= Basic earnings (loss) per share .................. $ (13.43) Diluted earnings (loss) per share ................ (13.43) Weighted average shares outstanding: Basic ........................................... 6,363 Diluted ......................................... 6,363 Other Data: EBITDA(u) ....................................... $ 32,734 $ 3,564 Depreciation and amortization ................... 18,797 8,813 Capital expenditures ............................ 9,707 3,000 ACQUISITION- RELATED ALLTRISTA TILIA PRO FORMA PRO FORMA PRO FORMA AS REPORTED ADJUSTMENTS COMBINED -------------- ------------- ------------------- -------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales ........................................ $ 241,679 $ 183,825 $ 425,504 Costs and expenses Cost of sales ................................... 172,775 89,668 262,443 Selling, general and administrative expenses..... 41,481 61,718 $ 1,000(q) 104,199 Goodwill amortization ........................... 1,109 -- 1,109 Special charges (credits) and reorganization expenses ....................................... 5,323 803 6,126 Loss on divestitures of assets .................. 461 -- 461 ---------- --------- ------------ ---------- Income (loss) before interest, taxes and minority interest ............................... 20,530 31,636 (1,000) 51,166 Interest expense, net ............................ 8,189 344 (8,189)(r) 19,994 18,750(s) 900(t) ---------- --------- ------------ ---------- Income (loss) before taxes and minority interest ........................................ 12,341 31,292 (12,461) 31,172 Income tax provision (benefit) ................... 3,909 8,513 (1,512) (o) 10,910 Minority interest in loss of consolidated subsidiary ...................................... -- -- -- ---------- --------- ------------ ---------- Net income (loss) ................................ $ 8,432 $ 22,779 $ (10,949) $ 20,262 ========== ========= ============ ========== Basic earnings (loss) per share .................. $ 1.33 $ 3.18 Diluted earnings (loss) per share ................ 1.32 3.18 Weighted average shares outstanding: Basic ........................................... 6,363 6,363 Diluted ......................................... 6,377 6,377 Other Data: EBITDA(u) ....................................... $ 36,298 $ 34,051 $ -- $ 70,349 Depreciation and amortization ................... 9,984 1,612 1,000 12,596 Capital expenditures ............................ 6,707 1,984 -- 8,691
F-20 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2001 Balance sheet adjustments: (a) Adjustment to reflect the use of the Tax Refunds to repay existing debt, thereby reducing income taxes receivable and deferred tax assets. (b) Adjustment to reflect the use of cash on hand to fund a portion of the purchase price of Tilia. (c) Adjustment to reflect estimated goodwill to be recorded with the Acquisition calculated as the purchase price plus related expenses ($163.5 million) related to the Acquisition less the net equity of Tilia and amounts allocated to specifically identifiable intangible assets ($5.0 million). (d) Adjustment to reflect the following: (i) estimated fair value of Tilia's identifiable intangible assets (primarily patents) of $5.0 million to be amortized over an average five-year life; (ii) estimated expenses of this offering of $5.0 million to be amortized over the ten-year term of the Senior Subordinated Notes due 2012; and (iii) estimated expenses of the new senior credit facility of $2.0 million to be amortized over the five-year term. (e) Adjustment to reflect the write-off of remaining debt issue costs relating to Alltrista's existing senior credit facility. (f) Adjustment to reflect the repayment of Alltrista's existing credit facility in conjunction with the Transactions. (g) Adjustment to reflect the initial borrowing under the new senior credit facility in conjunction with the Transactions. (h) Adjustment to reflect the subordinated seller notes to be issued in conjunction with the Transactions: (i) $10.0 million non-interest bearing note due March 31, 2003, and (ii) $5.0 million note due in 2004. (i) Adjustment to reflect the issuance of the Senior Subordinated Notes due 2012 at 98.436% of par value. (j) Adjustment to reflect the elimination of the existing stockholders' equity of Tilia. Statement of operations adjustments: (k) Adjustment to reflect the elimination of the operating results of the TPD Assets. (l) Adjustment to reflect the elimination of the operating results of Microlin, LLC. (m) Adjustment to reflect the elimination of the loss on the Dispositions. (n) Adjustment to reflect the elimination of interest expense related to the debt repayment resulting from the Tax Refunds. (o) Adjustment to reflect an effective tax rate of 35.0%. (p) Adjustment to reflect the elimination of the minority interest's share in the loss of Microlin, LLC. (q) Adjustment to reflect the amortization of estimated identifiable intangible assets. See note (d)(i) above. (r) Adjustment to reflect the elimination of historical Alltrista interest expense in conjunction with the Transactions. (s) Adjustment to reflect pro forma interest expense relating to: (i) the new senior credit facility based upon Alltrista's 2001 effective borrowing rate; (ii) the interest bearing subordinated seller note described in note (g)(ii) above based upon Alltrista's 2001 effective borrowing rate; and (iii) the 9 3/4% Senior Subordinated Notes due 2012. (t) Adjustment to reflect amortization of debt issue costs for both the new senior credit facility and the Senior Subordinated Notes due 2012. See note (d) above. (u) "EBITDA" is calculated as income (loss) before interest, taxes and minority interest plus (i) depreciation and amortization, (ii) special charges (credits) and reorganization expenses and (iii) loss (gain) on divestiture of assets and product lines. EBITDA is not intended to represent cash flow from operations as defined by accounting principles generally accepted in the United States and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. EBITDA is included in this offering memorandum because it is a basis upon which our management assesses financial performance. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. F-21 EX-4.1 3 file002.txt INDENTURE EXECUTION COPY ================================================================================ ALLTRISTA CORPORATION AND EACH OF THE GUARANTORS NAMED HEREIN 9 3/4% SENIOR SUBORDINATED NOTES DUE 2012 ----------------------------- INDENTURE DATED AS OF APRIL 24, 2002 ---------------------------- and The Bank of New York as Trustee ---------------------------- ================================================================================ CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310(a)(1).................................................... 7.10 (a)(2).................................................. 7.10 (a)(3).................................................. N.A. (a)(4).................................................. N.A. (a)(5).................................................. 7.10 (b)..................................................... 7.10 (c)..................................................... N.A. 311(a)....................................................... 7.11 (b)..................................................... 7.11 (c)..................................................... N.A. 312(a)....................................................... 2.05 (b)..................................................... 14.03 (c)..................................................... 14.03 313(a)....................................................... 7.06 (b)(1).................................................. N.A. (b)(2).................................................. 7.06; 7.07 (c)..................................................... 7.06; 14.02 (d)..................................................... 7.06 314(a)....................................................... 4.03; 14.02; 14.05 (b)..................................................... N.A. (c)(1).................................................. 14.04 (c)(2).................................................. 14.04 (c)(3).................................................. N.A. (d)..................................................... N.A. (e)..................................................... 14.05 (f)..................................................... N.A. 315(a)....................................................... 7.01 (b)..................................................... 7.05, 14.02 (c)..................................................... 7.01 (d)..................................................... 7.01 (e)..................................................... 6.11 316(a) (last sentence)....................................... 2.09 (a)(1)(A)............................................... 6.05 (a)(1)(B)............................................... 6.04 (a)(2).................................................. N.A. (b)..................................................... 6.07 (c)..................................................... 2.12 317(a)(1).................................................... 6.08 (a)(2).................................................. 6.09 (b)..................................................... 2.04 318(a)....................................................... 14.01 (b)..................................................... N.A. (c)..................................................... 14.01 N.A. means not applicable. * This Cross Reference Table is not part of the Indenture. TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions.................................................1 Section 1.02 Other Definitions..........................................18 Section 1.03 Incorporation by Reference of Trust Indenture Act..........19 Section 1.04 Rules of Construction......................................19 ARTICLE 2. THE NOTES Section 2.01 Form and Dating............................................20 Section 2.02 Execution and Authentication...............................20 Section 2.03 Registrar and Paying Agent.................................21 Section 2.04 Paying Agent to Hold Money in Trust........................21 Section 2.05 Holder Lists...............................................21 Section 2.06 Transfer and Exchange......................................21 Section 2.07 Replacement Notes..........................................33 Section 2.08 Outstanding Notes..........................................33 Section 2.09 Treasury Notes.............................................34 Section 2.10 Temporary Notes............................................34 Section 2.11 Cancellation...............................................34 Section 2.12 Defaulted Interest.........................................34 ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee.........................................34 Section 3.02 Selection of Notes to Be Redeemed or Purchased.............35 Section 3.03 Notice of Redemption.......................................35 Section 3.04 Effect of Notice of Redemption.............................36 Section 3.05 Deposit of Redemption or Purchase Price....................36 Section 3.06 Notes Redeemed or Purchased in Part........................37 Section 3.07 Optional Redemption........................................37 Section 3.08 Special Mandatory Redemption...............................37 Section 3.09 Mandatory Redemption.......................................38 Section 3.10 Offer to Purchase by Application of Excess Proceeds........38 ARTICLE 4. COVENANTS Section 4.01 Payment of Notes...........................................40 Section 4.02 Maintenance of Office or Agency............................40 Section 4.03 Reports....................................................41 Section 4.04 Compliance Certificate.....................................41 Section 4.05 Taxes......................................................42 Section 4.06 Stay, Extension and Usury Laws.............................42 Section 4.07 Restricted Payments........................................42 Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries...............................................45 Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock......................................................46 i Section 4.10 Asset Sales................................................48 Section 4.11 Transactions with Affiliates...............................49 Section 4.12 Liens......................................................50 Section 4.13 Line of Business...........................................50 Section 4.14 Corporate Existence........................................50 Section 4.15 Offer to Repurchase Upon Change of Control.................51 Section 4.16 No Senior Subordinated Debt................................52 Section 4.17 Payments for Consent.......................................53 Section 4.18 Additional Subsidiary Guarantees...........................53 Section 4.19 Designation of Restricted and Unrestricted Subsidiaries....53 Section 4.20 Amendment of Subordinated Seller Notes.....................53 ARTICLE 5. SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets...................54 Section 5.02 Successor Corporation Substituted..........................54 ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01 Events of Default..........................................55 Section 6.02 Acceleration...............................................56 Section 6.03 Other Remedies.............................................57 Section 6.04 Waiver of Past Defaults....................................57 Section 6.05 Control by Majority........................................58 Section 6.06 Limitation on Suits........................................58 Section 6.07 Rights of Holders of Notes to Receive Payment..............59 Section 6.08 Collection Suit by Trustee.................................59 Section 6.09 Trustee May File Proofs of Claim...........................59 Section 6.10 Priorities.................................................59 Section 6.11 Undertaking for Costs......................................60 ARTICLE 7. TRUSTEE Section 7.01 Duties of Trustee..........................................60 Section 7.02 Rights of Trustee..........................................61 Section 7.03 Individual Rights of Trustee...............................62 Section 7.04 Trustee's Disclaimer.......................................62 Section 7.05 Notice of Defaults.........................................62 Section 7.06 Reports by Trustee to Holders of the Notes.................62 Section 7.07 Compensation and Indemnity.................................63 Section 7.08 Replacement of Trustee.....................................63 Section 7.09 Successor Trustee by Merger, etc...........................64 Section 7.10 Eligibility; Disqualification..............................64 Section 7.11 Preferential Collection of Claims Against Company..........65 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance...65 Section 8.02 Legal Defeasance and Discharge.............................65 Section 8.03 Covenant Defeasance........................................66 Section 8.04 Conditions to Legal or Covenant Defeasance.................66 ii Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions..............67 Section 8.06 Repayment to Company.......................................67 Section 8.07 Reinstatement..............................................68 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes........................68 Section 9.02 With Consent of Holders of Notes...........................69 Section 9.03 Compliance with Trust Indenture Act........................70 Section 9.04 Revocation and Effect of Consents..........................70 Section 9.05 Notation on or Exchange of Notes...........................70 Section 9.06 Trustee to Sign Amendments, etc............................71 ARTICLE 10. SUBORDINATION Section 10.01 Agreement to Subordinate...................................71 Section 10.02 Certain Definitions........................................71 Section 10.03 Liquidation; Dissolution; Bankruptcy.......................72 Section 10.04 Default on Designated Senior Debt..........................72 Section 10.05 Occurrence of an Event of Default..........................73 Section 10.06 When Distribution Must Be Paid Over........................73 Section 10.07 Notice by Company..........................................74 Section 10.08 Subrogation................................................74 Section 10.09 Relative Rights............................................74 Section 10.10 Subordination May Not Be Impaired by Company...............74 Section 10.11 Distribution or Notice to or by Representative.............75 Section 10.12 Rights of Trustee and Paying Agent.........................75 Section 10.13 Authorization to Effect Subordination......................75 Section 10.14 Amendments.................................................75 Section 10.15 Trustee Not Fiduciary for Holders of Senior Debt...........75 ARTICLE 11. Subsidiary GUARANTEES Section 11.01 Guarantee..................................................76 Section 11.02 Subordination of Subsidiary Guarantee......................77 Section 11.03 Limitation on Guarantor Liability..........................77 Section 11.04 Execution and Delivery of Subsidiary Guarantee.............77 Section 11.05 Guarantors May Consolidate, etc., on Certain Terms.........78 Section 11.06 Releases Following Sale of Assets..........................78 ARTICLE 12. satisfaction and discharge Section 12.01 Satisfaction and Discharge.................................79 Section 12.02 Application of Trust Money.................................80 ARTICLE 13. SPECIAL TRUST ACCOUNT Section 13.01 Establishment of Special Trust Account.....................80 Section 13.02 Security Interest..........................................80 Section 13.03 Distributions from Special Trust Account...................82 iii Section 13.04 Termination of Security Interest...........................84 Section 13.05 Attorneys-in-Fact..........................................84 Section 13.06 Trustee May Perform........................................85 Section 13.07 Representations, Warranties and Agreements.................85 ARTICLE 14. MISCELLANEOUS Section 14.01 Trust Indenture Act Controls...............................85 Section 14.02 Notices....................................................85 Section 14.03 Communication by Holders of Notes with Other Holders of Notes...................................................86 Section 14.04 Certificate and Opinion as to Conditions Precedent.........86 Section 14.05 Statements Required in Certificate or Opinion..............87 Section 14.06 Rules by Trustee and Agents................................87 Section 14.07 No Personal Liability of Directors, Officers, Employees and Stockholders...........................................87 Section 14.08 Governing Law..............................................87 Section 14.09 No Adverse Interpretation of Other Agreements..............87 Section 14.10 Successors.................................................88 Section 14.11 Severability...............................................88 Section 14.12 Counterpart Originals......................................88 Section 14.13 Table of Contents, Headings, etc...........................88 EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL INVESTOR Exhibit E FORM OF SUBSIDIARY GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE iv INDENTURE dated as of April 24, 2002 among Alltrista Corporation, a Delaware corporation (the "Company"), the Guarantors (as defined) and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the 9 3/4% Senior Subordinated Notes due 2012 (the "Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions. "144A Global Note" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Acquisition" means the Company's acquisition of the business of Tilia pursuant to the Asset Purchase Agreement. "Additional Notes" means any Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial Notes. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Agent" means any Registrar, co-registrar, Paying Agent or additional paying agent. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Purchase Agreement" means that certain Asset Purchase Agreement among Tilia, Alexander Schilling and the Company dated as of March 27, 2002. 1 "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights, other than sales of inventory and accounts receivable in the ordinary course of business consistent with past practices; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole shall be governed by Section 4.15 and/or Section 5.04 hereof and not by the provisions of Section 4.10 hereof; and (2) the issuance of Equity Interests by any of the Company's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries. Notwithstanding the preceding, none of the following items shall be deemed to be an Asset Sale: (1) any single transaction or series of related transactions that involves assets having a fair market value of less than $1.0 million; (2) a transfer of assets between or among the Company and its Subsidiaries, (3) an issuance of Equity Interests by a Subsidiary to the Company or to another Subsidiary; (4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents or Government Securities; (6) transfers of accounts receivable and related assets by the Company or any of its Restricted Subsidiaries to a Receivables Subsidiary in connection with a Qualified Receivables Transaction; and (7) a Restricted Payment or Permitted Investment that is permitted by Section 4.07 hereof. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning. "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership or limited liability company, the Board of Directors of the general partner or managing member of the partnership; and 2 (3) with respect to any other Person, the board or committee of such Person serving a similar function. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than six months from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.00 million and a Thomson Bank Watch Rating of "B" or better; (4) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition; and (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition. "Clearstream" means Clearstream Banking, S.A. 3 "Change of Control" means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder; (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than a Permitted Holder, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or (4) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Company" means Alltrista Corporation, and any and all successors thereto. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period, plus (without duplication): (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; and (5) the net adjustment to EBITDA to calculate adjusted EBITDA on a pro forma basis for the year ended December 31, 2001, as shown in the Offering Memorandum in note (b) under the caption "Offering Memorandum Summary-Alltrista Summary Consolidated 4 Historical and Pro Forma Financial Data," to the extent that such net adjustment was deducted in computing such Consolidated Net Income; minus non-cash items increasing such Consolidated Net Income for such period, other than any items that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits, depreciation and amortization and other non-cash expenses, and net adjustment to EBITDA of a Subsidiary of the Company shall be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; and (4) the cumulative effect of a change in accounting principles shall be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the date of this Indenture; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office of the Trustee" will be at the address of the Trustee specified in Section 14.02 hereof or such other address as to which the Trustee may give notice to the Company. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. 5 "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. "Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "EBITDA" is calculated as income (loss) before interest, taxes and minority interest plus (i) depreciation and amortization, (ii) special charges (credits) and reorganization expenses and (iii) loss (gain) on divestiture of assets and product lines. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the New Senior Credit Facility) in existence on the date of this Indenture, until such amounts are repaid. 6 "Family" means, with respect to any Person, (i) the current and former spouses of such Person and (ii) the ancestors, siblings and descendants, whether by blood or adoption, of such Person. "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act, but without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date. "Fixed Charges" means, with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations; plus (2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus 7 (3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus (4) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any Disqualified Stock of such Person or any preferred stock of its Restricted Subsidiaries, other than dividends payable solely in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined marginal federal, state and local income tax rate of such Person (taking into account the deductibility of state and local taxes for federal income tax purposes), expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof. "Global Note Legend" means the legend set forth in Section 2.06(g)(2), which is required to be placed on all Global Notes issued under this Indenture. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Guarantors" means each of: (1) each of the Company's direct and indirect Domestic Subsidiaries existing on the date of this Indenture; and (2) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and 8 (2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Note is registered. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; (2) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness; (3) the lesser of the Indebtedness and the fair market value of the collateral asset, in the case of any Indebtedness of others secured by a Lien on any asset of the specified Person; and (4) the lesser of the primary Indebtedness and any stated limit on recourse under the Guarantee, in the case of Indebtedness of others secured by a Guarantee of the specified Person. "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" means the first $150,000,000 aggregate principal amount of Notes issued under this Indenture on the date hereof. 9 "Initial Purchasers" means Banc of America Securities LLC, CIBC World Markets Corp. and NatCity Investments. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to directors, officers, employees and consultants made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Company's Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07 hereof. The acquisition by the Company or any of its Restricted Subsidiaries of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the fair market value of the Investments held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of Section 4.07 hereof, if the acquired Person becomes a Restricted Subsidiary as a result of such acquisition and such third Person does not become a Restricted Subsidiary as a result of such acquisition. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset. "Liquidated Damages" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale; or 10 (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (a) the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, (b) taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, (c) amounts required to be applied to the repayment of Indebtedness, other than Senior Debt secured by a Lien on the asset or assets that were the subject of such Asset Sale, and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, and (d) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets that are subject to the Asset Sale. "New Senior Credit Facility" means (1) prior to the consummation of the Acquisition, the Company's existing credit facility as in effect on the date of this Indenture; and (2) following the consummation of the Acquisition, that certain Credit Agreement, dated as of the date of the consummation of the Acquisition, by and among the Company, Bank of America, N.A., as administrative agent, Banc of America Securities LLC, as co-lead arranger, and CIBC World Markets Corp., as co-lead arranger, providing for $50.0 million of term loan borrowings and up to $50.0 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, amended and restated, supplemented, modified, renewed, refunded, replaced or refinanced from time to time. "Non-Recourse Debt" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable as a guarantor or otherwise; (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its stated maturity; and (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries (other than Equity Interests in an Unrestricted Subsidiary). "Non-U.S. Person" means a Person who is not a U.S. Person. 11 "Notes" has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering Memorandum" means the Company's Offering Memorandum, dated April 10, 2002. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 14.05 hereof. "Opinion of Counsel" means an opinion from legal counsel that meets the requirements of Section 14.05 hereof. The counsel may be an employee of or counsel to the Company or any Subsidiary of the Company. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Permitted Business" means any business in which the Company and its Restricted Subsidiaries or Tilia were engaged on the date of this Indenture, any other business in the consumer products industry, including without limitation food products, and any business reasonably related or complementary thereto. "Permitted Holder" means (i) Martin E. Franklin or Ian Ashken; (ii) any member of the Family of Martin E. Franklin or Ian Ashken; (iii) any conservatorship, custodianship or decedent's estate of any Person specified in the foregoing clause (i) or (ii); (iv) any trust established for the benefit of any Person specified in the foregoing clause (i) or (ii); or (v) any corporation, limited liability company, partnership or other entity, the controlling equity interests in which are held by or for the benefit of any one or more Person specified in the foregoing clause (i) or (ii). "Permitted Investments" means: (1) any Investment in the Company or in a Restricted Subsidiary of the Company; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of the Company; or 12 (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (6) accounts receivable and any Investments received in compromise of obligations incurred in the ordinary course of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer or upon foreclosure on any secured Investment; (7) Hedging Obligations; (8) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (8) since the date of this Indenture not to exceed $10.0 million in original amount at any time outstanding; and (9) Investments by the Company or a Restricted Subsidiary of the Company in a Receivables Subsidiary in connection with a Qualified Receivables Transaction. "Permitted Liens" means: (1) Liens on assets of the Company and its Restricted Subsidiaries securing Senior Debt; (2) Liens in favor of the Company and its Restricted Subsidiaries; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary; (4) Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such acquisition; (5) Liens securing reimbursement obligations with respect to letters of credit and surety or performance bonds issued in the ordinary course of business; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (vi) of the second paragraph of Section 4.09 hereof covering only the assets acquired with such Indebtedness; (7) Liens existing on the date of this Indenture; 13 (8) Liens on Equity Interests in Unrestricted Subsidiaries that secure Non-Recourse Debt; and (9) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith, including consent fees); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes or the Subsidiary Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of the Notes, and is subordinated in right of payment to, the Notes or the Subsidiary Guarantees on terms at least as favorable to the Holders of the Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by the Company, by the Restricted Subsidiary that is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded or by any intermediate Restricted Subsidiary. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Private Placement Legend" means the legend set forth in Section 2.06(g)(1) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Public Equity Offering" means an offer and sale of Capital Stock (other than Disqualified Stock) of the Company pursuant to a registration statement that has been declared effective by the Commission pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company). "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Company or any of its Restricted Subsidiaries pursuant to which the Company or such Restricted Subsidiary may sell, convey or otherwise transfer to a Receivables Subsidiary accounts 14 receivable (whether now existing or arising in the future) and any assets related thereto, including without limitation, all collateral securing such accounts receivable, all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and all other assets that are customarily transferred, or in respect of which security interests are customarily granted, in connection with an asset securitization transaction involving accounts receivable. "Receivables Subsidiary" means an Unrestricted Subsidiary of the Company that engages in no activities other than in connection with financing of accounts receivable and that is designated by the Board of Directors of the Company as a Receivables Subsidiary. For purposes of the foregoing and the definition of "Unrestricted Subsidiary," the making of Standard Securitization Undertakings by the Company or any of its Restricted Subsidiaries shall not be deemed inconsistent with qualifying as an Unrestricted Subsidiary. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the issuer giving effect to such designation and an Officers' Certificate certifying, to the best of such officer's knowledge and belief after consulting with counsel, that such designation complied with the foregoing conditions. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of April 24, 2002, among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements among the Company, the Guarantors and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Global Note bearing the Private Placement Legend and deposited with or on behalf of the Depositary and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject and who shall have responsibility for the administration of this Indenture. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the 40-day distribution compliance period as defined in Regulation S. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. 15 "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture. "Standard Securitization Undertaking" means representations, warranties, covenants and indemnities entered into by the Company or any Restricted Subsidiary of the Company that are reasonably customary in accounts receivable transactions. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subordinated Seller Note due 2003" means the Company's Unsecured Subordinated Seller Note due March 31, 2003 payable to Tilia International, Inc. in the principal amount of $10.0 million issued in connection with the Acquisition. "Subordinated Seller Note due 2004" means the Company's Unsecured Subordinated Seller Note due ____, 2004 payable to Tilia International, Inc. in the principal amount of $5.0 million issued in connection with the Acquisition. "Subordinated Seller Notes" means the Subordinated Seller Note due 2003 and the Subordinated Seller Note due 2004. "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). 16 "Subsidiary Guarantee" means the Guarantee by each Guarantor of the Company's payment obligations under this Indenture and on the Notes, executed pursuant to the provisions of this Indenture. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Tilia" means Tilia International, Inc. and its subsidiaries, Tilia, Inc. and Tilia Canada, Inc. "Trustee" means the party named as such in the preamble to this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Global Note" means a permanent global Note substantially in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (5) has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and (i) shall be deemed to be redesignated as a Restricted Subsidiary and (ii) any Indebtedness of such Subsidiary shall be deemed to be incurred by a 17 Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, the Company shall be in default of Section 4.09. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (1) such Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation. Upon any such designation as a Restricted Subsidiary, such Subsidiary, if it is a Domestic Subsidiary, shall become a Guarantor and execute a supplemental Indenture. "U.S. Person" means a U.S. Person as defined in Rule 902(o) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. Section 1.02 Other Definitions.
Defined in Term Section ---- ------- "Affiliate Transaction"................................... 4.11 "Asset Sale Offer"........................................ 3.10 "Authentication Order".................................... 2.02 "Change of Control Offer"................................. 4.15 "Change of Control Payment"............................... 4.15 "Change of Control Payment Date".......................... 4.15 "Collateral" ............................................. 13.02 "Covenant Defeasance"..................................... 8.03 "Deadline Date"........................................... 3.08 "Designated Senior Debt".................................. 10.02 "DTC"..................................................... 2.03 "Event of Default"........................................ 6.01 "Excess Proceeds"......................................... 4.10 "incur"................................................... 4.09 "Legal Defeasance"........................................ 8.02 "Mandatory Redemption".................................... 3.08 "Mandatory Redemption Date"............................... 3.08 "Mandatory Redemption Price".............................. 3.08 "New York UCC"............................................ 13.03
18
Defined in Term Section ---- ------- "Offer Amount"............................................ 3.10 "Offer Period"............................................ 3.10 "Paying Agent"............................................ 2.03 "Permitted Debt".......................................... 4.09 "Permitted Junior Securities"............................. 10.02 "Pledged Property"........................................ 3.08 "Purchase Date"........................................... 3.10 "Registrar"............................................... 2.03 "Representative".......................................... 10.02 "Restricted Payments"..................................... 4.07 "Secured Obligations"..................................... 13.02 "Senior Debt"............................................. 10.02 "Special Trust Account"................................... 13.01
Section 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Subsidiary Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Subsidiary Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04 Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) "will" shall be interpreted to express a command; 19 (6) provisions apply to successive events and transactions; and (7) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2. THE NOTES Section 2.01 Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication will be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The Notes shall be dated the date of their authentication. The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form will be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearsteam. Section 2.02 Execution and Authentication. An Officer must sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid. A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture. 20 The Trustee will, upon receipt of a written order of the Company signed by one Officer (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 Registrar and Paying Agent. The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.04 Paying Agent to Hold Money in Trust. The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes. Section 2.05 Holder Lists. The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA ss. 312(a). Section 2.06 Transfer and Exchange. 21 Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if: (1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; (2) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; or (3) there has occurred and is continuing a Default or Event of Default with respect to the Notes and beneficial owners holding interests representing an aggregate principal amount of at least 51% of such Notes represented by Global Notes advise the Trustee in writing that the continuation of a book-entry system through the Depositary is no longer in such owner's best interests. Upon the occurrence of any of the preceding events in (1), (2) or (3) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. If a Holder is an Institutional Accredited Investor or a if a Holder is required to do so pursuant to any applicable law or regulation, such Holder may obtain Definitive Notes upon written request in accordance with the Depositary's and the Registrar's procedures and in accordance with this Section 2.06. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No 22 written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1). (2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either: (A) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and (ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or (B) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and (ii) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(2) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (3) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. 23 (4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. 24 (1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. 25 (2) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange 26 for a beneficial interest pursuant to this Section 2.06(c)(3) will not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee will cancel the Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of the Restricted Global Note. (2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: 27 (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (ii) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. 28 (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (1) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a broker-dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or 29 (ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate: (1) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered into the Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company; and (2) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee will cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company will execute and the Trustee will authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (1) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT 30 THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (i)(a) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) OF THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (ii) TO THE COMPANY OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY EVIDENCED HEREBY." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(2), (c)(3), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend. (2) Global Note Legend. Each Global Note will bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY 31 THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (1) To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 or at the Registrar's request. (2) No service charge will be made to a Holder of a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.08, 3.10, 4.10, 4.15 and 9.05 hereof). (3) The Registrar will not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (5) The Company will not be required: (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for 32 redemption under Section 3.02 hereof and ending at the close of business on the day of selection; (B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (7) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07 Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08 Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. 33 If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest. Section 2.09 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee knows are so owned will be so disregarded. Section 2.10 Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes will be entitled to all of the benefits of this Indenture. Section 2.11 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will dispose of canceled Notes in its customary manner. Certification of the destruction of all canceled Notes will be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee. 34 If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth: (1) the clause of this Indenture pursuant to which the redemption shall occur; (2) the redemption date; (3) the principal amount of Notes to be redeemed; and (4) the redemption price. Section 3.02 Selection of Notes to Be Redeemed or Purchased. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee will select Notes for redemption or purchase as follows: (1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate. In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Trustee from the outstanding Notes not previously called for redemption or purchase. The Trustee will promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase. Section 3.03 Notice of Redemption. Subject to the provisions of Section 3.10 hereof, at least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12 of this Indenture. The notice will identify the Notes (including applicable CUSIP numbers) to be redeemed and will state: (1) the redemption date; 35 (2) the redemption price; (3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee will give the notice of redemption in the Company's name and at its expense; provided, however, that the Company has delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05 Deposit of Redemption or Purchase Price. One Business Day prior to the redemption or purchase price date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest and Liquidated Damages, if any, on, all Notes to be redeemed or purchased. If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on 36 any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06 Notes Redeemed or Purchased in Part. Upon surrender of a Note that is redeemed or purchased in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered. Section 3.07 Optional Redemption. (a) At any time prior to May 1, 2005, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 109.750% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the red emption date, with the net cash proceeds of one or more Public Equity Offerings; provided that: (1) at least 65% of the aggregate principal amount of Notes issued under this Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption must occur within 45 days of the date of the closing of such Public Equity Offering. (b) Except pursuant to the preceding paragraph, the Notes are not redeemable at the Company's option prior to May 1, 2007. (c) After May 1, 2007 the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on May 1 of the years indicated below:
Year Percentage ---- ---------- 2007..................................................... 104.875% 2008..................................................... 103.250% 2009..................................................... 101.625% 2010 and thereafter...................................... 100.000%
(d) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08 Special Mandatory Redemption. (a) In the event that (i) the Acquisition is not consummated on or prior to July 15, 2002 (the "Deadline Date"), (ii) the Company elects to abandon the Acquisition on or prior to the Deadline Date or (iii) the Asset Purchase Agreement is terminated on or prior to the Deadline Date, the Company shall redeem on the applicable Mandatory Redemption Date all the Notes at a redemption price equal to 101% of the principal amount thereof, together with accrued and unpaid interest thereon to the date of redemption (the "Mandatory Redemption Price") pursuant to this Section 3.08 and Article 13 hereof (the 37 "Mandatory Redemption"). "Mandatory Redemption Date" means (a) July 15, 2002, if the Acquisition has not been consummated on or prior to the Deadline Date; and (b) the fifth Business Day following the occurrence of an event described in clause (ii) or (iii) above. After the occurrence of the event triggering such redemption, notice of Mandatory Redemption shall be mailed promptly to the Trustee and each Holder of Notes at its registered address. (b) In the event that the Acquisition and the offering of the Initial Notes do not close simultaneously, then, concurrently with the closing of the offering of the Initial Notes, the Company shall deliver to the Trustee for deposit in the Special Trust Account (hereinafter defined) the sum of $143,529,000, the net proceeds received from the sale of the Notes (such proceeds, the "Pledged Property"). All amounts to be deposited with the Trustee shall be transferred by wire transfer of immediately available funds to the following account: THE BANK OF NEW YORK ABA No.: 021000018 GLA No.: 111-565 Trust A/C No. 003471 A/C Name: Alltrista Corp. Special Trust Account Attention: Julie Salovitch-Miller 212-328-7629 (c) Promptly following the deposit of any funds into the Special Trust Account, the Trustee shall invest such funds in the name of the Trustee in Cash Equivalents. Prior to the earliest of the Mandatory Redemption Date, transfer of the Collateral to the Company pursuant to Section 13.03(2)(b) and an Event of Default, the Company shall provide written instructions to the Trustee as to the specific Cash Equivalents in which funds are to be invested. All such amounts shall remain so invested until the close of business on the Business Day prior to any withdrawal by the Trustee pursuant to Section 13.03 hereof. All Cash Equivalents from time to time credited to the Special Trust Account constituting "security entitlements" as defined in Section 8-102(a)(17) of the New York UCC (hereinafter defined) shall be held in the name of the Trustee and in no event shall the Company be or be deemed to be the "entitlement holder" (as such term is defined in as defined in Section 8-102(a)(7) of the New York UCC) with respect thereto. (d) Other than as specifically provided in this Section 3.08, any redemption pursuant to this Section 3.08 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. Section 3.09 Mandatory Redemption. Except as set forth in Section 3.08 hereof, the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.10 Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company is required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it will follow the procedures specified below. The Asset Sale Offer shall be made to all Holders and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets. The Asset Sale Offer will remain open for a period of at least 20 Business Days following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than three Business Days after the termination of the Offer Period (the "Purchase Date"), the 38 Company will apply all Excess Proceeds (the "Offer Amount") to the purchase of Notes and such other pari passu Indebtedness (on a pro rata basis, if applicable) or, if less than the Offer Amount has been tendered, all Notes and other Indebtedness tendered in response to the Asset Sale Offer. Payment for any Notes so purchased will be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, and Liquidated Damages, if any, will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company will send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice will contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The notice, which will govern the terms of the Asset Sale Offer, will state: (1) that the Asset Sale Offer is being made pursuant to this Section 3.10 and Section 4.10 hereof and the length of time the Asset Sale Offer will remain open; (2) the Offer Amount, the purchase price and the Purchase Date; (3) that any Note not tendered or accepted for payment will continue to accrue interest; (4) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer will cease to accrue interest after the Purchase Date; (5) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only; (6) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (7) that Holders will be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (8) that, if the aggregate principal amount of Notes and other pari passu Indebtedness surrendered by Holders exceeds the Offer Amount, the Company will select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, will be purchased); and (9) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). 39 On or before the Purchase Date, the Company will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and will deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.10. The Company, the Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company will promptly issue a new Note, and the Trustee, upon written request from the Company will authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.10, any purchase pursuant to this Section 3.10 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4. COVENANTS Section 4.01 Payment of Notes. The Company will pay or cause to be paid the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Liquidated Damages, if any will be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company will pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02 Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission will in any manner relieve 40 the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. Section 4.03 Reports. (a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes, within the time periods specified in the SEC's rules and regulations (together with any extensions granted by the SEC): (1) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and (2) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. In addition, following the consummation of the Exchange Offer contemplated by the Registration Rights Agreement, whether or not required by the SEC, the Company will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the SEC for public availability (unless the SEC will not accept such a filing) within the time periods specified in the SEC's rules and regulations (together with any extensions granted by the SEC) and make such information available to securities analysts and prospective investors upon request. The Company will at all times comply with TIA ss. 314(a). (b) For so long as any Notes remain outstanding, the Company and the Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.04 Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of 41 this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) So long as any of the Notes are outstanding, the Company will deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 Taxes. The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06 Stay, Extension and Usury Laws. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07 Restricted Payments. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or 42 distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company); (2) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees, except a payment of interest (including any amount comparable to Liquidated Damages) or principal at the Stated Maturity of the Indebtedness; or (4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; and (2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (2), (3), (4) and (5) of paragraph (b) below), is less than the sum, without duplication of: (A) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of this Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (B) 100% of the aggregate net cash proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company), plus (C) with respect to Restricted Investments made by the Company and its Restricted Subsidiaries after the date of this Indenture, an amount equal to the net reduction in such Restricted Investments resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances or other transfers of assets, in each case to the Company or any such Restricted Subsidiary from any such Investment, 43 or from the net cash proceeds from the sale of any such Investment, or from a redesignation of an Unrestricted Subsidiary to a Restricted Subsidiary, but only if and to the extent such amounts are not included in the calculation of Consolidated Net Income and not to exceed the amount of the Restricted Investment previously made by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary; provided that any amounts in excess of the amount of the Restricted Investment previously made may be included in the calculation of Consolidated Net Income otherwise available under clause (A), plus; (D) $5.0 million. (b) So long as no Default has occurred and is continuing or would be caused thereby, the provisions of Section 4.07(a) will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of this Indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(B) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Guarantor in exchange for, or with the net cash proceeds received from, the substantially concurrent sale of Permitted Refinancing Indebtedness; (4) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis and the redemption, purchase, cancellation or other retirement of Equity Interests in a Restricted Subsidiary held by any Person other than the Company or a Subsidiary of the Company; (5) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement, stock option agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in any twelve-month period and $5.0 million in the aggregate; and (6) prepayments on the Subordinated Seller Note due 2004 in accordance with its terms as in effect on the date of this Indenture. The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.07 will be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal 44 or investment banking firm of national standing if the fair market value exceeds $1.0 million. Not later than the date of making any Restricted Payment, the Company will deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. (b) The restrictions in Section 4.08(a) will not apply to encumbrances or restrictions existing under or by reason of: (1) agreements governing Existing Indebtedness and the New Senior Credit Facility as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained such agreements, as in effect on the date of this Indenture; (2) this Indenture, the Notes and the Subsidiary Guarantees; (3) applicable law; (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred; (5) customary non-assignment provisions in leases, licenses and other agreements entered into in the ordinary course of business and consistent with past practices; (6) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clause (3) of Section 4.08(a); 45 (7) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (8) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (9) Liens securing Indebtedness otherwise permitted to be incurred under Section 4.12 hereof that limit the right of the debtor to dispose of the assets subject to such lien; (10) provisions with respect to the disposition or distribution of assets or property in joint venture agreements , asset sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business; and (11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt), and the Company's Restricted Subsidiaries may incur Indebtedness or issue preferred stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such preferred stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the preferred stock had been issued, as the case may be, at the beginning of such four-quarter period. (b) The provisions of Section 4.09(a) will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by the Company and any of its Restricted Subsidiaries of Indebtedness and letters of credit under the New Senior Credit Facility in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed $100.0 million less the aggregate amount of all commitment reductions with respect to any revolving credit borrowings that have been made by the Company or any of its Restricted Subsidiaries since the date of this Indenture; (2) the incurrence by the Company and its Restricted Subsidiaries of Existing Indebtedness; (3) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Subsidiary Guarantees to be issued on the date of this Indenture and the Exchange Notes and the related Subsidiary Guarantees to be issued pursuant to the Registration Rights Agreement; 46 (4) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness of Tilia assumed as part of the Acquisition; provided that such Indebtedness was not incurred in connection with or in contemplation of the Acquisition; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in an amount not to exceed $15.0 million pursuant to promissory notes issued to the shareholders of Tilia in payment of a portion of the consideration for the Acquisition; provided that such Indebtedness is subordinated to the Notes to at least the same extent as the Notes are subordinated to Senior Debt; (6) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (6), not to exceed $10.0 million at any time outstanding; (7) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under Section 4.09(a) or clauses (2), (3), (4), (5), (6), (7) or (12) of this Section 4.09(b); (8) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Subsidiaries; provided, however, that: (A) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Guarantor; and (B) (1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (8); (9) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing, swapping or hedging interest rate risk with respect to any Indebtedness that is permitted by the terms of this Indenture to be outstanding; (10) the guarantee by the Company or any of its Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; (11) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the 47 same class of Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued; and (12) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (12), not to exceed $25.0 million. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (12) above, or is entitled to be incurred pursuant to Section 4.09(a), the Company will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.09. Indebtedness under the New Senior Credit Facility outstanding on the date on which Notes are first issued and authenticated under this Indenture will be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt. Section 4.10 Asset Sales. The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company or the Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (2) the fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee; and (3) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash: (A) any liabilities, as shown on the Company's most recent consolidated balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; (B) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that within 30 days are converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion; and (C) long-term assets that are used or useful in a Permitted Business. Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds at its option: 48 (1) to repay Senior Debt and, if the Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto to the extent required by such revolving credit Indebtedness; (2) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business; (3) to make a capital expenditure; or (4) to acquire other long-term assets that are used or useful in a Permitted Business. Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, within 30 days thereof, the Company will make an Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets in accordance with Section 3.10 hereof to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consumption of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis based on the aggregate principal amount of Notes and such other pari passu Indebtedness properly tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of Sections 3.10 or 4.10 of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under those provisions of this Indenture by virtue of such conflict. Section 4.11 Transactions with Affiliates. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each an "Affiliate Transaction"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and 49 (2) the Company delivers to the Trustee: (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this Section 4.11 and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. (b) The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of Section 4.11(a): (1) any employment or consulting agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary; (2) transactions between or among the Company and/or its Restricted Subsidiaries; (3) transactions with a Person that is an Affiliate of the Company solely because the Company owns an Equity Interest in, or controls, such Person; (4) payment of reasonable fees and compensation to, and indemnity provided on behalf of, directors and officers of the Company; (5) sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company; (6) Restricted Payments that are permitted by Section 4.07 hereof; and (7) transfers of accounts receivable and related assets to a Receivables Subsidiary in connection with a Qualified Receivables Transaction and the charging of fees and expenses in the ordinary course of business in connection with such transfers; and (8) Permitted Investments. Section 4.12 Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness for money borrowed on any asset now owned or hereafter acquired, except Permitted Liens. Section 4.13 Line of Business. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business activities other than in a Permitted Business. Section 4.14 Corporate Existence. 50 Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect: (1) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and (2) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.15 Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, the Company will make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages on the Notes repurchased, if any, to the date of purchase (the "Change of Control Payment"). Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no later than 30 business days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and 51 (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of Sections 3.10 or 4.15 of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under Section 3.10 or this Section 4.15 by virtue of such conflict. (b) On the Change of Control Payment Date, the Company will, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. Prior to complying with any of the provisions of this Section 4.15, but in any event within 70 days following a Change of Control, the Company will either repay all outstanding Senior Debt or obtain the requisite waivers and consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this Section 4.15. (c) Notwithstanding anything to the contrary in this Section 4.15, the Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Section 3.10 hereof and purchases all Notes validly tendered and not withdrawn under the Change of Control Offer. Section 4.16 No Senior Subordinated Debt. The Company will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes. No Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Guarantor and senior in any respect in right of payment to such Guarantor's Subsidiary Guarantee. 52 Section 4.17 Payments for Consent. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.18 Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries acquires or creates a Domestic Subsidiary after the date of this Indenture, then the Company will cause that newly acquired or created Domestic Subsidiary to execute a Subsidiary Guarantee pursuant to a supplemental indenture in the form attached as Exhibit F hereto and deliver an Opinion of Counsel that is satisfactory to the Trustee within 30 days of the date on which it was acquired or created to the effect that such supplemental indenture has been duly authorized, executed and delivered by that Domestic Subsidiary and constitutes a valid and binding agreement of that Domestic Subsidiary, enforceable in accordance with its terms (subject to customary exceptions). The form of such Subsidiary Guarantee is attached as Exhibit E hereto. Section 4.19 Designation of Restricted and Unrestricted Subsidiaries. (a) The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary to be designated shall be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of Section 4.07 hereof or Permitted Investments, as determined by the Company. That designation shall only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Upon its designation as an Unrestricted Subsidiary, it shall cease to be a Guarantor and its Subsidiary Guarantee shall be released. (b) The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. If an Unrestricted Subsidiary is redesignated as a Restricted Subsidiary, an amount equal to the lesser of the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary to be redesignated and the amount of all such Investments shall be deemed to be recovered in cash as of the time of the redesignation and will increase the amounts available for (1) Restricted Payments under the first paragraph of Section 4.07 hereof and (2) Permitted Investments in proportion to the amount of the Company's and its Restricted Subsidiaries' Investments in such Subsidiary that were Restricted Payments and Permitted Investments. Upon any such redesignation or other designation as a Restricted Subsidiary, such Subsidiary shall become a Guarantor and execute a Subsidiary Guarantee. Section 4.20 Amendment of Subordinated Seller Notes Without the consent of the Holders of at least a majority in principal amount of Notes then outstanding, the Company will not agree to amend or modify the Subordinated Seller Notes in any manner that would result in the Subordinated Seller Notes not being subordinated to the Notes to at least the same extent as the Notes are subordinated to Senior Debt, or that would accelerate any payment of the Subordinated Seller Notes or increase the interest rate on the Subordinated Seller Notes. 53 ARTICLE 5. SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets. The Company shall not, directly or indirectly, consolidate or merge with or into another Person (whether or not the Company is the surviving corporation), or sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: (1) either: (A) the Company is the surviving corporation; or (B) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction, no Default or Event of Default exists; and (4) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof. In addition, the Company shall not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This Section 5.01 will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of its Restricted Subsidiaries that are Guarantors. Section 5.02 Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the 54 Notes except in the case of a sale of all of the Company's assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01 Events of Default. Each of the following is an "Event of Default": (1) the Company defaults for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes whether or not prohibited by the subordination provisions of this Indenture; (2) the Company defaults in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes (including, but not limited to, amounts due in connection with Mandatory Redemption), whether or not prohibited by the subordination provisions of this Indenture; (3) the Company or any of its Subsidiaries fails to comply with the provisions of Section 4.10 (other than the requirement that the resolution of the Board of Directors pursuant to clause (2) of the first paragraph of Section 4.10 be set forth in an Officers' Certificate delivered to the Trustee, with respect to which the Event of Default described in clause (5) of the paragraph will apply), 4.15 or 5.01 hereof; (4) the Company or any of its Subsidiaries fails to comply with the provisions of Section 4.07 or 4.09 and such failure continues for 30 days; (5) the Company or any of its Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (6) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default: (A) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more; 55 (7) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any Restricted Subsidiary, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; provided that the aggregate of all such undischarged judgments exceeds $10.0 million (to the extent not insured); and (8) the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors, or (E) generally is not paying its debts as they become due; or (9) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (B) appoints a custodian of the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (C) orders the liquidation of the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (10) except as permitted by this Indenture, any Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee. Section 6.02 Acceleration. In the case of an Event of Default specified in clause (8) or (9) of Section 6.01 hereof, with respect to the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding 56 Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (8) or (9) of Section 6.01 hereof occurs with respect to the Company, any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs on or after May 1, 2007 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to May 1, 2007 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on May 1 of the years set forth below, as set forth below (expressed as a percentage of the principal amount of the Notes on the date of payment that would otherwise be due but for the provisions of this sentence):
YEAR PERCENTAGE ---- ---------- 2002............................................ 109.750% 2003............................................ 108.775% 2004............................................ 107.800% 2005............................................ 106.825% 2006............................................ 105.850%
Section 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Liquidated Damages, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or 57 Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal (including redemption or purchase price) of, premium and Liquidated Damages, if any, or interest on, the Notes (including in connection with an offer to purchase); provided, however, that at any time after a declaration of acceleration under this Indenture, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Notes, (B) all unpaid principal of (and premium, if any, on) any outstanding Notes that has become due, other than by such declaration of acceleration, and interest thereon at the rate borne by the Notes, (C) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal at the rate borne by the Notes, and (D) all sums paid or advanced by the Trustee under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on), or interest on, the Notes that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission will affect any subsequent default or impair any right consequent thereon. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05 Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06 Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (1) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (3) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability, claim, damage or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and 58 (5) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: 59 First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE Section 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (1) the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, with respect to opinions and certificates specifically required to be furnished to it by any provision hereunder, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein). 60 (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (2) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01. (e) No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability. The Trustee will be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02 Rights of Trustee. (a) The Trustee may conclusively rely upon any document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its own selection and the advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company will be sufficient if signed by an Officer of the Company. (f) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. 61 (g) The Trustee will not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event that is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. The Trustee shall be deemed to have actual knowledge of the failure of the Company to pay any principal of, or accrued interest or Liquidated Damages on, the Notes when due. (h) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder. (i) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. Section 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 Trustee's Disclaimer. The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium (including redemption or purchase price) or Liquidated Damages, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06 Reports by Trustee to Holders of the Notes. (a) Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee will mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be 62 transmitted). The Trustee also will comply with TIA ss. 313(b)(2). The Trustee will also transmit by mail all reports as required by TIA ss. 313(c). (b) A copy of each report at the time of its mailing to the Holders of Notes will be mailed by the Trustee to the Company and filed by the Trustee with the SEC and each stock exchange on which the Notes are listed in accordance with TIA ss. 313(d). The Company will promptly notify the Trustee when the Notes are listed on any stock exchange or delisted therefrom. Section 7.07 Compensation and Indemnity. (a) The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation will not be limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. (b) The Company and the Guarantors, jointly and severally, will indemnify the Trustee against any and all losses, liabilities, claims, damages or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, the Guarantors or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability, claim, damage or expense is determined by a court of competent jurisdiction to have been caused by its own negligence or willful misconduct. The Trustee will notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company or any of the Guarantors of their obligations hereunder. The Company or such Guarantor will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Company will pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent will not be unreasonably withheld. (c) The obligations of the Company and the Guarantors under this Section 7.07 will survive the satisfaction and discharge of this Indenture. (d) To secure the Company's payment obligations in this Section 7.07, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture. (e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(8) or (9) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. (f) The Trustee will comply with the provisions of TIAss. 313(b)(2) to the extent applicable. Section 7.08 Replacement of Trustee. 63 (a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. (b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (3) a custodian or public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition at the expense of the Company any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof will continue for the benefit of the retiring Trustee. Section 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee. Section 7.10 Eligibility; Disqualification. There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state 64 authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture will always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). Section 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02 Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Subsidiary Guarantees) on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Subsidiary Guarantees), which will thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Liquidated Damages, if any, on such Notes when such payments are due from the trust referred to in Section 8.04 hereof; (2) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof; (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors'obligations in connection therewith; and (4) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. 65 Section 8.03 Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 and 4.19 hereof and clause (4) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, "Covenant Defeasance"), and the Notes will thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and Subsidiary Guarantees, the Company and the Guarantors may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Subsidiary Guarantees will be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(6) hereof will not constitute Events of Default. Section 8.04 Conditions to Legal or Covenant Defeasance. In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and Liquidated Damages, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (2) in the case of an election under Section 8.02 hereof, the Company has delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that: (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; 66 (3) in the case of an election under Section 8.03 hereof, the Company must deliver to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit and after giving effect thereto; (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (6) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; and (7) the Company must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 Repayment to Company. 67 Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Liquidated Damages, if any, or interest on any Note and remaining unclaimed for two years after such principal, premium or Liquidated Damages, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the Notes and the Subsidiary Guarantees will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or Liquidated Damages, if any, or interest on any Note following the reinstatement of its obligations, the Company will be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees or the Notes without the consent of any Holder of a Note: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (3) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 or Article 11 hereof; (4) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (5) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; 68 (6) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof; or (7) to allow any Guarantor to execute a supplemental indenture and/or a Subsidiary Guarantee with respect to the Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee will not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including, without limitation, Section 3.10, 4.10 and 4.15 hereof), the Subsidiary Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including, without limitation, Additional Notes, if any) then outstanding voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium or Liquidated Damages, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). In addition, any amendment to, or waiver of, the provisions of Article 10 that adversely affects the rights of the Holders of the Notes will require the consent of the Holders of at least 75% in aggregate principal amount of Notes then outstanding. Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but will not be obligated to, enter into such amended or supplemental Indenture. It is not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it is sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount 69 of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes (except as provided above with respect to Article 10 hereof); (3) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (4) waive a Default or Event of Default in the payment of principal (including redemption or purchase price) of or premium or Liquidated Damages, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (5) make any Note payable in money other than that stated in the Notes; (6) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions; (7) waive a redemption payment with respect to any Note (other than a payment required by Section 3.08, 3.10, 4.10 or 4.15); or (8) release any Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture. Section 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes will be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05 Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee 70 shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 Trustee to Sign Amendments, etc. The Trustee will sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee will be entitled to receive and (subject to Section 7.01 hereof) will be fully protected in relying upon, in addition to the documents required by Section 14.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture is authorized or permitted by this Indenture. ARTICLE 10. SUBORDINATION Section 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. Section 10.02 Certain Definitions. "Designated Senior Debt" means: (1) any Indebtedness outstanding under the New Senior Credit Facility; and (2) after payment in full of all Obligations under the New Senior Credit Facility, any other Senior Debt permitted under this Indenture the outstanding principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt." "Permitted Junior Securities" means: (1) Equity Interests in the Company or any Guarantor or any successor to either of the foregoing; or (2) debt securities that are subordinated to all Senior Debt and any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the Notes and the Subsidiary Guarantees are subordinated to Senior Debt under this Indenture. "Representative" means the indenture trustee or other trustee, agent or representative for any Senior Debt. 71 "Senior Debt" means: (1) all Indebtedness of the Company or any Guarantor outstanding under the New Senior Credit Facility and all Hedging Obligations with respect thereto; (2) any other Indebtedness of the Company or any Guarantor permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated to any Senior Debt or on a parity with or subordinated in right of payment to the Notes or any Subsidiary Guarantee, and (3) all Obligations with respect to the items listed in the preceding clauses (1) and (2). Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include: (1) any liability for federal, state, local or other taxes owed or owing; (2) any intercompany Indebtedness of the Company or any of its Subsidiaries to the Company or any of its Affiliates; (3) any trade payables; (4) the portion of any Indebtedness that is incurred in violation of this Indenture; or (5) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company or any Guarantor. Section 10.03 Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities: (1) holders of Senior Debt will be entitled to receive payment in full of all Obligations due in respect of such Senior Debt (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Debt) before the Holders of Notes will be entitled to receive any payment with respect to the Notes (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof); and (2) until all Obligations with respect to Senior Debt (as provided in clause (1) above) are paid in full, any distribution to which Holders would be entitled but for this Article 10 will be made to holders of Senior Debt (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof), as their interests may appear. A distribution may consist of cash, securities or other property, by set-off or otherwise. Section 10.04 Default on Designated Senior Debt. 72 (a) The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes and may not acquire from the Trustee or any Holder any Notes for cash or property (other than Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (1) payment default on Designated Senior Debt occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Designated Senior Debt; or (2) any other default occurs and is continuing on any series of Designated Senior Debt that permits holders of that series of Designated Senior Debt to accelerate its maturity and the Trustee and the Company receive a notice of such default (a "Payment Blockage Notice") from the holders of any Designated Senior Debt (or their Representatives). If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice will be effective for purposes of this Section unless and until (A) at least 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice and (B) all scheduled payments of principal, premium and Liquidated Damages, if any, and interest on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee may be, or may be made, the basis for a subsequent Payment Blockage Notice. (b) The Company may and will resume payments on and distributions in respect of the Notes and may acquire them upon the earlier of: (1) in the case of a payment default, upon the date upon which such default is cured or waived, or (2) in the case of a nonpayment default, upon the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated, if this Article 10 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. Section 10.05 Occurrence of an Event of Default. The Company will promptly notify holders of Senior Debt (or their Representative) upon the occurrence of an Event of Default. Section 10.06 When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes (other than Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof) at a time when the payment is prohibited by this Article 10 and the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 10.04 hereof, such payment will be held by the Trustee or such Holder, in trust for the benefit of, and will be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests 73 may appear or their Representative under the agreement, indenture or other document (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only those obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt will be read into this Indenture against the Trustee. The Trustee will not be deemed to owe any fiduciary duty to the holders of Senior Debt, and will not be liable to any such holders if the Trustee pays over or distributes to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt are then entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.07 Notice by Company. The Company will promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article 10, but failure to give such notice will not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. Section 10.08 Subrogation. After all Senior Debt is paid in full and until the Notes are paid in full, Holders of Notes will be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes. Section 10.09 Relative Rights. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture will: (1) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium and interest and Liquidated Damages, if any, on the Notes in accordance with their terms; (2) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article 10 to pay principal of, premium or interest or Liquidated Damages, if any, on a Note on the due date, the failure is still a Default or Event of Default. Section 10.10 Subordination May Not Be Impaired by Company. 74 No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes may be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Section 10.11 Distribution or Notice to or by Representative. Whenever a distribution is to be made or a notice given to or by holders of Senior Debt, the distribution may be made and the notice given to or by their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes will be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. Section 10.12 Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee will not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee has received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 will impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 10.13 Authorization to Effect Subordination. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. Section 10.14 Amendments. The provisions of this Article 10 may not be amended or modified without the written consent of the holders of Senior Debt, as required under the agreement, indenture or other document (if any) governing such Senior Debt. In addition, any amendment to, or waiver of, the provisions of this Article 10 that adversely affects the rights of the Holders of the Notes will require the consent of the Holders of at least 75% in aggregate principal amount of Notes then outstanding. Section 10.15 Trustee Not Fiduciary for Holders of Senior Debt. 75 The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if the Trustee shall in good faith (and without gross negligence or willful misconduct) mistakenly pay over or distribute to Holders of Notes or to the Company or to any other person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article 10 or otherwise. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article 10 and no implied covenants or obligations with respect to holders of Senior Debt shall be read into this Indenture against the Trustee. ARTICLE 11. SUBSIDIARY GUARANTEES Section 11.01 Guarantee. (a) Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (1) the principal of, premium and Liquidated Damages, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. (b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect. 76 (d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. The Guarantors will have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. Section 11.02 Subordination of Subsidiary Guarantee. The Obligations of each Guarantor under its Subsidiary Guarantee pursuant to this Article 11 will be junior and subordinated to the Senior Debt of such Guarantor on the same basis as the Notes are junior and subordinated to Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders will have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. Section 11.03 Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. Section 11.04 Execution and Delivery of Subsidiary Guarantee. To evidence its Subsidiary Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form attached as Exhibit E hereto will be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture will be executed on behalf of such Guarantor by one of its Officers. Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 11.01 will remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee will be valid nevertheless. 77 The delivery of any Note by the Trustee, after the authentication thereof hereunder, will constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company creates or acquires any Domestic Subsidiary after the date of this Indenture, if required by Section 4.24 hereof, the Company will cause such Domestic Subsidiary to comply with the provisions of Section 4.24 hereof and this Article 11, to the extent applicable. Section 11.05 Guarantors May Consolidate, etc., on Certain Terms. Except as otherwise provided in Section 11.06, no Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor, unless: (1) immediately after giving effect to such transaction, no Default or Event of Default exists; and (2) either: (a) subject to Section 11.06 hereof, the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger unconditionally assumes all the obligations of that Guarantor under this Indenture, its Subsidiary Guarantee and the Registration Rights Agreement, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture and the Subsidiary Guarantee on the terms set forth herein or therein; or (b) the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation, Section 4.10 hereof. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person will succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued will in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes will prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or will prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 11.06 Releases Following Sale of Assets. In the event of any sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Subsidiary of the Company, then such Guarantor (in the event of a sale or other 78 disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee will execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. Any Guarantor not released from its obligations under its Subsidiary Guarantee will remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. ARTICLE 12. SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge. This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when: (1) either: (a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default has occurred and is continuing on the date of such deposit or will occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and (4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. 79 In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section, the provisions of Section 12.02 and Section 8.06 will survive. In addition, nothing in this Section 12.01 will be deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the satisfaction and discharge of this Indenture. Section 12.02 Application of Trust Money. Subject to the provisions of Section 8.06, all money deposited with the Trustee pursuant to Section 12.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 12.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. ARTICLE 13. SPECIAL TRUST ACCOUNT Section 13.01 Establishment of Special Trust Account. (a) The Trustee shall establish on the date hereof and maintain in the Trustee's name a "securities account" (within the meaning of Article 8 of Uniform Commercial Code (the "UCC")) (the "Special Trust Account") to which there shall be immediately credited and held amounts received by the Trustee from the Company in accordance with Section 3.08 hereof and this Article 13. The funds credited to the Special Trust Account shall be applied and disbursed only as provided in Section 3.08 hereof and in this Article 13. The Trustee shall segregate the funds credited to the Special Trust Account from its other funds held as an agent or in trust. The Trustee shall treat all property held by it in the Special Trust Account as "financial assets" under Section 8-501(a) (or successor section) of the UCC. Section 13.02 Security Interest. (a) Pledge and Assignment. The Company hereby irrevocably pledges, assigns, grants, hypothecates and sets over to the Trustee, for the equal and ratable benefit of the Holders of the Notes, a first priority continuing security interest in all of the Company's right, title and interest in and to all of the following whether now owned or existing or hereafter acquired or created (collectively, the "Collateral"): (1) all funds from time to time held in the Special Trust Account, including, without limitation, the Pledged Property and all certificates and instruments, if any, from time to time, representing or evidencing the Special Trust Account or the Pledged Property; 80 (2) all investments of funds in the Special Trust Account, which all shall constitute Cash Equivalents, and whether held by or registered in the name of the Trustee and all certificates and instruments, if any, from time to time representing or evidencing any such Cash Equivalents; (3) all promissory notes, certificates of deposit, deposit accounts, checks and other instruments evidencing such Cash Equivalents from time to time hereafter delivered to or otherwise possessed by the Trustee, for or on behalf of the Company, in substitution for or in addition to any or all of the then existing Collateral; (4) all interest, dividends, cash, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Collateral; and (5) all proceeds of the foregoing including, without limitation, all cash proceeds and all non-cash proceeds thereof. For so long as the foregoing pledge, assignment and security interest remains in effect, the Trustee hereby waives any right of setoff or banker's lien that it, in its individual capacity or in its capacity as an agent for Persons other than the Holders of the Notes, may have with respect to any or all of the Collateral. (b) Secured Obligations. This Article 13 secures the due and punctual payment and performance of all Obligations of the Company, whether now or hereafter existing, under the Notes and this Indenture, including, without limitation, interest and premium, if any, accrued on the Notes after the commencement of a bankruptcy, reorganization or similar proceeding involving the Company to the extent permitted by applicable law (collectively, the "Secured Obligations"). (c) Delivery of Collateral. All certificates or instruments, if any, representing or evidencing all or any portion of the Collateral shall be held by the Trustee pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignments in blank, all in form and substance sufficient to convey a valid security interest in such Collateral to the Trustee. All securities in uncertificated or book-entry form and all security entitlements, if any, in each case representing or evidencing the Collateral shall be registered in the name of the Trustee (or any of its nominees) as the registered owner thereof by book-entry or as otherwise appropriate so as to properly identify the interest of the Trustee therein. In addition, the Trustee shall have the right, at any time following the earlier of the Special Mandatory Redemption Date or the occurrence of an Event of Default, to transfer to or to register in the name of the Trustee or any of its nominees any or all other Collateral. Except as otherwise provided herein, all Collateral shall be deposited and held in the Special Trust Account. The Trustee shall have the right at any time to exchange certificates or instruments representing or evidencing all or any portion of the Collateral for certificates or instruments of smaller or larger denominations in the same aggregate amount. (d) Maintaining the Special Trust Account. So long as Section 3.08 hereof and this Article 13 are in full force and effect: (1) subject to the other terms and conditions of Section 3.08 and this Article 13, (i) all Collateral held by the Trustee pursuant to Section 3.08 and this Article 13 shall be held in the Special Trust Account, which shall be subject to the exclusive dominion and control of the Trustee for the benefit of the Trustee and the equal and ratable benefit of the Holders of the Notes; 81 (2) the Special Trust Account and all Collateral from time to time therein shall remain segregated from all other funds or other property otherwise held by the Trustee; (3) all amounts (including, without limitation, any Pledged Property or interest on or other proceeds of the Pledged Property or any Cash Equivalents held in the Special Trust Account) shall remain on deposit in the Special Trust Account until withdrawn in accordance with Section 3.08 hereof and this Article 13; and (4) the Trustee shall take all steps necessary to ensure that the Trustee is the holder or entitlement holder (as the case may be) of all of the Collateral and, for the equal and ratable benefit of the Holders of the Notes, the holder or entitlement holder of all Cash Equivalents and other uncertificated securities on the books of the applicable securities intermediary. (e) Further Assurances. Prior to, contemporaneously herewith, and at any time and from time to time hereafter, the Company shall, at the Company's expense, execute and deliver to the Trustee or its designee such other instruments and documents, and take all further action as necessary or advisable to confirm or perfect the security interest of the Trustee granted or purported to be granted hereby or to enable the Trustee to exercise and enforce its rights and remedies hereunder with respect to any Collateral, and the Company shall take all necessary action to preserve and protect the security interest created hereby as a first priority, perfected lien and encumbrance upon the Collateral. (f) Transfers and Other Liens. The Company agrees that it will not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral or (ii) create or permit to exist any Lien upon or with respect to any of the Collateral, except for the security interest under this Article 13. Section 13.03 Distributions from Special Trust Account. Funds on deposit in the Special Trust Account shall be withdrawn by the Trustee and transferred only in accordance with this Section 13.03: (1) Event of Default. (a) For so long as an Event of Default has occurred and is continuing under this Indenture, no amounts shall be disbursed from the Special Trust Account, except as provided in clause (2) below. (i) If (x) any Event of Default has occurred and is continuing under Section 6.01 hereof or (y) any other Event of Default has occurred and is continuing that results in the acceleration of the payment of principal, interest, premium, if any, and Liquidated Damages, if any, pursuant to the terms of this Indenture: (a) The Trustee may, without notice to the Company except as required by applicable law and at any time or from time to time, liquidate all Collateral and transfer all proceeds thereof to the Paying Agent to apply such funds in accordance with Section 6.02 of this Indenture. (b) The Trustee may also, in addition to the other rights and remedies provided for herein, exercise in respect of the Collateral all the rights and remedies of a secured party upon default under the UCC in effect at that time in the 82 State of New York (the "New York UCC") (whether or not the New York UCC applies to the affected Collateral), and may also, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sales, at any of the Trustee's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. The Company agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' notice to the Company of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (c) Any cash held by the Trustee as Collateral and all net cash proceeds received by the Trustee in respect of any sale or liquidation of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Trustee, be held by the Trustee as collateral for, and then or at any time thereafter be applied (after payment of any costs and expenses incurred in connection with any sale, liquidation or disposition of or realization upon the Collateral and the payment of any amounts payable to the Trustee) in whole or in part by the Trustee for the equal and ratable benefit of the Holders of the Notes against all or any part of the Secured Obligations in such order as the Trustee shall elect. Any surplus of such cash or cash proceeds held by the Trustee and remaining after payment in full of all the Secured Obligations and the costs and expenses incurred by and amounts payable to the Trustee hereunder shall be paid over to the Company. (2) Special Mandatory Redemption. (a) If the Trustee receives a notice of Mandatory Redemption from the Company or if the Trustee does not receive a notice to the effect described in clause (b) below on or before the Deadline Date, the Trustee shall, without notice to the Company except as required by applicable law and at any time or from time to time, liquidate all Collateral and transfer all proceeds thereof to the Paying Agent for payment of the Mandatory Redemption Price to Holders on the Mandatory Redemption Date. If the cash proceeds of the Collateral are less than the Mandatory Redemption Price, the Company shall be obligated to deliver to the Paying Agent, on or before the Mandatory Redemption Date, an amount equal to the deficiency. (b) If the Company delivers to the Trustee written notice that the closing of the Acquisition will occur on or prior to the Deadline Date, the Trustee shall transfer the Collateral to the Company as set forth in Section 13.04(4)(a) at or prior to 1:00 p.m., New York City time, on the day that is no later than one Business Day of receipt of an Officer's Certificate certifying to the Trustee that (A) the Company, Tilia and Alexander Schilling propose to consummate the Acquisition pursuant to the terms of the Asset Purchase Agreement, as it may be amended, concurrently with the release of the Pledged Property, (B) the terms of the transactions to be entered into conform in all material respects to the description thereof contained in the Offering Memorandum, subject only to any changes provided for or contemplated in the Offering Memorandum or otherwise permitted pursuant to the terms of such Asset Purchase Agreement, (C) all conditions to the closing of the Acquisition have been satisfied or waived, (D) immediately following such release (and, in any event, within one Business Day thereafter) such 83 funds will be used as set forth in the Offering Memorandum under the caption "Use of Proceeds" and (E) immediately following such release and the application of such funds as set forth in the Offering Memorandum under the caption "Use of Proceeds," no Default or Event of Default will exist under this Indenture. (3) Investment Income. All investment income earned on amounts on deposit in the Special Trust Account shall be added to the Pledged Property. (4) Wire Transfer. (a) All funds distributed from the Special Trust Account to the Company shall be transferred by wire transfer of immediately available funds to the following account: ABA No.: 111000012 Account No.: 3752171695 at Bank of America Account Name: Alltrista Corporation Attention: Desiree DeStefano (b) All funds distributed from the Special Trust Account to the Paying Agent for payment on the Notes shall be transferred by wire transfer of immediately available funds to the following account: THE BANK OF NEW YORK ABA No.: 021000018 GLA No.: 111-565 Trust A/C No. 072645 A/C Name: Corp. Fin Debt Service a/c Attention: Julie Salovitch-Miller 212-328-7629 (5) Written Instructions; Certificates. The Company shall, upon request by the Trustee, execute and deliver to the Trustee such additional written instructions and certificates hereunder as may be reasonably required by the Trustee to give effect to this Section 13.03. Section 13.04 Termination of Security Interest. Upon consummation of the Acquisition, the security interest evidenced by this Article 13 in any Collateral remaining in the Special Trust Account will terminate and be of no further force and effect. Furthermore, upon the release of any Collateral from the Special Trust Account in accordance with the terms of this Article 13, whether upon release of such Collateral to the Paying Agent for payment to the Holders of the Notes of the Mandatory Redemption Price pursuant to Section 13.03(2)(a), to the Company pursuant to Section 13.03(4)(a), or otherwise, the security interest evidenced by this Article 13 in such Collateral so released will terminate and be of no further force and effect. Section 13.05 Attorneys-in-Fact. The Company hereby irrevocably appoints the Trustee as the Company's attorney-in-fact, coupled with an interest, with full authority in the place and stead of the Company and in the name of the Company or otherwise, from time to time in the Trustee's discretion to take any action and to execute any instrument that the Trustee may deem necessary or advisable to accomplish the purposes of this Article 13, including, without limitation, to receive, endorse and collect all instruments made payable to the Company representing any distribution in respect of the Collateral or any part thereof and to give full 84 discharge for the same, and the expenses of the Trustee incurred in connection therewith shall be payable by the Company. Section 13.06 Trustee May Perform. Without limiting the authority granted under Section 13.05 hereof, if the Company fails to perform any agreement contained herein, the Trustee may, but shall not be obligated to, itself perform, or cause performance of, such agreement, and the expenses of the Trustee incurred in connection therewith shall be payable by the Company and shall be secured by the Collateral. Section 13.07 Representations, Warranties and Agreements. (a) Upon the delivery to the Trustee of the Collateral, the pledge of the Collateral pursuant to this Article 13 creates a valid and perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations for the benefit of the Trustee and the Holders of the Notes, enforceable as such against all creditors of each of them and any persons purporting to purchase any of the Collateral from each of them. (b) The pledge of the Collateral pursuant to this Article 13 is not prohibited by any applicable law or governmental regulation, release, interpretation or opinion of the Board of Governors of the Federal Reserve System or other regulatory agency (including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System). (c) All information set forth herein relating to the Collateral is accurate and complete in all material respects. ARTICLE 14. MISCELLANEOUS Section 14.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss.318(c), the imposed duties will control. Section 14.02 Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company and/or any Guarantor: Alltrista Corporation Suite B-302 555 Theodore Fremd Avenue Rye, NY 10580 Facsimile: (914) 967-9405 Attention: Ian G.H. Ashken 85 With a copy to: Willkie Farr & Gallagher 787 Seventh Avenue New York, NY 10019 Facsimile: (212) 728-8111 Attention: William J. Grant If to the Trustee: The Bank of New York 101 Barclay Street New York, NY 10268 Telecopier No.: (212)896-7298 Attention: Corporate Trust Administration The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication will also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time. Section 14.03 Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). Section 14.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 14.05 hereof) stating that, in the opinion 86 of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 14.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 14.05 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss. 314(a)(4)) must comply with the provisions of TIA ss. 314(e) and must include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 14.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 14.07 No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Subsidiary Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. Section 14.08 Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 14.09 No Adverse Interpretation of Other Agreements. 87 This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 14.10 Successors. All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successors. All agreements of each Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 11.06. Section 14.11 Severability. In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Section 14.12 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement. Section 14.13 Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof. [Signatures on following pages] 88 SIGNATURES Dated as of April 24, 2002 ALLTRISTA CORPORATION By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Vice Chairman, Chief Financial Officer and Secretary ALLTRISTA NEWCO CORPORATION By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary QUOIN CORPORATION By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer HEARTHMARK, INC. By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA PLASTICS CORPORATION By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary 89 ALLTRISTA ZINC PRODUCTS, L.P. By: Alltrista Newco Corporation, its General Partner By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA ACQUISITION I, INC. By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA ACQUISITION II, INC. By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA ACQUISITION III, INC. By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary PENN VIDEO, INC. By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary 90 LAFAYETTE STEEL & ALUMINUM CORPORATION By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary CASPERS TIN PLATE COMPANY By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary UNIMARK PLASTICS, INC. By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary LUMENX CORPORATION By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA UNIMARK, INC. By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary TRIENDA CORPORATION By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary 91 THE BANK OF NEW YORK By: /s/ Julie Salovitch-Miller ------------------------------------- Name: Julie Salovitch-Miller Title: Vice Predieent 92 SCHEDULE I SCHEDULE OF GUARANTORS The following schedule lists each Guarantor under the Indenture as of the date of the Indenture: Alltrista Newco Corporation Quoin Corporation Hearthmark, Inc.* Alltrista Plastics Corporation** Alltrista Zinc Products, L.P.*** Alltrista Acquisition I, Inc. Alltrista Acquisition II, Inc. Alltrista Acquisition III, Inc. Penn Video, Inc. Lafayette Steel & Aluminum Corporation Caspers Tin Plate Company Unimark Plastics, Inc. LumenX Corporation Alltrista Unimark, Inc. TriEnda Corporation * (DBA) Alltrista Consumer Products Company ** (DBA) Alltrista Unimark Plastics Company and Alltrista Industrial Plastics Company *** (DBA) Alltrista Zinc Products Company I-1 EXHIBIT A [Face of Note] - -------------------------------------------------------------------------------- CUSIP/CINS ____________ 9 3/4% Senior Subordinated Notes due 2012 No. ___ $____________ ALLTRISTA CORPORATION promises to pay to CEDE & CO. or registered assigns, the principal sum of Dollars on _____________, 2012. Interest Payment Dates: ____________ and ____________ Record Dates: ____________ and ____________ Dated: _____, 20__ ALLTRISTA CORPORATION By: ------------------------------------- Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: THE BANK OF NEW YORK, as Trustee By: ------------------------------ Authorized Signatory - -------------------------------------------------------------------------------- A-1 [Back of Note] 9 3/4% Senior Subordinated Notes due 2012 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. (1) INTEREST. Alltrista Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 9 3/4% per annum from April 24, 2002 until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages, if any, semi-annually in arrears on May 1 and November 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be the first of May 1 or November 1 to occur after the date of issuance, unless such May 1 or November 1 occurs within one calendar month of such date of issuance, in which case the first Interest Payment Date shall be the second of May 1 or November 1 to occur after the date of issuance. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. (2) METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the April 15 or October 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes and any other Notes if any Holder of $1.0 million or more in aggregate principal amount of such Notes has provided wire transfer instructions to the Company or the Paying Agent for that purpose. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. (3) PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying A-2 Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. (4) INDENTURE. The Company issued the Notes under an Indenture dated as of April 24, 2002 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company unlimited in aggregate principal amount. (5) OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company will not have the option to redeem the Notes prior to May 1, 2007. Thereafter, the Company will have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on May 1 of the years indicated below: Year Percentage ---- ---------- 2007.............................................. 104.875% 2008.............................................. 103.250% 2009.............................................. 101.625% 2010 and thereafter............................... 100.000% (b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to May 1, 2005, the Company may redeem Notes with the net proceeds of a public equity offering at a redemption price equal to 109.750% of the aggregate principal amount thereof; provided that at least 65% in aggregate principal amount of the Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption and that such redemption occurs within 45 days of the date of the closing of such public equity offering. (6) SPECIAL MANDATORY REDEMPTION. (a) In the event that (i) the Acquisition is not consummated on or prior to July 15, 2002 (the "Deadline Date"), (ii) the Company elects to abandon the Acquisition on or prior to the Deadline Date or (iii) the Asset Purchase Agreement is terminated on or prior to the Deadline Date, the Company shall redeem on the applicable Mandatory Redemption Date all the Notes at a redemption price equal to 101% of the principal amount thereof, together with accrued and unpaid interest thereon to the date of redemption (the "Mandatory Redemption Price") (the "Mandatory Redemption"). "Mandatory Redemption Date" means (a) July 15, 2002, if the Acquisition has not been consummated on or prior to the Deadline Date; and (b) the 5th Business Day following the occurrence of an event described in clause (ii) or (iii) above. After the occurrence of the event triggering such redemption, notice of Mandatory Redemption shall be mailed promptly to the Trustee and each Holder of Notes at its registered address. (b) Concurrently with the closing of the offering of the Notes, the Company shall deposit the net proceeds received from the sale of the Notes (such proceeds, the "Pledged A-3 Property") with the Trustee for credit to a special trust account established under Section 13.01 of the Indenture. The Pledged Property may be invested at the direction of the Company in Cash Equivalents, and all income earned shall be added to the Pledged Property. (c) If the Trustee receives a notice of Mandatory Redemption from the Company or if the Trustee does not receive notice from the Company that the closing of the Acquisition will occur on or prior to the Deadline Date and an Officers' Certificate setting forth those representation required by the Indenture on or before the Deadline Date, the Trustee shall release to the Paying Agent the Pledged Property in cash for payment of the Mandatory Redemption Price to Holders on the Mandatory Redemption Date. If the cash proceeds of the Pledged Property are less than the Mandatory Redemption Price, the Company shall be obligated to deliver to the Paying Agent, on or before the Mandatory Redemption Date, an amount equal to the deficiency. (d) If the Company delivers to the Trustee written notice that the closing of the Acquisition will occur on or prior to the Deadline Date, the Trustee shall transfer the Collateral to the Company upon presentation of an Officer's Certificate certifying to the Trustee that (A) the Company, Tilia and Alexander Schilling propose to consummate the Acquisition pursuant to the terms of the Asset Purchase Agreement, as it may be amended, concurrently with the release of the Pledged Property, (B) the terms of the transactions to be entered into conform in all material respects to the description thereof contained in the Offering Memorandum, subject only to any changes provided for or contemplated in the Offering Memorandum or otherwise permitted pursuant to the terms of such Asset Purchase Agreement, (C) all conditions to the closing of the Acquisition have been satisfied or waived, (D) immediately following such release (and, in any event, within one Business Day thereafter) such funds will be used as set forth in the Offering Memorandum under the caption "Use of Proceeds" and (E) immediately following such release and the application of such funds as set forth in the Offering Memorandum under the caption "Use of Proceeds," no Default or Event of Default will exist under this Indenture. (7) MANDATORY REDEMPTION. Except as set forth in Paragraph 6 above, the Company will not be required to make mandatory redemption or sinking fund payments with respect to the Notes. (8) REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company will be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 10 days following any Change of Control, the Company will mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, within 30 days of each date on which the aggregate amount of Excess Proceeds exceeds $5 million, the Company will commence an offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") pursuant to Section 3.10 of the Indenture to purchase the maximum principal amount of Notes (including any Additional Notes) and other pari passu Indebtedness that may be purchased A-4 out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) and other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness surrendered by holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. (9) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. (10) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. (11) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. (12) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class, and any existing default or compliance with any provision of the Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 of the Indenture (including the related definitions) in a manner that does not materially adversely affect any Holder, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, to provide for the A-5 Issuance of Additional Notes in accordance with the limitations set forth in the Indenture, or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Subsidiary Guarantee with respect to the Notes. (13) DEFAULTS AND REMEDIES. Events of Default include: (i) the Company defaults for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes whether or not prohibited by the subordination provisions of the Indenture; (ii) the Company defaults in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes (including, but not limited to, amounts due in connection with Mandatory Redemption), whether or not prohibited by the subordination provisions of the Indenture, (iii) the Company or any of its Subsidiaries fails to comply with the provisions of Section 4.10 (other than the requirement that the resolution of the Board of Directors pursuant to clause (2) of the first paragraph of Section 4.10 be set forth in an Officers' Certificate delivered to the Trustee, with respect to which the Event of Default described in clause (5) of the paragraph will apply), 4.15 or 5.01 of the Indenture; (iv) the Company or any of its Subsidiaries fails to comply with the provisions of Section 4.07 or 4.09 of the Indenture such failure continues for 30 days; (v) the Company or any of its Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in the Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (vi) default under certain other agreements relating to Indebtedness of the Company which default results in the acceleration of such Indebtedness prior to its express maturity; (vii) certain final judgments against the Company or any Restricted Subsidiary for the payment of money that remain undischarged for a period of 60 days; (viii) certain events of bankruptcy or insolvency with respect to the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and (ix) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor or any Person acting on its behalf shall deny or disaffirm its obligations under such Guarantor's Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages on, or the principal of, the Notes; provided, however, that at any time after a declaration of acceleration under the Indenture, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration and its consequences given certain circumstances as provided in the Indenture. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. A-6 (14) SUBORDINATION. Payment of principal, interest and premium and Liquidated Damages, if any, on the Notes is subordinated to the prior payment of Senior Debt on the terms provided in the Indenture. (15) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. (16) NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any of the Guarantors, as such, will not have any liability for any obligations of the Company or such Guarantor under the Notes, the Subsidiary Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. (17) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. (18) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (19) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all the rights set forth in the Registration Rights Agreement dated as of April 24, 2002, between the Company, the Guarantors and the other parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes will have the rights set forth in one or more registration rights agreements, if any, among the Company, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement"). (20) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Alltrista Corporation Suite B-302 555 Theodore Fremd Avenue Rye, NY 10580 Attention: Ian G.H. Ashken A-7 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: ----------------------------------- (Insert assignee's legal name) - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: --------------------------- Your Signature: ------------------------------ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: --------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-8 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: - Section 4.10 - Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $ ---------------------- Date: ------------------------------- Your Signature: ------------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ----------------------- Signature Guarantee*: --------------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-9 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE* The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount Amount of decrease Amount of increase in of this Global Note Signature of in Principal Amount Principal Amount following such authorized officer of of decrease of Trustee or Date of Exchange this Global Note this Global Note (or increase) Custodian - ---------------- ---------------- ---------------- ------------- ---------
* This schedule should be included only if the Note is issued in global form. A-10 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Alltrista Corporation Suite B-302 555 Theodore Fremd Avenue Rye, NY 10580 The Bank of New York 101 Barclay Street New York, NY 10268 Attention: Corporate Trust Administration Re: 9 3/4% Senior Subordinated Notes due 2012 Reference is hereby made to the Indenture, dated as of April 24, 2002 (the "Indenture"), among Alltrista Corporation, as issuer (the "Company"), the Guarantors named on the signature pages thereto and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ]CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii) the transaction is not part of a plan or scheme to evade the registration B-1 requirements of the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE RESTRICTED GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or B-2 Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ----------------------------------------- [Insert Name of Transferor] By: -------------------------------------- Name: Title: Dated: -------------------------- B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) a beneficial interest in the: (i) 144A Global Note (CUSIP _________), or (ii) Regulation S Global Note (CUSIP _________), or (b) a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) a beneficial interest in the: (i) 144A Global Note (CUSIP _________), or (ii) Regulation S Global Note (CUSIP _________), or (iii) Unrestricted Global Note (CUSIP _________); or (b) a Restricted Definitive Note; or (c) an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Alltrista Corporation Suite B-302 555 Theodore Fremd Avenue Rye, NY 10580 The Bank of New York 101 Barclay Street New York, NY 10268 Attention: Corporate Trust Administration Re: 9 3/4% Senior Subordinated Notes due 2012 (CUSIP ____________) Reference is hereby made to the Indenture, dated as of April 24, 2002 (the "Indenture"), among Alltrista Corporation, as issuer (the "Company"), the Guarantors named on the signature pages thereto and The Bank of New York, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in C-1 accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note, Regulation S Global Note, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ----------------------------------------- [Insert Name of Transferor] By: -------------------------------------- Name: Title: Dated: -------------------------------- C-2 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Alltrista Corporation Suite B-302 555 Theodore Fremd Avenue Rye, NY 10580 The Bank of New York 101 Barclay Street New York, NY 10268 Attention: Corporate Trust Administration Re: 9 3/4% Senior Subordinated Notes due 2012 Reference is hereby made to the Indenture, dated as of April 24, 2002 (the "Indenture"), among Alltrista Corporation, as issuer (the "Company"), the guarantors named on the signature pages thereto and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any Person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. D-1 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ----------------------------------------- [Insert Name of Accredited Investor] By: -------------------------------------- Name: Title: Dated: -------------------------------- D-2 EXHIBIT E FORM OF SUBSIDIARY GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of April 24, 2002 (the "Indenture") among Alltrista Corporation, (the "Company"), the Guarantors listed on Schedule I thereto and The Bank of New York, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium and Liquidated Damages, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. [NAME OF GUARANTOR(S)] By: -------------------------------------- Name: Title: E-1 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, 200__, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Alltrista Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and The Bank of New York, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of April 24, 2002, providing for the issuance of 9 3/4% Senior Subordinated Notes due 2012 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Subsidiary Guarantee and in the Indenture, including but limited to Article 11 thereof. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 5. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE F-1 BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. F-2 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written. Dated: _______________, 20___ [GUARANTEEING SUBSIDIARY] By: ------------------------------------ Name: Title: ALLTRISTA CORPORATION By: ------------------------------------ Name: Title: [EXISTING GUARANTORS] By: ------------------------------------ Name: Title: THE BANK OF NEW YORK, as Trustee By: ------------------------------------ Authorized Signatory F-3 EX-10.1 4 file003.txt CREDIT AGREEMENT =============================================================================== CREDIT AGREEMENT Dated as of April 24, 2002 among ALLTRISTA CORPORATION as the Borrower, BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, CANADIAN IMPERIAL BANK OF COMMERCE, as Syndication Agent, NATIONAL CITY BANK OF INDIANA, as Documentation Agent and The Lenders Party Hereto BANC OF AMERICA SECURITIES LLC and CIBC WORLD MARKETS CORP., as Co-Lead Arrangers and Co-Book Managers =============================================================================== TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01 Defined Terms............................................................................................1 1.02 Other Interpretive Provisions...........................................................................28 1.03 Accounting Terms........................................................................................28 1.04 Rounding................................................................................................29 1.05 References to Agreements and Laws.......................................................................29 ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS 2.01 Term Loan...............................................................................................30 2.02 Revolving Loans.........................................................................................30 2.03 Borrowings, Conversions and Continuations of Revolving Loans; Conversions and Continuations of Segments of the Term Loan...............................................................................30 2.04 Letters of Credit.......................................................................................32 2.05 Swing Line Loans........................................................................................39 2.06 Prepayments.............................................................................................42 2.07 Reduction or Termination of Revolving Credit Commitments................................................45 2.08 Repayment of Loans......................................................................................45 2.09 Interest................................................................................................47 2.10 Fees....................................................................................................47 2.11 Computation of Interest and Fees........................................................................48 2.12 Evidence of Debt........................................................................................48 2.13 Payments Generally......................................................................................48 2.14 Sharing of Payments.....................................................................................51 ARTICLE II A SECURITY 2A.01 Security 51 2A.02 Further Assurances 52 2A.03 Information Regarding Collateral........................................................................53 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes...................................................................................................53 3.02 Illegality..............................................................................................54 3.03 Inability to Determine Rates............................................................................55 3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on........................................55 3.05 Funding Losses..........................................................................................56 3.06 Matters Applicable to all Requests for Compensation.....................................................56
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Page ------ 3.07 Survival................................................................................................56 ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS 4.01 Conditions of Initial Credit Extension..................................................................57 4.02 Conditions to all Credit Extensions and Conversions and Continuations...................................61 ARTICLE V REPRESENTATIONS AND WARRANTIES 5.01 Existence, Qualification and Power; Compliance with Laws................................................62 5.02 Authorization; No Contravention.........................................................................62 5.03 Governmental and Third-Party Authorization..............................................................63 5.04 Binding Effect..........................................................................................63 5.05 Financial Statements; No Material Adverse Effect........................................................63 5.06 Litigation..............................................................................................64 5.07 No Default..............................................................................................64 5.08 Ownership of Property; Liens............................................................................64 5.09 Environmental Compliance................................................................................64 5.10 Insurance...............................................................................................65 5.11 Taxes...................................................................................................65 5.12 ERISA Compliance........................................................................................65 5.13 Subsidiaries............................................................................................66 5.14 Margin Regulations; Investment Company Act; Public Utility Holding Company Act..........................66 5.15 Disclosure..............................................................................................66 5.16 Intellectual Property; Licenses, Etc....................................................................66 5.17 Consummation of the Transaction.........................................................................66 5.18 Solvency................................................................................................67 ARTICLE VI AFFIRMATIVE COVENANTS 6.01 Financial Statements....................................................................................68 6.02 Certificates; Other Information.........................................................................68 6.03 Notices.................................................................................................69 6.04 Payment of Obligations..................................................................................70 6.05 Preservation of Existence, Etc..........................................................................71 6.06 Maintenance of Properties...............................................................................71 6.07 Maintenance of Insurance................................................................................71 6.08 Compliance with Laws and Contractual Obligations........................................................71 6.09 Books and Records.......................................................................................72 6.10 Inspection Rights.......................................................................................72 6.11 Compliance with ERISA...................................................................................72
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PAGE ---- 6.12 Use of Proceeds.........................................................................................72 6.13 Maintain Principal Line of Business.....................................................................72 6.14 New Subsidiaries and Pledgors...........................................................................72 6.15 Further Assurances......................................................................................74 ARTICLE VII NEGATIVE COVENANTS 7.01 Liens...................................................................................................75 7.02 Investments.............................................................................................76 7.03 Indebtedness............................................................................................77 7.04 Fundamental Changes.....................................................................................78 7.05 Dispositions............................................................................................78 7.06 Lease Obligations.......................................................................................79 7.07 Restricted Payments.....................................................................................79 7.08 ERISA...................................................................................................80 7.09 Change in Nature of Business............................................................................80 7.10 Transactions with Affiliates............................................................................80 7.11 Burdensome Agreements...................................................................................80 7.12 Use of Proceeds.........................................................................................80 7.13 Financial Covenants.....................................................................................81 7.14 Acquisitions............................................................................................82 7.15 Capital Expenditures....................................................................................82 7.16 Change in Fiscal Year...................................................................................83 7.17 Limitation on Cash Payment of Earn-Outs.................................................................83 7.18 Foreign Subsidiaries....................................................................................83 7.19 Subordinated Indebtedness...............................................................................83 7.20 Status of Borrower......................................................................................83 7.21 Wilbert Note............................................................................................84 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES 8.01 Events of Default.......................................................................................84 8.02 Remedies Upon Event of Default..........................................................................86 ARTICLE IX ADMINISTRATIVE AGENT 9.01 Appointment and Authorization of Administrative Agent...................................................86 9.02 Delegation of Duties....................................................................................87 9.03 Liability of Administrative Agent.......................................................................87 9.04 Reliance by Administrative Agent........................................................................88 9.05 Notice of Default.......................................................................................88 9.06 Credit Decision; Disclosure of Information by Administrative Agent......................................88
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Page ---- 9.07 Indemnification of Administrative Agent.................................................................89 9.08 Administrative Agent in its Individual Capacity.........................................................89 9.09 Successor Administrative Agent..........................................................................90 9.10 Other Agents; Lead Managers.............................................................................90 ARTICLE X MISCELLANEOUS 10.01 Amendments, Etc.........................................................................................91 10.02 Notices and Other Communications; Facsimile Copies......................................................92 10.03 No Waiver; Cumulative Remedies..........................................................................93 10.04 Attorney Costs, Expenses and Taxes......................................................................93 10.05 Indemnification by the Borrower; Limitation of Liability................................................94 10.06 Payments Set Aside......................................................................................95 10.07 Successors and Assigns..................................................................................95 10.08 Confidentiality.........................................................................................98 10.09 Set-off.................................................................................................99 10.10 Interest Rate Limitation................................................................................99 10.11 Counterparts............................................................................................99 10.12 Integration.............................................................................................99 10.13 Survival of Representations and Warranties.............................................................100 10.14 Severability...........................................................................................100 10.15 Tax Forms..............................................................................................100 10.16 Governing Law..........................................................................................101 10.17 Waiver of Right to Trial by Jury.......................................................................101 10.18 Entire Agreement.......................................................................................102 SCHEDULES 1.01(a) Commitments and Pro Rata Shares 1.01(b) Tilia Indebtedness 2A.03 Collateral Information 5.02 Transaction Document Matters 5.06 Litigation 5.09 Environmental Matters 5.12 ERISA Matters 5.13 Subsidiaries and Other Equity Investments 5.16 Intellectual Property Matters 5.17(a) Waived Transaction Conditions 5.17(b) Outstanding Transaction Conditions 7.01 Existing Liens 7.02 Existing Investments 7.03 Existing Indebtedness 7.06 Existing Leases
TABLE OF CONTENTS Page ---- 10.02 Lending Offices, Addresses for Notices EXHIBITS FORM OF A-1 Revolving Loan Notice A-2 Term Loan Interest Rate Selection Notice B Swing Line Revolving Loan Notice C-1 Term Loan Note C-2 Revolving Loan Note C-3 Swing Line Note D Compliance Certificate E Assignment and Assumption F Guaranty CREDIT AGREEMENT This CREDIT AGREEMENT ("Agreement") is entered into as of April 24, 2002, among ALLTRISTA CORPORATION, a Delaware corporation (the "Borrower"), each lender from time to time party hereto (collectively, the "Lenders" and individually, a "Lender"), and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, CANADIAN IMPERIAL BANK OF COMMERCE, as Syndication Agent, and NATIONAL CITY BANK OF INDIANA, as Documentation Agent. The Borrower has requested that the Lenders provide a senior term loan facility and a senior revolving credit facility, and the Lenders are willing to do so on the terms and conditions set forth herein. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings set forth below: "Accounts Receivable Purchase Agreement" means that certain Accounts Receivable Purchase Agreement dated as of July 25, 2000 by and between Tilia, Inc. and Longacre Master Fund, Ltd., which agreement is assigned to the Borrower or one of the Guarantors in connection with the Transaction. "Acquisition" means the acquisition of (i) a controlling equity or other ownership interest in another Person (including the purchase of an option, warrant or convertible or similar type security to acquire such a controlling interest at the time it becomes exercisable by the holder thereof), whether by purchase of such equity or other ownership interest or upon exercise of an option or warrant for, or conversion of securities into, such equity or other ownership interest, or (ii) assets of another Person which constitute all or any material part of the assets of such Person or of a line or lines of business conducted by such Person. "Acquisition Adjustments" means the adjustments to certain financial terms and computations more particularly described in Section 1.03(c). "Administrative Agent" means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent. "Administrative Agent's Office" means the Administrative Agent's address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. A Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, power to vote 10% or more of the securities having ordinary voting power for the election of directors or managing general partners. "Agent/Arranger Fee Letter" has the meaning specified in Section 2.10(b). "Agent-Related Persons" means the Administrative Agent (including any successor administrative agent), together with its Affiliates (including, in the case of Bank of America in its capacity as the Administrative Agent, BAS), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Aggregate Commitments" means, as at the date of determination thereof, the sum of (a) the Aggregate Revolving Credit Commitments at such date plus (b) the Outstanding Amount with respect to the Term Loan at such date (or, in the event such measurement is made prior to the funding of the Term Loan pursuant to Section 2.01, the original principal amount of the Term Loan Facility). "Aggregate Revolving Credit Commitments" means, as at the date of determination thereof, the sum of all Revolving Credit Commitments of all Lenders at such date. "Agreement" means this Credit Agreement. "Applicable Margin" means, from time to time, the following percentages per annum, based upon the Total Leverage Ratio as set forth below:
- -------------- ------------------------------------------ -------------------- ------------------- ------------------ EURODOLLAR RATE LOANS AND LETTER COMMITMENT FEE PRICING LEVEL TOTAL LEVERAGE RATIO OF CREDIT FEES BASE RATE LOANS - -------------- ------------------------------------------ -------------------- ------------------- ------------------ - -------------- ------------------------------------------ -------------------- ------------------- ------------------ 1 Greater than 3.00 to 1.00 2.75% 1.50% 0.500% 2 Less than or equal to 3.00 to 1.00, but 2.50% 1.25% 0.500% greater than 2.50 to 1.00 3 Less than or equal to 2.50 to 1.00, but 2.25% 1.00% 0.500% greater than 2.00 to 1.00 4 Less than or equal to 2.00 to 1.00 2.00% 0.75% 0.375% - -------------- ------------------------------------------ -------------------- ------------------- ------------------
The Applicable Margin shall be established at the end of each fiscal quarter of the Borrower (each, a "Determination Date"). Any change in the Applicable Margin following each Determination Date shall be determined based upon the computation of the Total Leverage Ratio set forth in each Compliance Certificate furnished to the Administrative Agent pursuant to 2 Section 6.02(b), subject to review and approval of such computation by the Administrative Agent, and shall be effective commencing on the third Business Day following the date such certificate is received until the third Business Day following the date on which a new certificate is delivered or is required to be delivered, whichever shall first occur. From the Closing Date to the third Business Day following the date the certificate referred to in the preceding sentence for the fiscal period ended as at the first Determination Date is delivered or is required to be delivered (whichever shall first occur), the Applicable Margin shall be Pricing Level 1. Notwithstanding the provisions of the two preceding sentences, if the Borrower shall fail to deliver any such certificate within the time period required by Section 6.02(b), then the Applicable Margin shall be Pricing Level 1 from the date such certificate was due until the third Business Day following the date the appropriate certificate is so delivered. "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Arrangers" means BAS and CIBC World Markets Corp., each in its respective capacity as co-lead arranger and co-book manager. "Asset Purchase Agreement" means that certain Asset Purchase Agreement dated as of March 28, 2002, by and among the Sellers, Andrew H. Schilling and the Borrower, including all exhibits and schedules thereto, as amended by Amendment No. 1 dated as of April 24, 2002. "Assignment and Assumption" means an Assignment and Assumption substantially in the form of Exhibit E. "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel. "Attributable Indebtedness" means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital Lease. "Audited Financial Statements" means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2001, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto. "Bank of America" means Bank of America, N.A. "BAS" means Banc of America Securities LLC. "Base Rate" means for any day a fluctuating rate per annum equal to the Applicable Margin plus the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime 3 rate." Such prime rate is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced prime rate. Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan (including a Segment) bearing interest or to bear interest at the Base Rate. "Base Rate Segment" means a Segment bearing interest or to bear interest at the Base Rate. "Borrower" has the meaning set forth in the introductory paragraph hereto. "Borrowing" means any of (i) the borrowing under the Term Loan Facility, (ii) a Revolving Borrowing or (iii) a Swing Line Borrowing, as the context may require. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks are authorized or required to close under the Laws of, or are in fact closed in, the state where the Administrative Agent's Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in deposits in Dollars are conducted by and between banks in the London interbank market. "Capital Expenditures" means, with respect to the Borrower and its Subsidiaries, for any period the sum of (without duplication) (i) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower or any Subsidiary during such period for items that are capitalized that would be classified as "property, plant or equipment" or comparable items on the consolidated balance sheet of the Borrower and its Subsidiaries, including without limitation all transactional costs incurred in connection with such expenditures provided the same have been capitalized, excluding, however, the amount of any Capital Expenditures paid for with proceeds of casualty insurance as evidenced in writing and submitted to the Administrative Agent together with any Compliance Certificate delivered pursuant to Section 6.02(b), and (ii) with respect to any Capital Lease entered into by the Borrower or its Subsidiaries during such period, the present value of the lease payments due under such Capital Lease over the term of such Capital Lease applying a discount rate equal to the interest rate provided in such lease (or in the absence of a stated interest rate, that rate used in the preparation of the financial statements described in Section 6.01), all the foregoing in accordance with GAAP. "Capital Leases" means all leases which have been or should be capitalized in accordance with GAAP as in effect from time to time including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof. "Cash Collateralize" means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations plus all fees accrued or to be incurred in connection therewith, cash, deposit accounts and all balances therein, in an amount not less than the sum of such L/C Obligations and fees and all proceeds of the foregoing pursuant to documentation in form and substance satisfactory to the 4 Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Lenders) and to take all such other action as shall be necessary for the Administrative Agent to have "control" thereof within the meaning of the Uniform Commercial Code applicable thereto. Derivatives of such term shall have corresponding meaning. The Borrower hereby grants the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a Lien on all such cash and deposit account balances. Cash collateral shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America or other institutions satisfactory to it. "Change of Control" means, with respect to any Person, an event or series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), but excluding (x) any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan, and (y) Marlin Partners II, LP, Martin Franklin, Ian Ashken or any of them or any Person the Equity Securities of which are wholly owned by any of them (whether or not constituting a "group" for this purpose), becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "option right"), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 30% or more of the Equity Securities of such Person entitled to vote for members of the board of directors or equivalent governing body of such Person on a fully diluted basis (i.e., taking into account all such securities that such person or group has the right to acquire pursuant to any option right); or (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of such Person cease to be composed of individuals (who qualify under any one of the following) (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (c) Martin Franklin and Ian Ashken cease to hold executive management positions with the Borrower, unless either or both of them has been replaced in any such executive management position with a Person approved by the Required Lenders (including any successive approved replacements). "Closing Date" means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 4.01 (or, in the case of Section 4.01(b), waived by the Person entitled to receive the applicable payment). 5 "Code" means the Internal Revenue Code of 1986, as amended, and all regulations issued pursuant thereto. "Collateral" means, collectively, all property of the Borrower, any Subsidiary or any other Person in which the Administrative Agent or any Lender is granted a Lien under any Security Instrument as security for all or any portion of the Obligations or any other obligation arising under any Loan Document. "Compliance Certificate" means a certificate substantially in the form of Exhibit D. "Consolidated Current Assets" means all assets of the Borrower and its Subsidiaries (other than cash and cash equivalents) which would be classified as a current asset, all determined on a consolidated basis in accordance with GAAP. "Consolidated Current Liabilities" means all liabilities of the Borrower and its Subsidiaries which by their terms are payable within one year (but excluding all Consolidated Funded Indebtedness payable on demand or maturing not more than one year from the date of computation and the current portion of Indebtedness having a maturity date in excess of one year), all determined on a consolidated basis in accordance with GAAP. "Consolidated EBITDA" means, for any period, for the Borrower and its Subsidiaries, an amount equal to the sum of (a) Consolidated Net Income (net of up to $10,000,000 of nonrecurring gains not otherwise excluded in the calculation of Consolidated Net Income as used in this definition), (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in determining such Consolidated Net Income, (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, (e) the amount of nonrecurring expenses incurred after the Closing Date and during such period not to exceed $10,000,000, and (f) for any period including the first fiscal quarter of the Borrower in 2002, the amount of special charges (credits) and reorganization expenses not to exceed $6,126,000, all determined on a consolidated basis in accordance with GAAP, subject (in connection with the calculation of the Senior Leverage Ratio and the Total Leverage Ratio only) to Acquisition Adjustments and pro forma historical adjustments for the TriEnda Disposition. "Consolidated Fixed Charges" means, with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the sum of, without duplication, (i) Consolidated Interest Charges, and (ii) scheduled payments of Consolidated Funded Indebtedness (including without limitation Consolidated Funded Indebtedness consisting of the Seller Notes), all determined on a consolidated basis in accordance with GAAP. "Consolidated Funded Indebtedness" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the sum of, without duplication, (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, including without limitation all direct or Contingent Obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds and similar instruments, (b) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (c) Attributable Indebtedness in 6 respect of Capital Leases and Synthetic Lease Obligations, and (d) without duplication, all Contingent Obligations with respect to Indebtedness of the types specified in subsections (a), (b) and (c) above of Persons other than the Borrower or any Subsidiary, all of (a), (b), (c) and (d) above determined on a consolidated basis (as consolidated basis is determined in accordance with GAAP). For all purposes hereof, the Consolidated Funded Indebtedness of the Borrower or any Subsidiary shall include the foregoing Indebtedness in (a), (b), (c) and (d) above of any partnership or joint venture (other than a joint venture that is itself a corporation or a limited liability company) in which the Borrower or any Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary. "Consolidated Interest Charges" means, for any period, for the Borrower and its Subsidiaries, the sum of, without duplication, (a) all interest, premium payments, commissions, fees, charges and related expenses of the Borrower and its Subsidiaries in connection with Indebtedness (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, (b) the portion of rent expense of the Borrower and its Subsidiaries with respect to such period under Capital Leases that is treated as interest in accordance with GAAP and (c) the amount of payments in respect of Synthetic Lease Obligations that are in the nature of interest, all of (a), (b) and (c) above determined on a consolidated basis (as consolidated basis is determined in accordance with GAAP). "Consolidated Net Income" means, for any period, for the Borrower and its Subsidiaries, the net income of the Borrower and its Subsidiaries from continuing operations without giving effect to extraordinary net gains (except for the purpose of determining Consolidated Net Income as used in the computation of Excess Cash Flow and the computation set forth in Section 7.13(a)) or extraordinary net losses, but excluding from the determination of such net income (except for the purpose of determining Consolidated Net Income as used in the computation set forth in Section 7.13(a)) gains or losses from Dispositions of assets (other than in the ordinary course of business) whether or not extraordinary for that period, all determined on a consolidated basis in accordance with GAAP. "Consolidated Net Worth" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, Stockholders' Equity of the Borrower and its Subsidiaries on that date. "Consolidated Senior Indebtedness" means, as of any date on which the amount thereof is to be determined, the aggregate principal amount of all Consolidated Funded Indebtedness outstanding as of such date minus, to the extent otherwise included in Consolidated Funded Indebtedness, the aggregate principal amount of all Subordinated Indebtedness outstanding as of such date. "Consolidated Total Assets" means, as of any date on which the amount thereof is to be determined, the net book value of all assets of the Borrower and its Subsidiaries as determined on a consolidated basis in accordance with GAAP. "Consolidated Working Capital" means, as of any date on which the amount thereof is to be determined, the excess of Consolidated Current Assets over Consolidated Current Liabilities. 7 "Contingent Obligation" means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guarantying or having the economic effect of guarantying any Indebtedness or other obligation payable or performable by another Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring or holding harmless in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guarantying Person in good faith. "Continuation" and "Continue" mean, with respect to any Eurodollar Rate Loan, the continuation of such Eurodollar Rate Loan as a Eurodollar Rate Loan on the last day of the Interest Period for such Loan. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Conversion" and "Convert" mean the conversion of a Loan from one Type to another Type. "Cost of Acquisition" means, with respect to any Acquisition, as at the date of entering into any agreement therefor, the sum of the following (without duplication): (i) the value of the capital stock, warrants or options to acquire capital stock of the Borrower or any Subsidiary to be transferred in connection therewith, (ii) the amount of any cash and fair market value of other property (excluding property described in clause (i) and the unpaid principal amount of any debt instrument) given as consideration, (iii) the amount (determined by using the face amount or the amount payable at maturity, whichever is greater) of any Indebtedness incurred, assumed or acquired by the Borrower or any Subsidiary in connection with such Acquisition, (iv) all additional purchase price amounts in the form of earnouts and other contingent obligations that should be recorded on the financial statements of the Borrower and its Subsidiaries in accordance with GAAP, (v) all amounts paid in respect of covenants not to compete, consulting agreements that should be recorded on financial statements of the Borrower and its Subsidiaries in accordance with GAAP, (vi) the aggregate fair market value of all other consideration given by the Borrower or any Subsidiary in connection with such Acquisition, and (vii) out-of-pocket transaction costs for the services and expenses of attorneys, accountants and other consultants incurred in effecting such transaction, and other similar transaction costs so incurred and 8 capitalized in accordance with GAAP. For purposes of determining the Cost of Acquisition for any transaction, the capital stock of the Borrower shall be valued (I) in the case of capital stock that is then designated as a national market system security by the National Association of Securities Dealers, Inc. ("NASDAQ") or is listed on a national securities exchange, the average of the last reported bid and ask quotations or the last prices reported thereon, and (II) with respect to any other shares of capital stock, as determined by the Board of Directors of the Borrower and, if requested by the Administrative Agent, determined to be a reasonable valuation by the independent public accountants referred to in Section 6.01(a). "Credit Extension" means each of a Borrowing or an L/C Credit Extension. "Debtor Relief Laws" means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally. "Default" means any event or circumstance that, with the giving of any notice, the passage of time, or both, would be an Event of Default. "Default Rate" means an interest rate equal to the Base Rate plus 2% per annum or, if lesser, the maximum rate permitted by applicable Laws; provided, however, that with respect to Eurodollar Rate Loans, until the end of the Interest Period during which the Default Rate is first applicable, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such Loan plus 2% per annum, and thereafter, the Base Rate plus 2% per annum, or in each case if lesser, the maximum rate permitted by applicable Laws. "Defaulting Lender" means, at any time of determination thereof, any Lender that has failed to fund any portion of the Revolving Loans, the Term Loan, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder, except to the extent that any such failure to fund is based on a good-faith dispute about such Lender's obligation so to fund, of which dispute the Administrative Agent has been informed in writing in reasonable detail. "Direct Foreign Subsidiary" means a Subsidiary other than a Domestic Subsidiary a majority of whose Voting Securities, or a majority of whose Subsidiary Securities, are owned by the Borrower or a Domestic Subsidiary. "Disposition" or "Dispose" means the sale, transfer, license or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. "Dollar" and "$" means lawful money of the United States of America. "Domestic Subsidiary" means any Subsidiary of the Borrower organized under the laws of the United States of America, any state or territory thereof or the District of Columbia. 9 "Earn-Out" means the obligation of the Borrower or any of its Subsidiaries or Affiliates to pay, after the initial closing of the Transaction, any amount in the form or nature of post-closing contingent consideration to the Sellers or Xeme Capital Corporation, a Cook Islands entity (or any of their respective assignees), pursuant to Section 3.2 of the Asset Purchase Agreement or any other provision of any Transaction Document. "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent, the L/C Issuer and the Swing Line Lender, and (ii) unless a Default or Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, "Eligible Assignee" shall not include the Borrower or any of the Borrower's Affiliates or Subsidiaries. "Eligible Securities" means the following obligations and any other obligations previously approved in writing by the Administrative Agent: (a) Government Securities; (b) obligations of any corporation organized under the laws of any state of the United States of America or under the laws of any other nation, payable in the United States of America, expressed to mature not later than 92 days following the date of issuance thereof and rated in an investment grade rating category by S&P and Moody's; (c) interest bearing demand or time deposits issued by any Lender or certificates of deposit maturing within one year from the date of issuance thereof and issued by a bank or trust company organized under the laws of the United States or of any state thereof having capital surplus and undivided profits aggregating at least $400,000,000 and being rated "A" or better by S&P or "A" or better by Moody's; and (d) Repurchase Agreements. "Environmental Laws" means all Laws relating to environmental matters applicable to any property. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Securities" means, with respect to any Person at any time, equity securities issued by such Person, including without limitation any security not constituting Indebtedness exchangeable, exercisable or convertible for or into equity securities of such Person both at the 10 time of issuance of such equity security and at the time of each such exchange, exercise or conversion which results in the receipt of Net Proceeds therefrom by such Person. "ERISA" means the Employee Retirement Income Security Act of 1974 and all regulations issued pursuant thereto. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate. "Escrow Agreement" means, individually or collectively as the context may indicate, each of the Long Term Escrow Agreement (as defined in the Asset Purchase Agreement) and the Sellers' Escrow Agreement (as defined in the Asset Purchase Agreement), each of which is executed in connection with, and attached as Exhibit B-2 and Exhibit B-1 respectively to, the Asset Purchase Agreement. "Eurodollar Rate" means for any Interest Period with respect to any Eurodollar Rate Loan, a rate per annum determined by Administrative Agent pursuant to the following formula: Interbank Offered Rate Eurodollar Rate = ------------------------------------ 1.00 - Eurodollar Reserve Percentage Where "Interbank Offered Rate" means, for such Interest Period: (i) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or 11 (ii) if the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (iii) if the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, Continued or Converted by Bank of America in its capacity as a Lender and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch or London Affiliate to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error. "Eurodollar Rate Loan" means a Loan (including a Segment) bearing interest or to bear interest at the Eurodollar Rate. "Eurodollar Rate Segment" means a Segment bearing interest or to bear interest at the Eurodollar Rate. "Eurodollar Reserve Percentage" means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. The determination of the Eurodollar Reserve Percentage by the Administrative Agent shall be conclusive in the absence of manifest error. "Event of Default" means any of the events or circumstances specified in Article VIII. "Excess Cash Flow" means, with respect to the Borrower and its Subsidiaries for any fiscal year, the difference of (i) Consolidated EBITDA for such period (including therein any net gain or loss, as applicable, of an extraordinary nature otherwise excluded from the calculation thereof in the definition of "Consolidated Net Income"), minus (ii) the sum of (A) the change in Consolidated Working Capital as at the end of such fiscal year; provided the positive change in Consolidated Working Capital shall not exceed $10,000,000 for any fiscal year; plus (B) Capital Expenditures for such period plus (C) Consolidated Fixed Charges for such period plus (D) taxes paid in cash during such period plus (E) the aggregate amount of any optional prepayments made 12 by the Borrower pursuant to Section 2.06 hereof during such period, the aggregate amount of prepayments made in connection with required reductions of the Aggregate Revolving Credit Commitment during such period and the aggregate amount of required repayments of principal of the Term Loan during such period. "Exchange Notes" has the meaning given to such term in the Subordinated Indenture. "Exchange Offer" has the meaning given to such term in the Subordinated Indenture. "Executive Loan Program" means the Alltrista Corporation 2002 Executive Loan Program effective January 2, 2002, pursuant to which the Borrower may make loans to executive officers of the Borrower solely for the purpose of financing exercises by such executive officers of incentive stock options and non-qualified stock options granted under various stock options plans maintained by the Borrower, as amended from time to time except without giving effect to any amendment to the limited stated purpose for which such loans can be made and their proceeds used. "Existing Credit Facility" means that certain Credit Agreement dated as of April 26, 1999 among the Borrower, the lenders named therein and Bank One Indiana, N.A. (as successor by merger to NBD Bank, N.A.), as agent, as amended through the Closing Date. "Facility Share" means, with respect to each Lender at any date of computation thereof, the percentage (carried out to the ninth decimal place) of the Aggregate Commitments represented by the sum of (i) the Revolving Credit Commitment of such Lender on such date and (ii) such Lender's Pro Rata Term Share (expressed in Dollars) of the Outstanding Amount of the Term Loan on such date; provided that if the Aggregate Revolving Credit Commitments have been terminated at such time, then the Facility Share of each Lender shall be determined based on the Facility Share of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to Section 10.07. "Federal Funds Rate" means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by the Administrative Agent. "Fixed Charge Ratio" means, with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the ratio of (i) Consolidated EBITDA minus (without duplication) Capital Expenditures minus (without duplication) taxes paid in cash for such period to (ii) Consolidated Fixed Charges for such period; provided that notwithstanding anything to the contrary in the relevant definitions or in the definition of Four-Quarter Period, the elements of the Fixed Charge Ratio (including Consolidated EBITDA, Capital Expenditures, taxes and Consolidated Fixed Charges) shall be computed (a) for the period ending closest to September 30, 2002, for the two most recent full consecutive fiscal 13 quarters of the Borrower and its Subsidiaries, taken together as one accounting period, times two, and (b) for the period ending December 31, 2002, the three most recent full consecutive fiscal quarters of the Borrower and its Subsidiaries, taken together as one accounting period, times four-thirds (4/3). "Foreign Lender" has the meaning specified in Section 10.15(a). "Four-Quarter Period" means a period of four full consecutive fiscal quarters of the Borrower and its Subsidiaries, taken together as one accounting period. "FRB" means the Board of Governors of the Federal Reserve System of the United States of America. "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied. "Government Securities" means direct obligations of, or obligations the timely payment of principal and interest on which are fully and unconditionally guaranteed by, the United States of America. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, and any corporation or other entity (other than one performing solely a commercial function) owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guarantors" means, collectively or individually as the context may indicate, each of the Domestic Subsidiaries of the Borrower at the Closing Date and each other Person who becomes a party to the Guaranty (including by execution of a Guaranty Joinder Agreement). "Guaranty" means that certain Guaranty Agreement dated as of the date hereof among the Guarantors and the Administrative Agent substantially in the form of Exhibit F, as supplemented from time to time by the execution and delivery of Guaranty Joinder Agreements pursuant to Section 6.14, as from time to time the same may be otherwise supplemented or amended, modified, amended and restated or replaced. "Guaranty Joinder Agreement" means each Guaranty Joinder Agreement, substantially in the form thereof attached to the Guaranty, executed and delivered by a Guarantor to the 14 Administrative Agent pursuant to Section 6.14, as amended, modified, supplemented, amended and restated or replaced. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature, the generation, handling, storage, transportation, disposal, treatment, release, discharge or emission of which is subject to any Environmental Law. "Honor Date" has the meaning set forth in Section 2.04(c)(i). "Indebtedness" means, as to any Person at a particular time, all of the following without duplication, whether or not included as indebtedness or liabilities in accordance with GAAP: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) all direct or Contingent Obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds and similar instruments; (c) net obligations under any Swap Contract in an amount equal to the Swap Termination Value thereof; (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business); (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (f) Capital Leases and Synthetic Lease Obligations; and (g) all Contingent Obligations of such Person in respect of any of the foregoing. For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any Capital Lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. "Indemnified Liabilities" has the meaning set forth in Section 10.05. 15 "Indemnitees" has the meaning set forth in Section 10.05. "Intellectual Property" means trademarks and service marks (whether registered or unregistered) and trade names; patents (including any continuations, continuations in part, renewals and applications for any of the foregoing); copyrights (including any registrations and applications therefor and whether registered or unregistered); computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, databases, including any and all collections of data, whether machine readable or otherwise (but excluding off-the-shelf software or software subject to shrink-wrap or click-wrap licenses); original works of authorship; mask works; technology; trade secrets, know-how, proprietary processes, formulae, algorithms, models, user interfaces, inventions, discoveries, concepts, ideas, techniques, methods, source codes, object codes, methodologies and, with respect to all of the foregoing, related confidential data or information and any licenses of the foregoing; but excluding any limited copyright license or permission from authors, publishers or other parties to use material in the Borrower's or a Subsidiary's products that have no future payment obligations. "Interbank Offered Rate" has the meaning therefor set forth in the definition of Eurodollar Rate. "Interest Payment Date" means, (a) as to any Eurodollar Rate Loan, the last day of the relevant Interest Period, any date that such Loan is prepaid or Converted, in whole or in part, and the Revolving Credit Maturity Date or Term Loan Maturity Date, as applicable; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, interest shall also be paid on the Business Day which falls every three months after the beginning of such Interest Period; and (b) as to any Base Rate Loan or Swing Line Loan, the last Business Day of each March, June, September and December and the Revolving Credit Maturity Date or Term Loan Maturity Date, as applicable; provided, further, that interest accruing at the Default Rate shall be payable from time to time upon demand of the Administrative Agent. "Interest Period" means, for each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or on the date any Loan is Continued as or Converted into a Eurodollar Rate Loan, and ending, in each case, on the date which is one, two, three or six months thereafter, as selected by the Borrower in its Revolving Loan Notice or Term Loan Interest Rate Selection Notice, provided that: (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii)no Interest Period shall extend beyond the Stated Maturity Date. 16 "Investment" means, as to any Person, any acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, guaranty of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment, but including subsequent amounts of Investments in the same Person at the time such amount is actually invested, whether pursuant to earnouts, working capital adjustments or other contractual obligations, or otherwise. "IP Security Agreement" means the Intellectual Property Security Agreement dated as of the date hereof by the Borrower and one or more of the Guarantors to the Administrative Agent, as supplemented from time to time by the execution and delivery of IP Security Joinder Agreements pursuant to Section 6.14, as the same may be otherwise supplemented or amended, modified, amended and restated or replaced. "IP Security Joinder Agreement" means each Intellectual Property Security Joinder Agreement, substantially in the form thereof attached to the IP Security Agreement, executed and delivered by a Guarantor or any other Person to the Administrative Agent pursuant to Section 6.14, as amended, modified, supplemented, amended and restated or replaced. "IRS" means the United States Internal Revenue Service and any successor governmental agency performing a similar function. "Joinder Agreements" means, collectively, Guaranty Joinder Agreements, the Pledge Joinder Agreements, the IP Security Joinder Agreements and the Security Joinder Agreements. "Laws" means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law. "L/C Advance" means, with respect to each Lender, such Lender's funding of its participation in any L/C Borrowing in accordance with its Pro Rata Revolving Share as set forth in Section 2.04(c). "L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Borrowing. "L/C Credit Extension" means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof. 17 "L/C Issuer" means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder. "L/C Obligations" means, as at any date of determination, the aggregate undrawn face amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. "Lender" has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the L/C Issuer and the Swing Line Lender. "Lending Office" means, as to any Lender, the office or offices of such Lender described as such on Schedule 10.02, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent. "Letter of Credit" means any letter of credit issued hereunder. A Letter of Credit may be a commercial letter of credit or a standby letter of credit. "Letter of Credit Application" means an application and agreement for the issuance or amendment of a letter of credit in the form from time to time in use by the L/C Issuer. "Letter of Credit Expiration Date" means the day that is seven days prior to the Stated Maturity Date (or, if such day is not a Business Day, the next preceding Business Day). "Letter of Credit Sublimit" means an amount equal to the lesser of the Aggregate Revolving Credit Commitments and $10,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Revolving Credit Commitments. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable Laws of any jurisdiction) of or in property securing any obligation to, or a claim by a Person other than the owner of such property, whether statutory, by contract or otherwise, including the interest of a purchaser of accounts receivable. "Loan" means an extension of credit by a Lender to the Borrower under Article II in the form of a Revolving Loan, the Term Loan or a Swing Line Loan, including any Segment. "Loan Documents" means this Agreement, each Note, the Guaranty (including the Guaranty Joinder Agreements), each Security Instrument, the Agent/Arranger Fee Letter, each Revolving Loan Notice, Term Loan Interest Rate Selection Notice, each Letter of Credit Application and each Compliance Certificate, and all other instruments and documents heretofore or hereafter executed or delivered to or in favor of any Lender or the Administrative Agent in connection with the Loans made and transactions contemplated by this Agreement. "Loan Parties" means, collectively, the Borrower, each Guarantor and each other Person providing Collateral pursuant to any Security Instrument. 18 "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, assets, properties, condition (financial or otherwise), liabilities (actual or contingent) or prospects of the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of (i) the ability of any Loan Party to pay or perform its obligations under any Loan Document to which it is a party or (ii) the ability of any party to any of the Transaction Documents to pay or perform its obligations thereunder; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability (i) against any Loan Party of any Loan Document to which it is a party or (ii) against any party to any Transaction Document of such Transaction Document. "Moody's" means Moody's Investors Service, Inc. and any successor thereto. "Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated to make contributions. "Net Proceeds" means, from any public or private offering of any security, cash payments received by the Borrower or any Subsidiary therefrom as and when received, net of all legal, accounting, banking and underwriting fees and expenses, commissions, discounts and other issuance expenses incurred in connection therewith and all taxes required to be paid or accrued as a consequence of such issuance. "Notes" means, collectively, the Revolving Loan Notes, the Term Loan Notes and the Swing Line Note. "Obligations" means all advances to, and debts, liabilities, obligations, covenants and duties of the Borrower arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest that accrues after the commencement by or against the Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding. "Organization Documents" means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws; (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation with the secretary of state or other department in the state of its formation and all certificates and articles issued thereto by such secretary of state or other department, in each case as amended from time to time. "Organizational Action" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, any corporate, organizational or partnership action (including any required shareholder, member or partner action), or other similar official action, as applicable, taken by such entity. 19 "Other Taxes" has the meaning therefor set forth in Section 3.01(b). "Outstanding Amount" means (i) with respect to the Term Loan on any date, the aggregate outstanding principal amount thereof after giving effect to the Borrowing of the Term Loan on the Closing Date and any prepayments or repayments of the Term Loan (or any Segment) occurring on such date, (ii) with respect to Revolving Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Revolving Loans and Swing Line Loans, as the case may be, occurring on such date; and (iii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes to the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date. "Participant" has the meaning specified in Section 10.07(d). "PBGC" means the Pension Benefit Guaranty Corporation. "Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years. "Permitted Acquisition" means any Acquisition that is permitted by the terms of Section 7.14. "Permitted Liens" has the meaning set forth in Section 7.01. "Permitted Business" means any business in which the Borrower and its Subsidiaries were engaged on the Closing Date (after giving effect to the Transaction), any other business in the consumer products industry, including without limitation food products, and any business reasonably related or complementary thereto. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) established by the Borrower or any ERISA Affiliate. "Pledge Agreement" means that certain Securities Pledge Agreement dated as of the date hereof among the Borrower, certain Guarantors and the Administrative Agent, as supplemented from time to time by the execution and delivery of Pledge Joinder Agreements pursuant to Sections 6.14, as the same may be otherwise supplemented (including by Pledge Agreement Supplement) or amended, modified, amended and restated or replaced. 20 "Pledge Agreement Supplement" means the Pledge Agreement Supplement in the form affixed as an exhibit to the Pledge Agreement. "Pledged Interests" means (a) with respect to Direct Foreign Subsidiaries, 65% of the Voting Securities (or if the Borrower and its Subsidiaries shall own less than 65%, then all of the Voting Securities owned by them), and 100% of all other Subsidiary Securities, of each Direct Foreign Subsidiary, and (b) with respect to Domestic Subsidiaries, all of the Subsidiary Securities of each Domestic Subsidiary. "Pledge Joinder Agreement" means each Pledge Joinder Agreement, substantially in the form thereof attached to the Pledge Agreement, executed and delivered by a Guarantor to the Administrative Agent pursuant to Section 6.14, as amended, modified, supplemented, amended and restated or replaced. "Post-Closing Agreement" has the meaning set forth in Section 4.01(a)(y). "Pro Rata Revolving Share" means, with respect to each Lender at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Revolving Credit Commitment of such Lender at such time and the denominator of which is the amount of the Aggregate Revolving Credit Commitments at such time; provided that if the Aggregate Revolving Credit Commitments have been terminated at such time, then the Pro Rata Revolving Share of each Lender shall be (x) with respect to the distribution of payments to such Lender, the percentage (carried out to the ninth decimal place) of the aggregate Outstanding Amount that is held by such Lender (with the aggregate amount of each Lender's funded participations in L/C Obligations and Swing Line Loans being deemed "held" by such Lender for this purpose), and (y) for all other purposes, determined based on the Pro Rata Revolving Share of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to Section 10.07. The initial Pro Rata Revolving Share of each Lender is set forth opposite the name of such Lender on Schedule 1.01(a) or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable. "Pro Rata Term Share" means, with respect to each Lender, the percentage (carried out to the ninth decimal place) of the principal amount of the Term Loan funded by such Lender after giving effect to any subsequent assignments made pursuant to Section 10.07. The initial Pro Rata Term Share of each Lender is set forth opposite the name of such Lender on Schedule 1.01(a) or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable. "Register" has the meaning set forth in Section 10.07(c). "Related Swap Contract" means all Swap Contracts which are entered into or maintained with a Lender or Affiliate of a Lender in connection with Indebtedness of the Borrower arising under the Loan Documents or the Subordinated Indenture and which are not prohibited by the express terms of the Loan Documents. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived. 21 "Repurchase Agreement" means a repurchase agreement entered into with (i) any financial institution whose debt obligations are rated "A" by either of S&P or Moody's or whose commercial paper is rated "A-1" by S&P or "P-1" by Moody's, or (ii) any Lender. "Required Lenders" means, as of any date of determination, Lenders having more than 50% of the Aggregate Commitments or, at any time after the Aggregate Revolving Credit Commitments have been terminated, Lenders holding in the aggregate more than 50% of the Total Outstandings (with the aggregate amount of each Lender's risk participations and funded participations in L/C Obligations and Swing Line Loans being deemed "held" by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders. "Responsible Officer" means the chief executive officer, president, vice president, chief financial officer or treasurer of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate and/or other action of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party. "Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other equity interest of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other equity interest or of any option, warrant or other right to acquire any such capital stock or other equity interest. "Revolving Borrowing" means a borrowing consisting of simultaneous Revolving Loans of the same Type and, as to Eurodollar Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.02. "Revolving Credit Commitment" means, as to each Lender, its obligation to (a) make Revolving Loans to the Borrower pursuant to Section 2.02, (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.01(a), as such amount may be reduced or adjusted from time to time in accordance with this Agreement. "Revolving Credit Facility" means the facility described in Section 2.02 providing for Revolving Loans to the Borrower by the Lenders in the maximum aggregate principal amount at any time outstanding of $50,000,000, as reduced from time to time pursuant to the terms of this Agreement. "Revolving Credit Maturity Date" means (a) the Stated Maturity Date, or (b) such earlier date upon which the Aggregate Revolving Credit Commitments may be terminated in accordance with the terms hereof. 22 "Revolving Loan" means a Base Rate Loan or a Eurodollar Rate Loan made to the Borrower by a Lender in accordance with its Pro Rata Revolving Share pursuant to Section 2.02, except as otherwise provided herein. "Revolving Loan Note" means a promissory note made by the Borrower in favor of a Lender evidencing Revolving Loans made by such Lender, substantially in the form of Exhibit C-2. "Revolving Loan Notice" means a notice of (a) a Revolving Borrowing, (b) a Conversion of Revolving Loans, or (c) a Continuation of Revolving Loans as the same Type, pursuant to Section 2.03(a), which, if in writing, shall be substantially in the form of Exhibit A-1. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto. "Same Day Funds" means immediately available funds. "Secured Parties" means, collectively, with respect to each of the Security Instruments, the Administrative Agent, the Lenders and such other Persons for whose benefit the Lien thereunder is conferred, as therein provided. "Security Agreement" means the Security Agreement dated as of the date hereof by the Borrower and one or more of the Guarantors to the Administrative Agent for the benefit of the Secured Parties, as supplemented from time to time by the execution and delivery of Security Joinder Agreements pursuant to Section 6.14, as the same may be otherwise supplemented or amended, modified, amended and restated or replaced. "Security Instruments" means, collectively or individually as the context may indicate, the Pledge Agreement (including the Pledge Joinder Agreements and the Pledge Agreement Supplements), the Security Agreement (including the Security Joinder Agreements), the IP Security Agreement (including the IP Security Joinder Agreements), and all other agreements (including control agreements), instruments and other documents, whether now existing or hereafter in effect, pursuant to which the Borrower or any Subsidiary or other Person shall grant or convey to the Administrative Agent or the Lenders a Lien in, or any other Person shall acknowledge any such Lien in, property as security for all or any portion of the Obligations or any other obligation under any Loan Document, as any of them may be amended, modified or supplemented from time to time. "Security Joinder Agreement" means each Security Joinder Agreement, substantially in the form thereof attached to the Security Agreement, executed and delivered by a Guarantor or any other Person to the Administrative Agent pursuant to Section 6.14, as amended, modified, supplemented, amended and restated, or replaced. "Segment" means a portion of the Term Loan (or all thereof) with respect to which a particular interest rate is (or is proposed to be) applicable. "Sellers" means, collectively or individually as the context may indicate, Tilia International, Inc., Tilia, Inc. and Tilia Canada, Inc. 23 "Seller Notes" means, individually or collectively as the context may indicate, (i) that certain promissory note by the Borrower in favor of Tilia International, Inc. dated as of April 24, 2002 in the aggregate initial principal amount of $5,000,000, which matures [____________ __], 2004, and (ii) that certain promissory note by the Borrower in favor of Tilia International, Inc. dated as of April 24, 2002 in the aggregate initial principal amount of $10,000,000, which matures March 31, 2003, each as amended from time to time in accordance with its terms and the terms of this Agreement. "Senior Leverage Ratio" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Senior Indebtedness as of such date to (b) Consolidated EBITDA for the Four-Quarter Period ending on or most recently ended prior to such date. "Stockholders' Equity" means, as of any date of determination for the Borrower and its Subsidiaries on a consolidated basis, stockholders' equity as of that date determined in accordance with GAAP. "Solvent" means, when used with respect to any Person, that at the time of determination: (a) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including Contingent Obligations; and (b) it is then able and expects to be able to pay its debts as they mature; and (c) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "Stated Maturity Date" means April 24, 2007. "Subordinated Indebtedness" means, without duplication, (i) all obligations of the Borrower and its Subsidiaries with respect to the Subordinated Notes as set forth therein and in the Subordinated Indenture, and (ii) all obligations of the Borrower and its Subsidiaries with respect to the Seller Notes as set forth therein. "Subordinated Indenture" means that certain Indenture dated as of April 24, 2002 between the Borrower and The Bank of New York, as Trustee, as amended from time to time in accordance with its terms and the terms of this Agreement. "Subordinated Notes" has the meaning given the term "Notes" in the Subordinated Indenture, including the Exchange Notes upon and after the occurrence of the Exchange Offer. "Subsidiary" of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise 24 specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Securities" means the shares of capital stock or the other equity interests issued by or equity participations in any Subsidiary, whether or not constituting a "security" under Article 8 of the Uniform Commercial Code as in effect in any jurisdiction. "Swap Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Lender). "Swing Line" means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.05. "Swing Line Borrowing" means a borrowing of a Swing Line Loan pursuant to Section 2.05. "Swing Line Lender" means Bank of America in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder. "Swing Line Loan" has the meaning specified in Section 2.05(a). "Swing Line Revolving Loan Notice" means a notice of a Swing Line Borrowing pursuant to Section 2.05(b), which, if in writing, shall be substantially in the form of Exhibit B. 25 "Swing Line Note" means a promissory note made by the Borrower in favor of the Swing Line Lender evidencing Swing Line Loans made by such Lender, substantially in the form of Exhibit C-3. "Swing Line Sublimit" means an amount equal to the lesser of the Aggregate Revolving Credit Commitments and $10,000,000. The Swing Line Sublimit is part of, and not in addition to, the Aggregate Revolving Credit Commitments. "Syndication Agent" means Canadian Imperial Bank of Commerce, in its capacity as syndication agent under any of the Loan Documents, or any successor syndication agent. "Synthetic Lease Obligation" means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment). "Taxes" has the meaning therefor set forth in Section 3.01(a). "Term Loan" means the loan made pursuant to the Term Loan Facility in accordance with Section 2.01. "Term Loan Facility" means the facility described in Section 2.01 providing for a Term Loan to the Borrower by the Lenders in the original principal amount of $50,000,000. "Term Loan Interest Rate Selection Notice" means the written notice delivered by a Responsible Officer of the Borrower in connection with the election of a subsequent Interest Period for any Eurodollar Rate Segment or the Conversion of any Eurodollar Rate Segment into a Base Rate Segment or the Conversion of any Base Rate Segment into a Eurodollar Rate Segment. "Term Loan Maturity Date" means (a) the Stated Maturity Date, or (b) such earlier date upon which the Outstanding Amounts under the Term Loan, including all accrued and unpaid interest, are either due and payable or are otherwise paid in full in accordance with the terms hereof. "Term Loan Note" means a promissory note made by the Borrower in favor of a Lender evidencing the portion of the Term Loan made by such Lender, substantially in the form of Exhibit C-1. "Threshold Amount" means $5,000,000. "Tilia Financial Statements" means the audited consolidated balance sheet of Tilia International, Inc. and its Subsidiaries for the fiscal year ended December 31, 2001, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for such fiscal year of Tilia International, Inc. and its Subsidiaries, including the notes thereto. 26 "Tilia Indebtedness" means that certain indebtedness of the Sellers, or any of them, to the Persons and in the amounts set forth on Schedule 1.01(b) to be paid in full and terminated on the Closing Date. "Total Leverage Ratio" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the Four-Quarter Period ending on or most recently ended prior to such date. "Total Outstandings" means, at any date of determination thereof, the aggregate of the Outstanding Amount of (a) the Term Loan, (b) Revolving Loans, (c) L/C Obligations and (d) Swing Line Loans. "Transaction" means the Acquisition by the Borrower and its Subsidiaries of all or substantially all of the assets of Tilia International, Inc., a Cook Islands corporation, and its Subsidiaries in accordance with the terms of the Transaction Documents. "Transaction Documents" means, individually or collectively as the context may indicate, (i) the Asset Purchase Agreement, (ii) the Seller Notes, (iii) the Escrow Agreements, and (iv) each other document entered into or delivered by the Borrower and the Sellers, or any of them, related to or in connection with the Transaction. "TriEnda Disposition" means, collectively, the Disposition by the Borrower and certain of its Subsidiaries in the fourth quarter of the fiscal year of the Borrower ending December 31, 2001, of (a) substantially all of the assets of TriEnda Corporation and the Triangle Plastics and Synergy World divisions of Alltrista Plastics Corporation, and (b) the investment of the Borrower in Microlin LLC. "Type" means with respect to a Revolving Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan. "Unfunded Pension Liability" means the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "Unreimbursed Amount" has the meaning set forth in Section 2.04(c)(i) "Wilbert Note" means that certain promissory note dated as of November 28, 2001 by Wilbert, Inc. in favor of the Borrower in the initial principal amount of $1,850,000, as amended, restated, amended and restated, supplemented or otherwise modified to the extent permitted herein. "Voting Securities" means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. 27 1.02 OTHER INTERPRETIVE PROVISIONS. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) (i) The words "herein" and "hereunder" and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof. (ii) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears. (iii) The term "including" is by way of example and not limitation. (iv) The term "documents" includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form. (c) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including;" the words "to" and "until" each mean "to but excluding;" and the word "through" means "to and including." (d) Each reference to "basis points" or "bps" shall be interpreted in accordance with the convention that 100 bps = 1.0%. (e) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. 1.03 ACCOUNTING TERMS. (a) All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. (b) If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. 28 (c) With respect to any Acquisition consummated on or after the Closing Date, including the Transaction, the following shall apply: (i) For each of the four periods of four fiscal quarters of the Borrower ending next following the date of any Acquisition, Consolidated EBITDA with respect to the Total Leverage Ratio and the Senior Leverage Ratio shall include the results of operations of the Person or assets so acquired on a historical pro forma basis, and which amounts may include such adjustments as are permitted under Regulation S-X of the Securities and Exchange Commission and reasonably satisfactory to the Administrative Agent; (ii) For each of the four periods of four fiscal quarters of the Borrower ending next following the date of each Acquisition, Consolidated Interest Charges as a component of Consolidated EBITDA with respect to the Total Leverage Ratio and the Senior Leverage Ratio shall include the results of operations of the Person or assets so acquired, which amounts shall be determined on a historical pro forma basis; provided, however, Consolidated Interest Expense shall be adjusted on a historical pro forma basis to (i) eliminate interest expense accrued during such period on any Indebtedness repaid in connection with such Acquisition and (ii) include interest expense on any Indebtedness (including Indebtedness hereunder) incurred, acquired or assumed in connection with such Acquisition ("Incremental Debt") calculated (A) as if all such Incremental Debt had been incurred as of the first day of such Four-Quarter Period and (B) at the following interest rates: (I) for all periods subsequent to the date of the Acquisition and for Incremental Debt assumed or acquired in the Acquisition and in effect prior to the date of Acquisition, at the actual rates of interest applicable thereto, and (II) for all periods prior to the actual incurrence of such Incremental Debt, equal to the rate of interest actually applicable to such Incremental Debt hereunder or under other financing documents applicable thereto as at the end of each affected period of such four fiscal quarters, as the case may be. 1.04 ROUNDING. Any financial ratios required to be maintained by the Borrower 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 herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number). 1.05 REFERENCES TO AGREEMENTS AND LAWS. Unless otherwise expressly provided herein, (a) references to agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law. ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS 29 2.01 TERM LOAN. (a) Subject to the terms and conditions of this Agreement, each Lender severally agrees to make an advance of its Pro Rata Term Share of the Term Loan in Dollars to the Borrower on the Closing Date. The principal amount of each Segment outstanding hereunder from time to time shall bear interest and the Term Loan shall be repayable as herein provided. No amount of the Term Loan repaid or prepaid by the Borrower may be reborrowed hereunder, and no subsequent Borrowing under the Term Loan Facility shall be allowed after the initial such advance of the Term Loan on the Closing Date. (b) Not later than 1:00 P.M. New York time, on the Closing Date, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of its Pro Rata Term Share of the Term Loan available by wire transfer to the Administrative Agent. Such wire transfer shall be directed to the Administrative Agent at the Administrative Agent's Office and shall be in the form of Same Day Funds in Dollars. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, including without limitation the satisfaction of all applicable conditions in Sections 4.01 and 4.02, be made available to the Borrower by delivery of the proceeds thereof as shall be directed by the Responsible Officer of the Borrower and reasonably acceptable to the Administrative Agent. The initial Borrowing of the Term Loan shall be a single Base Rate Segment, subject to Conversion after the Closing Date in accordance with a Term Loan Interest Rate Selection Notice delivered on the Closing Date pursuant to Section 4.01(a) (or, if a Term Loan Interest Rate Selection Notice is not delivered on the Closing Date, thereafter in accordance with Section 2.03). 2.02 REVOLVING LOANS. Subject to the terms and conditions set forth herein, each Lender severally agrees to make, Convert and Continue Revolving Loans in Dollars to the Borrower from time to time on any Business Day during the period from the Closing Date to the Revolving Credit Maturity Date; provided, however, that after giving effect to any Revolving Borrowing, (i) the aggregate Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations shall not exceed the Aggregate Revolving Credit Commitments, and (ii) the aggregate Outstanding Amount of the Revolving Loans of any Lender, plus such Lender's Pro Rata Revolving Share of the aggregate Outstanding Amount of all L/C Obligations, plus such Lender's Pro Rata Revolving Share of the aggregate Outstanding Amount of all Swing Line Loans, shall not exceed such Lender's Revolving Credit Commitment. Within the limits of each Lender's Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.02, prepay under Section 2.06, and reborrow under this Section 2.02. Revolving Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein. 2.03 BORROWINGS, CONVERSIONS AND CONTINUATIONS OF REVOLVING LOANS; CONVERSIONS AND CONTINUATIONS OF SEGMENTS OF THE TERM LOAN. (a) Each Revolving Borrowing, each Conversion of Revolving Loans or Segments of the Term Loan, and each Continuation of Revolving Loans or Segments of the Term Loan shall be made upon the Borrower's irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 12:00 noon, New York time, (i) three Business Days prior to the requested date of any 30 Borrowing of, Conversion to or Continuation of Eurodollar Rate Loans, and (ii) on the requested date of any Borrowing of, or Conversion to, Base Rate Loans. Each such telephonic notice must be confirmed promptly by delivery to the Administrative Agent of a written Revolving Loan Notice or Term Loan Interest Rate Selection Notice, appropriately completed and signed by a Responsible Officer (unless such Revolving Loan Notice is being delivered by the Swing Line Lender pursuant to Section 2.05(c) or by the Administrative Agent on behalf of the L/C Issuer pursuant to Section 2.04(c)(i)); provided that the lack of such prompt confirmation shall not affect the conclusiveness or binding effect of such telephonic notice. Each Borrowing of, Conversion to or Continuation of Eurodollar Rate Loans shall be in a principal amount of $2,500,000 or a whole multiple of $500,000 in excess thereof. Except as provided in Sections 2.04(c) and 2.05(c), each Borrowing of or Conversion to Base Rate Loans shall be in a principal amount of $2,500,000 or a whole multiple of $500,000 in excess thereof. Each Revolving Loan Notice (whether telephonic or written) shall be substantially in the form of Exhibit A-1 attached hereto, and each Term Loan Interest Rate Selection Notice (whether telephonic or written) shall be substantially in the form of Exhibit A-2 attached hereto. If the Borrower fails to specify a Type of Revolving Loan in a Revolving Loan Notice or Type of Segment in a Term Loan Interest Rate Selection Notice, or if the Borrower fails to give a timely notice requesting a Conversion or Continuation, then the applicable Revolving Loans and Segments of the Term Loan shall, subject to the last sentence of this Section 2.03(a), be made or Continued as, or Converted to, Base Rate Loans. Any such automatic Conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect. If no timely notice of a Conversion or Continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic Conversion to Base Rate Loans. If the Borrower requests a Borrowing of, Conversion to, or Continuation of Eurodollar Rate Loans in any such Revolving Loan Notice or Term Loan Interest Rate Selection Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month. (b) Following receipt of a Revolving Loan Notice, the Administrative Agent shall promptly notify each Lender of its Pro Rata Revolving Share of the applicable Revolving Loans. Each Lender shall make the amount of its Revolving Loan available to the Administrative Agent in Same Day Funds in Dollars at the Administrative Agent's Office not later than (x) 2:00 p.m., New York time, on the date of a Revolving Borrowing for the account of the L/C Issuer pursuant to Section 2.04(c)(ii), or (y) 3:00 p.m., New York time, in all other cases, on the Business Day specified in the applicable Revolving Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower. (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be Continued or Converted only on the last day of the Interest Period for such Eurodollar Rate Loan. During the existence of a Default or Event of Default, no Loans (including Segments) may be requested as, Converted into or Continued as Eurodollar Rate Loans without the consent of the Required Lenders, and the Required Lenders may demand that any or all of the then outstanding Eurodollar Rate Loans be Converted immediately to Base Rate Loans. 31 (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Eurodollar Rate Loan upon determination of such interest rate. The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error. (e) After giving effect to all Revolving Borrowings, all Conversions of Revolving Loans from one Type to the other, and all Continuations of Revolving Loans as the same Type, there shall not be more than seven Interest Periods in effect with respect to Revolving Loans. (f) After giving effect to the Borrowing under the Term Loan Facility, all Conversions of Segments of the Term Loan from one Type to the other, and all Continuations of Segments of the Term Loan as the same Type, there shall not be more than seven Interest Periods in effect with respect to Segments of the Term Loan. 2.04 LETTERS OF CREDIT. (a) The Letter of Credit Commitment. (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.04, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit in Dollars for the account of the Borrower, and to renew Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drafts under the Letters of Credit; and (B) the Lenders severally agree to risk participate in Letters of Credit issued for the account of the Borrower; provided that the L/C Issuer shall not be obligated to make any L/C Credit Extension with respect to any Letter of Credit, and no Lender shall be obligated to risk participate in, any Letter of Credit if as of the date of such L/C Credit Extension, (x) the aggregate Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations would exceed the Aggregate Revolving Credit Commitments, (y) the aggregate Outstanding Amount of the Revolving Loans of any Lender, plus such Lender's Pro Rata Revolving Share of the Outstanding Amount of all L/C Obligations, plus such Lender's Pro Rata Revolving Share of the Outstanding Amount of all Swing Line Loans, would exceed such Lender's Revolving Credit Commitment, or (z) the Outstanding Amount of the L/C Obligations would exceed the Letter of Credit Sublimit. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower's ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. (ii) The L/C Issuer shall be under no obligation to issue any Letter of Credit if: (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally 32 or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it; (B) subject to Section 2.04(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last renewal, unless the Required Lenders have approved such expiry date; (C) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date; or (D) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer. (iii) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. (b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Renewal Letters of Credit. (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer. Such L/C Application must be received by the L/C Issuer and the Administrative Agent not later than 12:00 noon, New York time, at least two Business Days (or such later date and time as the L/C Issuer may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may reasonably require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may reasonably require. 33 (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Upon receipt by the L/C Issuer of confirmation from the Administrative Agent that the requested issuance or amendment is permitted under Section 2.04(a)(i) in terms of any additional L/C Obligations created thereby, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer's usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender's Pro Rata Revolving Share times the amount of such Letter of Credit. (iii) If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic renewal provisions (each, an "Auto-Renewal Letter of Credit"); provided that any such Auto-Renewal Letter of Credit must permit the L/C Issuer to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the "Nonrenewal Notice Date") in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any such renewal. Once an Auto-Renewal Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the renewal of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit any such renewal if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its renewed form under the terms hereof, or (B) it has received notice (which may be by telephone or in writing) on or before the day that is two Business Days before the Nonrenewal Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such renewal or (2) from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied. Notwithstanding anything to the contrary contained herein, the L/C Issuer shall have no obligation to permit the renewal of any Auto-Renewal Letter of Credit at any time, and in no event shall the expiry date of any Auto-Renewal Letter of Credit after any renewal as described herein occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date. (iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment. (c) Drawings and Reimbursements; Funding of Participations. 34 (i) Upon any drawing under any Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof. Not later than 11:00 a.m., New York time, on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an "Honor Date"), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing in Dollars in Same Day Funds. If the Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the "Unreimbursed Amount"), such Lender's Pro Rata Revolving Share thereof and, in accordance with the following sentence and Section 2.04(c)(ii), whether a Swing Line Borrowing or a Revolving Borrowing will be made to repay the Unreimbursed Amount or whether, pursuant to Section 2.04(c)(iii), an L/C Borrowing in the amount of the Unreimbursed Amount shall be deemed incurred by the Borrower and that each Lender shall participate in such L/C Borrowing in accordance with its Pro Rata Revolving Share. In such event, the Borrower shall be deemed to have requested a Swing Line Borrowing, without regard to the minimum and multiples and times of day for notice specified in Section 2.05, or, if the Unreimbursed Amount is greater than the amount available for Swing Line Borrowings under the Swing Line Sublimit, a Revolving Borrowing, without regard to the minimum and multiples and times of day for notice specified in Section 2.03, to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, but subject, in each case, to the amount of the unutilized portion of the Aggregate Revolving Credit Commitments, and the conditions set forth in Section 4.02 (other than the delivery of a Revolving Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.04(c)(i) shall constitute a notice under Section 2.05(b) or a Revolving Loan Notice, respectively, and may be given by telephone if promptly confirmed in writing; provided that the lack of such prompt confirmation shall not affect the conclusiveness or binding effect of such notice. (ii) The Swing Line Lender, if a Swing Line Borrowing can be made as determined by the Administrative Agent pursuant to Section 2.05, shall make funds available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent's Office in an amount equal to the Unreimbursed Amount, not later than 3:00 p.m., New York time, on the Business Day specified in such notice by the Administrative Agent. In the event the Administrative Agent determines that a Swing Line Borrowing is not so available and, in the alternative, pursuant to Section 2.04(c)(i), a Revolving Borrowing or an L/C Borrowing is to be made, each Lender (including the Lender acting as L/C Issuer) shall upon receipt of any notice from the Administrative Agent pursuant to Section 2.04(c)(i) make funds in Dollars available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent's Office in the amount equal to its Pro Rata Revolving Share of the Unreimbursed Amount not later than 3:00 p.m., New York time, on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.04(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received from either the Swing Line Lender or the Lenders, as applicable, to the L/C Issuer. 35 (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Borrowing because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced by a Borrowing, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lender's payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(ii) shall be deemed payment in respect of its risk participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its risk participation obligation in such L/C Borrowing under this Section 2.04. (iv) Until each Lender funds its Revolving Loan or L/C Advance pursuant to Section 2.04(c)(ii) to reimburse the L/C Issuer for any Unreimbursed Amount drawn under any Letter of Credit or to fund its participation therein, as the case may be, interest in respect of such Lender's Pro Rata Revolving Share of such amount shall be solely for the account of the L/C Issuer. (v) Each Lender's obligation to make Revolving Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.04(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default or Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender's obligation to make Revolving Loans, and the Swing Line Lender's obligation to make Swing Line Loans, pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02 (other than the delivery of a Revolving Loan Notice or Swing Line Revolving Loan Notice). Any such reimbursement with the proceeds of Revolving Loans or L/C Advances shall not relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein. (vi) If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the applicable Federal Funds Rate for three (3) Business Days and thereafter at a rate per annum equal to the Default Rate. A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this Section 2.04(c) shall be conclusive absent manifest error. (d) Repayment of Participations. 36 (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender's L/C Advance in respect of such payment in accordance with Section 2.04(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), or any payment of interest thereon, the Administrative Agent will distribute to such Lender the amount of its Pro Rata Revolving Share thereof in the same funds as those received by the Administrative Agent. (ii) If any payment received by the Administrative Agent for the account of the L/C Issuer in respect of any drawing on any Letter of Credit is required to be returned (including pursuant to any settlement entered into by the Administrative Agent or the L/C Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Pro Rata Revolving Share of such amount on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the applicable Federal Funds Rate from time to time in effect, and such payment by each Lender shall be deemed to be its L/C Advance in such amount pursuant to Section 2.04(c)(iii). (e) Obligations Absolute. The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit, and to repay each L/C Borrowing, shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following: (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto; (ii) the existence of any claim, counterclaim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under such 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; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit; (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or 37 (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower. The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower's instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid. (f) Role of L/C Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. Neither the L/C Issuer, any Agent-Related Person nor any of the respective correspondents, participants or assignees of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. Neither the L/C Issuer, any Agent-Related Person, nor any of the respective correspondents, participants or assignees of the L/C Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.04(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, special, punitive or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer's willful misconduct or gross negligence or the L/C Issuer's willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. (g) Cash Collateral. Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date or the Revolving Credit Maturity Date, any Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, the Borrower shall immediately Cash Collateralize the Outstanding Amount of all L/C Obligations plus the Letter of Credit fees payable with respect to 38 such Letter of Credit (calculated at the Applicable Margin then in effect for the period from the date of such cash collateralization until the expiry date of such Letter of Credit). (h) Applicability of ISP98 and UCP. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the "ICC") at the time of issuance shall apply to each commercial Letter of Credit. (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Revolving Share a Letter of Credit fee (for each day such Letter of Credit remains in effect) for each Letter of Credit equal to the Applicable Margin for Eurodollar Rate Loans multiplied by the daily maximum amount available to be drawn under such Letter of Credit. Such fee for each Letter of Credit shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, and on the Letter of Credit Expiration Date. If there is any change in the Applicable Margin during any quarter, the actual daily amount of each Letter of Credit shall be computed and multiplied by the Applicable Margin separately for each period during such quarter that such Applicable Margin was in effect. (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee (for each day such Letter of Credit remains in effect) for each Letter of Credit in an amount equal to 1/8 of 1% per annum on the daily maximum amount available to be drawn thereunder, due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, and on the Letter of Credit Expiration Date. In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect. Such fees and charges are due and payable on demand and are nonrefundable. (k) Conflict with Letter of Credit Application. In the event of any conflict between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall control. 2.05 SWING LINE LOANS. (a) The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender agrees to make loans (each such loan, a "Swing Line Loan") in Dollars, to the Borrower from time to time on any Business Day during the period from the Closing Date to the Revolving Credit Maturity Date in an aggregate amount not to exceed the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the aggregate Outstanding Amount of Revolving Loans and Pro Rata Revolving Share of L/C Obligations of the Swing Line Lender in its capacity as a Lender, may exceed the amount of such 39 Swing Line Lender's Revolving Credit Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the aggregate Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations shall not exceed the Aggregate Revolving Credit Commitments, and (ii) the aggregate Outstanding Amount of the Revolving Loans of any Lender other than the Swing Line Lender, plus such Lender's Pro Rata Revolving Share of the Outstanding Amount of all L/C Obligations, plus such Lender's Pro Rata Revolving Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender's Revolving Credit Commitment. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.05, prepay under Section 2.06, and reborrow under this Section 2.05. Each Swing Line Loan shall be a Base Rate Loan. Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender's Pro Rata Revolving Share times the amount of the Swing Line Loan. (b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrower's irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 2:00 p.m., New York time on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000 and integral multiples of $25,000 in excess thereof, and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Revolving Loan Notice, appropriately completed and signed by a Responsible Officer. Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Revolving Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Revolving Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Lender) prior to (x) 1:00 p.m., New York time, in the case of Swing Line Loans to reimburse the L/C Issuer in respect of drawings under Letters of Credit, or (y) 3:00 p.m., New York time, in all other cases, on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.05(a), or (B) that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than (x) 2:00 p.m., New York time, in the case of Swing Line Loans to reimburse the L/C Issuer in respect of drawings under Letters of Credit, or (y) 4:00 p.m., New York time, in all other cases, on the borrowing date specified in such Swing Line Revolving Loan Notice, make the amount of its Swing Line Loan available to the Borrower either by (i) crediting the account of the Borrower on the books of the Swing Line Lender with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower. (c) Refinancing of Swing Line Loans. 40 (i) The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that a Revolving Loan be made in an amount equal to the amount of Swing Line Loans then outstanding, and such request by the Swing Line Lender shall constitute a Revolving Loan Notice. Such request shall be made in accordance with the requirements of Section 2.03, without regard to the minimum and multiples specified therein for the principal amount of Revolving Loans, but subject to the unutilized portion of the Aggregate Revolving Credit Commitments, and the conditions set forth in Section 4.02. Each Lender shall make an amount equal to its Pro Rata Revolving Share of the amount specified in such Revolving Loan Notice available to the Administrative Agent in Same Day Funds for the account of the Swing Line Lender at the Administrative Agent's Office not later than 2:00 p.m., New York time, on the Business Day specified in such Revolving Loan Notice, whereupon, subject to Section 2.05 (c)(ii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received from the Lenders to the Swing Line Lender. The Administrative Agent shall promptly notify the Borrower of the making of a Revolving Loan pursuant to this Section 2.05(c)(i), provided that the lack of such prompt notification shall in no way affect the making, validity or status of such Revolving Loan. (ii) If for any reason any Revolving Borrowing cannot be requested in accordance with Section 2.05(c)(i) or any Swing Line Loan cannot be refinanced by such a Revolving Borrowing, the Revolving Loan Notice submitted by the Swing Line Lender shall be deemed to be a request by the Swing Line Lender that each of the Lenders fund its risk participation in the amount of the relevant Swing Line Loan and each Lender's payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.05(c)(i) shall be deemed payment in respect of such risk participation in the amount of such Swing Line Loan. (iii) If any Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.05(c) by the time specified in Section 2.05(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the applicable Federal Funds Rate for three (3) Business Days and thereafter at a rate per annum equal to the Default Rate. A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this Section 2.05(c) shall be conclusive absent manifest error. (iv) Each Lender's obligation to make Revolving Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.05(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default or Event of Default, or (C) 41 any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender's obligation to make Revolving Loans pursuant to this Section 2.05(c) is subject to the conditions set forth in Section 4.02 (other than the delivery by the Borrower of a Revolving Loan Notice). Any such purchase of risk participations by each Lender from the Swing Line Lender shall not relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein. (d) Repayment of Participations. (i) At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute in Dollars to such Lender its Pro Rata Revolving Share of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's risk participation was outstanding and funded). (ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender, each Lender shall pay to the Swing Line Lender in Dollars its Pro Rata Revolving Share of such amount on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), at a rate per annum equal to the applicable Federal Funds Rate. The Administrative Agent will make such demand only upon the request of the Swing Line Lender. (e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Lender funds its Revolving Loan or risk participation pursuant to this Section 2.05, interest in respect of such Lender's Pro Rata Revolving Share shall be solely for the account of the Swing Line Lender. (f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender. 2.06 PREPAYMENTS. (a) The Borrower may, upon irrevocable notice to the Administrative Agent, at any time or from time to time voluntarily prepay Revolving Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 12:00 noon, New York time, (A) one Business Day prior to any date of prepayment of Eurodollar Rate Loans, and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $2,500,000 or a whole multiple of $500,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $2,500,000 or a whole multiple of $500,000 in excess thereof. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Revolving Loans to be prepaid. The Responsible Officer of the Borrower shall provide the Administrative Agent written confirmation of each such telephonic notice but failure to provide such confirmation shall 42 not affect the validity of such telephonic notice. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of such Lender's Pro Rata Revolving Share of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Revolving Loans of the Lenders in accordance with their respective Pro Rata Revolving Shares. (b) In addition to the required payments of principal of the Term Loan set forth in Section 2.08(c) and any mandatory prepayments of principal of the Term Loan effected under subsection (e) below, the Borrower may, upon irrevocable notice to the Administrative Agent, voluntarily prepay the Term Loan in whole or in part from time to time on any Business Day, without penalty or premium; provided that (i) such notice must be received by the Administrative Agent not later than 12:00 noon, New York time, (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans, and (B) on the date of prepayment of Base Rate Loans, (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $2,500,000 or a whole multiple of $500,000 in excess thereof (or in the entire remaining principal balance of the Term Loan); and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $2,500,000 or a whole multiple of $500,000 in excess thereof (or in the entire remaining principal balance of the Term Loan). Each such notice shall specify the date and amount of such prepayment and the Type(s) of Segment to be prepaid. The Responsible Officer of the Borrower shall provide the Administrative Agent written confirmation of each such telephonic notice but failure to provide such confirmation shall not affect the validity of such telephonic notice. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of such Lender's Pro Rata Term Share of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. All prepayments of principal under this Section 2.06(b) shall be applied to installments of principal in inverse order of their maturities. Each such prepayment shall be applied to the Segments of the Lenders in accordance with their respective Pro Rata Term Shares. (c) The Borrower may, upon irrevocable notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 12:00 noon, New York time, on the date of the prepayment, and (ii) any such prepayment shall be in a minimum principal amount of $50,000 or a whole multiple of $10,000 in excess thereof. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. (d) If for any reason the Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations at any time exceeds the Aggregate Revolving Credit Commitments then in effect, the Borrower shall immediately prepay Revolving Loans and/or Swing Line 43 Loans, and/or Cash Collateralize the L/C Obligations, as it shall select, in an aggregate amount equal to such excess. (e) In addition to the required payments of principal of the Term Loan set forth in Section 2.08(c) and any optional payments of principal of the Term Loan and the Revolving Loans effected under subsections (a) and (b) above, the Borrower shall make the following required prepayments of the Term Loan and the Revolving Loans, each such payment to be made to the Administrative Agent for the benefit of the Lenders within the time period specified below. (i) In the event that the Total Leverage Ratio is greater than 3.00 to 1.00 as of the end of any fiscal year of the Borrower, beginning with the fiscal year ending December 31, 2002, the Borrower shall make a prepayment in an amount equal to fifty percent (50%) of the amount of Excess Cash Flow, each such prepayment to be made on the date financial statements of the Borrower and its Subsidiaries for such fiscal year are required to be delivered (or if earlier, the date such financial statements are delivered) pursuant to Section 6.01, which payment shall be accompanied by a certificate of a Responsible Officer of the Borrower (which may be incorporated within the certificate regarding compliance with certain covenants otherwise required to be delivered under Section 6.02(b)) setting forth in reasonable detail the calculations utilized in computing Excess Cash Flow and the amount of such prepayment. (ii) The Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment with respect to each private or public offering of Equity Securities of the Borrower or any Subsidiary (other than Equity Securities issued to the Borrower or a Guarantor) in an amount equal to fifty percent (50%) of the Net Proceeds of each issuance of Equity Securities of the Borrower or any Subsidiary, each such prepayment to be made within ten (10) Business Days of receipt of such proceeds and upon not less than five (5) Business Days' prior written notice to the Administrative Agent, which notice shall include a certificate of a Responsible Officer of the Borrower setting forth in reasonable detail the calculations utilized in computing the Net Proceeds of such issuance and the amount of such prepayment; provided that no prepayment shall be required hereunder of the first $10,000,000 of Net Proceeds in each fiscal year of the Borrower realized from (x) the issuance of Equity Securities in connection with the exercise of any option, warrant or other convertible security of the Borrower or any Subsidiary or (y) the issuance, award or grant of Equity Securities to eligible participants under a stock plan of the Borrower. (iii) Subject to the proviso in Section 7.05(f), the Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment in an amount equal to one hundred percent (100%) of the Net Proceeds from each Disposition other than Dispositions permitted under Section 7.05(a), (b), (c), (d) and (e), each such prepayment to be made within ten (10) Business Days of receipt of the Net Proceeds thereof and upon not less than five (5) Business Days' prior written notice to the Administrative Agent, which notice shall include a certificate of a Responsible Officer of the Borrower setting forth in reasonable detail the calculations utilized in computing the Net Proceeds of such Disposition and the amount of such prepayment; provided, that despite the application of this Section 2.06(e)(iii) to any Disposition that is not otherwise permitted under this 44 Agreement, nothing in this Section 2.06(e)(iii) shall be deemed to permit any Disposition not expressly permitted under this Agreement or to constitute a waiver or cure of any Default or Event of Default that arises as a result of a Disposition that is not permitted under this Agreement. (iv) In the event that the Net Proceeds received from insurance carried with respect to the Collateral pursuant to this Credit Agreement and the Security Agreement and the other Loan Documents is not completely and fully utilized for the repair or replacement of Collateral as provided in the Security Agreement or any other Loan Document, the Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment in an amount equal to one hundred percent (100%) of the Net Proceeds received with respect to such insurance that is not so utilized. Prepayments made under this Section 2.06(e) shall be applied (a) first, to installments of principal of the Term Loan in inverse order of maturity, and (b) then, upon payment in full of all Outstanding Amounts under the Term Loan, to repay the Outstanding Amount under the Revolving Credit Facility, with a permanent reduction in the Aggregate Revolving Credit Commitment in the amount of such prepayment required under this Section 2.06(e) after payment in full of the Term Loan, notwithstanding the Outstanding Amount under the Revolving Credit Facility, and corresponding permanent reductions in each Lender's Revolving Credit Commitment; provided that in the event of a prepayment pursuant to Section 2.06(e)(ii), so long as all Outstanding Amounts under the Term Loan have been paid in full, no prepayment made under subpart (b) of this sentence shall include any associated permanent reduction in either the Aggregate Revolving Credit Commitment or the Revolving Credit Commitment of any Lender so long as, both before and after giving effect to such prepayment, (x) no Default or Event of Default shall have occurred and be continuing, (y) the Total Leverage Ratio shall be less than 2.25 to 1.00, and (z) the Senior Leverage Ratio shall be less than 0.75 to 1.00. 2.07 REDUCTION OR TERMINATION OF REVOLVING CREDIT COMMITMENTS. The Borrower may, upon irrevocable notice to the Administrative Agent, terminate the Aggregate Revolving Credit Commitments, or permanently reduce the Aggregate Revolving Credit Commitments to an amount not less than the then aggregate Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m., New York time, five Business Days prior to the date of termination or reduction, and (ii) any such partial reduction shall be in an aggregate amount of $2,500,000 or any whole multiple of $500,000 in excess thereof. The Responsible Officer of the Borrower shall provide the Administrative Agent written confirmation of each such telephonic notice but failure to provide such confirmation shall not affect the validity of such telephonic notice. The Administrative Agent shall promptly notify the Lenders of any such notice of reduction or termination of the Aggregate Revolving Credit Commitments. Once reduced in accordance with this Section 2.07, the Aggregate Revolving Credit Commitments may not be increased. Any reduction of the Aggregate Revolving Credit Commitments shall be applied to the Revolving Credit Commitment of each Lender according to its Pro Rata Revolving Share. All commitment fees accrued until the effective date of any termination of the Aggregate Revolving Credit Commitments shall be paid on the effective date of such termination. 2.08 REPAYMENT OF LOANS. The Borrower shall repay: 45 (a) to the Lenders on the Revolving Credit Maturity Date the aggregate principal amount of Revolving Loans outstanding on such date; (b) each Swing Line Loan on the earlier to occur of (i) demand (by telephonic or written notice) by the Administrative Agent and (ii) the Revolving Credit Maturity Date; and (c) the Term Loan in quarterly installments on the dates and in the amounts set forth below, subject to adjustments for prepayments made pursuant to Section 2.06: Date Amount ---- ------ September 30, 2002 $1,250,000.00 December 31, 2002 $1,250,000.00 March 31, 2003 $1,250,000.00 June 30, 2003 $1,250,000.00 September 30, 2003 $1,875,000.00 December 31, 2003 $1,875,000.00 March 31, 2004 $1,875,000.00 June 30, 2004 $1,875,000.00 September 30, 2004 $2,500,000.00 December 31, 2004 $2,500,000.00 March 31, 2005 $2,500,000.00 June 30, 2005 $2,500,000.00 September 30, 2005 $3,125,000.00 December 31, 2005 $3,125,000.00 March 31, 2006 $3,125,000.00 June 30, 2006 $3,125,000.00 September 30, 2006 $3,750,000.00 December 31, 2006 $3,750,000.00 March 31, 2007 $3,750,000.00 Stated Maturity Date All remaining Outstanding Amounts of the Term Loan 46 2.09 INTEREST. (a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Margin; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate. (b) If any amount payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times until paid equal to the Default Rate. Furthermore, while any Event of Default exists or after acceleration, the Borrower shall pay interest on the principal amount of all outstanding Obligations at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Law. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand. (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law. 2.10 FEES. In addition to certain fees described in subsections (i) and (j) of Section 2.04: (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Revolving Share, a commitment fee equal to the Applicable Margin times the actual daily amount by which the Aggregate Revolving Credit Commitments exceed the sum of (i) the Outstanding Amount of Revolving Loans and (ii) the Outstanding Amount of L/C Obligations. The commitment fee shall accrue at all times from the Closing Date until the Revolving Credit Maturity Date and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Revolving Credit Maturity Date. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Margin during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Margin separately for each period during such quarter that such Applicable Margin was in effect. The commitment fee shall accrue at all times, including at any time during which one or more of the conditions in Article IV is not met. (b) Arrangement and Agent Fees. (i) The Borrower shall pay an arrangement fee to each Arranger for such Arranger's own account, and shall pay an agency fee to the Administrative Agent for the Administrative Agent's own account, in the amounts and at the times specified in the letter agreement, dated March 19, 2002 (the "Agent/Arranger Fee Letter"), among the Borrower, the Arrangers, the Administrative Agent and the Syndication Agent. Such fees shall be fully earned when paid and shall be nonrefundable for any reason whatsoever. 47 (c) Lenders' Upfront Fee. On the Closing Date, the Borrower shall pay to the Administrative Agent, for the account of the Lenders in accordance with their respective Facility Share (computed as if the Borrowing of the Term Loan pursuant to Section 2.01 had occurred), an upfront fee in a mutually agreeable amount. Such upfront fees are for the credit facilities committed by the Lenders under this Agreement and are fully earned on the date paid. The upfront fee paid to each Lender is solely for its own account and is nonrefundable for any reason whatsoever. 2.11 COMPUTATION OF INTEREST AND FEES. Interest on Base Rate Loans determined by reference to the Bank of America prime rate shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed. Computation of all other types of interest and all fees shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to the payee thereof than a method based on a year of 365 or 366 days. Interest shall accrue on each Loan for the day on which the Loan is made, and, subject to Section 2.13(a), shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall bear interest for one day. 2.12 EVIDENCE OF DEBT. (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, such Lender's Loans shall be evidenced by a Revolving Loan Note, a Term Loan Note and/or a Swing Line Note, as applicable, in addition to such accounts or records. Each Lender may attach schedules to its Note(s) and endorse thereon the date, Type (if applicable), amount and maturity of the applicable Loans and payments with respect thereto. (b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent, in the absence of manifest error, shall control. 2.13 PAYMENTS GENERALLY. (a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative 48 Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agent's Office in Dollars and in Same Day Funds not later than 2:00 p.m., New York time, on the date specified herein. The Administrative Agent will promptly distribute to each such Lender its Pro Rata Revolving Share or Pro Rata Term Share, as applicable, of such payment in like funds as received by wire transfer to such Lender's Lending Office. All payments received by the Administrative Agent after 2:00 p.m., New York time, shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall in each case continue to accrue. (b) Subject to the definition of "Interest Period," if any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be. (c) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, L/C Borrowings, interest and fees then due hereunder, such funds shall be applied (i) first, toward the reasonable expenses incurred in connection with retaking, holding, preserving, processing, maintaining or preparing for sale, lease or other disposition of, any Collateral, including reasonable attorney's fees and legal expenses pertaining thereto, (ii) second, toward costs and expenses (including Attorney Costs and amounts payable under Article III) incurred by the Administrative Agent and each Lender, (iii) third, toward repayment of interest, fees, indemnification amounts and other obligations and liabilities (other than repayment of principal, L/C Borrowings or amounts payable under Related Swap Contracts) then due hereunder or under any other Loan Documents, ratably among the parties entitled thereto in accordance with the amounts of interest, fees, indemnification amounts and such other obligations and liabilities then due to such parties, and (iv) fourth, toward repayment of principal and L/C Borrowings then due hereunder (the "Principal Obligations"), ratably among the parties entitled thereto in accordance with the amounts of principal and L/C Borrowings then due to such parties; provided, however, that if the Loans outstanding hereunder shall have been declared or otherwise become immediately due and payable pursuant to Section 8.02, then amounts available for distribution under this clause (iv) arising from payments under the Guaranty or the realization on Collateral pursuant to the Security Instruments shall be distributed ratably to (x) the repayment of the Principal Obligations (to be applied ratably among the parties entitled thereto in accordance with the amounts of principal and L/C Borrowings then due to such parties) and (y) the payment of Swap Termination Values owing to any Lender or any Affiliate of any Lender arising under Related Swap Contracts that shall have been terminated and as to which the Administrative Agent shall have received notice of such termination and the Swap Termination Value thereof from the applicable Lender or Affiliate of a Lender. (d) Unless the Borrower or any Lender has notified the Administrative Agent prior to the date any payment is required to be made by it to the Administrative Agent hereunder, that the Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in Same Day Funds, then: 49 (i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in Same Day Funds, 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 in Same Day Funds, at the applicable Federal Funds Rate from time to time in effect; and (ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in Same Day Funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the Borrower to the date such amount is recovered by the Administrative Agent (the "Compensation Period") at a rate per annum equal to the applicable Federal Funds Rate from time to time in effect. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Revolving Credit Commitment or its obligation to fund its Pro Rata Term Share of the Term Loan or to prejudice any rights which the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder. A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (d) shall be conclusive, absent manifest error. (e) If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent, except to the extent such funds do not constitute the funding of a risk participation under Article II, shall return such funds (in like funds as received from such Lender) to such Lender, without interest. (f) The obligations of the Lenders hereunder to make Revolving Loans, to fund their respective Pro Rata Term Share of the Term Loan and to fund participations in Letters of Credit and Swing Line Loans are several and not joint. The failure of any Lender to make any Revolving Loan, to fund its Pro Rata Term Share of the Term Loan or to fund any risk participations in Letters of Credit and Swing Line Loans on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Revolving Loan, to fund its Pro Rata Term Share of the Term Loan or to purchase its risk participations in Letters of Credit and Swing Line Loans. 50 (g) Nothing herein 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. 2.14 SHARING OF PAYMENTS. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Revolving Loans or portion of the Term Loan made by it or the risk participations in L/C Obligations or in Swing Line Loans held by it (but not including any amounts applied by the Swing Line Lender to outstanding Swing Line Loans prior to the funding of risk participations therein), any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Revolving Loans and/or portion of the Term Loan made by them and/or such subparticipations in the risk participations in L/C Obligations or Swing Line Loans held by them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Revolving Loans, Term Loan or such risk participations, as the case may be, pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender (including pursuant to any settlement entered into by the Administrative Agent or any Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's ratable share (according to the proportion of (i) the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off), but subject to Section 10.09, with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.14 and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section shall from and after such 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. ARTICLE II A SECURITY 2A.01 SECURITY. As security for the full and timely payment and performance of all Obligations, the Borrower shall, and shall cause all other Loan Parties to, on or before the Closing Date, do or cause to be done all things reasonably necessary in the opinion of the Administrative Agent and its counsel to grant to the Administrative Agent for the benefit of the Secured Parties a duly perfected first priority security interest in all Collateral subject to no prior Lien or other encumbrance or restriction on transfer except as expressly permitted hereunder. 51 Without limiting the foregoing, on the Closing Date the Borrower shall deliver, and shall cause each Guarantor to deliver, to the Administrative Agent, in form and substance reasonably acceptable to the Administrative Agent, (a) in the event such Guarantor has rights in any Subsidiary Securities of a Domestic Subsidiary or Direct Foreign Subsidiary, (i) the Pledge Agreement which shall pledge to the Administrative Agent for the benefit of the Secured Parties the Pledged Interests of each Domestic Subsidiary and Direct Foreign Subsidiary, (ii) if such Pledged Interests are in the form of certificated securities, such certificated securities, together with undated stock powers or other appropriate transfer documents endorsed in blank pertaining thereto, (b) the Security Agreement and the IP Security Agreement, (c) Uniform Commercial Code financing statements in form, substance and number as requested by the Administrative Agent, reflecting the Lien in favor of the Secured Parties on the Pledged Interests and all other Collateral, and (d) documents in form, substance and number as requested by the Administrative Agent for filing with the Federal Patent and Trademark Office, the Federal Copyright Office, or such other places as requested by the Administrative Agent, reflecting the Lien in favor of the Secured Parties in the Intellectual Property, and (e) Qualifying Control Agreements (as defined in the Security Agreement) as provided in the Security Agreement. In addition, and without limiting the foregoing, the Borrower shall take and cause the Guarantors to take such further action, and deliver or cause to be delivered such further documents, as required by the Security Instruments or otherwise as the Administrative Agent may reasonably request to effect the transactions contemplated by this Article IIA and each of the Security Instruments. The Borrower shall also, and shall cause each Subsidiary to also, pledge to the Administrative Agent for the benefit of the Secured Parties (and as appropriate to reaffirm its prior pledge of) all of the Pledged Interests of any Domestic Subsidiary or Direct Foreign Subsidiary acquired or created after the Closing Date, or otherwise acquired by any Subsidiary and not theretofore pledged to the Administrative Agent for the benefit of the Secured Parties, and to deliver to the Administrative Agent all of the documents and instruments in connection therewith as are required pursuant to the terms of Section 6.14 and of the Security Instruments. 2A.02 FURTHER ASSURANCES. At the request of the Administrative Agent from time to time, the Borrower will or will cause all other Loan Parties, as the case may be, to execute, by their respective Responsible Officers, alone or with the Administrative Agent, any certificate, instrument, financing statement, control agreement, statement or document, or to procure any such certificate, instrument, statement or document, or to take such other action (and pay all connected costs) which the Administrative Agent reasonably deems necessary from time to time to create, continue or preserve the Liens in Collateral (and the perfection and priority thereof) of the Administrative Agent contemplated hereby and by the other Loan Documents and specifically including all Collateral acquired by the Borrower or other Loan Party after the Closing Date and all Collateral moved to or from time to time located at locations owned by third parties, including without limitation all leased locations, bailees, warehousemen and third party processors. The Administrative Agent is hereby irrevocably authorized to execute and file or cause to be filed, with or if permitted by applicable law without the signature of the Borrower or any Loan Party appearing thereon, all Uniform Commercial Code financing statements reflecting the Borrower or any other Loan Party as "debtor" and the Administrative Agent as "secured party", and continuations thereof and amendments thereto, as the Administrative Agent reasonably deems necessary or advisable to give effect to the transactions contemplated hereby and by the other Loan Documents. 52 2A.03 INFORMATION REGARDING COLLATERAL. The Borrower represents, warrants and covenants that: (a) the exact legal name, jurisdiction of formation and chief executive office of the Borrower and each other Person providing Collateral pursuant to a Security Instrument (each, a "Grantor") at the Closing Date, along with each location in which goods constituting Collateral are currently located, whether owned, leased or third-party locations (together with the name of each owner of the property located at such address if not the applicable Grantor, and a summary description of the relationship between the applicable Grantor and such Person), are specified on Schedule 2A.03; (b) other than as provided in (a) above, with respect to each Grantor Schedule 2A.03 contains a true and complete list of (i) each exact legal name, jurisdiction of formation, and each location of the chief executive office of such Grantor at any time since April 1, 1997, (ii) each location owned or leased by a Grantor in which goods constituting Collateral are or have been located since April 1, 2001 (together with the name of each owner of the property located at such address if not the applicable Grantor), and (iii) each trade name, trademark or other trade style used by such Grantor since April 1, 2001 and the purposes for which it was used; and (c) with respect to each Person (other than a Grantor) that has effected any merger or consolidation with a Grantor or contributed or transferred to a Grantor (including by virtue of the Transaction) any property constituting Collateral at any time since April 1, 1997 (excluding Persons making sales in the ordinary course of their businesses to a Grantor of property constituting inventory in the hands of such seller), Schedule 2A.03 contains a true and complete list of the exact legal name, jurisdiction of formation and each address of each such Person at the time such merger, consolidation, contribution or transfer occurred. The Borrower further covenants that it shall not change, and shall not permit any other Grantor to change, its name, jurisdiction of formation (whether by reincorporation, merger or otherwise), the location of its chief executive office, or use or permit any other Grantor to use, any additional trade name, trademark or other trade style, except upon giving not less than thirty (30) days' prior written notice to the Administrative Agent and taking or causing to be taken all such action at Borrower's or such other Grantor's expense as may be reasonably requested by the Administrative Agent to perfect or maintain the perfection of the Lien of the Administrative Agent in Collateral. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 TAXES. (a) Any and all payments by the Borrower to or for the account of the Administrative Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the 53 case of the Administrative Agent and each Lender, taxes imposed on or measured by its net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which the Administrative Agent or such Lender, as the case may be, is organized or maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), the Administrative Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within 30 days after the date of such payment, the Borrower shall furnish to the Administrative Agent (which shall forward the same to such Lender) the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as "Other Taxes"). (c) If the Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, the Borrower shall also pay to the Administrative Agent (for the account of such Lender) or to such Lender, at the time interest is paid, such additional amount that such Lender specifies is necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net income) such Lender would have received if such Taxes or Other Taxes had not been imposed. (d) The Borrower agrees to indemnify the Administrative Agent and each Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by the Administrative Agent and such Lender, (ii) amounts payable under Section 3.01(c) and (iii) any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Payment under this subsection (d) shall be made within 30 days after the date the Lender or the Administrative Agent makes a demand therefor together with appropriate supporting documentation. 3.02 ILLEGALITY. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans as it would otherwise be obligated hereunder to make, maintain or fund, or materially restricts the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the applicable Eurodollar interbank market, or to determine or charge interest rates based upon the Eurodollar Rate, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation 54 existing hereunder of such Lender to make or Continue Eurodollar Rate Loans or to Convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, Convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period thereof, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or Conversion, the Borrower shall also pay accrued interest on the amount so prepaid or Converted. Each Lender agrees to designate a different 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 materially disadvantageous to such Lender. 3.03 INABILITY TO DETERMINE RATES. If the Administrative Agent or the Required Lenders determine in connection with any request for a Eurodollar Rate Loan or a Conversion to or Continuation thereof that (a) deposits in Dollars are not being offered to banks in the London eurodollar interbank market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Base Rate for such Eurodollar Rate Loan, or (c) the Eurodollar Base Rate for such Eurodollar Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such Eurodollar Rate Loan, the Administrative Agent (following notice from the Required Lenders if they make such determination) will promptly notify the Borrower and all Lenders. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing, Conversion or Continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein. 3.04 INCREASED COST AND REDUCED RETURN; CAPITAL ADEQUACY; RESERVES ON EURODOLLAR RATE LOANS. (a) If any Lender determines that as a result of the introduction of or any change in or in the interpretation of any Law, or such Lender's compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Loans or (as the case may be) issuing or participating in Letters of Credit, or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this subsection (a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or has its Lending Office, and (iii) reserve requirements utilized, as to Eurodollar Rate Loans, in the determination of the Eurodollar Rate), then from time to time upon demand of such Lender together with appropriate supporting documentation (with a copy of such demand and documentation to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction. 55 (b) If any Lender determines that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, or compliance by such Lender (or its Lending Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender's desired return on capital), then from time to time upon demand of such Lender together with appropriate supporting documentation (with a copy of such demand and documentation to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction. 3.05 FUNDING LOSSES. Upon demand of any Lender together with appropriate supporting documentation (with a copy of such demand and documentation to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of: (a) any Continuation, Conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, Continue or Convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Interbank Offered Rate used in determining the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the applicable Eurodollar interbank market for Dollars for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded. 3.06 MATTERS APPLICABLE TO ALL REQUESTS FOR COMPENSATION. A certificate of the Administrative Agent or any Lender claiming compensation under this Article III and setting forth with specificity the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, the Administrative Agent or such Lender may use any reasonable averaging and attribution methods. 3.07 SURVIVAL. All of the Borrower's obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all Obligations. 56 ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS 4.01 CONDITIONS OF INITIAL CREDIT EXTENSION. The obligation of each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent: (a) Unless either (x) waived by all the Lenders (or by the Administrative Agent with respect to immaterial matters or items specified in clause (v) or (xxi) below with respect to which the Borrower has given assurances satisfactory to the Administrative Agent that such items shall be delivered promptly following the Closing Date), or (y) deferred to a reasonable later date after the Closing Date at the reasonable discretion of the Administrative Agent pursuant to the post-closing agreement (the "Post-Closing Agreement") entered into between the Borrower and the Administrative Agent as of the Closing Date, a copy of which will be delivered to each of the Lenders, the Administrative Agent's receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and its legal counsel: (i) executed counterparts of this Agreement, the Guaranty and each of the Security Instruments, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower; (ii) Revolving Loan Notes and Term Loan Notes executed by the Borrower in favor of each Lender requesting such a Note, each in a principal amount equal to such Lender's (A) Revolving Credit Commitment or (B) Pro Rata Term Share of the Term Loan, as applicable; (iii) a Swing Line Note executed by the Borrower in favor of the Swing Line Lender (if it requests such a Note) in the principal amount of the Swing Line Sublimit; (iv) such certificates of resolutions or other Organizational Action, incumbency certificates (including specimen signatures) and/or other certificates of Responsible Officers of the signing Loan Party as the Administrative Agent may reasonably require to evidence the identities of and the authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; (v) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, validly existing, in good standing and qualified to engage in business in each jurisdiction in which it is required to be qualified to engage in business except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, including certified copies of each Loan Parties' Organization Documents, certificates of good standing and/or qualification to engage in business; 57 (vi) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, (B) that there is no event, circumstance, action, suit, investigation or proceeding pending or, to the best of the Borrower's knowledge, threatened in any court or before any arbitrator or Governmental Authority since the date of the Audited Financial Statements which has or could reasonably be expected to have a Material Adverse Effect, (C) that the current implied rating on the Borrower's senior secured indebtedness as of the Closing Date is not lower than B1 by Moody's and B+ by S&P, (D) that prior to or substantially simultaneously with the Closing Date, not less than $147,654,000 in gross proceeds have been or are being delivered to the Borrower as a result of the issuance of the Subordinated Notes, and in the event such proceeds are being delivered from escrow, all conditions precedent to the release therefrom (other than the occurrence of the Closing Date) shall have been satisfied or waived, (E) that (I) the Transaction has been consummated, or is being consummated substantially simultaneously herewith, in accordance with the terms of the Transaction Documents and in compliance with applicable law and regulatory approvals, (II) all governmental, shareholder and third party consents and approvals necessary in connection with the Transaction shall have been obtained, (III) all such consents and approvals shall be in force and effect, (IV) all applicable waiting periods shall have expired (including the expiration or early termination of any Hart-Scott Rodino waiting period) without any action being taken by any Governmental Authority that could restrain, prevent or impose any material adverse conditions on the Transaction or that could seek or threaten any of the foregoing, (V) the aggregate purchase price of the Transaction does not exceed $160,000,000 (including the face amount of the Seller Notes and the amounts deposited into any escrow account for payment of indemnities or other amounts under any of the Transaction Documents, but excluding any earnouts and assumed liabilities), and (VI) except those conditions set forth on Schedule 5.17(b), each of which is subject to the terms of the Post-Closing Agreement, all conditions precedent to the consummation of the Transaction have been satisfied without waiver (except to the extent such waiver is set forth on Schedule 5.17(a)), (F) as to the matters described in Section 4.01(d), and (G) that Consolidated Net Worth as of the Closing Date, after giving effect to the Transaction and the issuance of the Subordinated Notes, is not less than the amount set forth in Section 7.13(a)(A), together with such other evidence of or documentation relating to any matters described in (A) through (G) above as the Administrative Agent may request; (vii) an opinion or opinions of counsel to each Loan Party in form and substance satisfactory to the Administrative Agent; (viii) with respect to each opinion delivered in connection with the Transaction, either (A) reliance letters from applicable counsel to the Sellers or the Borrower entitling the Administrative Agent and the Lenders to rely on such opinion, or (B) inclusion of the Administrative Agent and the Lenders as reliance parties in such opinion; (ix) (A) the consolidated financial statements of the Borrower and its Subsidiaries for the fiscal years ended 1999, 2000 and 2001, including balance sheets and related statements of operations, changes in stockholders' equity and cash flows, all audited and opined on by Ernst & Young LLP and prepared in conformity with GAAP, 58 (B) the consolidated financial statements of Tilia International, Inc. and its Subsidiaries for the fiscal years ended 1999, 2000 and 2001, including balance sheets and related statements of income or operations, shareholders' equity and cash flows, all audited and opined on by Arthur Andersen LLP and prepared in conformity with GAAP, (C) interim quarterly financial statements, and quarterly working capital detail, for the Borrower (pro forma for the Transaction) for the twelve months preceding the Transaction and first projected year after the Transaction, all prepared by management of the Borrower, (D) a pro forma balance sheet of the Borrower and its subsidiaries as of Closing after giving effect to the Transaction and the transactions contemplated hereby and reflecting estimated purchase price accounting adjustments, prepared by management of the Borrower, and (E) such other financial information and information relating to the Transaction as the Administrative Agent may reasonably request, including a copy of the review of the business of the Borrower and its subsidiaries prepared by the Borrower; (x) evidence that the Existing Credit Facility has been or concurrently with the Closing Date is being terminated, all indebtedness and obligations of the Borrower and its Subsidiaries incurred thereunder, and under the other documents executed and delivered in connection therewith, have been, or with the initial Credit Extension hereunder on the Closing Date will be, repaid and the Borrower and its Subsidiaries released from all liability thereunder except such as by their express terms survive such repayment and termination, and all Liens securing obligations under the Existing Credit Facility have been or concurrently with the Closing Date are being released; (xi) notice of appointment of the initial Responsible Officer(s); (xii) evidence of all insurance required by the Loan Documents; (xiii) an initial Revolving Loan Notice or Swing Line Revolving Loan Notice, or both, if any; (xiv) an initial Term Loan Interest Rate Selection Notice, if any; (xv) certified copies of the executed Transaction Documents, each of which shall be in form and substance satisfactory to the Administrative Agent and shall not have been amended, altered or otherwise changed or supplemented from the drafts thereof most recently delivered to and reviewed by the Administrative Agent; (xvi) certified copies of the executed Subordinated Indenture and each of the Subordinated Notes, and evidence of receipt of at least $147,654,000 in gross proceeds therefrom; (xvii) a certificate of the chief financial officer or other Responsible Officer of the Borrower, or such other Person as is permitted under the terms of the Subordinated Indenture and the Subordinated Notes, certifying that the Obligations qualify as "Senior Debt" and "Designated Senior Debt" (each as defined in the Subordinated Indenture); (xviii) delivery of Uniform Commercial Code financing statements suitable in form and substance for filing in all places required by applicable law to perfect the Liens 59 of the Administrative Agent under the Security Instruments as a first priority Lien as to items of Collateral in which a security interest may be perfected by the filing of financing statements, and such other documents and/or evidence of other actions as may be necessary under applicable law to perfect the Liens of the Administrative Agent under the Security Instruments as a first priority Lien in and to such other Collateral as the Administrative Agent may require, including without limitation the delivery by the Borrower of all documents required under Article IIA and certificates evidencing Pledged Interests, accompanied in each case by duly executed stock powers (or other appropriate transfer documents) in blank affixed thereto; (xix) evidence of payment in full of the Tilia Indebtedness including payoff letters, UCC-3 Termination Statements, and all other evidence of cancellation of the liens and Indebtedness arising under the Tilia Indebtedness and termination of the related credit facilities as the Administrative Agent may request; (xx) Uniform Commercial Code search results showing only those Liens as are acceptable to the Lenders; (xxi) waivers with respect to the Collateral and such other matters as the Administrative Agent may require, in form and substance satisfactory to the Administrative Agent, executed by (A) the owner of each location required by the Administrative Agent leased by the Borrower or any Loan Party, and (B) the owner or operator, as applicable, of each location required by the Administrative Agent at which Collateral is located (including without limitation each independent warehouse) but which is neither owned nor leased by any Loan Party; (xxii) a certificate signed by a Responsible Officer of the Borrower certifying that as of the Closing Date, upon and after giving effect to the Transaction, the issuance of the Subordinated Notes (and the receipt of proceeds therefrom), the payment in full of all amounts owing under, and the cancellation of, the Tilia Indebtedness and the Existing Credit Facility, the occurrence of the Closing Date and the initial Credit Extension, (A) the Borrower and each of its Subsidiaries shall be Solvent, both individually and collectively, and (B) the Outstanding Amount of Revolving Loans, Swing Line Loans and L/C Obligations, on a combined basis, will not exceed $25,000,000; (xxiii) the original of the Wilbert Note, accompanied by duly executed document of assignment (or other appropriate transfer documents) in blank affixed thereto; and (xxiv) such other assurances, certificates, documents, consents or opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lender or the Required Lenders reasonably may require. (b) Any fees required to be paid on or before the Closing Date shall have been paid. (c) Unless waived by the Administrative Agent, the Borrower shall have paid all Attorney Costs of the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that 60 such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent). (d) In the good faith judgment of the Administrative Agent and the Lenders: (i) there shall not have occurred or become known to the Administrative Agent or the Lenders any event, condition, situation or status since the date of the information contained in the financial and business projections, budgets, pro forma data and forecasts concerning the Borrower and its Subsidiaries delivered to the Administrative Agent prior to the Closing Date that has had or could reasonably be expected to result in a Material Adverse Effect; (ii) there shall not exist (A) any order, decree, judgment, ruling or injunction which restrains the consummation of the Transaction in the manner contemplated by the Transaction Documents, and (b) any pending or, to the knowledge of the Borrower or any Guarantor or to the Administrative Agent, threatened action, suit, investigation or other arbitral, administrative or judicial proceeding, which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; and (iii) the Borrower shall have received all approvals, consents and waivers, and shall have made or given all necessary filings and notices as shall be required to consummate the transactions contemplated hereby without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any Governmental Authority or arbitral authority or (B) any agreement, document or instrument to which the Borrower or any Subsidiary is a party or by which any of them or their properties is bound. 4.02 CONDITIONS TO ALL CREDIT EXTENSIONS AND CONVERSIONS AND CONTINUATIONS. The obligation of each Lender to honor any Revolving Loan Notice, Swing Line Revolving Loan Notice or Term Loan Interest Rate Selection Notice (other than a Revolving Loan Notice or Term Loan Interest Rate Selection Notice requesting only a Conversion of Eurodollar Rate Loans to Base Rate Loans) is subject to the following conditions precedent: (a) The representations and warranties of the Borrower contained in Article V or in any other Loan Documents shall be true and correct on and as of the date of such Credit Extension, Conversion or Continuation, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date. (b) No Default or Event of Default shall exist, or would result from such proposed Credit Extension, Conversion or Continuation. (c) The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Revolving Loan Notice, Swing Line Revolving Loan Notice, a Letter of Credit Application or an Term Loan Interest Rate Selection Notice, as applicable, in accordance with the requirements hereof. 61 (d) The Administrative Agent shall have received, in form and substance reasonably satisfactory to it, such other assurances, certificates, documents or consents related to the foregoing as the Administrative Agent or the Required Lenders reasonably may require. Each Revolving Loan Notice, Swing Line Revolving Loan Notice, Letter of Credit Application and Term Loan Interest Rate Selection Notice submitted by the Borrower under this Section 4.02 shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants (each of such representations and warranties as made as of the Closing Date to be deemed made giving effect to the Transaction) to the Administrative Agent and the Lenders that: 5.01 EXISTENCE, QUALIFICATION AND POWER; COMPLIANCE WITH LAWS. Each Loan Party (a) is a corporation, limited partnership, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute and deliver, and perform its obligations under, the Transaction Documents and the Loan Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except where the failure so to qualify or be licensed could not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Laws, except to the extent any non-compliance could not reasonable be expected to have a Material Adverse Effect. 5.02 AUTHORIZATION; NO CONTRAVENTION. (a) Except as set forth on Schedule 5.02(a), the execution, delivery and performance by each Loan Party of each Transaction Document to which such Person is party, have been duly authorized by all necessary corporate or other Organizational Action, and do not and will not (i) contravene the terms of any of the Person's Organization Documents; (ii) conflict with or result in any breach or contravention of, or the creation or imposition of any Lien (other than Permitted Liens) under, any material Contractual Obligation to which the Person is a party or any order, injunction, writ or decree of any Governmental Authority or arbitral award to which such Person or its property is subject, except any Liens in favor of the Administrative Agent and the Lenders created by the Loan Documents; or (iii) violate any Law the violation of which could reasonably be expected to have a Material Adverse Effect. 62 (b) The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other Organizational Action, and do not and will not (i) contravene the terms of any of the Person's Organization Documents; (ii) conflict with or result in any breach or contravention of, or the creation or imposition of any Lien under, any Contractual Obligation to which the Person is a party or any order, injunction, writ or decree of any Governmental Authority or arbitral award to which such Person or its property is subject, except any Liens in favor of the Administrative Agent and the Lenders created by the Loan Documents; or (iii) violate any Law. 5.03 GOVERNMENTAL AND THIRD-PARTY AUTHORIZATION. No further approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document or any Transaction Document, which has not been obtained or effected or with respect to which the failure so to obtain or effect could not reasonably be expected to have a Material Adverse Effect. 5.04 BINDING EFFECT. This Agreement and each Transaction Document has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement and each Transaction Document constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and other similar Laws relating to or affecting creditors' rights generally and by the application of general equitable principles (whether considered in proceedings at law or in equity). 5.05 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT. (a) Each of the Audited Financial Statements and the Tilia Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness to the extent disclosure of the same (including disclosure in the notes to financial statements) would be required to be disclosed under GAAP. (b) (i) The financial reports delivered pursuant to Sections 4.01(a)(ix)(C) and (D) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (ii) the pro forma balance sheet, giving effect to the Transaction, delivered pursuant to Section 4.01(a)(ix)(D) (I) fairly presents in all material respects the pro forma financial condition of the Borrower and its Subsidiaries as of the date thereof on a pro forma basis in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (II) shows all material 63 indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness, pro forma for the Transaction, to the extent disclosure of the same (including disclosure in the notes to financial statements) would be required to be disclosed under GAAP. (c) Since the date of the Audited Financial Statements, there has been no event or circumstance that has had or could reasonably be expected to have a Material Adverse Effect. 5.06 LITIGATION. Except as specifically disclosed in Schedule 5.06, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower or any of the Guarantors, threatened, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document or any Transaction Document, or the Transaction or any of the transactions contemplated hereby, or (b) if determined adversely, could reasonably be expected to have a Material Adverse Effect. 5.07 NO DEFAULT. Neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document. 5.08 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. As of the Closing Date, and giving effect to the application of the proceeds of the Subordinated Notes, the Seller Notes and the Term Loan, the property of the Borrower and its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01. 5.09 ENVIRONMENTAL COMPLIANCE. Except as listed on Schedule 5.09, (a) the Borrower and each Subsidiary is in compliance in all material respects with all applicable Environmental Laws and has been issued and currently maintains all required federal, state and local permits, licenses, certificates and approvals, except to the extent the failure to have so been issued and maintain any such permit, license, certificate or approval could not reasonably be expected to have a Material Adverse Effect, and (b) neither the Borrower nor any Subsidiary has been notified of any pending or threatened action, suit, proceeding or investigation, and neither the Borrower nor any Subsidiary is aware of any facts, which (i) calls into question, or could reasonably be expected to call into question, compliance by the Borrower or any Subsidiary with any Environmental Laws, (ii) seeks, or could reasonably be expected to form the basis of a meritorious proceeding, to suspend, revoke or terminate any license, permit or approval necessary for the operation of the Borrower's or any Subsidiary's business or facilities or for the generation, handling, storage, treatment or disposal of any Hazardous Materials, or (iii) seeks to cause, or could reasonably be expected to form the basis of a meritorious proceeding to cause, any property of the Borrower or any Subsidiary or other Loan Party to be subject to any restrictions on ownership, use, occupancy or transferability under any Environmental Law, any of which could reasonably be expected to have a Material Adverse Effect. 64 5.10 INSURANCE. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts (after giving effect to any self-insurance compatible with the following standards), with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or its Subsidiaries operate. In addition to, and without being limited by, the foregoing, the Borrower and its Subsidiaries are currently maintaining the insurance required by each of the Security Instruments, and all premiums payable in respect of such insurance are current and all such insurance is in force. 5.11 TAXES. The Borrower and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. After giving effect to the issuance of the Subordinated Notes and the Seller Notes, there is no proposed tax assessment against the Borrower or any Subsidiary, including any such assumed by any Loan Party under the Transaction Documents, that would, if made, have a Material Adverse Effect. 5.12 ERISA COMPLIANCE. (a) Except as set forth on Schedule 5.12, each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws, except for any required amendment for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. Except as set forth on Schedule 5.12, the Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with 65 respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA. 5.13 SUBSIDIARIES. The Borrower has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13 and has no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13. 5.14 MARGIN REGULATIONS; INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. (a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. (b) None of the Borrower, any Person controlling the Borrower, or any Subsidiary (i) 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, or (ii) is or is required to be registered as an "investment company" under the Investment Company Act of 1940. 5.15 DISCLOSURE. No statement, information, report, representation, or warranty made by any Loan Party in any Loan Document or furnished to the Administrative Agent or any Lender by or on behalf of any Loan Party in connection with any Loan Document (a) except with respect to financial projections concerning the Borrower and its Subsidiaries, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (b) in the case of financial projections concerning the Borrower and its Subsidiaries, have been prepared in good faith based upon assumptions the Borrower believes to be reasonable. 5.16 INTELLECTUAL PROPERTY; LICENSES, ETC. The Borrower and its Subsidiaries own, or possess the right to use, all Intellectual Property that is currently used for the operation of their respective businesses, without known conflict with the rights of any other Person. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any Subsidiary infringes upon any rights held by any other Person. Except as specifically disclosed in Schedule 5.16, no claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Borrower, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect. 5.17 CONSUMMATION OF THE TRANSACTION. (a) The Transaction has been consummated, or is being consummated substantially simultaneously with the Closing Date, in accordance with the terms of the Transaction Documents and in compliance with applicable law and regulatory approvals. 66 (b) All conditions to the consummation of the Transaction have been satisfied, including the obtaining of all governmental, shareholder and third party consents and approvals necessary in connection with the Transaction, and all such consents and approvals are in full force and effect, except (i) as set forth in Schedule 5.17(a), each of which closing conditions has been waived by the parties to the Transaction, and (ii) as set forth on Schedule 5.17(b), each of which closing conditions is subject to the terms of the Post-Closing Agreement. (c) All applicable waiting periods with respect to the Transaction have expired (including the expiration or early termination of any Hart-Scott Rodino waiting period) without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on the Transaction. (d) The aggregate purchase price of the Transaction does not exceed $160,000,000 (including the face amount of the Seller Notes and the amounts deposited into any escrow account for payment of indemnities or other amounts under any of the Transaction Documents, but excluding any earnouts and assumed liabilities). (e) Assuming the occurrence of the Closing Date, (i) both the Existing Credit Facility and the Tilia Indebtedness have been terminated, (ii) all indebtedness and obligations of the Borrower and its Subsidiaries incurred thereunder, and under the other documents executed and delivered in connection therewith, have been repaid, (iii) the Borrower and its Subsidiaries have been released from all liability thereunder except such as by their express terms survive such repayment and termination, and (iv) all Liens securing obligations under the Existing Credit Facility or the Tilia Indebtedness have been released. (f) On the Closing Date only, after giving effect to the occurrence of the Closing Date, the Transaction, the initial Credit Extension hereunder on the Closing Date, the issuance of the Subordinated Notes (and the receipt of proceeds therefrom), the payment in full of all amounts owing under, and the cancellation of, the Tilia Indebtedness and the Existing Credit Facility, the Outstanding Amount of Revolving Loans, Swing Line Loans and L/C Obligations, on a combined basis, does not exceed $25,000,000. 5.18 SOLVENCY. After giving effect to the initial Credit Extension hereunder on the Closing Date, the issuance of the Subordinated Notes (and the receipt of proceeds therefrom), and the payment in full of all amounts owing under, and the cancellation of, the Tilia Indebtedness and the Existing Credit Facility, the Borrower and each of the Guarantors are Solvent, both individually and collectively. 67 ARTICLE VI AFFIRMATIVE COVENANTS So long as any Lender shall have any Revolving Credit Commitment hereunder, any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (other than contingent Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Guarantor that may be owing to the Lenders pursuant to the Loan Documents and expressly survive termination of this Agreement), the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.11) cause each Subsidiary to: 6.01 FINANCIAL STATEMENTS. Deliver to the Administrative Agent and each Lender, in form and detail reasonably satisfactory to the Administrative Agent and the Required Lenders: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income or operations, cash flows and (as to consolidated statements only) stockholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, and (except with respect to consolidating balance sheets and related consolidating statements) audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any qualifications or exceptions as to the scope of the audit or the going concern status of the Borrower nor to any other qualifications and exceptions not reasonably acceptable to the Required Lenders; and (b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated and consolidating statements of income or operations, cash flows and (as to consolidated statements only) stockholders' equity for such fiscal quarter and for the portion of the Borrower's fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal, recurring year end audit adjustments and the absence of footnotes. 6.02 CERTIFICATES; OTHER INFORMATION. Deliver to the Administrative Agent and each Lender, in form and detail reasonably satisfactory to the Administrative Agent and the Required Lenders: (a) concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its independent certified public accountants certifying such financial statements and stating that in making the examination necessary therefor no knowledge 68 was obtained of any Default or Event of Default under the financial covenants set forth herein or, if any such Default or Event of Default shall exist, stating the nature and status of such event; (b) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower; (c) concurrently with the delivery of the financial statements referred to in Sections 6.01(a), quarterly projected financial statements, and quarterly projected working capital detail, for the next fiscal year of the Borrower, all prepared by management of the Borrower. (d) promptly after any request by the Administrative Agent or any Lender, 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 the Borrower by independent accountants in connection with the accounts or books of the Borrower or any Subsidiary, or any audit of any of them; (e) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the 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, and not otherwise required to be delivered to the Administrative Agent pursuant hereto; and (f) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Subsidiary as the Administrative Agent, at the reasonable request of any Lender, may from time to time request. Each document required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(e) shall be deemed to have been delivered on the date on which the Borrower posts such document on the Borrower's website on the Internet at the website address listed on Schedule 10.02 hereof, or when such document is posted on the Securities and Exchange Commission's website at www.sec.gov (the "SEC Website") or on an Internet website established by the Administrative Agent with Intralinks, Inc. or other similarly available electronic media (each of the foregoing an "Informational Website"); provided that (i) the Borrower shall deliver paper copies of all such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Administrative Agent and each Lender shall be notified by electronic mail of the applicable Informational Website and of the posting of each such document. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above in this paragraph, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents. 6.03 NOTICES. Promptly notify the Administrative Agent and each Lender: 69 (a) of the occurrence of any Default or Event of Default; (b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, any of the Transaction Documents or any other Contractual Obligation of the Borrower or any Subsidiary; or (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority; (c) of any litigation, investigation or proceeding affecting the Borrower or any Subsidiary in which the amount involved (excluding amounts covered by applicable insurance as to which no reservation of rights is in effect) exceeds the Threshold Amount, or in which injunctive relief or similar relief is sought, which relief, if granted, could reasonably be expected to have a Material Adverse Effect; (d) of the occurrence of any material ERISA Event; (e) of any material change in accounting policies or financial reporting practices by the Borrower or any Subsidiary; and (f) of any (i) violation or alleged violation by the Borrower or any Subsidiary of any applicable Environmental Laws; (ii) release or threatened release by the Borrower or any Subsidiary, or by any Person handling, transporting or disposing of any Hazardous Materials on behalf of the Borrower or any Subsidiary, or at any facility or property owned or leased or operated by the Borrower or any Subsidiary, of any Hazardous Materials, except where occurring legally; (iii) liability or alleged liability of the Borrower or any Subsidiary for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials; or (iv) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws except to the extent such litigation or proceeding could not reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section 6.03 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto, and with respect to matters in subsection (f), copies of all related notices, complaints, orders, directives, claims and citations. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement or other Loan Document that have been breached. 6.04 PAYMENT OF OBLIGATIONS. Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien (other than during the period in which such Lien may be a Permitted Lien) upon its property, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary and foreclosure or other enforcement of such Liens in respect of the Collateral have not commenced or have been 70 effectively stayed; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness and subject to any provision of this Agreement. 6.05 PRESERVATION OF EXISTENCE, ETC. Except in a transaction permitted by Section 7.04 or 7.05, preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization; take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, and preserve or renew all of its registered Intellectual Property, except in each case to the extent failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.06 MAINTENANCE OF PROPERTIES. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; and (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.07 MAINTENANCE OF INSURANCE. In the event compliance with the insurance requirements set forth in the Security Instruments does not satisfy the following requirements, maintain with financially sound and reputable insurance companies not Affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance compatible with the following standards) as are customarily carried under similar circumstances by such other Persons and providing for not less than 30 days prior notice to the Administrative Agent of termination, lapse or cancellation of such insurance. 6.08 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. (a) Comply in all material respects with the requirements of all Laws (including Environmental Laws) and Contractual Obligations applicable to it or to its business or property, except (other than with respect to those matters covered in subsection (b) below) in such instances in which (i) such requirement of Law or Contractual Obligation is being contested in good faith by appropriate proceedings diligently conducted or a bona fide dispute exists with respect thereto; or (ii) with respect to Contractual Obligations only, the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. (b) In addition to the foregoing, if the Borrower or any Subsidiary shall receive any letter, notice, complaint, order, directive, claim or citation alleging that the Borrower or any Subsidiary has violated any Environmental Law, has released any Hazardous Material, or is liable for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, the Borrower and any Subsidiary shall, within the time period permitted and to the extent required by applicable Laws or the Governmental Authority responsible for enforcing such Environmental Law, remove or remedy, or cause the applicable Subsidiary to remove or remedy, such violation or release or satisfy such liability unless such requirement is being contested in good faith by appropriate proceedings diligently conducted and adequate 71 reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary and such contest effectively stays any requirement to effect such removal or remedy. 6.09 BOOKS AND RECORDS. (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be. 6.10 INSPECTION RIGHTS. Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at reasonable times during normal business hours as often as may be reasonably desired, and upon reasonable advance notice to the Borrower, and (subject to the following proviso) (a) at the expense of the Borrower one time per year in the case of inspection by the Administrative Agent or such other Lender as it may designate, and (b) otherwise at the expense of the Lenders; provided, however, that when a Default or Event of Default has occurred and is continuing the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the sole expense of the Borrower at any time during normal business hours and without advance notice. 6.11 COMPLIANCE WITH ERISA. Do, and cause each of its ERISA Affiliates to do, each of the following: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code. 6.12 USE OF PROCEEDS. Use the proceeds of the Credit Extensions (i) for working capital, Capital Expenditures, and other general corporate purposes of the Borrower and its Subsidiaries not in contravention of any Law or of any Loan Document; and (ii) together with the proceeds of the Subordinated Notes and available cash, (A) to refinance certain outstanding existing indebtedness, including all indebtedness outstanding under the Existing Credit Facility and the Tilia Indebtedness, (B) to pay the cash portion of the purchase price of the Transaction, and (C) to pay fees and expenses incurred in connection with the Transaction. 6.13 MAINTAIN PRINCIPAL LINE OF BUSINESS. Continue at all times to conduct its business and engage principally in the Permitted Business. 6.14 NEW SUBSIDIARIES AND PLEDGORS. (a) As soon as practicable but in any event within 30 days following the acquisition or creation of any Subsidiary that is a Domestic Subsidiary or Direct Foreign Subsidiary, cause to be delivered to the Administrative Agent each of the following: (i) if such Subsidiary is a Domestic Subsidiary, a Guaranty Joinder Agreement duly executed by such Subsidiary; 72 (ii) if such Subsidiary is a Domestic Subsidiary, a Security Joinder Agreement duly executed by such Subsidiary (with all schedules thereto appropriately completed); (iii) if such Subsidiary is a Domestic Subsidiary or a Direct Foreign Subsidiary, and any of the Subsidiary Securities issued by such Subsidiary are owned by a Subsidiary who has not then executed and delivered to the Administrative Agent the Pledge Agreement or a Pledge Joinder Agreement granting a Lien to the Administrative Agent, for the benefit of the Secured Parties, in such Pledged Interests, a Pledge Joinder Agreement (with all schedules thereto appropriately completed) duly executed by the Subsidiary that directly owns such Pledged Interest (or, as to Pledged Interests issued by any Direct Foreign Subsidiary, a pledge agreement or comparable document pursuant to the laws of the jurisdiction of formation of such Subsidiary in form and substance acceptable to the Administrative Agent); (iv) if such Subsidiary is a Domestic Subsidiary or a Direct Foreign Subsidiary, and any of the Subsidiary Securities issued by such Subsidiary are owned by the Borrower or a Subsidiary who has previously executed a Pledge Agreement or a Pledge Joinder Agreement, a Pledge Agreement Supplement by each Borrower and Subsidiary that owns any of such Pledged Interests with respect to such Pledged Interests in the form required by the Pledge Agreement; (v) if the Pledged Interests issued or owned by such Subsidiary constitute securities under Article 8 of the Uniform Commercial Code (A) the certificates representing 100% of such Pledged Interests and (B) duly executed, undated stock powers or other appropriate powers of assignment in blank affixed thereto; (vi) if such Subsidiary is a Domestic Subsidiary and itself owns any Subsidiary that is or, after such acquisition or transaction, will be a Domestic Subsidiary or Direct Foreign Subsidiary, a Pledge Joinder Agreement (with all schedules thereto appropriately completed) duly executed by such Subsidiary (or, as to Pledged Interests issued by any Direct Foreign Subsidiary, a pledge agreement or comparable document pursuant to the laws of the jurisdiction of formation of such Subsidiary in form and substance reasonably acceptable to the Administrative Agent); (vii) if such Subsidiary is a Domestic Subsidiary and owns any Intellectual Property, an IP Security Joinder Agreement duly executed by such Subsidiary (with all schedules thereto appropriately completed); (viii) with respect to any Person that has executed a Pledge Joinder Agreement, a Pledge Agreement Supplement, a Security Joinder Agreement or an IP Security Joinder Agreement hereunder, Uniform Commercial Code financing statements naming such Person as "Debtor" and naming the Administrative Agent for the benefit of the Secured Parties as "Secured Party," in form, substance and number sufficient in the reasonable opinion of the Administrative Agent and its special counsel to be filed in all Uniform Commercial Code filing offices and in all jurisdictions in which filing is necessary or advisable to perfect in favor of the Administrative Agent for the benefit of the Secured Parties the Lien on the Collateral conferred under such Security Instrument to the extent such Lien may be perfected by Uniform Commercial Code filing; 73 (ix) unless the Administrative Agent expressly waives such requirement, an opinion of counsel to each Subsidiary executing any Joinder Agreement or Pledge Supplement, and the Borrower if it executes a Pledge Supplement, provided for in this Section 6.14 dated as of the date of delivery of such applicable Joinder Agreements (and other Loan Documents) provided for in this Section 6.14 and addressed to the Administrative Agent and the Lenders, in form and substance reasonably acceptable to the Administrative Agent, each of which opinions may be in form and substance, including assumptions and qualifications contained therein, substantially similar to those opinions of counsel delivered pursuant to Section 4.01(a)). (x) current copies of the Organizational Documents and Operating Documents of each such Subsidiary that is a Domestic Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, partners, or appropriate committees thereof (and, if required by such Organizational Documents, Operating Documents or applicable law, of the shareholders, members or partners) of such Domestic Subsidiary authorizing the actions and the execution and delivery of documents described in this Section 6.14, all certified by the applicable Governmental Authority or appropriate officer as the Administrative Agent may elect. (b) As soon as practicable but in any event within 30 days following the acquisition of any Pledged Interests by any Subsidiary who has not theretofore executed the Pledge Agreement or a Pledge Joinder Agreement and who is not required to deliver a Pledge Joinder Agreement pursuant to the preceding provisions of this Section 6.14, cause to be delivered to the Administrative Agent a Pledge Joinder Agreement (with all schedules thereto appropriately completed) duly executed by the Subsidiary, and the documents, stock certificates, stock powers, financing statements, opinions, Organizational Documents, Operating Documents, and Organizational Action relating thereto and to the pledge contained therein and described in clauses (v), (viii), (ix) and (x) of Section 6.14(a). 6.15 FURTHER ASSURANCES. At the Borrower's cost and expense, upon request of the Administrative Agent, duly execute and deliver or cause to be duly executed and delivered, to the Administrative Agent such further instruments, documents, certificates, financing and continuation statements, and do and cause to be done such further acts that may be reasonably necessary or advisable in the reasonable opinion of the Administrative Agent to carry out more effectively the provisions and purposes of this Agreement, the Guaranty, the Security Instruments and the other Loan Documents. 6.16 SELLER NOTES. (a) Determine and take all actions necessary to provide at all times that the Administrative Agent and the Lenders are the "senior most Designated Senior Debt" under the terms of the Seller Notes. (b) Provide written notice to the payee of each Seller Note, on the same Business Day on which a Responsible Officer has knowledge, of any subordination and prohibition of any payment under such Seller Note. 74 (c) Take all commercially reasonable action to provide that the payee of each of the Seller Notes (i) will not declare a default under or in connection with such Seller Note or take, sue for, ask or demand from the Borrower payment of all or any portion of such Seller Notes unless at least 10 days' prior written notice of such action is given to the Administrative Agent and (ii) will not commence, or join with any creditor other than the Lenders and the Administrative Agent in commencing, directly or indirectly, or cause the Borrower to commence, or assist the Borrower in commencing, any proceeding referred to in Section 4.2(a) of each Seller Note. ARTICLE VII NEGATIVE COVENANTS So long as any Lender shall have any Revolving Credit Commitment hereunder, any Loan or other Obligation shall remain unpaid or unsatisfied (other than contingent Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Guarantor that may be owing to the Lenders pursuant to the Loan Documents and expressly survive termination of this Agreement), or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly: 7.01 LIENS. Create, incur, assume or suffer to exist, any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following (collectively, the "Permitted Liens"): (a) Liens created or arising pursuant to the Security Instruments or any other Loan Document; (b) Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, provided that the property covered thereby is not increased and any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(b); (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; (d) statutory Liens of landlords who are not subject to a Landlord Waiver, carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; (e) pledges or deposits in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA; 75 (f) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, or arising as a result of process payments under government contracts to the extent required or imposed by applicable Laws, all to the extent incurred in the ordinary course of business; (g) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; (h) Liens securing judgments for the payment of money in an aggregate amount not in excess of the Threshold Amount (except to the extent covered by independent third-party insurance as to which the insurer has acknowledged in writing its obligation to cover), unless any such judgment remains undischarged for a period of more than 30 consecutive days during which execution is not effectively stayed; (i) Liens securing Indebtedness of any Subsidiary that is not a Guarantor to the Borrower or any Subsidiary; (j) Liens securing Indebtedness permitted under Section 7.03(e); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (ii) the Indebtedness secured thereby (x) is not less than 75% of the cost of property acquired on the date of acquisition and (y) does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition; and (k) Liens on assets other than equity interests in any Subsidiary securing Indebtedness (including Indebtedness committed to the Borrower or any Subsidiary but not advanced) in aggregate outstanding principal amount not to exceed $5,000,000 at any time. 7.02 INVESTMENTS. Make any Investments, except: (a) Investments that are existing on the date hereof and listed on Schedule 7.02, including the Seller Notes and any Investment in connection with the Escrow Agreements; (b) Investments held by the Borrower or such Subsidiary in the form of Eligible Securities and cash equivalents; (c) advances to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $500,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes; (d) Investments of (i) any Subsidiary in the Borrower, (ii) of the Borrower or any Subsidiary in a Guarantor, (iii) of any Subsidiary that is not a Guarantor in another Subsidiary that is not a Guarantor, or (iv) of the Borrower or any Guarantor in any Subsidiary that is not a Guarantor in an amount not to exceed $5,000,000 in the aggregate at any time outstanding; 76 (e) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss; (f) Investments permitted by Section 7.04; (g) Permitted Acquisitions; (h) Investments consisting of loans under the Executive Loan Program in an aggregate principal amount not to exceed $7,500,000 at any time outstanding, provided that any Investments under the Executive Loan Program outstanding on the Closing Date shall be deemed to have been incurred pursuant to this Section 7.02(h) without regard to such Investment appearing on Schedule 7.02 or otherwise being permitted under Section 7.02(a); and (i) other Investments in aggregate outstanding principal amount not to exceed, at any time, $5,000,000. 7.03 INDEBTEDNESS. Allow or permit any Subsidiary to create, incur, assume or suffer to exist any Indebtedness other than: (a) Indebtedness under the Loan Documents; (b) Indebtedness outstanding on the date hereof and listed on Schedule 7.03, including without limitation Indebtedness under the Subordinated Notes and the Seller Notes, and any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the fees and expenses reasonably incurred in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder, (ii) none of the instruments and agreements evidencing or governing such Indebtedness shall be amended, modified or supplemented after the Closing Date, including in connection with any refinancing, refunding, renewal or extension, to change any terms of subordination, repayment or rights of enforcement, conversion, put or exchange, or to make any covenants or events of default materially more restrictive or in any event more restrictive than as set forth herein, from such terms and rights as in effect on the Closing Date; (c) Contingent Obligations of (i) the Borrower or any Guarantor in respect of Indebtedness otherwise permitted hereunder of the Borrower or any Guarantor, (ii) any Subsidiary that is not a Guarantor in respect of Indebtedness otherwise permitted hereunder of any Subsidiary, provided that with respect to each of (i) and (ii) such Contingent Obligations with respect to Indebtedness that is subordinated to the Obligations shall be subordinated to the same or greater extent, and (iii) of the Borrower or any Subsidiary in the form of customary and commercially reasonable indemnification obligations incurred in good faith in connection with any Permitted Acquisition; (d) obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks 77 associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person and not for purposes of speculation or taking a "market view;" and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party; (e) Indebtedness in respect of Capital Leases, Synthetic Lease Obligations and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(j); provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $5,000,000; (f) Indebtedness (i) of the Borrower or any Guarantor owing to the Borrower or any Guarantor, (ii) of any Subsidiary that is not a Guarantor owing to the Borrower or any Subsidiary, and (iii) of the Borrower or any Guarantor owing to any Subsidiary that is not a Guarantor in an aggregate principal amount not to exceed $5,000,000 at any time outstanding for all such Indebtedness permitted under this subclause (iii); and (g) Unsecured Indebtedness (i) of the Borrowers and the Guarantors in an aggregate principal amount not to exceed $10,000,000 at any time outstanding, and (ii) of Subsidiaries that are not Guarantors in an aggregate principal amount not to exceed $5,000,000 at any time outstanding. 7.04 FUNDAMENTAL CHANGES. Merge, consolidate with or into, or convey, transfer, lease or otherwise Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default or Event of Default exists or would result therefrom and subject to Section 7.20: (a) any Subsidiary may merge with or transfer substantially all its assets (upon voluntary liquidation or otherwise) to any Guarantor, provided that, if a merger, the applicable Guarantor shall be the continuing or surviving Person, and provided further that if a transfer of assets in the form of a sale by a Subsidiary that is not a Guarantor, the sale shall be at fair market value and the aggregate amount of all such sales shall not exceed $5,000,000; (b) any Subsidiary substantially all of whose assets consist of Subsidiary Securities or other Equity Securities in any Person may merge with or transfer substantially all its assets (upon voluntary liquidation or otherwise) to the Borrower, provided that, if a merger, the Borrower shall be the continuing or surviving Person, and provided further that if a transfer of assets in the form of a sale by a Subsidiary that is not a Guarantor, the sale shall be at fair market value and the aggregate amount of all such sales shall not exceed $5,000,000; and (c) any Subsidiary that is not a Guarantor may merge with or sell substantially all its assets (upon voluntary liquidation or otherwise) to any one or more Subsidiaries that is not a Guarantor. 7.05 DISPOSITIONS. In each case subject to Section 7.20, make any Disposition or enter into any agreement to make any Disposition, except: 78 (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business; (b) Dispositions of inventory in the ordinary course of business; (c) Dispositions by the Borrower or any Subsidiary of equipment or real property which is replaced by equipment or real property of substantially equivalent or greater utility and value within ninety (90) days of the date of disposition thereof, provided that if the fair market value of the property so disposed of is greater than $3,000,000, the Administrative Agent shall have received notice of such disposition from the Borrower not less than twenty (20) days prior to the consummation of such disposition; (d) Dispositions of property (i) by any Subsidiary to a Guarantor, (ii) by the Borrower or any Guarantor to any Guarantor, and (iii) by any Subsidiary that is not a Guarantor to any other Subsidiary that is not a Guarantor; and (e) Dispositions permitted by Section 7.04; and (f) Dispositions not otherwise permitted by (a) through (e) above, so long as the aggregate fair market value of all such property so disposed in any fiscal year of the Borrower does not exceed $35,000,000 and the Net Proceeds therefrom are applied as provided in Section 2.06(e); provided that, without increasing the $35,000,000 limit provided in this Section 7.05(f), the first $1,000,000 of Net Proceeds in each fiscal year of the Borrower realized from the Disposition of Accounts under the Accounts Receivable Purchase Agreement shall not be required to be applied as a prepayment as would otherwise be required under Section 2.06(e). 7.06 LEASE OBLIGATIONS. Create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease, except: (a) leases in existence on the date hereof and listed on Schedule 7.06, and any renewal, refunding, extension or refinancing thereof; provided that with respect to Capital Leases and Synthetic Leases (i) the amount of such Capital Lease or Synthetic Lease is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the fees and expenses reasonably incurred in connection with such refinancing, and (ii) none of the instruments and agreements evidencing or governing such Capital Lease or Synthetic Lease shall be amended, modified or supplemented after the Closing Date, including in connection with any refinancing, refunding, renewal or extension, to change any terms of subordination, repayment or rights of enforcement, conversion, put, exchange or other rights, or to make any covenants or events of default materially more restrictive or in any event more restrictive than as set forth herein, from such terms and rights as in effect on the Closing Date; and (b) operating leases (other than those constituting Synthetic Lease Obligations) entered into or assumed by the Borrower or any Subsidiary after the date hereof in the ordinary course of business. 7.07 RESTRICTED PAYMENTS. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that: 79 (a) (i) each Guarantor may make Restricted Payments to the Borrower and to other Guarantors, and (ii) each Subsidiary that is not a Guarantor may make Restricted Payments to other Subsidiaries and the Borrower; (b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock of such Person; and (c) the Borrower may repurchase shares of its own stock in an aggregate amount not to exceed $10,000,000 in any fiscal year of the Borrower so long as both immediately before and after the making of any such repurchase, and pro forma for each such repurchase, (i) the Total Leverage Ratio is less than or equal to 1.75 to 1.00, (ii) the excess of the Aggregate Revolving Credit Commitments over the aggregate Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations shall equal or exceed $25,000,000, and (iii) no Default or Event of Default shall have occurred and be continuing. 7.08 ERISA. At any time engage in a transaction which could be subject to Section 4069 or 4212(c) of ERISA, or permit any Plan to (a) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (b) fail to comply with ERISA or any other applicable Laws; or (c) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), which, with respect to each event listed above, could reasonably be expected to have a Material Adverse Effect. 7.09 CHANGE IN NATURE OF BUSINESS. Engage in any material line of business other than the Permitted Business. 7.10 TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any kind with any Affiliate of the Borrower, other than for compensation and upon fair and reasonable terms with Affiliates in transactions that are otherwise permitted hereunder no less favorable to the Borrower or Subsidiary than would be obtained in a comparable arm's-length transaction with a Person other than an Affiliate. 7.11 BURDENSOME AGREEMENTS. Enter into any Contractual Obligation that limits the ability (a) of any Subsidiary to make Restricted Payments, loans or advances to the Borrower or any Guarantor or to otherwise transfer property to the Borrower or any Guarantor, or (b) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person, other than standard and customary negative pledge provisions in property acquired with the proceeds of any Capital Lease or purchase money financing that extend and apply only to such acquired property. 7.12 USE OF PROCEEDS. Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose, provided that to the extent permitted by Section 7.07(c), the proceeds of one or more Credit Extensions may be used by the Borrower to purchase stock of the Borrower so long as such purchase is made in compliance with Regulation U of the FRB and all other applicable Laws. 80 7.13 FINANCIAL COVENANTS. (a) Consolidated Net Worth. Permit Consolidated Net Worth of the Borrower at any time to be less than the sum of (A) $30,000,000, (B) an amount equal to 50% of the Consolidated Net Income earned in each fiscal quarter ending after December 31, 2001 (with no deduction for a net loss in any such fiscal quarter) and (C) an amount equal to 100% of the aggregate increases in Stockholders' Equity of the Borrower and its Subsidiaries after the date hereof by reason of the issuance and sale of capital stock of the Borrower (including upon any conversion of debt securities of the Borrower into such capital stock). (b) Total Leverage Ratio. Permit the Total Leverage Ratio as of the end of any Four-Quarter Period of the Borrower to be greater than the ratio set forth below opposite such Four-Quarter Period:
- ------------------------------------------------------------ ------------------------------------------------------- Four-Quarter Period ending closest to: Maximum Total Leverage Ratio - ------------------------------------------------------------ ------------------------------------------------------- September 30, 2002; December 31, 2002; 3.50 to 1.00 March 31, 2003; June 30, 2003; and September 30, 2003 - ------------------------------------------------------------ ------------------------------------------------------- December 31, 2003; March 31, 2004; 3.25 to 1.00 June 30, 2004; and September 30, 2004 - ------------------------------------------------------------ ------------------------------------------------------- December 31, 2004 and thereafter 3.00 to 1.00 - ------------------------------------------------------------ -------------------------------------------------------
(c) Senior Leverage Ratio. Permit the Senior Leverage Ratio as of the end of any Four-Quarter Period of the Borrower to be greater than the ratio set forth below opposite such Four-Quarter Period:
- ------------------------------------------------------------ ------------------------------------------------------- Four-Quarter Period ending closest to: Maximum Senior Leverage Ratio - ------------------------------------------------------------ ------------------------------------------------------- September 30, 2002; 2.00 to 1.00 December 31, 2002; and March 31, 2003 - ------------------------------------------------------------ ------------------------------------------------------- June 30, 2003; September 30, 2003; 1.75 to 1.00 - ------------------------------------------------------------ ------------------------------------------------------- 81 - ------------------------------------------------------------ ------------------------------------------------------- December 31, 2003; March 31, 2004; June 30, 2004; and September 30, 2004 - ------------------------------------------------------------ ------------------------------------------------------- December 31, 2004 and thereafter 1.50 to 1.00 - ------------------------------------------------------------ -------------------------------------------------------
(d) Fixed Charge Ratio. Permit the Fixed Charge Ratio as of the end of any applicable period of the Borrower, beginning with the period ending closest to September 30, 2002, to be less than 1.25 to 1.00. 7.14 ACQUISITIONS. Enter into any agreement, contract, binding commitment or other arrangement providing for any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition, unless (i) the Person to be (or whose assets are to be) acquired does not oppose such Acquisition and the line or lines of business of the Person to be acquired are a Permitted Business, (ii) no Default or Event of Default shall have occurred and be continuing either immediately prior to or immediately after giving effect to such Acquisition and, if the Cost of Acquisition is in excess of $10,000,000, the Borrower shall have furnished to the Administrative Agent (A) pro forma historical financial statements as of the end of the most recently completed fiscal year of the Borrower and most recent interim fiscal quarter, if applicable giving effect to such Acquisition and (B) a certificate in the form of Exhibit D prepared on a historical pro forma basis as of the date of the Audited Financial Statements or, if later, as of the most recent date for which financial statements have been furnished pursuant to Section 6.01(a) or (b) giving effect to such Acquisition, which certificate shall demonstrate that no Default or Event of Default would exist immediately after giving effect thereto, (iii) the Person acquired shall be a wholly-owned Subsidiary, or be merged into a wholly-owned Subsidiary, immediately upon consummation of the Acquisition (or if assets are being acquired, the acquiror shall be a wholly-owned Subsidiary), (iv) after the consummation of the Acquisition each Subsidiary that is a Domestic Subsidiary or Direct Foreign Subsidiary shall have complied with the provisions of Section 6.14, including with respect to any new assets acquired, (v) if the Cost of Acquisition shall exceed $20,000,000, the Required Lenders shall consent to such Acquisition in their discretion, (vi) after giving effect to such Acquisition, the aggregate Costs of Acquisition incurred in any fiscal year (on a noncumulative basis, with the effect that amounts not incurred in any fiscal year may not be carried forward to a subsequent period) shall not exceed $30,000,000. 7.15 CAPITAL EXPENDITURES. Make or become legally obligated to make Capital Expenditures which exceed in the aggregate in any fiscal year of the Borrower described below (on a noncumulative basis, with the effect that amounts not expended in any fiscal year may not be carried forward to a subsequent period), the amount set forth opposite each such period:
- ------------------------------------------------------------ ------------------------------------------------------- Fiscal Year Ending Maximum Capital Expenditures - ------------------------------------------------------------ ------------------------------------------------------- December 31, 2002 $12,000,000 - ------------------------------------------------------------ ------------------------------------------------------- 82 - ------------------------------------------------------------ ------------------------------------------------------- December 31, 2003 $14,000,000 - ------------------------------------------------------------ ------------------------------------------------------- December 31, 2004 $16,000,000 - ------------------------------------------------------------ ------------------------------------------------------- December 31, 2005 $18,000,000 - ------------------------------------------------------------ ------------------------------------------------------- December 31, 2006 $20,000,000 - ------------------------------------------------------------ -------------------------------------------------------
7.16 CHANGE IN FISCAL YEAR. Change its fiscal year. 7.17 LIMITATION ON CASH PAYMENT OF EARN-OUTS. Pay any Earn-Out in cash, including any such payment into escrow, unless both before and after the payment of the Earn-Out in Cash (a) no Default or Event of Default shall have occurred and be continuing, (b) the Borrower is in pro forma compliance with the terms of the Credit Agreement, including the financial covenants in Section 7.13, after giving effect thereto, (c) the excess of (i) the Aggregate Revolving Credit Commitments over (ii) the Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations, shall not be less than $20,000,000, and (d) the Borrower delivers to the Administrative Agent and the Lenders a certificate certifying as to the matters in (a), (b) and (c) above, and setting forth the pro forma calculation of each of the financial covenants in Section 7.13 in substantially the same manner as set forth in a Compliance Certificate. 7.18 FOREIGN SUBSIDIARIES. Permit more than ten percent (10%) of Consolidated Total Assets, in the aggregate, either to be owned by the Subsidiaries of the Borrower that are not Domestic Subsidiaries or to be located outside of the United States. 7.19 SUBORDINATED INDEBTEDNESS. Unless consented to by the Required Lenders: (a) prepay, redeem, purchase, repurchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Subordinated Indebtedness, in each case including pursuant to any change of control, sale of assets, issuance of any equity or otherwise as may be set forth in the terms therefor or available to the Borrower at its option, except such actions taken with respect to the Seller Notes to the extent specifically required by the terms thereof (subject to the subordination terms thereof); or (b) amend, modify or change in any manner any term or condition of any Subordinated Indebtedness (including without limitation any of the documents evidencing such Subordinated Indebtedness) so that the terms and conditions thereof are less favorable to the Administrative Agent and the Lenders than the terms and conditions of such Indebtedness as of the Closing Date; provided that to the extent the issuance of the Exchange Notes in accordance with the terms of the Subordinated Indenture would otherwise violate any part of Section 7.19(a) or (b) above, such issuance of the Exchange Notes in accordance with the terms of the Subordinated Indenture is expressly permitted. 83 7.20 STATUS OF BORROWER. The Borrower shall not at any time operate any of its lines of business other than through its Subsidiaries, or own any assets other than (i) equity interests in Subsidiaries, (ii) cash and cash equivalents and investments permitted under Sections 7.02(b), (c) and (d), and (iii) such other property consistent with its sole function as a holding company. 7.21 WILBERT NOTE. Unless consented to by the Required Lenders, amend, modify, change or enforce the Wilbert Note in any manner that would amount to the reduction of the principal amount thereof, including by forgiveness of any obligations thereunder.. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES 8.01 EVENTS OF DEFAULT. Any of the following shall constitute an Event of Default: (a) Non-Payment. The Borrower fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan, or any L/C Obligation, or (ii) within three days after the same becomes due interest on any Loan or on any L/C Obligation, or any commitment or other fee due hereunder, or (iii) within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement (i) contained in any of Section 6.05, 6.10, 6.12, 6.13 or 6.16 or Article VII, or (ii) contained in any of Section 6.01, 6.02 or 6.03 and such failure continues for 5 days; or (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or (d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading when made or deemed made; or (e) Cross-Default. (i) The Borrower or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Contingent Obligation (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such 84 Indebtedness to be demanded or to become due or to be repurchased or redeemed (automatically or otherwise) prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which the Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which the Borrower or any Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by the Borrower or such Subsidiary as a result thereof is greater than the Threshold Amount; or (iii) there occurs any Event of Default under the Subordinated Notes, Subordinated Indenture or Seller Notes; or (iv) the Borrower becomes obligated to prepay any Seller Note prior to its maturity for any reason, including the occurrence of any Change of Control or Leverage Ratio greater than 3.5 to 1.0, each as defined and calculated in the Seller Notes; or (f) Insolvency Proceedings, Etc. The Borrower or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, 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 such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or (g) Inability to Pay Debts; Attachment. (i) The Borrower or any Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or (h) Judgments. There is entered against the Borrower or any Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount exceeding $3,000,000 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any non-monetary final judgment that has, or could reasonably be expected to have, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 10 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or 85 (j) Invalidity of Loan Documents. Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of all 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; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or (k) Change of Control. There occurs any Change of Control with respect to the Borrower. 8.02 REMEDIES UPON EVENT OF DEFAULT. If any Event of Default occurs, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, (a) declare the commitment of each Lender to make Loans, the commitment of the Swing Line Lender to make Swing Line Loans, and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof) plus the Letter of Credit fees payable with respect to such Letter of Credit (calculated at the Applicable Margin then in effect for the period from the date of such cash collateralization until the expiry date of such Letter of Credit); and (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in subsection (f) of Section 8.01, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender. ARTICLE IX ADMINISTRATIVE AGENT 9.01 APPOINTMENT AND AUTHORIZATION OF ADMINISTRATIVE AGENT. (a) Each Lender hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement 86 and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time (and except for so long) as the Administrative Agent may agree at the request of the Required Lenders to act for the L/C Issuer with respect thereto; provided, however, that the L/C Issuer shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Administrative Agent" as used in this Article IX included the L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to the L/C Issuer. 9.02 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. 9.03 LIABILITY OF ADMINISTRATIVE AGENT. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained 87 in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof. 9.04 RELIANCE BY ADMINISTRATIVE AGENT. (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders or all the Lenders, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and participants. Where this Agreement expressly permits or prohibits an action unless the Required Lenders otherwise determine, the Administrative Agent shall, and in all other instances, the Administrative Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender. 9.05 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be directed by the Required Lenders in accordance with Article VIII; provided, however, that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. 9.06 CREDIT DECISION; DISCLOSURE OF INFORMATION BY ADMINISTRATIVE AGENT. Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Administrative Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, 88 shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person. 9.07 INDEMNIFICATION OF ADMINISTRATIVE AGENT. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Person's own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs and the costs and expenses incurred in connection with the use of Intralinks, Inc. or other comparable information transmission systems in connection with this Agreement) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive termination of the Aggregate Commitments, the payment of all Obligations hereunder and the resignation of the Administrative Agent. 9.08 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, 89 acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though Bank of America were not the Administrative Agent or the L/C Issuer hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans, Bank of America shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent or the L/C Issuer, and the terms "Lender" and "Lenders" include Bank of America in its individual capacity. 9.09 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders; provided that any such resignation by Bank of America shall also constitute its resignation as L/C Issuer and Swing Line Lender. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders which successor administrative agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower 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 the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, the Person acting as such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent, L/C Issuer and Swing Line Lender and the respective terms "Administrative Agent," "L/C Issuer" and "Swing Line Lender" shall mean such successor administrative agent, Letter of Credit issuer and swing line lender, and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated and the retiring L/C Issuer's and Swing Line Lender's rights, powers and duties as such shall be terminated, without any other or further act or deed on the part of such retiring L/C Issuer or Swing Line Lender or any other Lender, other than the obligation of the successor L/C Issuer to issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article IX and Sections 10.04 and 10.05 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. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 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 Required Lenders appoint a successor agent as provided for above. 9.10 OTHER AGENTS; LEAD MANAGERS. None of the Lenders identified on the facing page or signature pages of this agreement as a "Syndication Agent," "Documentation Agent," "Co-Agent," "Lead Manager," "Arranger" or "Co-Arranger" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified shall have or 90 be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. ARTICLE X MISCELLANEOUS 10.01 AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by each of the Lenders directly affected thereby and by the Borrower, and acknowledged by the Administrative Agent, do any of the following: (a) extend or increase the Revolving Credit Commitment or Pro Rata Term Share of the Term Loan of any Lender (or reinstate any Revolving Credit Commitment terminated pursuant to Section 2.06 or 8.02); (b) extend or postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document; provided, however, that only the consent of the Required Lenders shall be necessary to waive or extend or postpone the date fixed for any mandatory prepayment required under Section 2.06(e); (c) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso below) any fees or other amounts payable hereunder or under any other Loan Document; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of "Default Rate" or to waive any obligation of the Borrower to pay interest at the Default Rate; (d) change the definition of "Required Lenders" or the percentage of the Aggregate Commitments or of the aggregate unpaid principal amount of the Loans and L/C Obligations which is required for the Lenders or any of them to take any action hereunder; (e) change the Pro Rata Revolving Share, Pro Rata Term Share or Facility Share of any Lender; (f) release all or substantially all of the Guarantors from the Guaranty; (g) release all or substantially all of the Collateral; or (h) amend this Section 10.01, Section 2.14 or any provision in this Agreement providing for consent or other action by all the Lenders; 91 and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Required Lenders or each directly-affected Lender, as the case may be, affect the rights or duties of the L/C Issuer under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Required Lenders or each directly-affected Lender, as the case may be, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Required Lenders or each directly-affected Lender, as the case may be, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (iv) the Agent/Arranger Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the respective parties thereto. Notwithstanding anything to the contrary herein, any Lender that is a Defaulting Lender shall not have any right to approve or disapprove any amendment, waiver or consent hereunder, except that neither the Facility Share, the Pro Rata Revolving Share or the Pro Rata Term Share of such Lender may be increased without the consent of such Lender. 10.02 NOTICES AND OTHER COMMUNICATIONS; FACSIMILE COPIES. (a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, to the address, facsimile number or (subject to subsection (c) below) electronic mail address specified for notices on Schedule 10.02; or, in the case of the Borrower, the Administrative Agent, the L/C Issuer or the Swing Line Lender, to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended recipient and (ii) (A) if delivered by hand or by courier, when signed for by the intended recipient (which need not be any natural person to whose attention such communication is directed, in the case of communications to Persons other than natural Persons); (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered; provided, however, that notices and other communications to the Administrative Agent, the L/C Issuer and the Swing Line Lender pursuant to Article II shall not be effective until actually received by such Person. Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified on Schedule 10.02, or to such other number as shall be designated by such party in a notice to the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender, it being understood and agreed that a voicemail message shall in no event be effective as a notice, communication or confirmation hereunder. (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually-signed originals and 92 shall be binding on all Loan Parties, the Administrative Agent and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. (c) Limited Use of Electronic Mail. Electronic mail and Internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section 6.02, and to distribute Loan Documents for execution by the parties thereto, and may not be used for any other purpose. (d) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Revolving Loan Notices, Swing Line Revolving Loan Notices and Term Loan Interest Rate Selection Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. 10.03 NO WAIVER; CUMULATIVE REMEDIES. No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein or therein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.04 ATTORNEY COSTS, EXPENSES AND TAXES. The Borrower agrees (a) to pay or reimburse the Administrative Agent, the Arrangers and the Syndication Agent for all reasonable costs and expenses incurred in connection with the development, due diligence, preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs of the Administrative Agent and the costs and expenses incurred in connection with the use of Intralinks, Inc. or other similar information transmission systems in connection with this Agreement, and (b) to pay or reimburse the Administrative Agent, the Arrangers, the Syndication Agent and each Lender for all costs and expenses incurred in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any "workout" or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law), including all Attorney Costs of each of them. The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Administrative Agent and the cost of independent public accountants and other outside 93 experts retained by the Administrative Agent or any Lender. The agreements in this Section 10.04 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. 10.05 INDEMNIFICATION BY THE BORROWER; LIMITATION OF LIABILITY. Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify and hold harmless each Agent-Related Person, the Arrangers, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the "Indemnitees") from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document, any Transaction Document, or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, including the Transaction, (b) any Revolving Credit Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), including any proposed use or use to consummate the Transaction or to repay any indebtedness in connection with the Transaction (including without limitation the Tilia Indebtedness and indebtedness under the Existing Credit Facility), (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Borrower or any Subsidiary, or any Environmental Liability related in any way to the Borrower or any Subsidiary, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and non-appealable judgment by a court of competent jurisdiction to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee. The Borrower agrees that no Indemnitee shall have any liability (whether direct or indirect, in contract or tort or otherwise) to it or any of its Subsidiaries, security holders or creditors as a result for any action taken or not taken by it arising out of, related to or taken in connection with any Loan Document or the consummation of the transactions contemplated hereby or the actual or proposed use of Loan or Letter of Credit proceeds, except to the extent that such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have directly resulted from the gross negligence or willful misconduct of such Indemnitee, and in no event shall any Indemnitee be liable thereto for special, consequential, punitive or indirect damages. Without limitation of the foregoing, no Indemnitee shall be liable for any damages arising from the use by others of information or other materials obtained through Intralinks or other comparable electronic transmission systems utilized in connection with the credit facilities provided hereunder. The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of 94 all the other Obligations. All amounts due under this Section 10.05 shall be payable within ten Business Days after demand therefor. 10.06 PAYMENTS SET ASIDE. To the extent that the Borrower makes a payment to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of set-off, or realizes or receives any proceeds of security or from enforcement action or otherwise, and such payment or proceeds or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver, agent or any other Person, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, including all Indebtedness of the Borrower hereunder, shall be revived, reinstated, outstanding and continue in full force and effect as if such payment had not been made or such set-off, enforcement or realization of security had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or paid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Federal Funds Rate from time to time in effect. 10.07 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any other attempted assignment or transfer by the Borrower without such consent shall be null and void) and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of the Pro Rata Term Share of the Term Loan at the time owing to it ("Term Loan Share"), its Revolving Credit Commitment and the Revolving Loans (including participations in L/C Obligations and participations in Swing Line Loans) at the time owing to it ("Revolving Loan Share")); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Revolving Credit Commitment, Term Loan Share and Revolving Loan Share, or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Term Loan Share and the Revolving Credit Commitment (which for this purpose includes Revolving Loans outstanding thereunder) or, if the applicable Revolving Credit Commitment is not then in effect, the Revolving Loan Share, of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if a 95 "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $1,000,000 unless each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment with respect to the Revolving Credit Facility shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Revolving Loan Share and Revolving Credit Commitment assigned, except that this clause (ii) shall not apply to rights in respect of Swing Line Loans, and (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500. Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, the Borrower (at its expense) shall execute and deliver new or replacement Notes to the assigning Lender and the assignee Lender, and any assigning Lender that shall cease to be a Lender as a result of such assignment shall return its Notes to the Borrower, if any. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section. (c) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent's Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Revolving Credit Commitments of, and principal amounts of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower's Affiliates or Subsidiaries (each, a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Revolving Credit Commitment and/or the Loans (including such Lender's participations in L/C Obligations and/or Swing Line Loans and Pro Rata Term Share of the Term Loan) owing to it); provided 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 96 performance of such obligations and (iii) the Borrower, 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. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification that would (i) postpone any date upon which any payment of money is scheduled to be paid to such Participant, (ii) reduce the principal, interest, fees or other amounts payable to such Participant, (iii) release all or substantially all of the Guarantors from the Guaranty, or (iv) release all or substantially all of the Collateral except as expressly contemplated in the Loan Documents. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender, provided such Participant agrees to be subject to Section 2.14 as though it were a Lender. (e) A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 10.15 as though it were a Lender. (f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Notes, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (g) Notwithstanding anything to the contrary contained herein, any Lender that is a Fund that invests in bank loans may create a security interest in all or any portion of the advances owing to it and the Note or Notes held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities, provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 10.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise. (h) Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Revolving Credit Commitment and Loans (including its Pro Rata Term Share of the Term Loan) and its participations in the L/C Obligations or any L/C Borrowing pursuant to subsection (b) above, Bank of America may, (i) upon 30 days' notice to the Borrower and the Lenders, resign as L/C Issuer and/or (ii) upon five Business Days' notice to the 97 Borrower, resign as Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. Bank of America shall retain all the rights and obligations of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Swing Line Lender to make Swing Line Loans or the Lenders to make Revolving Loans or fund participations in the manner set forth in Section 2.04(c)). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such termination, including the right to require the Lenders to make Revolving Loans or fund participations in outstanding Swing Line Loans in the manner set forth in Section 2.05(c). 10.08 CONFIDENTIALITY. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty's or prospective counterparty's professional advisor) to any credit derivative transaction relating to obligations of the Borrower; (g) with the consent of the Borrower; (h) to the extent such Information (1) becomes publicly available other than as a result of a breach of this Section or (2) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower (unless such information became available from such source in violation of a confidentiality obligation of such source with respect to such Information, of which obligation the Administrative Agent or applicable Lender was aware); or (i) to the National Association of Insurance Commissioners or any other similar organization or any nationally recognized rating agency that requires access to information about a Lender's or its Affiliates' investment portfolio in connection with ratings issued with respect to such Lender or its Affiliates. In addition, the Administrative Agent and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Administrative Agent and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Aggregate Commitments, and the Credit Extensions. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from 98 the Borrower after the date hereof, such information is clearly identified in writing at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 10.09 SET-OFF. In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and during the continuance of any Event of Default, each Lender is authorized at any time and from time to time, without prior notice to the Borrower or any other Loan Party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party) to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. 10.10 INTEREST RATE LIMITATION. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the "Maximum Rate"). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations. 10.11 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.12 INTEGRATION. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. 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; 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. 99 10.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or Event of Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding. 10.14 SEVERABILITY. Any provision of this Agreement and the other Loan Documents to which the Borrower is a party that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.15 TAX FORMS. (a) Each Lender that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code (a "Foreign Lender") shall deliver to the Administrative Agent, prior to receipt of any payment subject to withholding under the Code (or upon accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Person and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Person by the Borrower pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Person by the Borrower pursuant to this Agreement) or such other evidence satisfactory to the Borrower and the Administrative Agent that such Person is entitled to an exemption from, or reduction of, U.S. withholding tax. Thereafter and from time to time, each such Person shall (i) promptly submit 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 Borrower and the Administrative Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Person by the Borrower pursuant to this Agreement, (ii) promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws that the Borrower make any deduction or withholding for taxes from amounts payable to such Person. If such Person fails to deliver the above forms or other documentation, then the Administrative Agent may withhold from any interest payment to such Person an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. (b) Upon the request of the Administrative Agent, each Lender that is a "United States person" within the meaning of Section 7701(a)(30) of the Code shall deliver to the Administrative Agent two duly signed completed copies of IRS Form W-9. If such Lender fails 100 to deliver such forms, then the Administrative Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable back-up withholding tax imposed by the Code, without reduction. (c) If any Governmental Authority asserts that the Administrative Agent did not properly withhold or backup withhold, as the case may be, any tax or other amount from payments made to or for the account of any Lender, such Lender shall indemnify the Administrative Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, and costs and expenses (including Attorney Costs) of the Administrative Agent. The obligation of the Lenders under this Section shall survive the termination of the Aggregate Commitments, repayment of all Obligations and the resignation of the Administrative Agent. 10.16 GOVERNING LAW. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, the LAW OF THE STATE OF NEW YORK applicable to agreements made and to be performed entirely within such State; PROVIDED THAT THE PARTIES HERETO SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE. 10.17 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 PARTIES 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 FOUNDED 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 101 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. 10.18 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. [Signatures on following pages.] 102 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. ALLTRISTA CORPORATION By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President Signature Page - 1 BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Igor Suica ------------------------------------- Name: Igor Suica Title: Vice President Signature Page - 2 BANK OF AMERICA, N.A., as a Lender, L/C Issuer and Swing Line Lender By: /s/ Igor Suica ------------------------------------- Name: Igor Suica Title: Vice President Signature Page - 3 CIBC INC. By: /s/ Dean J. Decker ------------------------------------- Name: Dean J. Decker Title: Managing Director CIBC World Markets Corp., AS AGENT Signature Page - 4 NATIONAL CITY BANK OF INDIANA By: /s/ David G. McNeely ------------------------------------- Name: David G. McNeely Title: Corporate Banking Officer Signature Page - 5 THE BANK OF NEW YORK By: /s/ Maurice A. Campbell ------------------------------------- Name: Maurice A. Campbell Title: Assisant Vice President Signature Page - 6 FLEET NATIONAL BANK By: /s/ W. Lincoln Schoff, Jr. ------------------------------------- Name: W. Lincoln Schoff, Jr. Title: Senior Vice President Signature Page - 7 HARRIS TRUST AND SAVINGS BANK By: /s/ Thad D. Rasche ------------------------------------- Name: Thad D. Rasche Title: Vice President Signature Page - 8 U.S. BANK NATIONAL ASSOCIATION By: /s/ Scott A. Dvornik ------------------------------------- Name: Scott A. Dvornik Title: Vice President Signature Page - 9 ALLFIRST BANK By: /s/ Mark X. Fidati ------------------------------------- Name: Mark X. Fidati Title: Vice President Signature Page - 10 TRANSAMERICA BUSINESS CAPITAL CORPORATION By: /s/ Perry Vavoules ------------------------------------- Name: Perry Vavoules Title: Executive Vice President Signature Page - 11 UNION FEDERAL BANK OF INDIANAPOLIS By: /s/ Julia C. Schneider ------------------------------------- Name: Julia C. Schneider Title: Commercial Loan Officer Signature Page - 12 EXHIBIT C-1 FORM OF TERM LOAN NOTE Date: __________, 20__ FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of _____________________________ (the "Lender"), on the Term Loan Maturity Date (as defined in the Credit Agreement referred to below), or such earlier date or dates as may be required pursuant to the terms of the Credit Agreement, the Lender's Pro Rata Term Share of the Term Loan under that certain Credit Agreement, dated as of April __, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender. The Borrower promises to pay interest on the unpaid principal amount of the portion of the Term Loan made by the Lender from the Closing Date until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars, in Same Day Funds at the Administrative Agent's Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Term Loan Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranty and the Security Instruments. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. The portion of the Term Loan made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of the portion of the Segments made by the Lender and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. C-1-1 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ALLTRISTA CORPORATION By:_______________________________________ Name:_____________________________________ Title:____________________________________ C-1-2 EXHIBIT C-2 FORM OF REVOLVING LOAN NOTE Date: __________, 20__ FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of _____________________________ (the "Lender"), on the Revolving Credit Maturity Date (as defined in the Credit Agreement referred to below) the Lender's Revolving Credit Commitment or such lesser principal amount of Revolving Loans (as defined in such Credit Agreement) due and payable by the Borrower to the Lender on the Revolving Credit Maturity Date under that certain Credit Agreement, dated as of April __, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender. The Borrower promises to pay interest on the unpaid principal amount of each Revolving Loan from the date of such Revolving Loan until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars, in Same Day Funds at the Administrative Agent's Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Revolving Loan Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranty and the Security Instruments. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Revolving Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Revolving Loans and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. C-2-1 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ALLTRISTA CORPORATION By:_______________________________________ Name:_____________________________________ Title:____________________________________ C-2-2 EXHIBIT C-3 FORM OF SWING LINE NOTE Date: ____________, 20__ FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of BANK OF AMERICA, N.A. ("Swing Line Lender"), on the date when due in accordance with the Credit Agreement referred to below, the Swing Line Sublimit or such lesser aggregate principal amount of each Swing Line Loan from time to time made by the Swing Line Lender to the Borrower under that certain Credit Agreement, dated as of April ____, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender. The Borrower promises to pay interest on the unpaid principal amount of each Swing Line Loan from the date of such Swing Line Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement. All payments of principal and interest shall be made to the Swing Line Lender in Dollars, in Same Day Funds at its Lending Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is the Swing Line Note referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranty and the Security Instruments. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Swing Line Loans made by the Swing Line Lender shall be evidenced by one or more loan accounts or records maintained by Swing Line Lender in the ordinary course of business. The Swing Line Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of the Swing Line Loans and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. C-3-1 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ALLTRISTA CORPORATION By:_______________________________________ Name:_____________________________________ Title:____________________________________ C-3-2 EX-10.2 5 file004.txt GUARANTY AGREEMENT GUARANTY AGREEMENT THIS GUARANTY AGREEMENT (this "Guaranty Agreement"), dated as of April [24], 2002, is made by EACH OF THE UNDERSIGNED AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF A GUARANTY JOINDER AGREEMENT (each a "Guarantor" and collectively the "Guarantors") to BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States, as administrative agent (in such capacity, the "Administrative Agent") for each of the lenders (the "Lenders" and collectively with the Administrative Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. W I T N E S S E T H: ------------------- WHEREAS, the Secured Parties have agreed to provide to Alltrista Corporation, a Delaware corporation (the "Borrower") certain credit facilities, including a term loan facility and revolving credit facility with a letter of credit and swing line sublimit pursuant to the terms of that certain Credit Agreement dated as of April [24], 2002, among the Borrower, the Administrative Agent, Canadian Imperial Bank of Commerce, as Syndication Agent and National City Bank of Indiana, as Documentation Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Credit Agreement"); and WHEREAS, each Guarantor is, directly or indirectly, a Domestic Subsidiary of the Borrower and will materially benefit from the Loans made and to be made, and the Letters of Credit issued and to be issued, under the Credit Agreement; and WHEREAS, each Guarantor is required to enter into this Guaranty Agreement pursuant to the terms of the Credit Agreement; and WHEREAS, a material part of the consideration given in connection with and as an inducement to the execution and delivery of the Credit Agreement by the Secured Parties was the obligation of the Borrower to cause each Guarantor to enter into this Guaranty Agreement, and the Secured Parties are unwilling to extend and maintain the credit facilities provided under the Loan Documents unless the Guarantors enter into this Guaranty Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows: 1. GUARANTY. Each Guarantor hereby jointly and severally, unconditionally, absolutely, continually and irrevocably guarantees to the Administrative Agent for the benefit of the Secured Parties the payment and performance in full of the Borrower's Liabilities (as defined below). For all purposes of this Guaranty Agreement, "Borrower's Liabilities" means: (a) the Borrower's prompt payment in full, when due or declared due and at all such times, of all Obligations and all other amounts pursuant to the terms of the Credit Agreement, the Notes, and all other Loan Documents heretofore, now or at any time or times hereafter owing, arising, due or payable from the Borrower to any one or more of the Secured Parties, including principal, interest, premiums and fees (including, but not limited to, loan fees and Attorney Costs); (b) the Borrower's prompt, full and faithful performance, observance and discharge of each and every agreement, undertaking, covenant and provision to be performed, observed or discharged by the Borrower under the Credit Agreement and all other Loan Documents; and (c) the Borrower's prompt payment in full, when due or declared due and at all such times, of obligations and liabilities now or hereafter arising under Related Swap Contracts. The Guarantors' obligations to the Secured Parties under this Guaranty Agreement are hereinafter collectively referred to as the "Guarantors' Obligations" and, with respect to each Guarantor individually, the "Guarantor's Obligations". Notwithstanding anything to the contrary contained in this Guaranty Agreement, the liability of each Guarantor individually with respect to its Guarantor's Obligations shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. Each Guarantor agrees that it is jointly and severally, directly and primarily liable (subject to the limitation in the immediately preceding sentence) for the Borrower's Liabilities. The Guarantors' Obligations are secured by various Security Instruments referred to in the Credit Agreement, including without limitation the Pledge Agreement (including the Pledge Joinder Agreements and the Pledge Agreement Supplements), the Security Agreement (including the Security Joinder Agreements), the IP Security Agreement (including the IP Security Joinder Agreements), and all other agreements (including control agreements), instruments and other documents, whether now existing or hereafter in effect, pursuant to which the Borrower or any Subsidiary or other Person shall grant or convey to the Administrative Agent or the Lenders a Lien in, or any other Person shall acknowledge any such Lien in, property as security for all or any portion of the Obligations or any other obligation under any Loan Document, as any of them may be amended, modified, supplemented, amended and restated or replaced from time to time. 2. PAYMENT. If the Borrower shall default in payment or performance of any of the Borrower's Liabilities, whether principal, interest, premium, fee (including, but not limited to, loan fees and Attorney Costs), or otherwise, when and as the same shall become due, and after expiration of any applicable grace period, whether according to the terms of the Credit Agreement, by acceleration, or otherwise, or upon the occurrence and during the continuance of any Event of Default under the Credit Agreement, then any or all of the Guarantors will, upon demand thereof by the Administrative Agent, fully pay to the Administrative Agent, for the benefit of the Secured Parties, subject to any restriction on each Guarantor's Obligations set forth in Section 1 hereof, an amount equal to all the Borrower's Liabilities then due and owing. 3. ABSOLUTE RIGHTS AND OBLIGATIONS. This is a guaranty of payment and not of collection. The Guarantors' Obligations under this Guaranty Agreement shall be joint and several, absolute and unconditional irrespective of, and each Guarantor hereby expressly waives, to the extent permitted by law, any defense to its obligations under this Guaranty Agreement and all Security Instruments to which it is a party by reason of: 2 (a) any lack of legality, validity or enforceability of the Credit Agreement, of any of the Notes, of any other Loan Document, or of any other agreement or instrument creating, providing security for, or otherwise relating to any of the Guarantors' Obligations, any of the Borrower's Liabilities, or any other guaranty of any of the Borrower's Liabilities (the Loan Documents and all such other agreements and instruments being collectively referred to as the "Related Agreements"); (b) any action taken under any of the Related Agreements, any exercise of any right or power therein conferred, any failure or omission to enforce any right conferred thereby, or any waiver of any covenant or condition therein provided; (c) any acceleration of the maturity of any of the Borrower's Liabilities, of the Guarantor's Obligations of any other Guarantor, or of any other obligations or liabilities of any Person under any of the Related Agreements; (d) any release, exchange, non-perfection, lapse in perfection, disposal, deterioration in value, or impairment of any security for any of the Borrower's Liabilities, for any of the Guarantor's Obligations of any Guarantor, or for any other obligations or liabilities of any Person under any of the Related Agreements; (e) any dissolution of the Borrower or any Guarantor or any other party to a Related Agreement, or the combination or consolidation of the Borrower or any Guarantor or any other party to a Related Agreement into or with another entity or any transfer or disposition of any assets of the Borrower or any Guarantor or any other party to a Related Agreement; (f) any extension (including without limitation extensions of time for payment), renewal, amendment, restructuring or restatement of, any acceptance of late or partial payments under, or any change in the amount of any borrowings or any credit facilities available under, the Credit Agreement, any of the Notes or any other Loan Document or any other Related Agreement, in whole or in part; (g) the existence, addition, modification, termination, reduction or impairment of value, or release of any other guaranty (or security therefor) of the Borrower's Liabilities (including without limitation the Guarantor's Obligations of any other Guarantor and obligations arising under any other Facility Guaranty now or hereafter in effect); (h) any waiver of, forbearance or indulgence under, or other consent to any change in or departure from any term or provision contained in the Credit Agreement, any other Loan Document or any other Related Agreement, including without limitation any term pertaining to the payment or performance of any of the Borrower's Liabilities, any of the Guarantor's Obligations of any other Guarantor, or any of the obligations or liabilities of any party to any other Related Agreement; 3 (i) any other circumstance whatsoever (with or without notice to or knowledge of any Guarantor) which may or might in any manner or to any extent vary the risks of such Guarantor, or might otherwise constitute a legal or equitable defense available to, or discharge of, a surety or a guarantor, including without limitation any right to require or claim that resort be had to the Borrower or any other Loan Party or to any collateral in respect of the Borrower's Liabilities or Guarantors' Obligations. It is the express purpose and intent of the parties hereto that this Guaranty Agreement and the Guarantors' Obligations hereunder shall be absolute and unconditional under any and all circumstances and shall not be discharged except by payment as herein provided. 4. CURRENCY AND FUNDS OF PAYMENT. All Guarantors' Obligations will be paid in lawful currency of the United States of America and in immediately available funds, regardless of any law, regulation or decree now or hereafter in effect that might in any manner affect the Borrower's Liabilities, or the rights of any Secured Party with respect thereto as against the Borrower, or cause or permit to be invoked any alteration in the time, amount or manner of payment by the Borrower of any or all of the Borrower's Liabilities. 5. EVENTS OF DEFAULT. Without limiting the provisions of Section 2 hereof, in the event that there shall occur and be continuing an Event of Default, then notwithstanding any collateral or other security or credit support for the Borrower's Liabilities, at the Administrative Agent's election and upon written notice thereof, the Guarantors' Obligations shall immediately be and become due and payable. 6. SUBORDINATION. Until this Guaranty Agreement is terminated in accordance with Section 22 hereof, each Guarantor hereby unconditionally subordinates all present and future debts, liabilities or obligations now or hereafter owing to such Guarantor (i) of the Borrower, to the payment in full of the Borrower's Liabilities, (ii) of every other Guarantor (an "obligated guarantor"), to the payment in full of the Guarantors' Obligations of such obligated guarantor, and (iii) of each other Person now or hereafter constituting a Loan Party, to the payment in full of the obligations of such Loan Party owing to any Secured Party and arising under the Loan Documents. All amounts due under such subordinated debts, liabilities, or obligations shall, upon the occurrence and during the continuance of an Event of Default, be collected and, upon request by the Administrative Agent, paid over forthwith to the Administrative Agent for the benefit of the Secured Parties on account of the Borrower's Liabilities, the Guarantors' Obligations, or such other obligations, as applicable, and, after such request and pending such payment, shall be held by such Guarantor as agent and bailee of the Secured Parties separate and apart from all other funds, property and accounts of such Guarantor. 7. SUITS. Each Guarantor from time to time shall pay to the Administrative Agent for the benefit of the Secured Parties, on demand, at the Administrative Agent's place of business set forth in the Credit Agreement or such other address as the Administrative Agent shall give notice of to such Guarantor, the Guarantors' Obligations as they become or are declared due, and in the event such payment is not made forthwith, the Administrative Agent may proceed to suit against any one or more or all of the Guarantors. At the Administrative Agent's election, one or more and successive or concurrent suits may be brought hereon by the 4 Administrative Agent against any one or more or all of the Guarantors, whether or not suit has been commenced against the Borrower, any other Guarantor, or any other Person and whether or not the Secured Parties have taken or failed to take any other action to collect all or any portion of the Borrower's Liabilities or have taken or failed to take any actions against any collateral securing payment or performance of all or any portion of the Borrower's Liabilities, and irrespective of any event, occurrence, or condition described in Section 3 hereof. 8. SET-OFF AND WAIVER. Each Guarantor waives any right to assert against any Secured Party as a defense, counterclaim, set-off, recoupment or cross claim in respect of its Guarantor's Obligations, any defense (legal or equitable) or other claim which such Guarantor may now or at any time hereafter have against the Borrower or any or all of the Secured Parties without waiving any additional defenses, set-offs, counterclaims or other claims otherwise available to such Guarantor. Each Guarantor agrees that each Secured Party shall have a lien for all the Guarantor's Obligations upon all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts, now or hereafter pledged, mortgaged, transferred or assigned to such Secured Party or otherwise in the possession or control of such Secured Party for any purpose (other than solely for safekeeping) for the account or benefit of such Guarantor, including any balance of any deposit account or of any credit of such Guarantor with the Secured Party, whether now existing or hereafter established, and hereby authorizes each Secured Party from and after the occurrence of an Event of Default at any time or times with or without prior notice to apply such balances or any part thereof to such of the Guarantor's Obligations to the Secured Parties then due and in such amounts as provided for in the Credit Agreement or otherwise as they may elect. For the purposes of this Section 8, all remittances and property shall be deemed to be in the possession of a Secured Party as soon as the same may be put in transit to it by mail or carrier or by other bailee. 9. WAIVER OF NOTICE; SUBROGATION. (a) Each Guarantor hereby waives to the extent permitted by law notice of the following events or occurrences: (i) acceptance of this Guaranty Agreement; (ii) the Lenders' heretofore, now or from time to time hereafter making Loans and issuing Letters of Credit and otherwise loaning monies or giving or extending credit to or for the benefit of the Borrower, whether pursuant to the Credit Agreement or the Notes or any other Loan Document or Related Agreement or any amendments, modifications, or supplements thereto, or replacements or extensions thereof; (iii) presentment, demand, default, non-payment, partial payment and protest; and (iv) any other event, condition, or occurrence described in Section 3 hereof. Each Guarantor agrees that each Secured Party may heretofore, now or at any time hereafter do any or all of the foregoing in such manner, upon such terms and at such times as each Secured Party, in its sole and absolute discretion, deems advisable, without in any way or respect impairing, affecting, reducing or releasing such Guarantor from its Guarantor's Obligations, and each Guarantor hereby consents to each and all of the foregoing events or occurrences. (b) Each Guarantor hereby agrees that payment or performance by such Guarantor of its Guarantor's Obligations under this Guaranty Agreement may be enforced by the Administrative Agent on behalf of the Secured Parties upon demand by 5 the Administrative Agent to such Guarantor without the Administrative Agent being required, such Guarantor expressly waiving to the extent permitted by law any right it may have to require the Administrative Agent, to (i) prosecute collection or seek to enforce or resort to any remedies against the Borrower or any other Guarantor or any other guarantor of the Borrower's Liabilities, or (ii) seek to enforce or resort to any remedies with respect to any security interests, Liens or encumbrances granted to the Administrative Agent or any Lender or other party to a Related Agreement by the Borrower, any other Guarantor or any other Person on account of the Borrower's Liabilities or any guaranty thereof, IT BEING EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY SUCH GUARANTOR THAT DEMAND UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE ADMINISTRATIVE AGENT, AND THE PROVISIONS HEREOF ENFORCED BY THE ADMINISTRATIVE AGENT, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND IS CONTINUING UNDER THE CREDIT AGREEMENT. (c) Each Guarantor further agrees with respect to this Guaranty Agreement that it shall have no right of subrogation, reimbursement, contribution or indemnity, nor any right of recourse to security for the Borrower's Liabilities unless and until 93 days immediately following the Facility Termination Date (as defined below) shall have elapsed without the filing or commencement, by or against any Loan Party, of any state or federal action, suit, petition or proceeding seeking any reorganization, liquidation or other relief or arrangement in respect of creditors of, or the appointment of a receiver, liquidator, trustee or conservator in respect to, such Loan Party or its assets. This waiver is expressly intended to prevent the existence of any claim in respect to such subrogation, reimbursement, contribution or indemnity by any Guarantor against the estate of any other Loan Party within the meaning of Section 101 of the Bankruptcy Code, in the event of a subsequent case involving any other Loan Party. If an amount shall be paid to any Guarantor on account of such rights at any time prior to termination of this Guaranty Agreement in accordance with the provisions of Section 22 hereof, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent, for the benefit of the Secured Parties, to be credited and applied upon the Guarantors' Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement or otherwise as the Secured Parties may elect. The agreements in this subsection shall survive repayment of all of the Guarantors' Obligations, the termination or expiration of this Guaranty Agreement in any manner, including but not limited to termination in accordance with Section 22 hereof, and occurrence of the Facility Termination Date. For purposes of this Guaranty Agreement, "Facility Termination Date" means the date as of which all of the following shall have occurred: (a) the Borrower shall have permanently terminated the credit facilities under the Loan Documents by final payment in full of all Outstanding Amounts, together with all accrued and unpaid interest and fees thereon, other than (i) the undrawn portion of Letters of Credit and (ii) all letter of credit fees relating thereto accruing after such date (which fees shall be payable solely for the account of the Issuing Bank and shall be computed (based on interest rates then in effect) on such undrawn amounts to the respective expiry dates of the Letters of Credit), in each case as have been fully Cash 6 Collateralized or as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made; (b) all Related Swap Contracts shall have been terminated, expired or Cash Collateralized; (c) all Commitments shall have terminated or expired; and (d) the Borrower shall have fully, finally and irrevocably paid and satisfied in full all other Obligations (except for Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Loan Party that may be owing to any Agent-Related Person or any Lender pursuant to the Loan Documents and expressly survive termination of this Guaranty Agreement). 10. EFFECTIVENESS; ENFORCEABILITY. This Guaranty Agreement shall be effective as of the date first above written and shall continue in full force and effect until termination in accordance with Section 22 hereof. Any claim or claims that the Secured Parties may at any time hereafter have against a Guarantor under this Guaranty Agreement may be asserted by the Administrative Agent on behalf of the Secured Parties by written notice directed to such Guarantor in accordance with Section 24 hereof. 11. REPRESENTATIONS AND WARRANTIES. Each Guarantor warrants and represents to the Administrative Agent, for the benefit of the Secured Parties, that (a) it is duly authorized to execute and deliver this Guaranty Agreement (or the Guaranty Joinder Agreement to which it is a party, as applicable), and to perform its obligations under this Guaranty Agreement; (b) this Guaranty Agreement (or the Guaranty Joinder Agreement to which it is a party, as applicable) has been duly executed and delivered on behalf of such Guarantor by its duly authorized representatives; that this Guaranty Agreement (and any Guaranty Joinder Agreement to which such Guarantor is a party) is legal, valid, binding and enforceable against such Guarantor in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; and (c) such Guarantor's execution, delivery and performance of this Guaranty Agreement (and any Guaranty Joinder Agreement to which such Guarantor is a party) do not violate or constitute a breach of (i) any of its Organizational Documents, (ii) any material Contractual Obligation to which such Guarantor is a party, or (iii) any law, order, regulation, decree or award of any governmental authority or arbitral body to which it or its properties or operations is subject the violation or breach of which could reasonably be expected to have a Material Adverse Effect. 12. EXPENSES. Each Guarantor agrees to be jointly and severally liable for the payment of all reasonable fees and expenses, including Attorney Costs, incurred by any Secured Party in connection with the enforcement of this Guaranty Agreement, whether or not suit be brought. 13. REINSTATEMENT. Each Guarantor agrees that this Guaranty Agreement shall continue to be effective or be reinstated, as the case may be, at any time payment received by any Secured Party in respect of any Borrower's Liabilities is rescinded or must be restored for any reason, or is repaid by any Secured Party in whole or in part in good faith and commercially reasonable settlement of any pending or threatened avoidance claim. 7 14. ATTORNEY-IN-FACT. To the extent permitted by law, each Guarantor hereby appoints the Administrative Agent, for the benefit of the Secured Parties, as such Guarantor's attorney-in-fact for the purposes of carrying out the provisions of this Guaranty Agreement and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is coupled with an interest and is irrevocable; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of an Event of Default. 15. RELIANCE. Each Guarantor represents and warrants to the Administrative Agent, for the benefit of the Secured Parties, that: (a) such Guarantor has adequate means to obtain on a continuing basis (i) from the Borrower, information concerning the Borrower and the Borrower's financial condition and affairs and (ii) from other reliable sources, such other information as it deems material in deciding to provide this Guaranty Agreement (and any Guaranty Joinder Agreement) ("Other Information"), and has full and complete access to the Borrower's books and records and to such Other Information; (b) such Guarantor is not relying on any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, to provide any such information, now or in the future; (c) such Guarantor has been furnished with and reviewed the terms of the Credit Agreement and such other Loan Documents as it has requested, is executing this Guaranty Agreement (or the Guaranty Joinder Agreement to which it is a party, as applicable) freely and deliberately, and understands the obligations and financial risk undertaken by providing this Guaranty Agreement (and any Guaranty Joinder Agreement); (d) such Guarantor has relied solely on the Guarantor's own independent investigation, appraisal and analysis of the Borrower, the Borrower's financial condition and affairs, the "Other Information", and such other matters as it deems material in deciding to provide this Guaranty Agreement (and any Guaranty Joinder Agreement) and is fully aware of the same; and (e) such Guarantor has not depended or relied on any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, for any information whatsoever concerning the Borrower or the Borrower's financial condition and affairs or any other matters material to such Guarantor's decision to provide this Guaranty Agreement (and any Guaranty Joinder Agreement), or for any counseling, guidance, or special consideration or any promise therefor with respect to such decision. Each Guarantor agrees that no Secured Party has any duty or responsibility whatsoever, now or in the future, to provide to such Guarantor any information concerning the Borrower or the Borrower's financial condition and affairs, or any Other Information, other than as expressly provided herein, and that, if such Guarantor receives any such information from any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, such Guarantor will independently verify the information and will not rely on any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, with respect to such information. 16. RULES OF INTERPRETATION. The rules of interpretation contained in Sections 1.02 and 1.05 of the Credit Agreement shall be applicable to this Guaranty Agreement and each Guaranty Joinder Agreement and are hereby incorporated by reference. All representations and warranties contained herein shall survive the delivery of documents and any extension of credit referred to herein or guaranteed hereby. 8 17. ENTIRE AGREEMENT. This Guaranty Agreement and each Guaranty Joinder Agreement, together with the Credit Agreement and other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior negotiations, agreements, understandings, inducements, commitments or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof. Except as provided in Section 22, neither this Guaranty Agreement nor any Guaranty Joinder Agreement nor any portion or provision hereof or thereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement. 18. BINDING AGREEMENT; ASSIGNMENT. This Guaranty Agreement, each Guaranty Joinder Agreement and the terms, covenants and conditions hereof and thereof, shall be binding upon and inure to the benefit of the parties hereto and thereto, and to their respective heirs, legal representatives, successors and assigns; provided, however, that no Guarantor shall be permitted to assign any of its rights, powers, duties or obligations under this Guaranty Agreement, any Guaranty Joinder Agreement or any other interest herein or therein without the prior written consent of the Administrative Agent. Without limiting the generality of the foregoing sentence of this Section 18, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.07 thereof concerning assignments and participations. All references herein to the Administrative Agent shall include any successor thereof. 19. RELATED SWAP CONTRACTS. All obligations of the Borrower under Related Swap Contracts to which any Lender or its Affiliates are a party shall be deemed to be Borrower's Liabilities, and each Lender or Affiliate of a Lender party to any such Swap Contract shall be deemed to be a Secured Party hereunder with respect to such Borrower's Liabilities; provided, however, that such obligations shall cease to be Borrower's Liabilities at such time as such Person (or Affiliate of such Person) shall cease to be a "Lender" under the Credit Agreement. No Person who obtains the benefit of this Guaranty Agreement by virtue of the provisions of this Section shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Guarantors' Obligations (including the release or modification of any Guarantors' Obligations or security therefor) other than in its capacity as a Lender and only to the extent expressly provided in the Loan Documents. 20. SEVERABILITY. The provisions of this Guaranty Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of 9 any other provision hereof, but this Guaranty Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 21. COUNTERPARTS. This Guaranty Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Guaranty Agreement to produce or account for more than one such counterpart executed by the Guarantor against whom enforcement is sought. Without limiting the foregoing provisions of this Section 21, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this Guaranty Agreement. 22. TERMINATION. Subject to reinstatement pursuant to Section 13 hereof, this Guaranty Agreement and each Guaranty Joinder Agreement, and all of the Guarantors' Obligations hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate on the Facility Termination Date. 23. REMEDIES CUMULATIVE; LATE PAYMENTS. All remedies hereunder are cumulative and are not exclusive of any other rights and remedies of the Administrative Agent or any other Secured Party provided by law or under the Credit Agreement, the other Loan Documents or other applicable agreements or instruments. The making of the Loans and other Credit Extensions pursuant to the Credit Agreement shall be conclusively presumed to have been made or extended, respectively, in reliance upon each Guarantor's guaranty of the Borrower's Liabilities pursuant to the terms hereof. Any amounts not paid when due under this Guaranty Agreement shall bear interest at the Default Rate. 24. NOTICES. Any notice required or permitted hereunder or under any Guaranty Joinder Agreement shall be given, (a) with respect to each Guarantor, at the address for such Guarantor set forth below its signature on this Guaranty Agreement or the Guaranty Joinder Agreement of such Guarantor, as applicable and (b) with respect to the Administrative Agent or any other Secured Party, at the Administrative Agent's address indicated in Schedule 10.02 of the Credit Agreement. All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder. 25. JOINDER. Each Person who shall at any time execute and deliver to the Administrative Agent a Guaranty Joinder Agreement substantially in the form attached as Exhibit A hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Guarantor, and all references herein and in the other Loan Documents to the Guarantors or to the parties to this Guaranty Agreement shall be deemed to include such Person as a Guarantor hereunder. 26. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. 10 (A) THIS GUARANTY AGREEMENT AND EACH GUARANTY JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (B) EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS GUARANTY AGREEMENT OR A GUARANTY JOINDER AGREEMENT, SUCH GUARANTOR EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS FOR NOTICES TO SUCH GUARANTOR IN EFFECT PURSUANT TO SECTION 24 HEREOF, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT OR ANY OTHER LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE ANY GUARANTOR OR ANY OF SUCH GUARANTOR'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. 11 (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, EACH GUARANTOR AND THE ADMINISTRATIVE AGENT ON BEHALF OF THE SECURED PARTIES HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT ANY SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. (F) EACH GUARANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. [Signature pages follow.] 12 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Guaranty Agreement as of the day and year first written above. GUARANTORS: HEARTHMARK, INC., an Indiana corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA PLASTICS CORPORATION, an Indiana corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ZINC PRODUCTS, L.P., an Indiana limited partnership By: Alltrista Newco Corporation, a Indiana corporation, its general partner By: /s/ Desiree DeStefano ------------------------------------ Name: Desiree DeStefano Title: Vice President QUOIN CORPORATION, a Delaware corporation By: /s/ Ian G. H. Asken ----------------------------------- Name: Ian G. H. Asken Title: Treasurer Signature Page 1 of 4 ALLTRISTA NEWCO CORPORATION, an Indiana corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President PENN VIDEO, INC., an Indiana corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President LAFAYETTE STEEL & ALUMINUM CORPORATION, an Illinois corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President CASPERS TIN PLATE COMPANY, An Illinois corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President Signature Page 2 of 4 UNIMARK PLASTICS, INC., a Pennsylvania corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President LUMENX CORPORATION, an Ohio corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA UNIMARK, INC., an Indiana corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President TRIENDA CORPORATION (F/K/A TRIENDA NEWCO, INC.), a Indiana corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ACQUISITION I, INC., a Delaware corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President Signature Page 3 and 4 ALLTRISTA ACQUISITION II, INC., a Delaware corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ACQUISITION III, INC., a Delaware corporation By: /s/ Desiree DeStefano ---------------------------------------- Name: Desiree DeStefano Title: Vice President ADDRESS FOR NOTICES FOR ALL GUARANTORS: 555 Theodore Fremd Ave. Ste. B-302 Rye, NY 10580 Telefacsimile: (___) ___-____ ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., as Administrative Agent for the Lenders By: /s/ Igor Suica --------------------------------------- Name: Igor Suica Title: Vice President Signature Page 4 of 4 EX-10.3 6 file005.txt SECURITY AGREEMENT SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Security Agreement") is made and entered into as of April [24], 2002 by ALLTRISTA CORPORATION, a Delaware corporation (the "Borrower" and a "Grantor"), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF A SECURITY JOINDER AGREEMENT (each a "Guarantor" and a "Grantor", and collectively with the Borrower, the "Grantors"), BANK OF AMERICA, N. A., a national banking association, as Administrative Agent (the "Administrative Agent") for each of the lenders (the "Lenders" and collectively with the Administrative, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein or pursuant to Section 1 hereof shall have the respective meanings assigned thereto in the Credit Agreement (as defined below). W I T N E S S E T H: ------------------- WHEREAS, the Secured Parties have agreed to provide to the Borrower a certain term loan facility and revolving credit facility with a letter of credit sublimit and swing line facility pursuant to the Credit Agreement dated as of April __, 2002 by and among the Borrower, the Administrative Agent, Canadian Imperial Bank of Commerce, as Syndication Agent and National City Bank of Indiana, as Documentation Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Credit Agreement"); and WHEREAS, as collateral security for payment and performance of its Obligations, the Borrower is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in all of its personal property and assets pursuant to the terms of this Security Agreement; and WHEREAS, each Guarantor will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement and each Guarantor is a party (as signatory or by joinder) to a Guaranty pursuant to which each Guarantor guarantees the Obligations of the Borrower; and WHEREAS, as collateral security for payment and performance by each Guarantor of its Guarantor's Obligations (as defined in the Guaranty to which such Guarantor is a party), and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party, each Guarantor is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in all of its personal property and assets pursuant to the terms of this Security Agreement; and WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents unless the Borrower and the Guarantors enters into this Security Agreement; NOW, THEREFORE, in order to induce the Secured Parties to enter into the Loan Documents and to make Loans and issue Letters of Credit, and in further consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (a) Terms used in this Security Agreement, not otherwise expressly defined herein or in the Credit Agreement, and for which meanings are provided in the Uniform Commercial Code of the State of New York (the "UCC"), shall have such meanings. The term "Qualifying Control Agreement" shall have the meaning set forth on Schedule 1 hereto. (b) "Non-Material Accounts" means all Deposit Accounts and securities accounts with respect to which the sum of (a) the amounts on deposit in all such Deposit Accounts, plus (b) the value of the securities entitlements in all such securities accounts, does not exceed $1,000,000. 2. GRANT OF SECURITY INTEREST. The Borrower hereby grants as collateral security for the payment, performance and satisfaction of all of the Borrower's Obligations, and each Guarantor hereby grants as collateral security for the payment, performance and satisfaction of all of its Guarantor's Obligations (as defined in its Guaranty) and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party (collectively, the "Secured Obligations"), to the Administrative Agent for the benefit of the Secured Parties a continuing first priority security interest in and to, and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties, all of the personal property of such Grantor or in which such Grantor has or may have or acquire an interest or the power to transfer rights therein, whether now owned or existing or hereafter created, acquired or arising and wheresoever located, including the following: (a) All accounts, and including accounts receivable, contracts, bills, acceptances, choses in action, and other forms of monetary obligations at any time owing to such Grantor arising out of property sold, leased, licensed, assigned or otherwise disposed of or for services rendered or to be rendered by such Grantor, and all of such Grantor's rights with respect to any property represented thereby, whether or not delivered, property returned by customers and all rights as an unpaid vendor or lienor, including rights of stoppage in transit and of recovering possession by proceedings including replevin and reclamation (collectively referred to hereinafter as "Accounts"); (b) All inventory, including all goods manufactured or acquired for sale or lease, and any piece goods, raw materials, work in process and finished merchandise, component materials, and all supplies, goods, incidentals, office supplies, packaging materials and any and all items used or consumed in the operation of the business of such Grantor or which may contribute to the finished product or to the sale, promotion and shipment thereof, in which such Grantor now or at any time hereafter may have an interest, whether or not the same is in transit or in the constructive, actual or exclusive occupancy or possession of such Grantor or is held by such Grantor or by others for such Grantor's account (collectively referred to hereinafter as "Inventory"); 2 (c) All goods, including all machinery, equipment, motor vehicles, parts, supplies, apparatus, appliances, tools, patterns, molds, dies, blueprints, fittings, furniture, furnishings, fixtures and articles of tangible personal property of every description, and all computer programs embedded in any of the foregoing and all supporting information relating to such computer programs (collectively referred to hereinafter as "Equipment"); (d) All general intangibles, including all rights now or hereafter accruing to such Grantor under contracts, leases, agreements or other instruments, including all contracts or contract rights to perform or receive services, to purchase or sell goods, or to hold or use land or facilities, and to enforce all rights thereunder, all causes of action, corporate or business records, inventions, patents and patent rights, rights in mask works, designs, trade names and trademarks and all goodwill associated therewith, trade secrets, trade processes, copyrights, licenses, permits, franchises, customer lists, computer programs and software, all internet domain names and registration rights thereto, all internet websites and the content thereof, all payment intangibles, all claims under guaranties, tax refund claims, all rights and claims against carriers and shippers, leases, all claims under insurance policies, all interests in general and limited partnerships, limited liability companies, and other Persons not constituting Investment Property (as defined below), all rights to indemnification and all other intangible personal property and intellectual property of every kind and nature (collectively referred to hereinafter as "General Intangibles"); (e) All deposit accounts, including demand, time, savings, passbook, or other similar accounts maintained with any bank by or for the benefit of such Grantor (collectively referred to hereinafter as "Deposit Accounts"); (f) All chattel paper, including tangible chattel paper, electronic chattel paper, or any hybrid thereof (collectively referred to hereinafter as "Chattel Paper"); (g) All investment property, including all securities, security entitlements, securities accounts, commodity contracts and commodity accounts of or maintained for the benefit of such Grantor, but excluding Pledged Interests subject to any Pledge Agreement (collectively referred to hereinafter as "Investment Property"); (h) All instruments, including all promissory notes (collectively referred to hereinafter as "Instruments"); (i) All documents, including warehouse receipts, bills of lading and other documents of title (collectively referred to hereinafter as "Documents"); (j) All rights to payment or performance under letters of credit including rights to proceeds of letters of credit ("Letter-of-Credit Rights"), and all guaranties, endorsements, Liens, other Guaranty Obligations or supporting obligations of any Person securing or supporting the payment, performance, value or liquidation of any of the foregoing (collectively, with Letter-of-Credit Rights, referred to hereinafter as "Supporting Obligations"); 3 (k) The commercial tort claims identified on Schedule 9(i) hereto, as such Schedule may be supplemented from time to time in accordance with the terms hereof (collectively referred to hereinafter as "Commercial Tort Claims"); (l) All books and records relating to any of the forgoing (including customer data, credit files, ledgers, computer programs, printouts, and other computer materials and records (and all media on which such data, files, programs, materials and records are or may be stored)); and (m) All proceeds, products and replacements of, accessions to, and substitutions for, any of the foregoing, including without limitation proceeds of insurance policies insuring any of the foregoing; provided that neither the grant in this Section 2 nor any definition included in any of subsection (a) through (m) above shall include any Grantor's interest or power to transfer rights in either of (x) that certain promissory note dated as of January 24, 2002 by Martin Franklin in favor of the Borrower in the initial principal amount of $3,282,000, or (y) that certain promissory note dated as of January 24, 2002 by Ian Ashken in favor of the Borrower in the initial principal amount of $1,641,000 (collectively, the "Manager Notes"). All of the property and interests in property described in subsections (a) through (m), but subject to the immediately preceding proviso relating to the Manager Notes, are herein collectively referred to as the "Collateral." 3. PERFECTION. As of the date of execution of this Security Agreement or joinder to this Security Agreement by each Grantor, as applicable (with respect to each Grantor, its "Applicable Date"), such Grantor shall have: (a) furnished the Administrative Agent with properly executed financing statements in form, number and substance as provided by the Administrative Agent and suitable for filing, sufficient under applicable law, and satisfactory to the Administrative Agent in order that upon the filing of the same the Administrative Agent, for the benefit of the Secured Parties, shall have a duly perfected security interest in all Collateral in which a security interest can be perfected by the filing of financing statements; (b) to the extent expressly required by the terms hereof or of the Credit Agreement, or otherwise as the Administrative Agent may request, furnished the Administrative Agent with properly executed Qualifying Control Agreements, issuer acknowledgments of the Administrative Agent's interest in Letter-of-Credit Rights, and evidence of the placement of a restrictive legend on tangible chattel paper (and the tangible components of electronic Chattel Paper), and taken appropriate action reasonably acceptable to the Administrative Agent sufficient to establish the Administrative Agent's control of electronic Chattel Paper (and the electronic components of hybrid Chattel Paper), as appropriate, with respect to Collateral in which either (i) a security interest can be perfected only by control or such restrictive legending, or (ii) a security interest perfected by control or accompanied by such restrictive legending shall have priority as against a lien creditor, a purchaser of such Collateral from the applicable Grantor, or a security interest perfected by Persons not having control or not accompanied by such restrictive legending, in each case in form and substance 4 acceptable to the Administrative Agent and sufficient under applicable law so that the Administrative Agent, for the benefit of the Secured Parties, shall have a security interest in all such Collateral perfected by control; and (c) delivered to the Administrative Agent possession of all Collateral with respect to which either a security interest can be perfected only by possession or a security interest perfected by possession shall have priority as against Persons not having possession, and including in the case of Instruments, Documents, and Investment Property in the form of certificated securities, duly executed endorsements or stock powers in blank, as the case may be, affixed thereto in form and substance acceptable to the Administrative Agent and sufficient under applicable law so that the Administrative Agent, for the benefit of the Secured Parties, shall have a security interest in all such Collateral perfected by possession; subject in each case only to Liens allowed to exist and have priority under Section 7.01 of the Credit Agreement ("Permitted Liens"). All financing statements (including all amendments thereto and continuations thereof), control agreements, certificates, acknowledgments, stock powers and other documents, electronic identification, restrictive legends, and instruments furnished in connection with the creation, enforcement, protection, perfection or priority of the Administrative Agent's security interest in Collateral, including such items as are described above in this Section 3, are sometimes referred to herein as "Perfection Documents". The delivery of possession of items of or evidencing Collateral, causing other Persons to execute and deliver Perfection Documents as appropriate, the filing or recordation of Perfection Documents, the establishment of control over items of Collateral, and the taking of such other actions as may be necessary in the reasonable determination of the Administrative Agent to create, enforce, protect, perfect, or establish or maintain the priority of, the security interest of the Administrative Agent for the benefit of the Secured Parties in the Collateral is sometimes referred to herein as "Perfection Action". 4. MAINTENANCE OF SECURITY INTEREST; FURTHER ASSURANCES. (a) Each Grantor will from time to time at its own expense, deliver specific assignments of Collateral or such other Perfection Documents, and take such other or additional Perfection Action, as may be required by the terms of the Loan Documents or as the Administrative Agent may reasonably request in connection with the administration or enforcement of this Security Agreement or related to the Collateral or any part thereof in order to carry out the terms of this Security Agreement, to perfect, protect, maintain the priority of or enforce the Administrative Agent's security interest in the Collateral, subject only to Permitted Liens, or otherwise to better assure and confirm unto the Administrative Agent its rights, powers and remedies for the benefit of the Secured Parties hereunder. Without limiting the foregoing, each Grantor hereby irrevocably authorizes the Administrative Agent to file (with, or to the extent permitted by applicable law, without the signature of the Grantor appearing thereon) financing statements (including amendments thereto and initial financing statements in lieu of continuation statements) or other Perfection Documents (including copies thereof) showing such Grantor as "debtor" at such time or times and in all filing offices as the Administrative Agent may from time to time reasonably determine to be necessary or 5 advisable to perfect or protect the rights of the Administrative Agent and the Secured Parties hereunder, or otherwise to give effect to the transactions herein contemplated, any of which Perfection Documents, at the Administrative Agent's election, may describe the Collateral as or including all personal property of the Grantor (other than those items of personal property expressly excluded from the grant of a security interest). Each Grantor hereby irrevocably ratifies and acknowledges the Administrative Agent's authority to have effected filings of Perfection Documents made by the Administrative Agent prior to its Applicable Date. (b) With respect to any and all Collateral, each Grantor agrees to do and cause to be done all things necessary to perfect, maintain the priority of and keep in full force the security interest granted in favor of the Administrative Agent for the benefit of the Secured Parties, including, but not limited to, the prompt payment upon demand therefor by the Administrative Agent of all fees and expenses (including documentary stamp, excise or intangibles taxes) incurred in connection with the preparation, delivery, or filing of any Perfection Document or the taking of any Perfection Action to perfect, protect or enforce a security interest in Collateral in favor of the Administrative Agent for the benefit of the Secured Parties, subject only to Permitted Liens. All amounts not so paid when due shall constitute additional Secured Obligations and (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (c) Each Grantor agrees to maintain among its books and records appropriate notations or evidence of, and to make or cause to be made appropriate disclosure upon its financial statements of, in accordance with the requirements of GAAP, the security interest granted hereunder to the Administrative Agent for the benefit of the Secured Parties. 5. RECEIPT OF PAYMENT. In the event an Event of Default shall occur and be continuing and a Grantor (or any of its Affiliates, subsidiaries, stockholders, directors, officers, employees or agents) shall receive any proceeds of Collateral, including without limitation monies, checks, notes, drafts or any other items of payment, each Grantor shall hold all such items of payment in trust for the Administrative Agent for the benefit of the Secured Parties, and as the property of the Administrative Agent for the benefit of the Secured Parties, separate from the funds and other property of such Grantor, and no later than the first Business Day following the receipt thereof, at the election of the Administrative Agent, such Grantor shall cause such Collateral to be forwarded to the Administrative Agent for its custody, possession and disposition on behalf of the Secured Parties in accordance with the terms hereof and of the other Loan Documents. 6. PRESERVATION AND PROTECTION OF COLLATERAL. (a) The Administrative Agent shall be under no duty or liability with respect to the collection, protection or preservation of the Collateral, or otherwise, except with respect to any Collateral in its possession. Each Grantor shall be responsible for the safekeeping of its Collateral, and in no event shall the Administrative Agent, except with respect to any Collateral in its possession, have any responsibility for (i) any loss or 6 damage thereto or destruction thereof occurring or arising in any manner or fashion from any cause, (ii) any diminution in the value thereof, or (iii) any act or default of any carrier, warehouseman, bailee or forwarding agency thereof or other Person in any way dealing with or handling such Collateral. (b) Each Grantor shall keep and maintain its tangible personal property Collateral in good operating condition and repair (except where the failure to do so could not reasonably be expected to have a Material Adverse Effect), ordinary wear and tear excepted. To the extent that such items are not a fixture on the date hereof, no Grantor shall permit any such items to become a fixture to real property (unless such Grantor has granted the Administrative Agent for the benefit of the Secured Parties a Lien on such real property having a priority acceptable to the Administrative Agent) or accessions to other personal property. (c) Each Grantor agrees (i) to pay when due all taxes, charges and assessments against the Collateral in which it has any interest, unless being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves have been established in accordance with GAAP applied on a consistent basis and provided that all enforcement proceedings in the nature of levy or foreclosure are effectively stayed, and (ii) to cause to be terminated and released all Liens (other than Permitted Liens) on the Collateral. Upon the failure of any Grantor to so pay or contest such taxes, charges, or assessments, or cause such Liens to be terminated, the Administrative Agent at its option may pay or contest any of them or amounts relating thereto (the Administrative Agent having the sole right to determine the legality or validity and the amount necessary to discharge such taxes, charges, Liens or assessments) but shall not have any obligation to make any such payment or contest. All sums so disbursed by the Administrative Agent, including reasonable Attorneys' Costs, court costs, expenses and other charges related thereto, shall be payable on demand by the applicable Grantor to the Administrative Agent and shall be additional Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. 7. STATUS OF GRANTORS AND COLLATERAL GENERALLY. Each Grantor represents and warrants to, and covenants with, the Administrative Agent for the benefit of the Secured Parties, with respect to itself and the Collateral as to which it has or acquires any interest, that: (a) It is at its Applicable Date (or as to Collateral acquired after its Applicable Date will be upon the acquisition of the same) and, except as permitted by the Credit Agreement and subsection (b) of this Section 7, will continue to be, the owner of the Collateral, free and clear of all Liens, other than the security interest hereunder in favor of the Administrative Agent for the benefit of the Secured Parties and Permitted Liens, and that it will at its own cost and expense defend such Collateral and any products and proceeds thereof against all claims and demands of all Persons (other than holders of Permitted Liens) at any time claiming the same or any interest therein adverse to the Secured Parties. Upon the failure of any Grantor to so defend, the Administrative Agent may do so at its option but shall not have any obligation to do so. All sums so disbursed 7 by the Administrative Agent, including reasonable Attorneys' Costs, court costs, expenses and other charges related thereto, shall be payable on demand by the applicable Grantor to the Administrative Agent and shall be additional Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (b) It shall not (i) sell, assign, transfer, lease, license or otherwise dispose of any of, or grant any option with respect to, the Collateral, except for dispositions permitted under the Credit Agreement, (ii) create or suffer to exist any Lien upon or with respect to any of the Collateral except for the security interests created by this Security Agreement and Permitted Liens, or (iii) take any other action in connection with any of the Collateral that would materially impair the value of the interest or rights of such Grantor in the Collateral taken as a whole or that would materially impair the interest or rights of the Administrative Agent for the benefit of the Secured Parties. (c) It has full power, legal right and lawful authority to enter into this Security Agreement (and any Security Joinder Agreement applicable to it) and to perform its terms, including the grant of the security interests in the Collateral herein provided for. (d) No authorization, consent, approval or other action by, and no notice to or filing with, any Governmental Authority or other regulatory body or any other Person is required either (i) for the grant by such Grantor of the security interests granted hereby, or the collateral assignment hereunder, or for the execution, delivery or performance of this Security Agreement (or any Security Joinder Agreement applicable to it) by such Grantor, or (ii) for the perfection of or the exercise by the Administrative Agent, on behalf of the Secured Parties, of its rights and remedies hereunder, except (x) for action required by the Uniform Commercial Code to perfect the security interest conferred hereunder, and (y) to the extent that the exercise of rights and remedies may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors rights generally or by general principles of equity. (e) Upon and after the filing of certain UCC termination statements and related releases obtained on or about the date hereof in connection with (i) the closing of the Transaction (including the payoff of Union Bank of California's credit facility with the Seller) and (ii) the termination of the Existing Credit Agreement, and the acceptance and filing of such UCC termination statements and related releases by the appropriate jurisdictions and Governmental Authorities, no effective financing statement or other Perfection Document similar in effect, nor any other Perfection Action, covering all or any part of the Collateral purported to be granted or taken by or on behalf of such Grantor (or by or on behalf of any other Person and which remains effective as against all or any part of the Collateral) will be on file or in any recording office or will have been delivered to another Person for filing (whether upon the occurrence of a contingency or otherwise), or otherwise taken, as the case may be, except such as pertain to Permitted Liens and such as may have been filed for the benefit of, delivered to, or taken in favor of, the Administrative Agent for the benefit of the Secured Parties in connection with the security interests conferred hereunder. 8 (f) Schedule 7(f) attached hereto contains true and complete information as to the information required to be contained in Schedule 2A.03 of the Credit Agreement by Section 2A.03 of the Credit Agreement. No Grantor shall change its name, change its jurisdiction of formation (whether by reincorporation, merger or otherwise), change the location of its chief executive office, utilize any additional location where tangible personal property Collateral (including Account Records and Account Documents) may be located, change or use any additional or different material trade name or style, except in each case upon giving not less than fifteen (15) days' prior written notice to the Administrative Agent and taking or causing to be taken at such Grantor's expense all such Perfection Action, including the delivery of such Perfection Documents, as may be reasonably requested by the Administrative Agent to perfect or protect, or maintain the perfection and priority of, the Lien of the Administrative Agent for the benefit of the Secured Parties in Collateral contemplated hereunder. (g) No Grantor shall engage in any consignment transaction in respect of any of the Collateral, whether as consignee or consignor, without the prior written consent of the Administrative Agent in each instance. (h) No Grantor shall cause, suffer or permit any of the tangible personal property Collateral (i) to be evidenced by any document of title (except for shipping documents as necessary or customary to effect the receipt of raw materials or components or the delivery of inventory to customers, in each case in the ordinary course of business) or (ii) to be in the possession, custody or control of any warehouseman or other bailee unless such location and Person are set forth on Schedule 7(f) or the Administrative Agent shall have received not less than fifteen (15) days' prior written notice of each such transaction, the Administrative Agent shall have received a duly executed Qualifying Control Agreement from such bailee, and the Grantor shall have caused at its expense to be prepared and executed such additional Perfection Documents and to be taken such other Perfection Action as the Administrative Agent may reasonably deem necessary or advisable to carry out the transactions contemplated by this Security Agreement. (i) No tangible personal property Collateral is or shall be located at any location that is leased by such Grantor from any other Person, unless (x) such location and lessor is set forth on Schedule 7(f) attached hereto or such Grantor provides not less than fifteen (15) days' prior written notice thereof to the Administrative Agent, (y) unless otherwise agreed by the Administrative Agent, such lessor acknowledges the Lien in favor of the Administrative Agent for the benefit of the Secured Parties conferred hereunder and waives its statutory and consensual liens and rights with respect to such Collateral in form and substance reasonably acceptable to the Administrative Agent and delivered in writing to the Administrative Agent prior to any Collateral being located at any such location, and (z) the Grantor shall have caused at its expense to be prepared and executed such additional Perfection Documents and to be taken such other Perfection Action as the Administrative Agent may deem necessary to carry out the transactions contemplated by this Security Agreement. 9 8. INSPECTION. (a) The Administrative Agent (by any of its officers, employees and agents), on behalf of the Secured Parties, shall have the right upon reasonable prior notice to an executive officer of any Grantor, and at any reasonable times (and for reasonable durations) during such Grantor's usual business hours, to inspect the Collateral, all records related thereto (and to make extracts or copies from such records), and the premises upon which any of the Collateral is located, to discuss such Grantor's affairs and finances with any Person (other than Persons obligated on any Accounts ("Account Debtors") except as expressly otherwise permitted in the Loan Documents) and to verify with any Person other than (except as expressly otherwise permitted in the Loan Documents) Account Debtors the amount, quality, quantity, value and condition of, or any other matter relating to, the Collateral and, if an Event of Default has occurred and is continuing, to discuss such Grantor's affairs and finances with such Grantor's Account Debtors and to verify the amount, quality, value and condition of, or any other matter relating to, the Collateral with such Account Debtors. The inspection provided for in this Section 8(a) shall be at the sole cost and expense of the Secured Parties except (i) at any time an Event of Default has occurred and is continuing, or (ii) if such inspection is being conducted in conjunction with an inspection at the expense of the Borrower pursuant to Section 6.10 of the Credit Agreement. (b) Upon the occurrence and during the continuation of an Event of Default, the Administrative Agent may at any time and from time to time employ and maintain on such Grantor's premises a custodian selected by the Administrative Agent who shall have full authority to do all acts necessary to protect the Administrative Agent's (for the benefit of the Secured Parties) interest. All expenses incurred by the Administrative Agent, on behalf of the Secured Parties, by reason of the employment of such custodian shall be paid by such Grantor on demand from time to time and shall be added to the Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. 9. SPECIFIC COLLATERAL. (a) ACCOUNTS. With respect to its Accounts, whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Each Grantor shall keep accurate and complete records of its Accounts ("Account Records") and from time to time at reasonable intervals designated by the Administrative Agent such Grantor shall provide the Administrative Agent with a schedule of Accounts in form and substance acceptable to the Administrative Agent describing all Accounts created or acquired by such Grantor ("Schedule of Accounts"); provided, however, that such Grantor's failure to execute and deliver any such Schedule of Accounts shall not affect or limit the Administrative Agent's security interest or other rights in and to any Accounts for the benefit of the Secured Parties. If requested by the 10 Administrative Agent, each Grantor shall furnish the Administrative Agent with copies of proof of delivery and other documents relating to the Accounts so scheduled, including without limitation repayment histories and present status reports (collectively, "Account Documents") and such other matter and information relating to the status of then existing Accounts as the Administrative Agent shall reasonably request. (ii) All Account Records and Account Documents are and shall at all times be located only at such Grantor's offices as set forth on Schedule 7(f) attached hereto or as to which the Grantor has complied with Section 7(f) hereof. (iii) The Accounts are genuine, are in all respects what they purport to be, are not evidenced by an instrument or document or, if evidenced by an instrument or document, are only evidenced by one original instrument or document. (iv) The Accounts cover bona fide sales and deliveries of Inventory usually dealt in by such Grantor, or the rendition by such Grantor of services, to an Account Debtor in the ordinary course of business. (v) The amounts of the face value of any Account shown or reflected on any Schedule of Accounts, invoice statement, or certificate delivered to the Administrative Agent, are actually owing to such Grantor and are not contingent for any reason other than non-material contingencies arising in the ordinary course of business; and there are no setoffs, discounts, allowances, claims, counterclaims or disputes of any kind or description, in an amount greater than the amount of reserves for doubtful accounts net against accounts receivable as set forth on the most recently delivered consolidated balance sheet of the Borrower and its Subsidiaries, existing or asserted with respect to any account and such Grantor has not made any agreement with any Account Debtor thereunder for any deduction therefrom, except as may be stated in the Schedule of Accounts and reflected in the calculation of the face value of each respective invoice related thereto. (vi) Except for conditions generally applicable to such Grantor's industry and markets, there are no facts, events, or occurrences known to such Grantor pertaining particularly to any Accounts which are reasonably expected to materially impair in any way the validity, collectibility or enforcement of Accounts that would reasonably be likely, in the aggregate, to be of material economic value, or in the aggregate materially reduce the amount payable thereunder from the amount of the invoice face value shown on any Schedule of Accounts, or on any certificate, contract, invoice or statement delivered to the Administrative Agent with respect thereto. (vii) The property or services giving rise thereto are not, and were not at the time of the sale or performance thereof, subject to any Lien, claim, 11 encumbrance or security interest, except those of the Administrative Agent for the benefit of Secured Parties and Permitted Liens. (viii) In the event any amounts due and owing in excess of $1,000,000 individually, or $2,500,000 in the aggregate amount, are in dispute between any Account Debtor and a Grantor (which shall include without limitation any dispute in which an offset claim or counterclaim may result), such Grantor shall provide the Administrative Agent with written notice thereof as soon as practicable, explaining in detail the reason for the dispute, all claims related thereto and the amount in controversy. (b) INVENTORY. With respect to its Inventory whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Each Grantor shall keep accurate and complete records of its Inventory in commercially reasonable detail in the ordinary course of business, and shall furnish to the Administrative Agent from time to time at reasonable intervals designated by the Administrative Agent, a current schedule of Inventory ("Schedule of Inventory") based upon its most recent physical inventory and its periodic inventory records. Each Grantor shall conduct a physical inventory no less frequently than annually, and shall furnish to the Administrative Agent such other documents and reports thereof as the Administrative Agent shall reasonably request with respect to the Inventory. (ii) All Inventory shall at all times be located only at such Grantor's locations as set forth on Schedule 7(f) attached hereto or at such other locations as to which such Grantor has complied with Section 7(f) hereof. No Grantor shall, other than in the ordinary course of business in connection with its sale, lease, license or other permitted disposition, remove any Inventory having an aggregate value in excess of $5,000,000 from any such location except to the extent such Inventory is moved to any other such location. (iii) If any Account Debtor returns any Inventory to a Grantor after shipment thereof, and such return generates a credit in excess of $1,000,000 on any individual Account or $5,000,000 in the aggregate on any Accounts of such Account Debtor, such Grantor shall notify the Administrative Agent in writing of the same as soon as practicable. (c) EQUIPMENT. With respect to its Equipment whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) The Grantors, as soon as practicable following a reasonable request therefor by the Administrative Agent, shall deliver to the Administrative Agent any and all evidence of ownership of any of the Equipment (including without limitation copies of certificates of title and applications for title). 12 (ii) The Grantors shall maintain accurate, itemized records describing the kind, type, quality, quantity and value of its Equipment and shall furnish the Administrative Agent upon request with a current schedule containing the foregoing information, but, other than during the continuance of an Event of Default, not more often than once per fiscal quarter. (iii) All Equipment is and shall at all times be located only at such Grantor's locations as set forth on Schedule 7(f) attached hereto or at such other locations as to which such Grantor has complied with Section 7(f) hereof. No Grantor shall, other than as expressly permitted under the Credit Agreement, sell, lease, transfer, dispose of or remove any Equipment (other than motor vehicles) from such locations. (d) SUPPORTING OBLIGATIONS. With respect to its Supporting Obligations whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Each Grantor shall (i) maintain at all times, and furnish to the Administrative Agent from time to time at the Administrative Agent's reasonable request, a current list identifying in reasonable detail each Supporting Obligation relating to any Collateral from a single obligor in excess of $500,000, and (ii) upon the request of the Administrative Agent from time to time following the occurrence and during the continuance of any Default or Event of Default, deliver to the Administrative Agent the originals of all documents evidencing or constituting Supporting Obligations, together with such other documentation (executed as appropriate by the Grantor) and information as may be necessary to enable the Administrative Agent to realize upon the Supporting Obligations in accordance with their respective terms or transfer the Supporting Obligations as may be permitted under the Loan Documents or by applicable law. (ii) With respect to each letter of credit giving rise to Letter-of-Credit Rights that has an aggregate stated amount available to be drawn in excess of $500,000, each Grantor shall, within thirty (30) days of the issuance of each such letter of credit, cause the issuer thereof to execute and deliver to the Administrative Agent a Qualifying Control Agreement. (iii) With respect to each transferable letter of credit giving rise to Letter-of-Credit Rights that has an aggregate stated amount available to be drawn in excess of $500,000, each Grantor shall, within thirty (30) days of the issuance of each such letter of credit, deliver to the Administrative Agent a duly executed, undated transfer form in blank sufficient in form and substance under the terms of the related letter of credit to effect, upon completion and delivery to the letter of credit issuer together with any required fee, the transfer of such letter of credit to the transferee identified in such form. Each Grantor hereby expressly authorizes the Administrative Agent following the occurrence and during the continuance of any Event of Default to complete and tender each such transfer form as transferor 13 in its own name or in the name, place and stead of the Grantor in order to effect any such transfer, either to the Administrative Agent or to another transferee, as the case may be, in connection with any sale or other disposition of Collateral or for any other purpose permitted under the Loan Documents or by applicable law. (e) INVESTMENT PROPERTY. With respect to its Investment Property whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Schedule 9(e) attached hereto contains a true and complete description of (x) the name and address of each securities intermediary with which such Grantor maintains a securities account in which Investment Property is or may at any time be credited or maintained, and (y) all other Investment Property of such Grantor other than interests in Subsidiaries in which such Grantor has granted a Lien to the Administrative Agent for the benefit of the Secured Parties pursuant to a Pledge Agreement. (ii) Except with the express prior written consent of the Administrative Agent in each instance, all Investment Property other than interests in Subsidiaries in which such Grantor has granted a Lien to the Administrative Agent for the benefit of the Secured Parties pursuant to a Pledge Agreement shall be maintained at all times in the form of (A) certificated securities, which certificates shall have been delivered to the Administrative Agent together with duly executed undated stock powers endorsed in blank pertaining thereto, or (B) security entitlements credited to one or more securities accounts. Except with the express prior written consent of the Administrative Agent, with respect to each securities account that is not a Non-Material Account (as defined in Section 1(b)), the Administrative Agent has received (x) copies of the account agreement between the applicable securities intermediary and the Grantor and the most recent statement of account pertaining to such securities account (each certified to be true and correct by an officer of the Grantor) and (y) a Qualifying Control Agreement from the applicable securities intermediary which remains in full force and effect and as to which the Administrative Agent has not received any notice of termination. (iii) Without limiting the generality of the foregoing, no Grantor shall cause, suffer or permit any Investment Property to be credited to or maintained in any securities account not listed on Schedule 9(e) attached hereto except (x) in the case of a securities account that is a Non-Material Account, upon giving prompt notice to the Administrative Agent thereof, and (y) in the case of all other securities accounts, upon giving not less than twenty (20) days' prior written notice to the Administrative Agent and taking or causing to be taken at such Grantor's expense all such Perfection Action, including the delivery of such Perfection Documents, as may be reasonably requested by the Administrative Agent to perfect or protect, or maintain the perfection and priority of, the Lien of the Administrative Agent for the benefit of the Secured Parties in Collateral contemplated hereunder. 14 (iv) All dividends and other distributions with respect to any of the Investment Property shall be subject to the security interest conferred hereunder, provided, however, that cash dividends paid to a Grantor as record owner of the Investment Property may be disbursed to and retained by such Grantor so long as no Default or Event of Default shall have occurred and be continuing, free from any Lien hereunder. (v) So long as no Default or Event of Default shall have occurred and be continuing, the registration of Investment Property in the name of a Grantor as record and beneficial owner shall not be changed and such Grantor shall be entitled to exercise all voting and other rights and powers pertaining to Investment Property for all purposes not inconsistent with the terms hereof or of any Qualifying Control Agreement relating thereto. (vi) Upon the occurrence and during the continuance of any Default or Event of Default, at the reasonable exercise of the option of the Administrative Agent, all rights of the Grantors to exercise the voting or consensual rights and powers which it is authorized to exercise pursuant to clause (iv) immediately above shall cease and the Administrative Agent may thereupon (but shall not be obligated to), at its request, cause such Collateral to be registered in the name of the Administrative Agent or its nominee or agent for the benefit of the Secured Parties and/or exercise such voting or consensual rights and powers as appertain to ownership of such Collateral, and to that end each Grantor hereby appoints the Administrative Agent as its proxy, with full power of substitution, to vote and exercise all other rights as a shareholder with respect to such Investment Property upon the occurrence and during the continuance of any Default or Event of Default, which proxy is coupled with an interest and is irrevocable until the Facility Termination Date, and each Grantor hereby agrees to provide such further proxies as the Administrative Agent may request; provided, however, that the Administrative Agent in its discretion may from time to time refrain from exercising, and shall not be obligated to exercise, any such voting or consensual rights or such proxy. For purposes of this Security Agreement, "Facility Termination Date" means the date as of which all of the following shall have occurred: (a) the Borrower shall have permanently terminated the credit facilities under the Loan Documents by final payment in full of all Outstanding Amounts, together with all accrued and unpaid interest and fees thereon, other than (i) the undrawn portion of Letters of Credit and (ii) all letter of credit fees relating thereto accruing after such date (which fees shall be payable solely for the account of the Issuing Bank and shall be computed (based on interest rates then in effect) on such undrawn amounts to the respective expiry dates of the Letters of Credit), in each case as have been fully Cash Collateralized or as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made; (b) all Related Swap Contracts shall have been terminated, expired or Cash Collateralized; (c) all Commitments shall have terminated or expired; and (d) the Borrower shall have fully, finally and irrevocably paid and satisfied in full all other Obligations (except for Obligations consisting of continuing indemnities and other contingent Obligations of the 15 Borrower or any Loan Party that may be owing to any Agent-Related Person or any Lender pursuant to the Loan Documents and expressly survive termination of this Security Agreement). (vii) Upon the occurrence and during the continuance of any Default or Event of Default, all rights of the Grantors to receive and retain cash dividends and other distributions upon or in respect to Investment Property pursuant to clause (iii) above shall cease and shall thereupon be vested in the Administrative Agent for the benefit of the Secured Parties, and each Grantor shall, or shall cause, all such cash dividends and other distributions with respect to the Investment Property to be promptly delivered to the Administrative Agent (together, if the Administrative Agent shall request, with any documents related thereto) to be held, released or disposed of by it hereunder or, at the option of the Administrative Agent, to be applied to the Secured Obligations. (f) DEPOSIT ACCOUNTS. With respect to its Deposit Accounts whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Schedule 9(f) attached hereto contains a true and complete description of the name and address of each depositary institution with which such Grantor maintains a Deposit Account. (ii) The Administrative Agent shall have received a Qualifying Control Agreement with respect to each Deposit Account of each Grantor except with respect to (x) Deposit Accounts that are Non-Material Accounts, and (y) such other Deposit Accounts as the Administrative Agent shall from time to time give its express prior written consent waiving such requirement (collectively, the Deposit Accounts described in (x) and (y) are referred to as the "Excluded Deposit Accounts"). The parties agree, however, that notwithstanding anything to the contrary in any Qualifying Control Agreement or any Loan Document, the Administrative Agent (A) will only deliver a notice to any depositary institution asserting its right of control of any Deposit Account under any Qualifying Control Agreement so long as an Event of Default pursuant to Section 8.01(f) of the Credit Agreement has occurred and is continuing, and (B) to the extent necessary or provided for under any Qualifying Control Agreement, will deliver to the relevant depositary institution a rescission of the notice provided in (A) in the event that the Event of Default under Section 8.01(f) of the Credit Agreement giving rise to such notice is waived in accordance with the terms of the Credit Agreement. (iii) Without limiting the generality of the foregoing, no Grantor shall cause, suffer or permit (x) any deposit in excess of $100,000 to be evidenced by a certificate of deposit unless such certificate of deposit is a negotiable instrument and immediately upon receipt thereof such certificate shall have been delivered to the Administrative Agent, together with a duly executed undated assignment in 16 blank affixed thereto, (y) any Deposit Account that is a Non-Material Account and is not listed on Schedule 9(f) attached hereto to be opened or maintained except in each case upon giving notice of the opening or maintenance thereof to the Administrative Agent promptly after such opening or maintenance, or (z) any Deposit Account that is not a Non-Material Account and is not listed on Schedule 9(f) attached hereto to be opened or maintained except in each case upon giving not less than twenty (20) days' prior written notice to the Administrative Agent and taking or causing to be taken at such Grantor's expense all such Perfection Action, including the delivery of such Perfection Documents, as may be reasonably requested by the Administrative Agent to perfect or protect, or maintain the perfection and priority of, the Lien of the Administrative Agent for the benefit of the Secured Parties in Collateral contemplated hereunder. (g) CHATTEL PAPER. With respect to its Chattel Paper whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Each Grantor shall at all times retain sole physical possession of the originals of all Chattel Paper (other than electronic Chattel Paper and the electronic components of hybrid Chattel Paper); provided, however, that (x) upon the request of the Administrative Agent upon the occurrence and during the continuance of any Default or Event of Default, such Grantor shall immediately deliver physical possession of such Chattel Paper to the Administrative Agent or its designee, and (y) in the event that there shall be created more than one original counterpart of any physical document that alone or in conjunction with any other physical or electronic document constitutes Chattel Paper, then such counterparts shall be numbered consecutively starting with "1" and such Grantor shall retain the counterpart numbered "1". (ii) All counterparts of all tangible Chattel Paper (and the tangible components of hybrid Chattel Paper) shall immediately upon the creation or acquisition thereof by any Grantor be conspicuously legended as follows: "A FIRST PRIORITY SECURITY INTEREST IN THIS CHATTEL PAPER HAS BEEN GRANTED TO BANK OF AMERICA, N.A., FOR ITSELF AND AS ADMINISTRATIVE AGENT FOR CERTAIN LENDERS PURSUANT TO A SECURITY AGREEMENT DATED AS OF APRIL ___, 2002, AS AMENDED FROM TIME TO TIME. NO SECURITY INTEREST OR OTHER INTEREST IN FAVOR OF ANY OTHER PERSON MAY BE CREATED BY THE TRANSFER OF PHYSICAL POSSESSION OF THIS CHATTEL PAPER OR OF ANY COUNTERPART HEREOF EXCEPT BY OR WITH THE CONSENT OF THE AFORESAID ADMINISTRATIVE AGENT AS PROVIDED IN SUCH SECURITY AGREEMENT." In the case of electronic Chattel Paper (including the electronic components of hybrid Chattel Paper), no Grantor shall create or acquire any such Chattel Paper unless, prior to such acquisition or creation, it shall have taken such Perfection Action as the Administrative Agent may require to perfect by control the security interest of the Administrative Agent for the benefit of the Secured Parties in such Collateral. 17 (iii) Other than in the ordinary course of business and in keeping with reasonable and customary practice, no Grantor shall amend, modify, waive or terminate any provision of, or fail to exercise promptly and diligently each material right or remedy conferred under or in connection with, any Chattel Paper, in any case in such a manner as could reasonably be expected to materially adversely affect the value of affected Chattel Paper as collateral. (h) INSTRUMENTS. With respect to its Instruments whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Each Grantor shall (i) maintain at all times, and furnish to the Administrative Agent from time to time at the Administrative Agent's request, a current list identifying in reasonable detail Instruments of which such Grantor is the payee or holder and having a face amount payable in excess of $500,000, and (ii) upon the request of the Administrative Agent from time to time following the occurrence and during the continuance of any Default or Event of Default, deliver to the Administrative Agent the originals of all such Instruments, together with duly executed undated endorsements in blank affixed thereto and such other documentation and information as may be necessary to enable the Administrative Agent to realize upon the Instruments in accordance with their respective terms or transfer the Instruments as may be permitted under the Loan Documents or by applicable law. (ii) Other than in the ordinary course of business and in keeping with reasonable and customary practice, no Grantor shall amend, modify, waive or terminate any provision of, or fail to exercise promptly and diligently each material right or remedy conferred under or in connection with, any Instrument, in any case in such a manner as could reasonably be expected to materially adversely affect the value of affected Instrument as collateral. (i) COMMERCIAL TORT CLAIMS. With respect to its Commercial Tort Claims whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Schedule 9(i) attached hereto contains a true and complete list of all Commercial Tort Claims in which any Grantor has an interest and which have been identified by a Grantor as of its Applicable Date, and as to which the Pledgor believes in good faith there exists the possibility of recovery (including by way of settlement) of monetary relief in excess of $500,000 ("Grantor Claims"). Each Grantor shall furnish to the Administrative Agent (x) quarterly, and in any event not later than the respective dates established in Sections 6.01(a) and 6.01(b) of the Credit Agreement for the delivery of financial statements for such quarter, a certificate of an officer of such Grantor referring to this Section 9(i) and identifying all Grantor Claims that are not then described on Schedule 9(i) attached hereto and stating that each of such additional Grantor Claims shall be 18 deemed added to such Schedule 9(i) and shall constitute a Commercial Tort Claim, a Grantor Claim, and additional Collateral hereunder, and (y) annually, and in any event not later than the date established in Section 6.01(a) of the Credit Agreement for the delivery of financial statements for such fiscal year, summarizing the status or disposition of any Grantor Claims that have been settled, or have been made the subject of any binding mediation, judicial or arbitral proceeding, or any judicial or arbitral order on the merits, or that have been abandoned. With respect to each such additional Grantor Claim, such Grantor Claim shall be and become part of the Collateral hereunder from the date such claim is identified to the Administrative Agent as provided above without further action, and (ii) the Administrative Agent is hereby authorized at the expense of the applicable Grantor to execute and file such additional financing statements or amendments to previously filed financing statements, and take such other action as it may deem necessary or advisable, to perfect the Lien on such additional Grantor Claims conferred hereunder, and the Grantor shall, if required by applicable law or otherwise at the request of the Administrative Agent, execute and deliver such Perfection Documents and take such other Perfection Action as the Administrative Agent may determine to be necessary or advisable to perfect or protect the Lien of the Administrative Agent for the benefit of the Secured Parties in such additional Grantor Claims conferred hereunder. (j) INTERNET PROPERTY RIGHTS. With respect to its right, title and interest in and to any internet domain names or registration rights relating thereto, and any internet websites or the content thereof (collectively, "Internet Property Rights") whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Schedule 9(j) attached hereto contains a true and complete description of (t) each material internet domain name registered to such Grantor or in which such Grantor has ownership, operating or registration rights, (u) the name and address of the registrar for such internet domain name, (v) the registration identification information for such internet domain name, (w) the name of each internet website operated (whether individually or jointly with others) by such Grantor, (x) the name and address of each internet service provider through whom each such website is operated, (y) the name and address of each operator of each other internet site, internet search engine, internet directory or Web browser with whom such Grantor maintains any advertising or linking relationship which is material to the operation of or flow of internet traffic to such Grantor's website, and (z) each technology licensing and other agreement that is material to the operation of or flow of internet traffic to such Grantor's website, and the name and address of each other party to such agreement. (ii) Such Grantor shall cause to be delivered to the Administrative Agent at or prior to the Closing Date with respect to each material internet domain name registered to such Grantor an undated transfer document, duly executed in blank by such Grantor and in the form required by the applicable internet domain 19 name registrar, sufficient to effect the transfer of each internet domain name to the transferee thereof named in such transfer form upon delivery to such registrar. Without limiting the generality of the foregoing, no Grantor shall acquire any rights to any material internet domain name not listed on Schedule 9(j) attached hereto except in each case upon giving not less than thirty (30) days' prior written notice thereof to the Administrative Agent, which notice shall be accompanied by an appropriate supplement to Schedule 9(j) reflecting such additional name, the delivery of additional executed internet domain name transfer documents executed in blank with respect thereto, and taking or causing to be taken at such Grantor's expense all such Perfection Action, including the delivery of such Perfection Documents, as may be reasonably requested by the Administrative Agent to perfect or protect, or maintain the perfection and priority of, the Lien of the Administrative Agent for the benefit of the Secured Parties in Collateral contemplated hereunder. Without limiting the foregoing, each Grantor shall furnish to the Administrative Agent and the Lenders such supplements to Schedule 9(j) from time to time as shall be necessary to keep such Schedule true and complete at all times. (iii) So long as no Event of Default shall have occurred and be continuing, the registration of Internet Property Rights in the name of a Grantor shall not be changed and such Grantor shall be entitled to exercise all rights and powers with respect thereto not inconsistent with the terms hereof. (iv) Each Grantor hereby expressly authorizes the Administrative Agent following the occurrence and during the continuance of any Event of Default to (i) complete and tender each internet domain name transfer document in its own name or in the name, place and stead of the Grantor in order to effect the transfer of any internet domain name registration, either to the Administrative Agent or to another transferee, as the case may be, and (ii) maintain, obtain access to, and continue to operate, in its own name or in the name, place and stead of such Grantor, such Grantor's internet website and the contents thereof, and all related advertising, linking and technology licensing and other contractual relationships, in each case in connection with the maintenance, preservation, operation, sale or other disposition of Collateral or for any other purpose permitted under the Loan Documents or by applicable law. 10. CASUALTY AND LIABILITY INSURANCE REQUIRED. (a) Each Grantor will keep the Collateral continuously insured against such risks as are customarily insured against by businesses of like size and type engaged in the same or similar operations including: (i) casualty insurance on the Inventory and the Equipment in an amount not less than is customarily carried on such assets by companies engaged in similar businesses and owning similar properties in localities where the Borrower or its Subsidiaries operate, against loss or damage by theft, fire, lightning and other hazards ordinarily included under uniform broad form 20 standard extended coverage policies, limited only as may be provided in the standard broad form of extended coverage endorsement at the time in use in the states in which the Collateral is located; (ii) comprehensive general liability insurance against claims for bodily injury, death or property damage occurring with or about such Collateral (such coverage to include provisions waiving subrogation against the Secured Parties), with the Administrative Agent and the Lenders as additional insureds thereunder, in amounts as shall be reasonably satisfactory to Administrative Agent; (iii) liability insurance with respect to the operation of its facilities under the workers' compensation laws of the states in which such Collateral is located, in amounts as shall be reasonably satisfactory to Administrative Agent; and (iv) business interruption insurance in an amount not less than is customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or its Subsidiaries operate. (b) Each insurance policy obtained in satisfaction of the requirements of Section 10(a): (i) may be provided by blanket policies now or hereafter maintained by each or any Grantor or by the Borrower; (ii) shall be issued by such insurer (or insurers) as shall be financially responsible, of recognized standing and reasonably acceptable to the Administrative Agent; (iii) shall be in such form and have such provisions (including without limitation the loss payable clause, the waiver of subrogation clause, the deductible amount, if any, and the standard mortgagee endorsement clause) as are generally considered standard provisions for the type of insurance involved and are reasonably acceptable in all respects to the Administrative Agent; (iv) shall prohibit cancellation by the insurer without at least 30 days' prior written notice to the Administrative Agent, except for non-payment of premium, as to which such policies shall provide for at least ten (10) days' prior written notice to the Administrative Agent; (v) without limiting the generality of the foregoing, all insurance policies where applicable under Section 10(a)(i) carried on the Collateral shall name the Administrative Agent, for the benefit of the Secured Parties, as loss payee and the Administrative Agent and Lenders as parties insured thereunder in respect of any claim for payment. (c) Prior to expiration of any such policy, such Grantor shall furnish the Administrative Agent with evidence satisfactory to the Administrative Agent that the 21 policy or certificate has been renewed or replaced or is no longer required by this Security Agreement. (d) Each Grantor hereby makes, constitutes and appoints the Administrative Agent (and all officers, employees or agents designated by the Administrative Agent), for the benefit of the Secured Parties, as such Grantor's true and lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item or payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance, which appointment is coupled with an interest and is irrevocable; provided, however, that the powers pursuant to such appointment shall be exercisable only upon the occurrence and during the continuation of an Event of Default. (e) In the event such Grantor shall fail to maintain, or fail to cause to be maintained, the full insurance coverage required hereunder or shall fail to keep any of its Collateral in good repair and good operating condition, the Administrative Agent may (but shall be under no obligation to), without waiving or releasing any Secured Obligation or Default or Event of Default by such Grantor hereunder, contract for the required policies of insurance and pay the premiums on the same or make any required repairs, renewals and replacements; and all sums so disbursed by Administrative Agent, including reasonable Attorneys' Costs, court costs, expenses and other charges related thereto, shall be payable on demand by such Grantor to the Administrative Agent, shall be additional Secured Obligations secured by the Collateral, and (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (f) Each Grantor agrees that to the extent that it shall fail to maintain, or fail to cause to be maintained, the full insurance coverage required by Section 10(a), it shall in the event of any loss or casualty pay promptly to the Administrative Agent, for the benefit of the Secured Parties, to be held in a separate account for application in accordance with the provisions of Section 10(h), such amount as would have been received as Net Proceeds (as hereinafter defined) by the Administrative Agent, for the benefit of the Secured Parties, under the provisions of Section 10(h) had such insurance been carried to the extent required. (g) The Net Proceeds of the insurance carried pursuant to the provisions of Sections 10(a)(ii) and 10(a)(iii) shall be applied by such Grantor toward satisfaction of the claim or liability with respect to which such insurance proceeds may be paid. (h) The Net Proceeds of the insurance carried with respect to the Collateral pursuant to the provisions of Section 10(a)(i) hereof shall be paid to such Grantor and held by such Grantor in a separate account and applied, as long as no Event of Default shall have occurred and be continuing, as follows: after any loss under any such insurance and payment of the proceeds of such insurance, each Grantor shall have a period of 90 days after payment of the insurance proceeds with respect to such loss to elect to either (x) repair or replace the Collateral so damaged, (y) apply such Net 22 Proceeds to the acquisition of tangible assets constituting Collateral used or useful in the conduct of the business of such Grantor, subject to the provisions of this Security Agreement, or (z) deliver such Net Proceeds to the Administrative Agent, for the benefit of the Secured Parties, for application as provided in the Credit Agreement. If such Grantor elects to repair or replace the Collateral so damaged, such Grantor agrees the Collateral shall be repaired to a condition substantially similar to or of better quality or higher value than its condition prior to damage or replaced with Collateral in a condition substantially similar to or of better quality or higher value than the condition of the Collateral so replaced prior to damage. At all times during which an Event of Default shall have occurred and be continuing, the Administrative Agent shall be entitled to receive direct and immediate payment of the proceeds of such insurance and such Grantor shall take all action as the Administrative Agent may reasonably request to accomplish such payment. Notwithstanding the foregoing, in the event such Grantor shall receive any such proceeds, such Grantor shall immediately deliver such proceeds to such Administrative Agent for the benefit of the Secured Parties as additional Collateral, and pending such delivery shall hold such proceeds in trust for the benefit of the Secured Parties and keep the same segregated from its other funds. (i) "Net Proceeds" when used with respect to any insurance proceeds shall mean the gross proceeds from such proceeds, award or other amount, less all taxes, fees and expenses (including Attorneys' Costs) incurred in the realization thereof. (j) In case of any material damage to, destruction or loss of, or claim or proceeding against, all or any material part of the Collateral pledged hereunder by a Grantor, such Grantor shall give prompt notice thereof to the Administrative Agent. Each such notice shall describe generally the nature and extent of such damage, destruction, loss, claim or proceeding. Subject to Section 10(d), each Grantor is hereby authorized and empowered to adjust or compromise any loss under any such insurance other than losses relating to claims made directly against any Secured Party as to which the insurance described in Section 10(a)(ii) or (iii) is applicable. (k) The provisions contained in this Security Agreement pertaining to insurance shall be cumulative with any additional provisions imposing additional insurance requirements with respect to the Collateral or any other property on which a Lien is conferred under any Security Instrument. 11. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the following rights and remedies on behalf of the Secured Parties in addition to any rights and remedies set forth elsewhere in this Security Agreement or the other Loan Documents, all of which may be exercised with or, if allowed by law, without notice to a Grantor: (a) All of the rights and remedies of a secured party under the UCC or under other applicable law, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, to the extent permitted by law, in addition to any other rights and remedies contained in this Security Agreement or any other Loan Document; 23 (b) The right to foreclose the Liens and security interests created under this Security Agreement by any available judicial procedure or without judicial process; (c) To the extent not prohibited by law, the right to (i) enter upon the premises of a Grantor through self-help and without judicial process, without first obtaining a final judgment or giving such Grantor notice or opportunity for a hearing on the validity of the Administrative Agent's claim and without any obligation to pay rent to such Grantor, or any other place or places where any Collateral is located and kept, and remove the Collateral therefrom to the premises of the Administrative Agent or any agent of the Administrative Agent, for such time as the Administrative Agent may desire, in order effectively to collect or liquidate the Collateral, (ii) require such Grantor or any bailee or other agent of such Grantor to assemble the Collateral and make it available to the Administrative Agent at a place to be designated by the Administrative Agent that is reasonably convenient to both parties, and (iii) notify any or all Persons party to a Qualifying Control Agreement or who otherwise have possession of or control over any Collateral of the occurrence of an Event of Default and other appropriate circumstances, and exercise control over and take possession or custody of any or all Collateral in the possession, custody or control of such other Persons; (d) The right to (i) exercise all of a Grantor's rights and remedies with respect to the collection of Accounts, Chattel Paper, Instruments, Supporting Obligations and General Intangibles (collectively, "Payment Collateral"), including the right to demand payment thereof and enforce payment, by legal proceedings or otherwise; (ii) settle, adjust, compromise, extend or renew all or any Payment Collateral or any legal proceedings pertaining thereto; (iii) discharge and release all or any Payment Collateral; (iv) take control, in any manner, of any item of payment or proceeds referred to in Section 5 above; (v) prepare, file and sign a Grantor's name on any Proof of Claim in bankruptcy, notice of Lien, assignment or satisfaction of Lien or similar document in any action or proceeding adverse to any obligor under any Payment Collateral or otherwise in connection with any Payment Collateral; (vi) endorse the name of a Grantor upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to any Collateral; (vii) use the information recorded on or contained on a Grantor's internet website or otherwise in any data processing equipment and computer hardware and software relating to any Collateral to which a Grantor has access; (viii) open such Grantor's mail and collect any and all amounts due to such Grantor from any Account Debtors or other obligor in respect of Payment Collateral; (ix) take over such Grantor's post office boxes or make other arrangements as the Administrative Agent, on behalf of the Secured Parties, deems necessary to receive such Grantor's mail, including notifying the post office authorities to change the address for delivery of such Grantor's mail to such address as the Administrative Agent, on behalf of the Secured Parties, may designate; (x) notify any or all Account Debtors or other obligor on any Payment Collateral that such Payment Collateral has been assigned to the Administrative Agent for the benefit of the Secured Parties and that Administrative Agent has a security interest therein for the benefit of the Secured Parties (provided that the Administrative Agent may at any time give such notice to an Account Debtor that is a department, agency or authority of the United States government); each Grantor hereby agrees that any such notice, in the Administrative Agent's sole discretion, may (but need 24 not) be sent on such Grantor's stationery, in which event such Grantor shall co-sign such notice with the Administrative Agent if requested to do so by the Administrative Agent; and (xi) to the extent not prohibited by applicable Laws, do all acts and things and execute all documents necessary, in Administrative Agent's sole discretion, to collect the Payment Collateral; and (e) The right to sell all or any Collateral in its then existing condition, or after any further manufacturing or processing thereof, at such time or times, at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, with or without representations and warranties, all as the Administrative Agent, in its sole discretion, may deem advisable. The Administrative Agent shall have the right to conduct such sales on a Grantor's premises or elsewhere and shall have the right to use a Grantor's premises without charge for such sales for such time or times as the Administrative Agent may reasonably see fit. The Administrative Agent may, if it deems it reasonable, postpone or adjourn any sale of the Collateral from time to time by an announcement at the time and place of such postponed or adjourned sale, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor agrees that the Administrative Agent has no obligation to preserve rights to the Collateral against prior parties or to marshal any Collateral for the benefit of any Person. The Administrative Agent for the benefit of the Secured Parties is hereby granted an irrevocable fully paid license or other right (including each Grantor's rights under any license or any franchise agreement to the extent permitted by such agreement), each of which shall remain in full force and effect until the Facility Termination Date, to use, without charge, each Grantor's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale and selling any Collateral. If any of the Collateral shall require repairs, maintenance, preparation or the like, or is in process or other unfinished state, the Administrative Agent shall have the right, but shall not be obligated, to perform such repairs, maintenance, preparation, processing or completion of manufacturing for the purpose of putting the same in such saleable form as the Administrative Agent shall deem appropriate, but the Administrative Agent shall have the right to sell or dispose of the Collateral without such processing and no Grantor shall have any claim against the Administrative Agent for the value that may have been added to such Collateral with such processing. In addition, each Grantor agrees that in the event notice is necessary under applicable law, written notice mailed to such Grantor in the manner specified herein ten (10) days prior to the date of public sale of any of the Collateral or prior to the date after which any private sale or other disposition of any of the Collateral will be made shall constitute commercially reasonable notice to such Grantor. All notice is hereby waived with respect to any of the Collateral which threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Administrative Agent may purchase all or any part of the Collateral at public or, if permitted by law, private sale, free from any right of redemption which is hereby expressly waived by such Grantor and, in lieu of actual payment of such purchase price, may set off the amount of such price against the Secured Obligations. Each Grantor recognizes that the Administrative Agent may be unable to effect a public sale of certain of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, 25 as amended (the "Securities Act"), and applicable state law, and may be otherwise delayed or adversely affected in effecting any sale by reason of present or future restrictions thereon imposed by governmental authorities ("Affected Collateral"), and that as a consequence of such prohibitions and restrictions the Administrative Agent may be compelled (i) to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire Affected Collateral for their own account, for investment and not with a view to the distribution or resale thereof, or (ii) to seek regulatory approval of any proposed sale or sales, or (iii) to limit the amount of Affected Collateral sold to any Person or group. Each Grantor agrees and acknowledges that private sales so made may be at prices and upon terms less favorable to such Grantor than if such Affected Collateral was sold either at public sales or at private sales not subject to other regulatory restrictions, and that the Administrative Agent has no obligation to delay the sale of any Affected Collateral for the period of time necessary to permit the Grantor or any other Person to register or otherwise qualify them under or exempt them from any applicable restriction, even if such Grantor or other Person would agree to register or otherwise qualify or exempt such Affected Collateral so as to permit a public sale under the Securities Act or applicable state law. Each Grantor further agrees, to the extent permitted by applicable law, that the use of private sales made under the foregoing circumstances to dispose of Affected Collateral shall be deemed to be dispositions in a commercially reasonable manner. Each Grantor hereby acknowledges that a ready market may not exist for Affected Collateral that is not traded on a national securities exchange or quoted on an automated quotation system. The net cash proceeds resulting from the collection, liquidation, sale, or other disposition of the Collateral shall be applied first to the expenses (including all Attorneys' Costs) of retaking, holding, storing, processing and preparing for sale, selling, collecting, liquidating and the like, and then to the satisfaction of all Secured Obligations in accordance with the terms of Section 2.13, and as applicable, Section 2.06(e)(iii) of the Credit Agreement. Each Grantor shall be liable to the Administrative Agent, for the benefit of the Secured Parties, and shall pay to the Administrative Agent, for the benefit of the Secured Parties, on demand any deficiency which may remain after such sale, disposition, collection or liquidation of the Collateral. 12. ATTORNEY-IN-FACT. Each Grantor hereby appoints the Administrative Agent as the Grantor's attorney-in-fact for the purposes of carrying out the provisions of this Security Agreement and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of an Event of Default. Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the right and power (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; 26 (b) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (a) above; (c) to endorse such Grantor's name on any checks, notes, drafts or any other payment relating to or constituting proceeds of the Collateral which comes into the Administrative Agent's possession or the Administrative Agent's control, and deposit the same to the account of the Administrative Agent, for the benefit of the Secured Parties, on account and for payment of the Secured Obligations. (d) to file any claims or take any action or institute any proceedings that the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent, for the benefit of the Secured Parties, with respect to any of the Collateral; and (e) to execute, in connection with any sale or other disposition of Collateral provided for herein, any endorsement, assignments, or other instruments of conveyance or transfer with respect thereto. 13. REINSTATEMENT. The granting of a security interest in the Collateral and the other provisions hereof shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party or is repaid by any Secured Party in whole or in part in good faith settlement of a pending or threatened avoidance claim, whether upon the insolvency, bankruptcy or reorganization of any Grantor or any other Loan Party or otherwise, all as though such payment had not been made. The provisions of this Section 13 shall survive repayment of all of the Secured Obligations and the termination or expiration of this Security Agreement in any manner, including but not limited to termination upon occurrence of the Facility Termination Date. 14. CERTAIN WAIVERS BY THE GRANTORS. Each Grantor waives to the extent permitted by applicable law (a) any right to require any Secured Party or any other obligee of the Secured Obligations to (x) proceed against any Person or entity, including without limitation any Loan Party, (y) proceed against or exhaust any Collateral or other collateral for the Secured Obligations, or (z) pursue any other remedy in its power; (b) any defense arising by reason of any disability or other defense of any other Person, or by reason of the cessation from any cause whatsoever of the liability of any other Person or entity, (c) any right of subrogation, (d) any right to enforce any remedy which any Secured Party or any other obligee of the Secured Obligations now has or may hereafter have against any other Person and any benefit of and any right to participate in any collateral or security whatsoever now or hereafter held by the Administrative Agent for the benefit of the Secured Parties. Each Grantor authorizes each Secured Party and each other obligee of the Secured Obligations without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Loan Documents from time to time to: (i) take and hold security, other than the Collateral herein described, for the payment of such Secured Obligations or any part thereof, and exchange, enforce, waive and release the Collateral herein described or any part thereof or any such other security; and (ii) apply such Collateral or other security and direct the order or manner of sale thereof as such Secured Party or obligee in its discretion may determine. 27 The Administrative Agent may at any time deliver (without representation, recourse or warranty) the Collateral or any part thereof to a Grantor and the receipt thereof by such Grantor shall be a complete and full acquittance for the Collateral so delivered, and the Administrative Agent shall thereafter be discharged from any liability or responsibility therefor. 15. CONTINUED POWERS. Until the Facility Termination Date shall have occurred, the power of sale and other rights, powers and remedies granted to the Administrative Agent for the benefit of the Secured Parties hereunder shall continue to exist and may be exercised by the Administrative Agent at any time and from time to time irrespective of the fact that any of the Secured Obligations or any part thereof may have become barred by any statute of limitations or that any part of the liability of any Grantor may have ceased. 16. OTHER RIGHTS. The rights, powers and remedies given to the Administrative Agent for the benefit of the Secured Parties by this Security Agreement shall be in addition to all rights, powers and remedies given to the Administrative Agent or any Secured Party under any other Loan Document or by virtue of any statute or rule of law. Any forbearance or failure or delay by the Administrative Agent in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of the Secured Parties shall continue in full force and effect until such right, power or remedy is specifically waived in accordance with the terms of the Credit Agreement. 17. ANTI-MARSHALING PROVISIONS. The right is hereby given by each Grantor to the Administrative Agent, for the benefit of the Secured Parties, to make releases (whether in whole or in part) of all or any part of the Collateral agreeable to the Administrative Agent without notice to, or the consent, approval or agreement of other parties and interests, including junior lienors, which releases shall not impair in any manner the validity of or priority of the Liens and security interests in the remaining Collateral conferred hereunder, nor release any Grantor from personal liability for the Secured Obligations. Notwithstanding the existence of any other security interest in the Collateral held by the Administrative Agent, for the benefit of the Secured Parties, the Administrative Agent shall have the right to determine the order in which any or all of the Collateral shall be subjected to the remedies provided in this Security Agreement. Each Grantor hereby waives any and all right to require the marshaling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein or in any other Loan Document. 18. ENTIRE AGREEMENT. This Security Agreement and each Security Joinder Agreement, together with the Credit Agreement and other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and understandings, inducements, commitments or conditions, express or implied, oral or written, except as contained in the Loan Documents. The express terms hereof and of the Security Joinder Agreements control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof or thereof. Neither this Security Agreement nor any Security Joinder Agreement nor any portion or provision hereof or thereof may be changed, altered, modified, supplemented, 28 discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement. 19. THIRD PARTY RELIANCE. Each Grantor hereby consents and agrees that all issuers of or obligors in respect of any Collateral, and all securities intermediaries, warehousemen, bailees, public officials and other Persons having any interest in, possession of, control over or right, privilege, duty or discretion in respect of, any Collateral shall be entitled to accept the provisions hereof and of the Security Joinder Agreements as conclusive evidence of the right of the Administrative Agent, on behalf of the Secured Parties, to exercise its rights hereunder or thereunder with respect to the Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any Grantor or any other Person to any of such Persons. 20. BINDING AGREEMENT; ASSIGNMENT. This Security Agreement and each Security Joinder Agreement, and the terms, covenants and conditions hereof and thereof, shall be binding upon and inure to the benefit of the parties hereto, and to their respective successors and assigns, except that no Grantor shall be permitted to assign this Security Agreement, any Security Joinder Agreement or any interest herein or therein or, except as expressly permitted herein or in the Credit Agreement, in the Collateral or any part thereof or interest therein. Without limiting the generality of the foregoing sentence of this Section 20, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.07 thereof (concerning assignments and participations). All references herein to the Administrative Agent and to the Secured Parties shall include any successor thereof or permitted assignee, and any other obligees from time to time of the Secured Obligations. 21. RELATED SWAP CONTRACTS. All obligations of each Grantor under or in respect of Related Swap Contracts (which are not prohibited under the terms of the Credit Agreement) to which any Lender or any Affiliate of any Lender is a party, shall be deemed to be Secured Obligations secured hereby, and each Lender or Affiliate of a Lender party to any such Related Swap Contract shall be deemed to be a Secured Party hereunder with respect to such Secured Obligations; provided, however, that such obligations shall cease to be Secured Obligations at such time as such Person (or Affiliate of such Person) shall cease to be a "Lender" under the Credit Agreement. No Person who obtains the benefit of any Lien by virtue of the provisions of this Section 21 shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and only to the extent expressly provided in the Loan Documents. 22. SEVERABILITY. The provisions of this Security Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of 29 any other provision hereof, but this Security Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 23. COUNTERPARTS. This Security Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Security Agreement to produce or account for more than one such counterpart executed by the Grantor against whom enforcement is sought. Without limiting the foregoing provisions of this Section 23, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this Security Agreement. 24. TERMINATION. Subject to the provisions of Section 13, this Security Agreement and each Security Joinder Agreement, and all obligations of the Grantors hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party on the Facility Termination Date. Upon such termination of this Security Agreement, the Administrative Agent shall, at the request and sole expense of the Grantors, promptly deliver to the Grantors such termination statements and take such further actions as the Grantors may reasonably request to terminate of record, or otherwise to give appropriate notice of the termination of, any Lien conferred hereunder. 25. NOTICES. Any notice required or permitted hereunder shall be given (a) with respect to the Borrower, at the address for the giving of notice then in effect under the Credit Agreement, (b) with respect to any Grantor, at the address then in effect for the giving of notices to such Grantor under the Guaranty to which it is a party, and (c) with respect to the Administrative Agent or a Lender, at the Administrative Agent's address indicated in Section 10.02 of the Credit Agreement. All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder. 26. JOINDER. Each Person who shall at any time execute and deliver to the Administrative Agent a Security Joinder Agreement substantially in the form attached as Exhibit A hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Grantor and shall have thereupon pursuant to Section 2 hereof granted a security interest in and collaterally assigned to the Administrative Agent for the benefit of the Secured Parties all Collateral in which it has at its Applicable Date or thereafter acquires any interest or the power to transfer, and all references herein and in the other Loan Documents to the Grantors or to the parties to this Security Agreement shall be deemed to include such Person as a Grantor hereunder. Each Security Joinder Agreement shall be accompanied by the Supplemental Schedules referred to therein, appropriately completed with information relating to the Grantor executing such Security Joinder Agreement and its property. Each of the applicable Schedules attached hereto shall be deemed amended and supplemented without further action by such information reflected on the Supplemental Schedules. 27. RULES OF INTERPRETATION. The rules of interpretation contained in Sections 1.02 and 1.05 of the Credit Agreement shall be applicable to this Security Agreement and each Security Joinder Agreement and are hereby incorporated by reference. All representations and 30 warranties contained herein shall survive the delivery of documents and any Credit Extensions referred to herein or secured hereby. 28. RELEASE. Upon the Disposition of any item of Collateral, so long as such Disposition is permitted under Section 7.05 of the Credit Agreement and all conditions to such Disposition contained therein have been satisfied: (a) the Lien of the Administrative Agent for the benefit of the Secured Parties in such disposed Collateral shall, subject to the provision at the end of this subsection (a), be deemed to be released without any further action on the part of the Administrative Agent or the relevant Grantor, provided that in the event following any such Disposition any Grantor shall thereafter acquire any interest in (or the power to transfer rights in) any asset that constituted Collateral hereunder prior to its Disposition and release from the security interests hereunder, the pledge, assignment and security interest granted hereunder shall be deemed to automatically apply and attach to such asset and it shall from such time forward continue to constitute Collateral hereunder notwithstanding any prior release; and (b) the Administrative Agent will (other than in connection with sales of Inventory in the ordinary course of business), at the Grantors' expense, execute and deliver to each Grantor such documents as such Grantor shall reasonably request on reasonable advance notice to evidence the release of such item of Collateral from the pledge, assignment and security interest granted hereunder, provided that such Grantor shall have delivered to the Collateral Agent a written request for release describing the item of Collateral and the terms of the Disposition thereof in reasonable detail, including the price thereof and any expenses in connection therewith. 29. GOVERNING LAW; WAIVERS. (A) THIS SECURITY AGREEMENT AND EACH SECURITY JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE; PROVIDED THAT (I) WITH RESPECT TO THOSE INSTANCES IN WHICH THE APPLICABLE CHOICE OF LAWS RULES OF SUCH STATE, INCLUDING SECTION 9-301 OF THE UCC, REQUIRE THAT THE MANNER OF CREATION OF A SECURITY INTEREST IN SPECIFIC COLLATERAL OR THE MANNER OR EFFECT OF PERFECTION OR NONPERFECTION OR THE RULES GOVERNING PRIORITY OF SECURITY INTERESTS ARE TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION, THEN THE LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH MATTERS, (II) EACH CONTROL AGREEMENT (INCLUDING EACH QUALIFYING CONTROL AGREEMENT) APPLICABLE TO ANY SECURITIES ACCOUNT OR DEPOSIT ACCOUNT SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED IN SUCH CONTROL AGREEMENT, OR OTHERWISE BY THE LAWS OF THE JURISDICTION THAT GOVERN THE SECURITIES ACCOUNT OR DEPOSIT 31 ACCOUNT TO WHICH SUCH CONTROL AGREEMENT RELATES, AND (III) IN THOSE INSTANCES IN WHICH THE LAWS OF THE JURISDICTION IN WHICH COLLATERAL IS LOCATED GOVERN MATTERS PERTAINING TO THE METHODS AND EFFECT OF REALIZING ON COLLATERAL, SUCH LAWS SHALL BE GIVEN EFFECT WITH RESPECT TO SUCH MATTERS. (B) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT OR A SECURITY JOINDER AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION 25 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR ANY 32 AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY EXPRESSLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. (F) EACH GRANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. [SIGNATURE PAGES FOLLOW.] 33 IN WITNESS WHEREOF, the parties have duly executed this Security Agreement on the day and year first written above. GRANTORS: ALLTRISTA CORPORATION, a Delaware corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President HEARTHMARK, INC., an Indiana corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA PLASTICS CORPORATION, an Indiana corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ZINC PRODUCTS, L.P., an Indiana limited partnership By: Alltrista Newco Corporation, a Indiana corporation, its general partner By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President Security Agreement Signature Page 1 QUOIN CORPORATION, a Delaware corporation By: /s/ Ian G. H. Asken --------------------------------- Name: Ian G. H. Asken Title: Treasurer ALLTRISTA NEWCO CORPORATION, an Indiana corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President PENN VIDEO, INC., an Indiana corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President LAFAYETTE STEEL & ALUMINUM CORPORATION, an Illinois corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President CASPERS TIN PLATE COMPANY, an Illinois corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President Security Agreement Signature Page 2 UNIMARK PLASTICS, INC., a Pennsylvania corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President LUMENX CORPORATION, an Ohio corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA UNIMARK, INC., an Indiana corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President TRIENDA CORPORATION (F/K/A TRIENDA NEWCO, INC.), a Indiana corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ACQUISITION I, INC., a Delaware corporation By: /s/ Desiree DeStefano --------------------------------- Name: Desiree DeStefano Title: Vice President Security Agreement Signature Page 3 ALLTRISTA ACQUISITION II, INC., a Delaware corporation By: /s/ Desiree DeStefano -------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ACQUISITION III, INC., a Delaware corporation By: /s/ Desiree DeStefano -------------------------------- Name: Desiree DeStefano Title: Vice President Security Agreement Signature Page 4 ADMINISTRATIVE AGENT: BANK OF AMERICA, N. A., as Administrative Agent for the Lenders By: /s/ Igor Suica --------------------------------- Name: Igor Suica Title: Vice President Security Agreement Signature Page 5 SCHEDULE 1 For purposes of this Security Agreement, a "Qualifying Control Agreement" shall mean each of the following, as applicable to the respective items or types of property in which the Grantor now has or may hereafter acquire an interest: (a) With respect to Investment Property credited to any securities account, an agreement executed by the applicable securities intermediary substantially in the form of Schedule 1-A hereto or in such other form as may be consented to by the Administrative Agent in its reasonable discretion; (b) With respect to Deposit Accounts or tangible personal property Collateral in the possession, custody or control of any warehouseman or other bailee, an acknowledgment and agreement executed by the depositary institution or bailee (each, a "Custodian"), as the case may be, and (as to Deposit Accounts) the applicable Grantor, in form and substance acceptable to the Administrative Agent and in which the Custodian (i) acknowledges the Lien created hereunder (and, in the case of any Custodian of tangible personal property, that such Custodian holds such Collateral for the Administrative Agent for the benefit of the Secured Parties), (ii) agrees to discontinue accepting requests or demands from or on behalf of the applicable Grantor for access to or possession of any Collateral of which it is Custodian upon receipt of notice from the Administrative Agent that a Default or Event of Default has occurred and is continuing (a "Default Notice"), until such time as the Administrative Agent may furnish it with a subsequent notice that such Default or Event of Default has been cured or waived, (iii) agrees that it will comply with instructions from the Administrative Agent directing the disposition of the Collateral of which it is Custodian, without requiring further consent from the Grantor, following receipt of any Default Notice from the Administrative Agent, (iv) agrees that it will not consent to or acknowledge any Lien on Collateral of which it is Custodian in favor of any other Person and, as to Deposit Accounts only, agrees that it will not permit any withdrawals from such deposit accounts, until it receives notice from the Administrative Agent that all Liens on such Collateral in favor of the Secured Parties have been released or terminated, (v) agrees to waive or subordinate to the Lien conferred hereunder, on terms acceptable to the Administrative Agent, any lien, claim, or right of setoff or recoupment (whether statutory or consensual) in favor of the Custodian on any of the Collateral; provided, however, Deposit Account Custodians may retain a prior Lien solely for the payment of routine deposit account maintenance and activity charges, and (vi) in the case of any warehouseman or other bailee of tangible personal property collateral, agrees to deliver (and accompanies such agreement with any then existing) warehouse receipts or other Documents pertaining to such Collateral; (c) With respect to Letter-of-Credit Rights, an acknowledgment and agreement of the issuer or other applicable person nominated to accept drafts and or effect payment thereunder (the "Issuer") of the related letter of credit in form and substance acceptable to the Administrative Agent and in which the Issuer (i) consents to and acknowledges the Lien in favor of the Administrative Agent conferred hereunder in proceeds of drawings under the related letter of credit, (ii) agrees that it will not acknowledge any Lien in favor of any other Person on Letter-of-Credit Rights until it receives notice from the Administrative Agent that all Liens on such Collateral in favor of the Secured Parties have been released or terminated, and (iii) to the extent not inconsistent with the express terms of the related letter of credit, agrees that upon receipt of notice from the Administrative Agent that an Event of Default has occurred and is continuing, it will make all payments of drawings honored by it under the related letter of credit to the Administrative Agent, notwithstanding any contrary instruction received from the Grantor; and (d) With respect to any Investment Property in the form of uncertificated securities, an agreement of the issuer of such Investment Property in form and substance acceptable to the Administrative Agent sufficient to confer control (within the meaning of Section 9-106 of the UCC) over such property and containing such other terms and provisions as the Administrative Agent may reasonably request. EX-10.4 7 file006.txt INTELLECTUAL PROPERTY SECURITY AGREEMENT INTELLECTUAL PROPERTY SECURITY AGREEMENT THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "IP Security Agreement") is made and entered into as of April [24], 2002 by ALLTRISTA CORPORATION, a Delaware corporation (herein referred to as a "Grantor" and the "Borrower"), and EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF AN IP SECURITY JOINDER AGREEMENT (each a "Guarantor" and a "Grantor", and collectively with the Borrower, the "Grantors"), and BANK OF AMERICA, N.A., a national banking association, as Administrative Agent (the "Administrative Agent") for each of the lenders (the "Lenders", and together with the Administrative Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement. W I T N E S S E T H: ------------------- WHEREAS, pursuant to that certain Credit Agreement dated as of April [24], 2002 by and among the Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Credit Agreement"), the lenders have made available to the Borrower a term loan facility and a revolving credit facility with a letter of credit sublimit and a swing line facility; and WHEREAS, as collateral security for payment and performance of the Borrower's Obligations, the Borrower is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in the Collateral (as defined below) pursuant to the terms of this IP Security Agreement; and WHEREAS, each Guarantor will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement and each Guarantor is a party (as signatory or by joinder) to a Guaranty pursuant to which each Guarantor guarantees the Obligations of the Borrower; and WHEREAS, as collateral security for payment and performance by each Guarantor of its Guarantor's Obligations (as defined in the Guaranty to which such Guarantor is a party) and for payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party, each Guarantor is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in the Collateral pursuant to the terms of this IP Security Agreement; and WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents unless the Borrower and the Guarantors enter into this IP Security Agreement; NOW, THEREFORE, in order to induce the Secured Parties to enter into the Loan Documents and to make Loans and issue Letters of Credit, and in further consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. GRANT OF SECURITY INTEREST. The Borrower hereby grants as collateral security for the payment, performance and satisfaction of all of the Borrower's Obligations, and each Guarantor hereby grants as collateral security for the payment, performance and satisfaction of all of its Guarantor's Obligations (as defined in the Guaranty), and each of them hereby grants as collateral security for the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party (such Borrower's Obligations, Guarantor's Obligations and all other obligations and liabilities of the Borrower and the other Grantors referred to collectively as the "Secured Obligations"), to the Administrative Agent for the benefit of the Secured Parties a continuing first priority security interest in and to, and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties, the following property of such Grantor or in which such Grantor has or may have or acquire an interest or the power to transfer rights therein, whether now owned or existing or hereafter created, acquired or arising and wheresoever located: (a) all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all United States and foreign patents and patent applications (including without limitation the patents and patent applications identified on Schedule I attached hereto and incorporated herein by reference) and including the right to recover for all past, present and future infringements thereof and all reissues, divisions, continuations, continuations in part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (collectively, the "Patents"); (b) all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all United States and foreign trademarks, trade names, domain names, trade dress, service marks, trademark and service mark registrations, and applications for trademark or service mark registration and any renewals thereof (including without limitation each trademark, trade name, domain name and service mark registration and application identified in Schedule II attached hereto and incorporated herein by reference) and including all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto (including without limitation damages for past or future infringements thereof), the right to sue or otherwise recover for all past, present and future infringements thereof, all rights corresponding thereto throughout the world (but only such rights as now exist or may come to exist under applicable local law) and all other rights of any kind whatsoever of each Grantor accruing thereunder or pertaining thereto, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark and service mark (collectively, the "Trademarks"); (c) all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all United States and foreign copyrights and copyright 2 applications (including without limitation the copyright registrations identified on Schedule III attached hereto and incorporated herein by reference) and including the right to recover for all past, present and future infringements thereof and all supplemental registrations, renewals, and extensions thereof, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (collectively, the "Copyrights"); and (d) all proceeds of any of the foregoing. All of the property and interests in property described in clauses (a) through (d) are herein collectively referred to as the "Collateral". The security interests granted under this IP Security Agreement are herein referred to as the "Security Interests." 2. PERFECTION. As of the date of execution of this IP Security Agreement or an IP Security Joinder Agreement by each Grantor, as applicable (with respect to each Grantor, its "Applicable Date"), such Grantor shall have furnished the Administrative Agent with properly executed financing statements in form, number and substance suitable for filing, sufficient under applicable law, and satisfactory to the Administrative Agent in order that upon the filing of the same the Administrative Agent, for the benefit of the Secured Parties, shall have a duly perfected security interest in all Collateral in which a security interest can be perfected by the filing of financing statements, subject only to Liens allowed to exist and have priority under Section 7.01 of the Credit Agreement ("Permitted Liens") with the effect that the Liens conferred in favor of the Administrative Agent shall be and remain duly perfected and of first priority. All financing statements (including all amendments thereto and continuations thereof), certificates, acknowledgments, instruments and other documents furnished in connection with the creation, enforcement, protection, perfection or priority of the Administrative Agent's security interest in or collateral assignment of Collateral, including such items as are described above in this Section 2 or in Sections 3 and 4 below, are sometimes referred to herein as "Perfection Documents". The delivery of possession of items of or evidencing Collateral, causing other Persons to execute and deliver Perfection Documents as appropriate, the filing or recordation of Perfection Documents, the establishment of control over items of Collateral, and the taking of such other actions as may be necessary or advisable in the determination of the Administrative Agent to create, enforce, protect, perfect, or establish or maintain the priority of, the security interest of or collateral assignment to, the Administrative Agent for the benefit of the Secured Parties in the Collateral is sometimes referred to herein as "Perfection Action". 3. SECURITY FOR OBLIGATIONS. The Security Interests granted under this IP Security Agreement by (a) the Borrower secure the payment, performance and satisfaction of all of the Secured Obligations now or hereafter owing by the Borrower and (b) each Guarantor to secure the payment, performance and satisfaction of all of the Secured Obligations now or hereafter owing by such Guarantor. The Security Interests granted by this IP Security Agreement are granted in conjunction with the security interests granted to the Administrative Agent, for the benefit of the Secured Parties, in other assets of each Grantor pursuant to the other Loan Documents. 3 4. COLLATERAL ASSIGNMENT. In addition to, and not in limitation of, the grant of the Security Interests in the Patents, Trademarks and Copyrights in Section 1 above, each Grantor hereby grants, assigns, transfers, conveys and sets over to the Administrative Agent, for the benefit of the Secured Parties, the Grantor's entire right, title and interest in and to the Patents, Trademarks and Copyrights; provided, that such grant, assignment, transfer, conveyance and set over shall become effective only at the election of the Administrative Agent following the occurrence of an Event of Default that is continuing at the time of such election. Each Grantor hereby agrees that after the effectiveness of such grant, assignment, transfer, conveyance and set over of any of the Patents, Trademarks and Copyrights, the use by the Administrative Agent of any of such Patents, Trademarks and Copyrights shall be without any liability for royalties or other related charges from the Administrative Agent to any Grantor. In furtherance of the foregoing, each Grantor has executed in blank and delivered to the Administrative Agent an assignment of federally registered patents, trademarks and copyrights (the "IP Assignment") owned by it in the form of Exhibit A hereto, such blank assignments to be filed and/or otherwise used by the Administrative Agent only upon the occurrence and during the continuance of an Event of Default. Each Grantor hereby authorizes the Administrative Agent to complete as assignee, execute, and record with the United States Patent and Trademark Office (the "Patent and Trademark Office") and the United States Copyright Office (the "Copyright Office") and with other applicable state and federal agencies and authorities, each IP Assignment upon the occurrence of an Event of Default that is continuing at the time of filing. 5. FURTHER ASSURANCES. (a) Each Grantor agrees that from time to time, at the expense of such Grantor, such Grantor will promptly execute and deliver all further instruments and documents, including such other Perfection Documents and take all further action and such other or additional Perfection Action, as may be required by the terms of the Loan Documents or as the Administrative Agent may reasonably request, in order to (i) continue, perfect and protect any Security Interest or collateral assignment granted or purported to be granted hereby, and (ii) enable the Administrative Agent, for the benefit of the Secured Parties, to exercise and enforce its rights and remedies hereunder with respect to any part of the Collateral. Without limiting the generality of the foregoing, each Grantor will execute and file (with the appropriate governmental offices, authorities, agencies and regulatory bodies) such joinders or supplements to this IP Security Agreement and such financing or continuation statements, or amendments thereto, and such other instruments or notices, including executed IP Assignments (but the filing of such IP Assignments shall be effected only in accordance with Section 4 above), with the Patent and Trademark Office and the Copyright Office, as may be necessary or desirable, or as the Administrative Agent, on behalf of the Secured Parties, may reasonably request, in order to perfect and preserve the Security Interests and collateral assignments granted hereby. 4 (b) Each Grantor hereby authorizes the Administrative Agent, on behalf of the Secured Parties, to file, where permitted by law, one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor. A carbon, photographic or other reproduction of this IP Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) Each Grantor will furnish to the Administrative Agent, on behalf of the Secured Parties, from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent, on behalf of the Secured Parties, may reasonably request, all in reasonable detail. (d) Each Grantor agrees to maintain among its books and records appropriate notations or evidence of, and to make or cause to be made appropriate disclosure upon its financial statements or, the Security Interests granted hereunder to the Administrative Agent for the benefit of the Secured Parties. (e) Each Grantor agrees that, should it have or obtain an ownership interest in any material United States patent or patent application that is not now identified on Schedule I, any material trademark or trademark application that is not now identified on Schedule II or any material copyright registration or copyright application that is not now identified on Schedule III: (i) the provisions of this IP Security Agreement shall automatically apply to such item, and such item shall automatically become part of the Collateral; (ii) such Grantor shall, within one month after acquiring or becoming aware of such ownership interest, (A) give written notice thereof to the Administrative Agent, (B) take all commercially reasonable and appropriate steps to protect such material Patents, Trademarks and Copyrights, as, for example, by filing applications for their registration with the Patent and Trademark Office or the Copyright Office, as applicable, and (C) with respect to such material Patents, Trademarks and Copyrights, prepare, execute and file in the Patent and Trademark Office or the Copyright Office, as applicable, within the requisite time period, all documents that are known by such Grantor to be necessary or that the Administrative Agent, on behalf of the Secured Parties, reasonably requests in order to perfect the Security Interest of the Administrative Agent, on behalf of the Secured Parties, therein, including delivery to the Administrative Agent of an executed IP Assignment. Each Grantor authorizes the Administrative Agent, on behalf of the Secured Parties, to execute and file (subject in the case of the filing of IP Assignments, to the limitation contained in Section 4 above) such a document in the name of such Grantor if such Grantor fails to do so. 5 (f) Without limiting Article IIA or Section 6.14 of the Credit Agreement, each Grantor agrees that should any of its Domestic Subsidiaries (other than a Subsidiary which is a party hereto and whether now or hereafter existing) obtain any ownership interest in any intellectual property of a nature that would be Collateral hereunder if owned by such Grantor, such Grantor shall either cause such Subsidiary (i) to become a party hereto by executing an IP Security Joinder Agreement and a party to the Guaranty by executing a Guaranty Joinder Agreement and other Security Instruments in accordance with Section 6.14 of the Credit Agreement, or (ii) to transfer and assign, all such Subsidiary's ownership interests therein to such Grantor, whereupon the provisions of subsection (e) of this Section 5 shall be applicable thereto. (g) Each Grantor agrees: (i) to take all commercially reasonable steps in any proceeding before the Patent and Trademark Office, the Copyright Office or any similar office or agency in any other country or any political subdivision thereof or in any court, to maintain and pursue each patent application now or hereafter included in the Collateral which the Grantor determines to be material to the conduct of its business, and to maintain each such Patent, and each Trademark or Copyright now or hereafter included in the Collateral that such Grantor determines to be material to the conduct of its business, including the filing of divisional, continuation, continuation-in-part and substitute applications, the filing of applications for reissue, renewal or extensions, the payment of fees, and the participation in interference, reexamination, opposition and infringement proceedings, to the extent commercially reasonable; (ii) to take corresponding steps with respect to unpatented inventions which the Grantor determines to be material to the conduct of its business and on which such Grantor is now or hereafter becomes entitled to seek protection, including maintaining the confidentiality of such inventions if filing a patent application is not justified in the commercially reasonable judgment of such Grantor; and (iii) to bear any expenses incurred in connection with such activities. (h) No Grantor shall do any act or omit to do any act whereby any of the Collateral may become dedicated or abandoned, except where such dedication or abandonment (i) will not cause, create or give rise to a Material Adverse Effect, and (ii) is in the ordinary course of such Grantor's business. (i) Each Grantor agrees that in the event that any of the Collateral which is material to the operation of its business and as to which it has granted the Security Interests is infringed or misappropriated by a third party, such Grantor shall take all commercially reasonable steps to terminate the infringement or misappropriation, and take such other commercially reasonable actions as such Grantor shall deem appropriate under the circumstances to protect such Collateral. Any expense incurred in connection with such activities shall be borne by such Grantor. 6. GENERAL REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: 6 (a) It has full power, legal right and lawful authority to enter into this IP Security Agreement (and any IP Security Joinder Agreement applicable to it) and to perform its terms, including the grant of the Security Interests herein provided for. (b) No authorization, consent, approval or other action by, and no notice to or filing with, any Governmental Authority or other regulatory body or any other Person is required either (i) for the grant by such Grantor of the Security Interests granted hereby, or the collateral assignment hereunder, or for the execution, delivery or performance of this IP Security Agreement (or any IP Security Joinder Agreement applicable to it) by such Grantor, or (ii) for the perfection of or the exercise by the Administrative Agent, on behalf of the Secured Parties, of its rights and remedies hereunder, except (x) with respect to the Security Interests, the filing of this IP Security Agreement with the Patent and Trademark Office and the Copyright Office, as applicable, and the filings required by the Uniform Commercial Code of the State in which such Grantor is formed, (y) with respect to the consummation of assignment pursuant to Section 4 above, the filing in the Patent and Trademark Office or the Copyright Office, as applicable, of the IP Assignments, and (z) to the extent that the exercise of rights and remedies may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors rights generally or by general principles of equity. (c) No action or proceeding is pending or, to such Grantor's knowledge, threatened seeking to limit, cancel or question the validity of any part of the Collateral, which such action or proceeding, if determined adversely to such Grantor, could reasonably be expected to have a Material Adverse Effect. (d) It has not granted any release, covenant not to sue, or non-assertion assurance to any third person with respect to any material part of the Collateral. (e) The actions contemplated under or in connection with the Loan Documents will not impair the legal right of such Grantor to use any of the Collateral. (f) Except as set forth on Schedule 6(f) hereto, such Grantor has no knowledge of the existence of any right under any patent, trademark, license agreement, trade name, trade secret, know-how, confidential research, development and commercial information, or other proprietary information held by any other Person that would materially interfere with the ability of such Grantor to carry on its business as currently carried on, and such Grantor has no knowledge of any claim to the contrary. (g) None of such Grantor's Domestic Subsidiaries (except to the extent that such Subsidiaries are also Grantors hereunder or grantors under any other Security Instrument relating to such property) has an ownership interest in any patents, patent applications, copyrights, copyright applications, trademark, trade name, trade dress, service marks, trademark or service mark registrations or any applications for trademark or service mark registration or any other intellectual property of a nature that would be Collateral hereunder if owned by such Grantor. 7 (h) No claim has been made, and such Grantor has no knowledge of any claim, that the use by such Grantor of any Collateral does or may violate the rights of any Person, to the extent that such claim could reasonably be expected to have a Material Adverse Effect. 7. PATENT REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (a) It is the sole, legal and beneficial owner of the entire right, title and interest in and to the material Patents purported to be granted by it hereunder, free and clear of any Lien, security interest, option, charge, pledge, registered user agreement, assignment (whether conditional or not), or covenant, or any other encumbrance, except for non-exclusive licenses as to which such Grantor is the licensor, Permitted Liens, and the Security Interests created by this IP Security Agreement. Upon and after the filing of certain UCC termination statements and related releases obtained on or about the date hereof in connection with (i) the closing of the Transaction (including the payoff of Union Bank of California's credit facility with the Seller) and (ii) the termination of the Existing Credit Agreement, and the acceptance and filing of such UCC termination statements and related releases by the appropriate jurisdictions and Governmental Authorities, no financing statement or other instrument similar in effect covering all or any part of the Patents purported to be granted by such Grantor hereunder shall be on file in any recording office, including, without limitation, the Patent and Trademark Office, except such as may have been filed in favor of the Administrative Agent, for the benefit of the Secured Parties. (b) Set forth on Schedule I is a list of all of the Patents owned by such Grantor and utilized in the conduct of its business as currently conducted and material in such Grantor's operations or in the selling or marketing of such Grantor's products or services. (c) Each Patent of such Grantor identified on Schedule I hereto is validly subsisting and has not been adjudged unpatentable, invalid or unenforceable, in whole or in part, and to the knowledge of such Grantor is patentable, valid and enforceable, and each of such Patent applications has been filed in conformity with applicable rules and procedures of the Patent and Trademark Office in all material respects and will be prosecuted in conformity therewith so as not to become improperly abandoned. 8. TRADEMARK REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (a) It is the sole, legal and beneficial owner of the entire right, title and interest in and to the material Trademarks purported to be granted by it hereunder, free and clear of any Lien, security interest, option, charge, pledge, registered user agreement, assignment (whether conditional or not), or covenant, or any other encumbrance, except for non-exclusive licenses as to which such Grantor is the licensor, Permitted Liens, and the Security Interests created by this IP Security Agreement. Upon and after the filing of certain UCC termination statements and related releases obtained on or about the date 8 hereof in connection with (i) the closing of the Transaction (including the payoff of Union Bank of California's credit facility with the Seller) and (ii) the termination of the Existing Credit Agreement, and the acceptance and filing of such UCC termination statements and related releases by the appropriate jurisdictions and Governmental Authorities, no financing statement or other instrument similar in effect covering all or any part of the Trademarks purported to be granted by such Grantor hereunder shall be on file in any recording office, including, without limitation, the Patent and Trademark Office, except such as may have been filed in favor of the Administrative Agent, for the benefit of the Secured Parties. (b) Set forth on Schedule II is a list of all of the Trademarks owned by such Grantor and utilized in the conduct of its business as currently conducted and material in such Grantor's operations or in the selling or marketing of such Grantor's products or services. (c) Except as expressly described on Schedule II, each Trademark of such Grantor identified on Schedule II is validly subsisting and has not been abandoned or adjudged invalid, unregistrable or unenforceable, in whole or in part, and is, to such Grantor's knowledge, valid, registrable and enforceable, and each application for registration of any such Trademark has been filed in conformity with applicable rules and procedures of the Patent and Trademark Office in all material respects and will be prosecuted in conformity therewith. 9. COPYRIGHT REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (a) It is the sole, legal and beneficial owner of the entire right, title and interest in and to the material Copyrights purported to be granted by it hereunder, free and clear of any Lien, security interest, option, charge, pledge, registered user agreement, assignment (whether conditional or not), or covenant, or any other encumbrance, except for the Permitted Liens, Security Interests created or permitted by this IP Security Agreement or the Credit Agreement. Upon and after the filing of certain UCC termination statements and related releases hereof in connection with (i) the closing of the Transaction (including the payoff of Union Bank of California's credit facility with the Seller) and (ii) the termination of the Existing Credit Agreement, and the acceptance and filing of such UCC termination statements and related releases by the appropriate jurisdictions and Governmental Authorities, no financing statement or other instrument similar in effect covering all or any part of the Copyrights purported to be granted by such Grantor hereunder shall be on file in any recording office, including, without limitation, the Copyright Office, except such as may have been filed in favor of the Administrative Agent, for the benefit of the Secured Parties. (b) Set forth on Schedule III is a list of all of the federally registered Copyrights owned by such Grantor and utilized in the conduct of its business as currently 9 conducted and material in such Grantor's operations or used in the selling or marketing of such Grantor's products or services. (c) Each Copyright of such Grantor identified on Schedule III is validly subsisting and has not been abandoned or adjudged invalid, unregistrable or unenforceable, in whole or in part, and is, to such Grantor's knowledge, valid, registrable and enforceable, and each of such Copyright applications has been filed in conformity with applicable rules and procedures of the Copyright Office in all material respects and will be prosecuted in conformity therewith so as not to become improperly abandoned. 10. TRANSFERS AND OTHER LIENS. No Grantor shall: (a) sell, assign (by operation of law or otherwise) or otherwise dispose of any of, or grant any option with respect to, the Collateral, except as permitted by the Credit Agreement or, with respect to such Collateral as is not material to the business of such Grantor, which may be transferred in the ordinary course of business, except that any Grantor may license the Collateral either on an exclusive or a non-exclusive basis (i) in the ordinary course of such Grantor's business, provided that such license is necessary or desirable in the conduct of such Grantor's business, or (ii) in connection with a sale of assets in compliance with Section 7.05 of the Credit Agreement. The Administrative Agent, for the benefit of the Secured Parties, shall execute any documents that such Grantor may reasonably request in order to permit the Grantor to exercise its right hereunder to license the Collateral, provided that the Administrative Agent shall not be required to do anything that may, in the sole judgment of the Administrative Agent, adversely affect the validity of the Security Interests; (b) create or suffer to exist any Lien, security interest or other charge or encumbrance upon or with respect to any of the Collateral except for Permitted Liens or the Security Interests created by this IP Security Agreement; or (c) take any other action in connection with any of the Collateral that would impair the value of the interest or rights of such Grantor in the Collateral taken as a whole or that would impair the interest or rights of the Administrative Agent for the benefit of the Secured Parties. 11. ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT. Each Grantor hereby appoints the Administrative Agent as the Grantor's attorney-in-fact for the purposes of carrying out the provisions of this IP Security Agreement and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of an Event of Default. Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the right and power 10 (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (a) above; (c) to endorse such Grantor's name on any checks, notes, drafts or any other payment relating to or constituting proceeds of the Collateral which comes into the Administrative Agent's possession or the Administrative Agent's control, and deposit the same to the account of the Administrative Agent, for the benefit of the Secured Parties, on account and for payment of the Secured Obligations. (d) to file any claims or take any action or institute any proceedings that the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent, for the benefit of the Secured Parties, with respect to any of the Collateral; and (e) to execute, in connection with any sale or other disposition of Collateral provided for herein, any endorsement, assignments, or other instruments of conveyance or transfer with respect thereto. 12. ADMINISTRATIVE AGENT MAY PERFORM. If any Grantor fails to perform any agreement contained herein, the Administrative Agent may itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by such Grantor under Section 16 hereof to the fullest extent permitted by applicable law. The Administrative Agent agrees that, upon its performing or causing the performance of any agreement contained herein, it will promptly provide notice thereof to the Borrower, provided that the failure so to provide notice shall not affect the obligation of the Borrower to pay amounts incurred in connection therewith pursuant to this Section 12. 13. THE ADMINISTRATIVE AGENT'S DUTIES. (a) The Administrative Agent shall be under no duty or liability with respect to the collection, protection or preservation of the Collateral, or otherwise, beyond the use of reasonable care in the custody and preservation thereof while in its possession. (b) Each Grantor agrees to pay when due all taxes, charges, Liens and assessments against the Collateral in which it has an interest, unless being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves have been established in accordance with GAAP and evidenced to the satisfaction of the Administrative Agent and provided that all enforcement proceedings in the nature of levy or foreclosure are effectively stayed. Upon the failure of any Grantor to so pay or contest such taxes, charges, Liens or assessments, or upon the failure of any Grantor to pay any amount pursuant to this IP Security Agreement, the Administrative 11 Agent at its option may pay or contest any of them (the Administrative Agent having the sole right to determine the legality or validity and the amount necessary to discharge such taxes, charges, Liens or assessments) but shall not have any obligation to make any such payment or contest. All sums so disbursed by the Administrative Agent, including reasonable Attorneys' Costs, court costs, expenses and other charges related thereto, shall be payable on demand by the applicable Grantor to the Administrative Agent and shall be additional Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (c) Each Grantor hereby irrevocably authorizes the Administrative Agent to file (with, or to the extent permitted by applicable law, without the signature of the Grantor appearing thereon) financing statements (including amendments thereto and continuations and copies thereof) showing such Grantor as "debtor" at such time or times and in all filing offices as the Administrative Agent may from time to time determine to be necessary or advisable to perfect or protect the rights of the Administrative Agent and the Secured Parties hereunder, or otherwise to give effect to the transactions herein contemplated. 14. REINSTATEMENT. The granting of a security interest in the Collateral and the other provisions hereof shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party or is repaid by any Secured Party in whole or in part in good faith settlement of a pending or threatened avoidance claim, whether upon the insolvency, bankruptcy or reorganization of any Grantor or any other Loan Party or otherwise, all as though such payment had not been made. The provisions of this Section 14 shall survive repayment of all of the Secured Obligations and the termination or expiration of this IP Security Agreement in any manner, including but not limited to termination upon occurrence of the Facility Termination Date. 15. REMEDIES UPON AN EVENT OF DEFAULT. If an Event of Default shall have occurred and be continuing: (a) The Administrative Agent, for the benefit of the Secured Parties, may exercise in respect of the Collateral of any defaulting Grantor, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code as in effect in the State of New York (the "UCC") and also may (i) exercise any and all rights and remedies of such Grantor under, in connection with, or otherwise in respect of, such Collateral, including the completion and filing of the IP Assignment, (ii) require such Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the documents embodying such Collateral as directed by the Administrative Agent and make it available to the Administrative Agent, for the benefit of the Secured Parties, at a place to be designated by the Administrative Agent that is reasonably convenient to both the Administrative Agent and such Grantor, (iii) occupy any premises owned or leased by such Grantor 12 where documents embodying such Collateral or any part thereof are assembled for a reasonable period in order to effectuate the Administrative Agent's rights and remedies hereunder or under applicable law, without obligation to such Grantor in respect of such occupation, (iv) license such Collateral or any part thereof, and (v) without notice except as specified below, sell such Collateral or any part thereof at public or private sale, at any of the Administrative Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable. Each Grantor agrees that at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of the Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) All payments received by any defaulting Grantor under or in connection with any of such Collateral shall be received in trust for the benefit of the Secured Parties, shall be segregated from other funds of such Grantor and shall be immediately paid over to the Administrative Agent, for the benefit of the Secured Parties, in the same form as so received (with any necessary endorsement). (c) The net cash proceeds resulting from the collection, liquidation, sale, or other disposition of the Collateral of any defaulting Grantor shall be applied first to the expenses (including all Attorneys' Costs) owing pursuant to Section 16 hereof, of retaking, holding, storing, processing and preparing for sale, selling, collecting, liquidating and the like, and then to the satisfaction of all Secured Obligations in accordance with the terms of Section 2.13 and, as applicable, Section 2.06(e)(iii) of the Credit Agreement. Each Grantor shall be liable to the Administrative Agent, for the benefit of the Secured Parties, and shall pay to the Administrative Agent, for the benefit of the Secured Parties, on demand any deficiency which may remain after such sale, disposition, collection or liquidation of the Collateral. 16. EXPENSES. Each Grantor will upon demand pay to the Administrative Agent the amount of any and all reasonable expenses, including Attorneys' Costs and the reasonable fees and disbursements of any experts and agents, that the Administrative Agent, for the benefit of the Secured Parties, may incur in connection with (i) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral, (ii) the exercise or enforcement of any of the rights of the Secured Parties, or (iii) the failure by any Grantor to perform or observe any of the provisions hereof. 17. WAIVER. Each Grantor waives to the extent permitted by applicable law (a) any right to require any Secured Party or any other obligee of the Secured Obligations to (x) proceed against any Person or entity, including without limitation any Loan Party, (y) proceed against or exhaust any Collateral or other collateral for the Secured Obligations, or (z) pursue any other remedy in its power; (b) any defense arising by reason of any disability or other defense of any other Person, or by reason of the cessation from any cause whatsoever of the liability of any 13 other Person or entity, (c) any right of subrogation, or (d) any right to participate in any collateral or security whatsoever now or hereafter held by the Administrative Agent for the benefit of the Secured Parties. Each Grantor authorizes each Secured Party and each other obligee of the Secured Obligations without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Loan Documents from time to time to: (i) take and hold security that may be granted to it, other than the Collateral herein described, for the payment of such Secured Obligations or any part thereof, and exchange, enforce, waive and release the Collateral herein described or any part thereof or any such other security; and (ii) after the occurrence and during the continuance of an Event of Default, apply such Collateral or other security and direct the order or manner of sale thereof as such Secured Party or obligee in its discretion may determine. Nothing in this Section 17 is intended as a waiver of any Grantor's right to proceed against any Secured Party in connection with any duty to protect the Collateral as provided in Section 13(a) hereof or otherwise. 18. AMENDMENTS. No amendment, modification, or termination or waiver of any provision of this IP Security Agreement nor consent to any departure by any Grantor therefrom shall in any event be effective unless effected in accordance with Section 10.01 of the Credit Agreement, then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 19. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE CREDIT AGREEMENT (a) This IP Security Agreement shall create a continuing Security Interest in the Collateral and shall remain in full force and effect until terminated in accordance with the provisions of Section 29 hereof. (b) Except as permitted by this IP Security Agreement or the Credit Agreement, no Grantor shall sell, lease, transfer or otherwise dispose of any item of Collateral during the term of this IP Security Agreement without the prior written consent of the Required Lenders to such sale, lease, transfer or other disposition. (c) Upon the termination of this IP Security Agreement in accordance with Section 29 hereof, the Collateral shall be automatically released from the Liens created hereby, all rights to the Collateral shall automatically revert to the Grantors, and this IP Security Agreement and all obligations of the Grantors hereunder shall terminate without delivery of any instrument or performance of any act by any party. Upon such termination of this IP Security Agreement, the Administrative Agent shall reassign and redeliver such Collateral then held by or for the Secured Parties and execute and deliver to each Grantor such documents as it shall reasonably request to evidence such termination. 20. ADDITIONAL COLLATERAL. If any Grantor shall acquire or hold any additional material Patents, Trademarks or Copyrights not listed on Schedules I, II, or III hereto (any such Patents, Trademarks or Copyrights being referred to herein as the "Additional Collateral"), such Grantor shall promptly deliver to the Administrative Agent for the benefit of the Secured Parties a revised Schedule I, II, or III hereto, as applicable, reflecting the ownership and pledge of such 14 Additional Collateral. Each Grantor shall comply with the requirements of this Section 20 concurrently with the acquisition of any such Additional Collateral. 21. JOINDER. Each Person who shall at any time execute and deliver to the Administrative Agent an IP Security Joinder Agreement substantially in the form attached as Exhibit A hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Grantor and shall have thereupon pursuant to Section 1 hereof granted a security interest in and collaterally assigned to the Administrative Agent for the benefit of the Secured Parties all Collateral in which it has at its Applicable Date or thereafter acquires any interest or the power to transfer, and all references herein and in the other Loan Documents to the Grantors or to the parties to this IP Security Agreement shall be deemed to include such Person as a Grantor hereunder. Each IP Security Joinder Agreement shall be accompanied by the Supplemental Schedules referred to therein, appropriately completed with information relating to the Grantor executing such IP Security Joinder Agreement and its property. Each of the applicable Schedules attached hereto shall be deemed amended and supplemented without further action by such information reflected on the Supplemental Schedules. 22. DEFINITIONS. All terms used herein unless otherwise defined herein or in the Credit Agreement shall be defined in accordance with the appropriate definitions appearing in the Uniform Commercial Code in effect in New York, and such definitions are hereby incorporated herein by reference and made a part hereof. 23. ENTIRE AGREEMENT. This IP Security Agreement and each IP Security Joinder Agreement, together with the Credit Agreement and the other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, inducements, commitments or conditions, express or implied, oral or written, except as contained in the Loan Documents. The express terms hereof and of the IP Security Joinder Agreements control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof or thereof. Neither this IP Security Agreement or any IP Security Joinder Agreement nor any portion or provision hereof or thereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement. 24. EVIDENCE OF LIEN. Each Grantor hereby consents and agrees that the issuers of or obligors in respect of the Collateral shall be entitled to accept the provisions hereof and of the IP Security Joinder Agreements as conclusive evidence of the right of the Administrative Agent, on behalf of the Secured Parties, to exercise its rights hereunder or thereunder with respect to the Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any Grantor or any other Person to any of such issuers or obligors. 25. BINDING AGREEMENT; ASSIGNMENT. This IP Security Agreement and each IP Security Joinder Agreement, and the terms, covenants, conditions, rights and remedies hereof, shall be binding upon and inure to the benefit of the parties hereto, and to their respective successors and assigns; provided, however, that no Grantor shall be permitted to assign this IP 15 Security Agreement, any IP Security Joinder Agreement or any interest herein or therein or in the Collateral. Without limiting the generality of the foregoing sentence of this Section 25, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.7 thereof (concerning assignments and participations.) All references herein to the Administrative Agent and to the Secured Parties shall include any successor thereof or permitted assignee, and any other obligees from time to time of the Secured Obligations. 26. RELATED SWAP CONTRACTS. All obligations of each Grantor under or in respect of Related Swap Contracts (which are not prohibited under the terms of the Credit Agreement) to which any Lender or any Affiliate of any Lender is a party, shall be deemed to be Secured Obligations secured hereby, and each Lender or Affiliate of a Lender party to any such Related Swap Contract shall be deemed to be a Secured Party hereunder with respect to such Secured Obligations; provided, however, that such obligations shall cease to be Secured Obligations at such time as such Person (or Affiliate of such Person) shall cease to be a "Lender" under the Credit Agreement. No Person who obtains the benefit of any Lien by virtue of the provisions of this Section shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and only to the extent expressly provided in the Loan Documents. 27. SEVERABILITY. The provisions of this IP Security Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this IP Security Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 28. COUNTERPARTS. This IP Security Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. 29. TERMINATION. Subject to the provisions of Section 14, this IP Security Agreement and each IP Security Joinder Agreement, and all obligations of the Grantors hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party on the Facility Termination Date. For purposes of this IP Security Agreement, "Facility Termination Date" means the date as of which all of the following shall have occurred: (a) the Borrower shall have permanently terminated the credit facilities under the Loan Documents by final payment in 16 full of all Outstanding Amounts, together with all accrued and unpaid interest and fees thereon, other than (i) the undrawn portion of Letters of Credit and (ii) all letter of credit fees relating thereto accruing after such date (which fees shall be payable solely for the account of the Issuing Bank and shall be computed (based on interest rates then in effect) on such undrawn amounts to the respective expiry dates of the Letters of Credit), in each case as have been fully Cash Collateralized or as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made; (b) all Related Swap Contracts shall have been terminated, expired or Cash Collateralized; (c) all Commitments shall have terminated or expired; and (d) the Borrower shall have fully, finally and irrevocably paid and satisfied in full all other Obligations (except for Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Loan Party that may be owing to any Agent-Related Person or any Lender pursuant to the Loan Documents and expressly survive termination of this IP Security Agreement). Upon such termination of this IP Security Agreement, the Administrative Agent shall, at the request and sole expense of the Grantors, promptly deliver to the Grantors such termination statements and IP Assignments and take such further actions as the Grantors may reasonably request to terminate of record, or otherwise to give appropriate notice of the termination of, any Lien conferred hereunder. 30. NOTICES. Any notice required or permitted hereunder shall be given (a) with respect to the Borrower, at the address for the giving of notice then in effect under the Credit Agreement, (b) with respect to any Grantor, at the address then in effect for the giving of notices to such Grantor under the Guaranty to which it is a party, and (c) with respect to the Administrative Agent or a Lender, at the Administrative Agent's address for the giving of notice then in effect under the Credit Agreement. All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder 31. RULES OF INTERPRETATION. The rules of interpretation contained in Sections 1.02 and 1.05 of the Credit Agreement shall be applicable to this IP Security Agreement and each IP Security Joinder Agreement and are hereby incorporated by reference. All representations and warranties contained herein shall survive the delivery of documents and any Credit Extensions referred to herein or secured hereby. 17 32. GOVERNING LAW; WAIVERS. (A) THIS IP SECURITY AGREEMENT AND EACH IP SECURITY JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE (I) WITH RESPECT TO THOSE INSTANCES IN WHICH THE APPLICABLE CHOICE OF LAWS RULES OF SUCH STATE, INCLUDING SECTION 9-301 OF THE UCC, REQUIRE THAT THE MANNER OF CREATION OF A SECURITY INTEREST IN SPECIFIC COLLATERAL OR THE MANNER OR EFFECT OF PERFECTION OR NONPERFECTION OR THE RULES GOVERNING PRIORITY OR SECURITY INTERESTS ARE TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION, THEN THE LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH MATTERS, AND (II) IN THOSE INSTANCES IN WHICH THE LAWS OF THE JURISDICTION IN WHICH COLLATERAL IS LOCATED GOVERN MATTERS PERTAINING TO THE METHODS AND EFFECT OF REALIZING ON COLLATERAL, SUCH LAWS SHALL BE GIVEN EFFECT WITH RESPECT TO SUCH MATTERS. (B) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS IP SECURITY AGREEMENT OR ANY IP SECURITY JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS IP SECURITY AGREEMENT OR AN IP SECURITY JOINDER AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION 30 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. 18 (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS IP SECURITY AGREEMENT OR ANY IP SECURITY JOINDER AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS IP SECURITY AGREEMENT OR ANY IP SECURITY JOINDER AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY EXPRESSLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. (F) EACH GRANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. [SIGNATURE PAGES FOLLOW] 19 IN WITNESS WHEREOF, the parties have duly executed this Intellectual Property Security Agreement on the day and year first written above. GRANTORS: ALLTRISTA CORPORATION, a Delaware corporation By: /s/ Desiree DeStefano ----------------------------------- Name: Desiree DeStefano Title: Vice President HEARTHMARK, INC., an Indiana corporation By: /s/ Desiree DeStefano ----------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA PLASTICS CORPORATION, an Indiana corporation By: /s/ Desiree DeStefano ----------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ZINC PRODUCTS, L.P., an Indiana limited partnership By: Alltrista Newco Corporation, a Indiana corporation, its general partner By: /s/ Desiree DeStefano -------------------------------- Name: Desiree DeStefano Title: Vice President Intellectual Property Security Agreement Signature Page 1 QUOIN CORPORATION, a Delaware corporation By: /s/ Ian G. H. Asken ------------------------------------- Name: Ian G. H. Asken Title: Treasurer ALLTRISTA NEWCO CORPORATION, an Indiana corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President PENN VIDEO, INC., an Indiana corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President LAFAYETTE STEEL & ALUMINUM CORPORATION, an Illinois corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President Intellectual Property Security Agreement Signature Page 2 CASPERS TIN PLATE COMPANY, An Illinois corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President UNIMARK PLASTICS, INC., a Pennsylvania corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President LUMENX CORPORATION, an Ohio corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA UNIMARK, INC., an Indiana corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President Intellectual Property Security Agreement Signature Page 3 TRIENDA CORPORATION (F/K/A TRIENDA NEWCO, INC.), a Indiana corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ACQUISITION I, INC., a Delaware corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ACQUISITION II, INC., a Delaware corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President ALLTRISTA ACQUISITION III, INC., a Delaware corporation By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano Title: Vice President Intellectual Property Security Agreement Signature Page 4 ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Igor Suica ------------------------------------ Name: Igor Suica Title: Vice President Intellectual Property Security Agreement Signature Page 5 EXHIBIT A ASSIGNMENT OF PATENTS, TRADEMARKS AND COPYRIGHTS THIS ASSIGNMENT OF PATENTS, TRADEMARKS AND COPYRIGHTS (this "Agreement") is made as of ______________ ___, 2002 by ALLTRISTA CORPORATION, a Delaware corporation (herein referred to the "Borrower" and a "Grantor"), and EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER (each a "Guarantor" and a "Grantor", and collectively with the Borrower, the "Grantors") in favor of BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States, as Administrative Agent (the "Administrative Agent") for each of the lenders now or hereafter party to the Credit Agreement (as defined below) (the "Secured Parties"). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement. W I T N E S S E T H: ------------------- WHEREAS, pursuant to that certain Credit Agreement dated as of April [24], 2002 by and among the Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated, or replaced, renewed, refunded or refinanced, the "Credit Agreement"), the lenders have made available to the Borrower a term loan facility and a revolving credit facility with a letter of credit sublimit and a swing line facility; and WHEREAS, the Borrower and each Guarantor will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement and each Guarantor is a party to a Guaranty pursuant to which each Guarantor guarantees the Obligations of the Borrower; and WHEREAS, each Grantor has entered into that certain Intellectual Property Security Agreement (by joinder or otherwise) (the "IP Security Agreement") dated as of April [24], 2002 pursuant to which each Grantor has granted to the Administrative Agent for the benefit of the Secured Parties a security interest in the Trademarks, Copyrights, and Patents defined below in order to secure the Secured Obligations (as defined in the IP Security Agreement). WHEREAS, each Grantor (a) has adopted, registered and used and is using the trademarks and service marks (the "Trademarks") identified on Annex I hereto, and is the owner of the registrations of and pending registration applications for such Trademarks in the United States Patent and Trademark Office identified on Annex I hereto, (b) is the owner of and uses the copyright registrations set forth on Annex II hereto (the "Copyrights"), and (c) is the owner of and uses the patents, patent registrations and pending registration applications set forth on Annex III hereto (the "Patents" and together with the Trademarks and the Copyrights, the "Collateral"); and A-1 WHEREAS, the Administrative Agent for the benefit of the Secured Parties desires to acquire the Trademarks, the Copyrights, and the Patents and the registrations thereof and applications therefor, as applicable, in connection with the exercise of its remedies after the occurrence of an Event of Default and pursuant to the terms of the IP Security Agreement; NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, each Grantor does hereby assign, sell and transfer unto the Administrative Agent all right, title and interest in and to the Trademarks, Copyrights, and Patents, together with (i) the registrations of and applications therefor, as applicable, (ii) all reissues, divisions, continuations, continuations in part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto, (iii) the goodwill of the business symbolized by and associated with the Trademarks and the registrations thereof, and (iv) the right to sue and recover for, and the right to profits or damages due or accrued arising out of or in connection with, any and all past, present or future infringements or dilution of or damage or injury to the Trademarks, Copyrights, Patents or the registrations thereof or such associated goodwill. Each Grantor hereby grants to the Administrative Agent, for the benefit of the Secured Parties, and notice is hereby given that each Grantor has granted to the Administrative Agent, for the benefit of the Secured Parties, a first priority security interest in the Collateral to secure the payment and performance in full of all Secured Obligations (as defined in the IP Security Agreement) and all obligations of each Grantor under its respective Guaranty (if applicable) and any other Loan Documents to which it is a party. This Agreement is intended to and shall take effect as a sealed instrument at such time as the Administrative Agent shall complete this instrument by signing its acceptance of this IP Security Agreement below. IN WITNESS WHEREOF, the parties have duly executed this Assignment of Patents, Trademarks and Copyrights on the day and year first written above. GRANTORS: ________________________________________________ By: ____________________________________________ Name: __________________________________________ Title: _________________________________________ ________________________________________________ By: ____________________________________________ Name: __________________________________________ A-2 Title: _________________________________________ ________________________________________________ By: ____________________________________________ Name: __________________________________________ Title: _________________________________________ The foregoing Assignment of the Patents, Trademarks and Copyrights and the registrations thereof and registration applications therefor by the Grantors is hereby accepted as of the ___ day of ____________, 20__. BANK OF AMERICA, N.A., as Administrative Agent By: ___________________________________________ Name: _________________________________________ Title: ________________________________________ A-3 EX-10.5 8 file007.txt SECURITIES PLEDGE AGREEMENT SECURITIES PLEDGE AGREEMENT THIS SECURITIES PLEDGE AGREEMENT (this "Pledge Agreement") is made and entered into as of this [24th] day April, 2002 by ALLTRISTA CORPORATION, a Delaware corporation (the "Borrower" and a "Grantor"), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF A PLEDGE JOINDER AGREEMENT (each a "Pledgor" and, collectively with the Borrower, the "Pledgors") and BANK OF AMERICA, N.A., a national banking association, as Administrative Agent (as defined in the Credit Agreement referred to below) for each of the Lenders (as defined in the Credit Agreement referred to below and, collectively with the Administrative Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement. W I T N E S S E T H: WHEREAS, the Secured Parties have agreed to provide to the Borrower a revolving credit facility with a letter of credit sublimit and a swing line sublimit and a term loan facility pursuant to the Credit Agreement dated as of April [24], 2002 among the Borrower, the Administrative Agent, National City Bank of Indiana, as Documentation Agent, Canadian Imperial Bank of Commerce, as Syndication Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Credit Agreement"); and WHEREAS, each Pledgor is a Domestic Subsidiary of the Borrower and will materially benefit from the Loans and other credit facilities (including Letters of Credit) made or to be made available under the Credit Agreement, and in connection therewith and pursuant to the terms of the Credit Agreement each Domestic Subsidiary is a party (as signatory or by joinder) to a Guaranty pursuant to which it has guaranteed the full and prompt payment and performance of the Obligations and is required to execute and deliver this Pledge Agreement; and WHEREAS, the Secured Parties are unwilling to make available or maintain the credit facilities under the Credit Agreement unless the Pledgors enter into this Pledge Agreement; and WHEREAS, each of (i) the Borrower, as collateral security for the payment and performance of its Obligations, and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party, and (ii) each Guarantor, as collateral security for the payment and performance of its Guarantor's Obligations (as defined in the Guaranty to which it is a party), and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party (such obligations and liabilities of the Pledgors described in clauses (i) and (ii) being referred to as "Secured Obligations"), is willing to pledge and grant to the Administrative Agent for the benefit of the Secured Parties a security interest in (i) 65% of the Voting Securities (or if any Pledgor shall own less than 65% of such Voting Securities, then 100% of the Voting Securities owned by such Pledgor) and 100% of the other Subsidiary Securities of each of its Direct Foreign Subsidiaries, and (ii) all of the Subsidiary Securities of all of its other Domestic Subsidiaries, in each case, whether now existing or hereafter created or acquired (collectively, the "Pledged Interests"), and certain related property, including without limitation the Pledged Interests more particularly described on Schedule I hereto (such Subsidiaries, together with all other Subsidiaries whose Subsidiary Securities may be required to be subject to this Pledge Agreement from time to time, are hereinafter referred to collectively as the "Pledged Subsidiaries"); and WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents unless each Pledgor enters into this Pledge Agreement; NOW, THEREFORE, in order to induce the Secured Parties to enter into the Loan Documents and to make or maintain the credit facilities provided for therein available to or for the account of the Borrower, and in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. PLEDGE OF PLEDGED INTERESTS; OTHER COLLATERAL. (a) As collateral security for the payment and performance by each Pledgor of its now or hereafter existing Secured Obligations, each Pledgor hereby grants, pledges and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties a first priority security interest in all of the following items of property in which it now has or may at any time hereafter acquire an interest or the power to transfer rights therein, and wheresoever located: (i) the Pledged Interests; and (ii) all money, securities, security entitlements and other investment property, dividends, rights, general intangibles and other property at any time and from time to time (x) declared or distributed in respect of or in exchange for or on conversion of any Pledged Interest, or (y) by its or their terms exchangeable or exercisable for or convertible into any Pledged Interest; and (iii) all other property of whatever character or description, including money, securities, security entitlements and other investment property, and general intangibles hereafter delivered to the Administrative Agent in substitution for or as an addition to any of the foregoing; and (iv) all securities accounts to which may at any time be credited any or all of the foregoing or any proceeds thereof and all certificates and instruments representing or evidencing any of the foregoing or any proceeds thereof; and (iv) all proceeds of any of the foregoing. 2 All such Pledged Interests, certificates, instruments, cash, securities, interests, dividends, rights and other property referred to in clauses (i) through (iv) of this Section 1 are herein collectively referred to as the "Collateral." (b) Subject to Section 10(a), each Pledgor agrees to deliver all certificates, instruments or other documents representing any Collateral to the Administrative Agent at such location as the Administrative Agent shall from time to time designate by written notice pursuant to Section 22 for its custody at all times until termination of this Pledge Agreement, together with such instruments of assignment and transfer as requested by the Administrative Agent. (c) Each Pledgor agrees to execute and deliver, or cause to be executed and delivered by other Persons, at Pledgor's expense, all share certificates, documents, instruments, agreements, financing statements (and amendments thereto and continuations thereof), assignments, control agreements, or other writings as the Administrative Agent may reasonably request from time to time to carry out the terms of this Pledge Agreement or to protect or enforce the Administrative Agent's Lien and security interest in the Collateral hereunder granted to the Administrative Agent for the benefit of the Secured Parties and further agrees to do and cause to be done upon the Administrative Agent's reasonable request, at Pledgor's expense, all things determined by the Administrative Agent to be reasonably necessary to perfect and keep in full force and effect the Lien in the Collateral hereunder granted to the Administrative Agent for the benefit of the Secured Parties, including the prompt payment of all out-of-pocket fees and expenses incurred in connection with any filings made to perfect or continue the Lien and security interest in the Collateral hereunder granted in favor of the Administrative Agent for the benefit of the Secured Parties. (d) All filing fees, advances, charges, costs and expenses, including reasonable Attorney Costs, incurred or paid by the Administrative Agent or any Lender in exercising any right, power or remedy conferred by this Pledge Agreement, or in the enforcement thereof, shall become a part of the Secured Obligations secured hereunder and shall be paid to the Administrative Agent for the benefit of the Secured Parties by the Pledgor in respect of which the same was incurred immediately upon written demand therefor detailing such amounts, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (e) Each Pledgor agrees to register and cause to be registered the interest of the Administrative Agent, for the benefit of the Secured Parties, in the Collateral on its own books and records and the registration books of each of the Pledged Subsidiaries. 2. STATUS OF PLEDGED INTERESTS. Each Pledgor hereby represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties, with respect to itself and the Collateral as to which it has or acquires any interest, that: (a) All of the Pledged Interests are, as of the date of execution of this Pledge Agreement or Pledge Joinder Agreement by each Pledgor pledging such Pledged 3 Interests (such date as applicable with respect to each Pledgor, its "Applicable Date"), and shall at all times thereafter be validly issued and outstanding, fully paid and non-assessable and constitute (i) 65% of the issued and outstanding Voting Securities (or if any Pledgor shall own less than 65% of such Voting Securities, then 100% of the Voting Securities owned by such Pledgor) and 100% of the other issued and outstanding Subsidiary Securities of each Direct Foreign Subsidiary constituting a Pledged Subsidiary and (ii) all of the issued and outstanding Subsidiary Securities of all other Domestic Subsidiaries constituting Pledged Subsidiaries, and are accurately described on Schedule I. (b) The Pledgor is as at its Applicable Date and shall at all times thereafter be the sole registered and record and beneficial owner of the Pledged Interests, free and clear of all Liens (other than Liens permitted by Section 7.01(c) or 7.01(h) of the Credit Agreement), charges, equities, options, hypothecations, encumbrances and restrictions on pledge or transfer, including transfer of voting rights (other than the pledge hereunder and applicable restrictions pursuant to federal and state and applicable foreign securities laws). Without limiting the foregoing, the Pledged Interests are not and will not be subject to any voting trust, shareholders agreement, right of first refusal, voting proxy, power of attorney or other similar arrangement (other than the rights hereunder in favor of the Administrative Agent). (c) At no time shall any Pledged Interests (i) be held or maintained in the form of a security entitlement or credited to any securities account and (ii) which constitute a "security" (or as to which the related Pledged Subsidiary has elected to have treated as a "security") under Article 8 of the Uniform Commercial Code of the State of New York or of any other jurisdiction whose laws may govern (the "UCC") be maintained in the form of uncertificated securities. With respect to Pledged Interests that are "securities" under the UCC, or as to which the issuer has elected at any time to have such interests treated as "securities" under the UCC, such Pledged Interests are, and shall at all times be, represented by the share certificates listed on Schedule I hereto, which share certificates, with stock powers duly executed in blank by the Pledgor, have been delivered to the Administrative Agent or are being delivered to the Administrative Agent simultaneously herewith or, in the case of Additional Interests as defined in Section 21, shall be delivered pursuant to Section 21. In addition, with respect to all Pledged Interests, including Pledged Interests that are not "securities" under the UCC and as to which the applicable Pledged Subsidiary has not elected to have such interests treated as "securities" under the UCC, the Pledgor has at its Applicable Date delivered to the Administrative Agent (or has previously delivered to the Administrative Agent or, in case of Additional Interests shall deliver pursuant to Section 21) Uniform Commercial Code financing statements on Form UCC-1 (or appropriate amendments thereto) duly executed (if necessary) by or on behalf of the Pledgor as "debtor" and naming the Administrative Agent for the benefit of the Secured Parties as "secured party," in form, substance and number sufficient in the reasonable opinion of the Administrative Agent to be filed in all UCC filing offices and in all jurisdictions in which filing is necessary or advisable to perfect in favor of the Administrative Agent for the benefit of the Secured Parties the Lien on such Pledged Interests, together with all required filing fees. Without limiting the foregoing provisions of this Section 2(c), with respect to any Pledged Interests issued 4 by any Direct Foreign Subsidiary, Pledgor shall deliver or cause to be delivered, (i) in addition to or in substitution for all or any of the foregoing items, as the Administrative Agent may elect, such other instruments, certificates, agreements, notices, filings, and other documents, and take or cause to be taken such other action, as the Administrative Agent may reasonably determine to be necessary under the laws of the jurisdiction of formation of such Direct Foreign Subsidiary, to grant, perfect and protect as a first priority lien in such Collateral in favor of the Administrative Agent for the benefit of the Lenders, and (ii) if the Administrative Agent shall reasonably determine it to be necessary, an opinion of counsel reasonably acceptable in form and substance to the Administrative Agent issued by a law firm reasonably acceptable to the Administrative Agent licensed to practice law in such foreign jurisdiction, addressing with respect to such Pledged Interests the matters described in Section 6.14 of the Credit Agreement. (d) It has full corporate power, legal right and lawful authority to execute this Pledge Agreement (and any Pledge Joinder Agreement applicable to it) and to pledge, assign and transfer its Pledged Interests in the manner and form hereof. (e) The pledge, assignment and delivery of its Pledged Interests (along with undated stock powers executed in blank, financing statements and other agreements referred to in Section 2(c) hereof) to the Administrative Agent for the benefit of the Secured Parties pursuant to this Pledge Agreement (or any Pledge Joinder Agreement) creates or continues, as applicable, a valid and perfected first priority security interest in such Pledged Interests in favor of the Administrative Agent for the benefit of the Secured Parties, securing the payment of the Secured Obligations, assuming, in the case of the Pledged Interests which constitute certificated "securities" under the UCC, continuous and uninterrupted possession by or on behalf of the Administrative Agent. The Pledgor will defend the Secured Parties' right, title and security interest in and to the Collateral against the claims and demands of all persons whomsoever. (f) Except as otherwise expressly provided herein or in the Credit Agreement, none of the Pledged Interests (nor any interest therein or thereto) shall be sold, transferred or assigned without the Administrative Agent's prior written consent, which may be withheld for any reason. (g) It shall at all times cause the Pledged Interests of such Pledgor that constitute "securities" (or as to which the issuer elects to have treated as "securities") under the UCC to be represented by the certificates now and hereafter delivered to the Administrative Agent in accordance with Sections 1, 2 and 21 hereof and that it shall cause each of the Pledged Subsidiaries as to which it is the Pledgor not to issue any Subsidiary Securities, or securities convertible into, or exchangeable or exercisable for, Subsidiary Securities, at any time during the term of this Pledge Agreement unless the Pledged Interests of such Pledge Subsidiary are issued solely to either (y) such Pledgor who shall immediately comply with Sections 2 and 21 hereof with respect to such property or (z) the Borrower or a Guarantor who shall immediately pledge such additional Subsidiary Securities to the Administrative Agent for the benefit of the Secured Parties pursuant to Section 21 or 23 hereof, as applicable, on substantially identical terms as are contained herein and deliver or cause to be delivered the 5 appropriate documents described in Section 2(c) hereof to the Administrative Agent and take such further actions as the Administrative Agent may deem necessary in order to perfect a first priority security interest in such Subsidiary Securities. (h) The exact legal name and address, type of Person, jurisdiction of formation, jurisdiction of formation identification number, and location of the chief executive office of such Pledgor are (i) with respect to each Pledgor granting a Lien to the Administrative Agent under a Security Instrument at the Closing Date, as specified on Schedule 2A.03 to the Credit Agreement, and (ii) with respect to each other Pledgor, as specified on Schedule II attached hereto. No Pledgor shall change its name, jurisdiction of formation (whether by reincorporation, merger or otherwise), or the location of its chief executive office, except upon giving not less than thirty (30) days' prior written notice to the Administrative Agent and taking or causing to be taken all such action at such Pledgor's expense as may be reasonably requested by the Administrative Agent to perfect or maintain the perfection of the Lien of the Administrative Agent in Collateral. 3. PRESERVATION AND PROTECTION OF COLLATERAL. (a) The Administrative Agent shall be under no duty or liability with respect to the collection, protection or preservation of the Collateral, or otherwise, beyond the use of reasonable care in the custody and preservation thereof while in its possession. (b) Each Pledgor agrees to pay when due all taxes, charges, Liens and assessments against the Collateral in which it has an interest, unless being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves have been established in accordance with GAAP applied on a consistent basis and provided that all enforcement proceedings in the nature of levy or foreclosure are effectively stayed. Upon the failure of any Pledgor to so pay or contest such taxes, charges, Liens or assessments, or upon the failure of any Pledgor to pay any amount pursuant to Section 1(c), the Administrative Agent at its option may pay or contest any of them (the Administrative Agent having the sole right to determine the legality or validity and the amount necessary to discharge such taxes, charges, Liens or assessments) but shall not have any obligation to make any such payment or contest. All sums so disbursed by the Administrative Agent, including reasonable attorneys' fees, court costs, expenses and other charges related thereto, shall be payable on demand by the applicable Pledgor to the Administrative Agent and shall be additional Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (c) Each Pledgor hereby irrevocably (i) authorizes the Administrative Agent to file (with, or to the extent permitted by applicable law, without the signature of the Pledgor appearing thereon) financing statements (including amendments thereto and continuations and copies thereof) showing such Pledgor as "debtor" at such time or times and in all filing offices as the Administrative Agent may from time to time reasonably determine to be necessary or advisable to perfect or protect the rights of the Administrative Agent and the Secured Parties hereunder, or otherwise to give effect to 6 the transactions herein contemplated and (ii) irrevocably ratifies and acknowledges all such actions taken by or on behalf of the Administrative Agent prior to the Applicable Date. 4. DEFAULT. Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent is given full power and authority to sell, assign, deliver or collect the whole or any part of the Collateral, or any substitute therefor or any addition thereto, in one or more sales, with or without any previous demands or demand of performance or, to the extent permitted by law, notice or advertisement, in such order as the Administrative Agent may elect; and any such sale may be made either at public or private sale at the Administrative Agent's place of business or elsewhere, either for cash or upon credit or for future delivery, at such price or prices as the Administrative Agent may reasonably deem fair; and, to the extent not prohibited by applicable Law, the Administrative Agent or any other Secured Party may be the purchaser of any or all Collateral so sold and hold the same thereafter in its own right free from any claim of any Pledgor or right of redemption. Demands of performance, advertisements and presence of property and sale and notice of sale are hereby waived to the extent permissible by law. Any sale hereunder may be conducted by an auctioneer or any officer or agent of the Administrative Agent. Each Pledgor recognizes that the Administrative Agent may be unable to effect a public sale of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state law, and may be otherwise delayed or adversely affected in effecting any sale by reason of present or future restrictions thereon imposed by governmental authorities, and that as a consequence of such prohibitions and restrictions the Administrative Agent may (i) resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof, or (ii) seek regulatory approval of any proposed sale or sales, or (iii) limit the amount of Collateral sold to any Person or group. Each Pledgor agrees and acknowledges that private sales so made may be at prices and upon terms less favorable to such Pledgor than if such Collateral was sold either at public sales or at private sales not subject to other regulatory restrictions, and that the Administrative Agent, to the extent not prohibited by applicable Law, has no obligation to delay the sale of any of the Collateral for the period of time necessary to permit the Pledged Subsidiary to register or otherwise qualify the Collateral, even if such Pledged Subsidiary would agree to register or otherwise qualify such Collateral for public sale under the Securities Act or applicable state law. Each Pledgor further agrees, to the extent permitted by applicable law, that the use of private sales made under the foregoing circumstances to dispose of the Collateral shall be deemed to be dispositions in a commercially reasonable manner. Each Pledgor hereby acknowledges that a ready market may not exist for the Pledged Interests if they are not traded on a national securities exchange or quoted on an automated quotation system and agrees and acknowledges that in such event the Pledged Interests may be sold for an amount less than a pro rata share of the fair market value of the Pledged Subsidiary's assets minus its liabilities. In addition to the foregoing, the Secured Parties may exercise such other rights and remedies as may be available under the Loan Documents, at law (including without limitation the UCC) or in equity. 5. PROCEEDS OF SALE. The net cash proceeds resulting from the collection, liquidation, sale or other disposition of the Collateral, to the extent not prohibited by applicable Law, shall be applied first to the expenses (including all Attorneys' Fees) of retaking, holding, 7 storing, processing and preparing for sale, selling, collecting, liquidating and the like, and then to the satisfaction of all Secured Obligations in accordance with the terms of Section 2.13 and, as applicable Section 2.06(e)(iii) of the Credit Agreement. Each Grantor shall be liable to the Administrative Agent, for the benefit of the Secured Parties, and shall pay to the Administrative Agent, for the benefit of the Secured Parties, on demand any deficiency which may remain after such sale, disposition, collection or liquidation of the Collateral. 6. PRESENTMENTS, DEMANDS AND NOTICES. The Administrative Agent shall not be under any duty or obligation whatsoever to make or give any presentments, demands for performances, notices of nonperformance, protests, notice of protest or notice of dishonor in connection with any obligations or evidences of indebtedness held thereby as collateral, or in connection with any obligations or evidences of indebtedness which constitute in whole or in part the Secured Obligations secured hereunder. 7. ATTORNEY-IN-FACT. Each Pledgor hereby appoints the Administrative Agent as the Pledgor's attorney-in-fact for the purposes of carrying out the provisions of this Pledge Agreement and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of a Default or an Event of Default. Without limiting the generality of the foregoing, upon the occurrence and during the continuance of a Default or an Event of Default, the Administrative Agent shall have the right and power to receive, endorse and collect all checks and other orders for the payment of money made payable to any Pledgor representing any dividend, interest payment, principal payment or other distribution payable or distributable in respect to the Collateral or any part thereof and to give full discharge for the same. 8. REINSTATEMENT. The granting of a security interest in the Collateral and the other provisions hereof shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party or is repaid by any Secured Party in whole or in part in good faith settlement of a pending or threatened avoidance claim, whether upon the insolvency, bankruptcy or reorganization of any Pledgor or any other Credit Party or otherwise, all as though such payment had not been made. The provisions of this Section 8 shall survive repayment of all of the Secured Obligations and the termination or expiration of this Pledge Agreement in any manner, including but not limited to termination upon occurrence of the Facility Termination Date. For purposes of this Pledge Agreement, "Facility Termination Date" means the date as of which all of the following shall have occurred: (a) the Borrower shall have permanently terminated the credit facilities under the Loan Documents by final payment in full of all Outstanding Amounts, together with all accrued and unpaid interest and fees thereon, other than (i) the undrawn portion of Letters of Credit and (ii) all letter of credit fees relating thereto accruing after such date (which fees shall be payable solely for the account of the Issuing Bank and shall be computed (based on interest rates then in effect) on such undrawn amounts to the respective expiry dates of the Letters of Credit), in each case as have been fully Cash Collateralized or as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made; (b) all Related Swap Contracts shall have been terminated, expired or Cash Collateralized; (c) all Commitments shall have terminated or expired; and (d) the Borrower 8 shall have fully, finally and irrevocably paid and satisfied in full all other Obligations (except for Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Loan Party that may be owing to any Agent-Related Person or any Lender pursuant to the Loan Documents and expressly survive termination of this Pledge Agreement). 9. WAIVER BY THE PLEDGORS. Each Pledgor waives to the extent permitted by applicable law (a) any right to require any Secured Party or any other obligee of the Secured Obligations to (i) proceed against any Person or entity, including without limitation any Credit Party, (ii) proceed against or exhaust any Collateral or other collateral for the Secured Obligations, or (iii) pursue any other remedy in its power; (b) any defense arising by reason of any disability or other defense of any other Person, or by reason of the cessation from any cause whatsoever of the liability of any other Person or entity, (c) any right of subrogation, (d) any right to enforce any remedy which any Secured Party or any other obligee of the Secured Obligations now has or may hereafter have against any other Person and any benefit of and any right to participate in any collateral or security whatsoever now or hereafter held by the Administrative Agent for the benefit of the Secured Parties. Each Pledgor authorizes each Secured Party and each other obligee of the Secured Obligations without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Loan Documents from time to time to: (x) take and hold security that may be granted to it, other than the Collateral herein described, for the payment of such Secured Obligations or any part thereof, and exchange, enforce, waive and release the Collateral herein described or any part thereof or any such other security; and (y) after the occurrence and during the continuance of an Event of Default, apply such Collateral or other security and direct the order or manner of sale thereof as such Secured Party or obligee in its discretion may determine. The Administrative Agent may at any time deliver (without representation, recourse or warranty) the Collateral or any part thereof to a Pledgor and the receipt thereof by such Pledgor shall be a complete and full acquittance for the Collateral so delivered, and the Administrative Agent shall thereafter be discharged from any liability or responsibility therefor. 10. DIVIDENDS AND VOTING RIGHTS. (a) All dividends and other distributions with respect to any of the Pledged Interests shall be subject to the pledge hereunder, provided, however, that cash dividends paid to a Pledgor as record owner of the Pledged Interests, to the extent permitted by the Credit Agreement to be declared and paid, may be retained by such Pledgor so long as no Default or Event of Default shall have occurred and be continuing, free from any Liens hereunder. (b) So long as no Default or Event of Default shall have occurred and be continuing, the registration of the Collateral in the name of a Pledgor as record and beneficial owner shall not be changed and such Pledgor shall be entitled to exercise all voting and other rights and powers pertaining to the Collateral for all purposes not inconsistent with the terms hereof. (c) Upon the occurrence and during the continuance of any Default or Event of Default, all rights of the Pledgors to receive and retain cash dividends and other 9 distributions upon the Collateral pursuant to subsection (a) above shall cease and shall thereupon be vested in the Administrative Agent for the benefit of the Secured Parties, and each Pledgor shall promptly deliver, or shall cause to be promptly delivered, all such cash dividends and other distributions with respect to the Pledged Interests to the Administrative Agent (together, if the Administrative Agent shall request, with the documents described in Sections 1(c) and 2(c) hereof or other negotiable documents or instruments so distributed) to be held by it hereunder or, at the option of the Administrative Agent, to be applied to the Secured Obligations. Pending delivery to the Administrative Agent of such property, each Pledgor shall keep such property segregated from its other property and shall be deemed to hold the same in trust for the benefit of the Secured Parties. (d) Upon the occurrence and during the continuance of any Default or Event of Default, at the option of the Administrative Agent, all rights of each of the Pledgors to exercise the voting or consensual rights and powers which it is authorized to exercise pursuant to subsection (b) above shall cease and the Administrative Agent may (but shall not be obligated to), at its written request, cause such Collateral to be registered in the name of the Administrative Agent or its nominee or agent for the benefit of the Secured Parties and/or exercise such voting or consensual rights and powers as appertain to ownership of such Collateral, and to that end each Pledgor hereby appoints the Administrative Agent as its proxy, with full power of substitution, to vote and exercise all other rights as a shareholder with respect to such Pledged Interests hereunder upon the occurrence and during the continuance of any Default or Event of Default, which proxy is coupled with an interest and is irrevocable until the Facility Termination Date, and each Pledgor hereby agrees to provide such further proxies as the Administrative Agent may request; provided, however, that the Administrative Agent in its discretion may from time to time refrain from exercising, and shall not be obligated to exercise, any such voting or consensual rights or such proxy. 11. CONTINUED POWERS. Until the Facility Termination Date shall have occurred, the power of sale and other rights, powers and remedies granted to the Administrative Agent for the benefit of the Secured Parties hereunder shall continue to exist and may be exercised by the Administrative Agent at any time and from time to time irrespective of the fact that any of the Secured Obligations or any part thereof may have become barred by any statute of limitations or that any part of the liability of any Pledgor may have ceased. 12. OTHER RIGHTS. The rights, powers and remedies given to the Administrative Agent for the benefit of the Secured Parties by this Pledge Agreement shall be in addition to all rights, powers and remedies given to the Administrative Agent or any Secured Party under any Related Agreement or by virtue of any statute or rule of law. Any forbearance or failure or delay by the Administrative Agent in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of the Secured Parties shall continue in full force and effect until such right, power or remedy is specifically waived in accordance with the terms of the Credit Agreement. 10 13. ANTI-MARSHALING PROVISIONS. The right is hereby given by each Pledgor to the Administrative Agent, for the benefit of the Secured Parties, to make releases (whether in whole or in part) of all or any part of the Collateral agreeable to the Administrative Agent without notice to, or the consent, approval or agreement of other parties and interests, including junior lienors, which releases shall not impair in any manner the validity of or priority of the Liens and security interests in the remaining Collateral conferred hereunder, nor release any Pledgor from personal liability for the Secured Obligations. Notwithstanding the existence of any other security interest in the Collateral held by the Administrative Agent, for the benefit of the Secured Parties, the Administrative Agent shall have the right to determine the order in which any or all of the Collateral shall be subjected to the remedies provided in this Pledge Agreement. Each Pledgor hereby waives any and all right to require the marshaling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein or in any Related Agreement. 14. ENTIRE AGREEMENT. This Pledge Agreement and each Pledge Joinder Agreement, together with the Credit Agreement and other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and understandings, inducements, commitments or conditions, express or implied, oral or written, except as herein contained. The express terms hereof and of the Pledge Joinder Agreements control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof and thereof. Neither this Pledge Agreement nor any Pledge Joinder Agreement nor any portion or provision hereof or thereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement. 15. FURTHER ASSURANCES. Each Pledgor agrees at its own expense to do such further acts and things, and to execute and deliver, and cause to be executed and delivered as may be reasonably necessary or advisable to give effect thereto, such additional conveyances, assignments, financing statements, control agreements, documents, certificates, stock powers, agreements and instruments, as the Administrative Agent may at any time reasonably request in connection with the administration or enforcement of this Pledge Agreement or any Pledge Joinder Agreement or related to the Collateral or any part thereof or in order better to assure and confirm unto the Administrative Agent its rights, powers and remedies for the benefit of the Secured Parties hereunder or thereunder. Each Pledgor hereby consents and agrees that the Pledged Subsidiaries and all other Persons, shall be entitled to accept the provisions hereof and of the Pledge Joinder Agreements as conclusive evidence of the right of the Administrative Agent, on behalf of the Secured Parties, to exercise its rights, privileges, and remedies hereunder or thereunder with respect to the Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any Pledgor or any other Person to any of such Pledged Subsidiaries or Registrars or other Persons. 16. BINDING AGREEMENT; ASSIGNMENT. This Pledge Agreement and each Pledge Joinder Agreement, and the terms, covenants and conditions hereof and thereof, shall be binding upon and inure to the benefit of the parties hereto, and to their respective successors and assigns, except that no Pledgor shall be permitted to assign this Pledge Agreement, any Pledge Joinder Agreement or any interest herein or therein or in the Collateral, or any part thereof or interest therein, or otherwise pledge, encumber or grant any option with respect to the Collateral, or any 11 part thereof, or any cash or property held by the Administrative Agent as Collateral under this Pledge Agreement. Without limiting the generality of the foregoing sentence of this Section 16, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.07 thereof (concerning assignments and participations). All references herein to the Administrative Agent and to the Secured Parties shall include any successor thereof or permitted assignee, and any other obligees from time to time of the Secured Obligations. 17. RELATED SWAP CONTRACTS. All obligations of each Pledgor under or in respect of Related Swap Contracts (which are not prohibited under the terms of the Credit Agreement) to which any Lender or any Affiliate of any Lender is a party, shall be deemed to be Secured Obligations secured hereby, and each Lender or Affiliate of a Lender party to any such Related Swap Contract shall be deemed to be a Secured Party hereunder with respect to such Secured Obligations; provided, however, that such obligations shall cease to be Secured Obligations at such time as such Person (or Affiliate of such Person) shall cease to be a "Lender" under the Credit Agreement. No Person who obtains the benefit of any Lien by virtue of the provisions of this Section shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and only to the extent expressly provided in the Loan Documents. 18. SEVERABILITY. The provisions of this Pledge Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this Pledge Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 19. COUNTERPARTS. This Pledge Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Pledge Agreement to produce or account for more than one such counterpart executed by the Pledgor against whom enforcement is sought. Without limiting the foregoing provisions of this Section 19, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this Pledge Agreement. 20. TERMINATION. Subject to the provisions of Section 8, this Pledge Agreement and each Pledge Joinder Agreement, and all obligations of the Pledgors hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party on the Facility Termination Date. Upon such termination of this Pledge Agreement, the Administrative Agent shall, at the 12 sole expense of the Pledgors, promptly deliver to the Pledgors the certificates evidencing its shares of Pledged Interests (and any other property received as a dividend or distribution or otherwise in respect of such Pledged Interests to the extent then held by the Administrative Agent as additional Collateral hereunder), together with any cash then constituting the Collateral not then sold or otherwise disposed of in accordance with the provisions hereof, and take such further actions at the request of the Pledgors as may be necessary to effect the same. 21. ADDITIONAL INTERESTS. If any Pledgor shall at any time acquire or hold any additional Pledged Interests, including any Pledged Interests issued by any Subsidiary not listed on Schedule I hereto which are required to be subject to a Lien pursuant to a Pledge Agreement by the terms hereof or of Article IIA or any other provision of the Credit Agreement (any such shares being referred to herein as the "Additional Interests"), such Pledgor shall deliver to the Administrative Agent for the benefit of the Secured Parties (i) a Pledge Agreement Supplement in the form of Exhibit A hereto with respect to such Additional Interests duly completed and executed by such Pledgor and (iii) any other document required in connection with such Additional Interests as described in Section 2(c). Each Pledgor shall comply with the requirements of this Section 21 concurrently with the acquisition of any such Additional Interests or, in the case of Additional Interests to which Section 6.14 of the Credit Agreement applies, within the time period specified in Article IIA, Section 6.14 or elsewhere in the Credit Agreement with respect to such Additional Interests; provided, however, that the failure to comply with the provisions of this Section 21 shall not impair the Lien on Additional Interests conferred hereunder. 22. NOTICES. Any notice required or permitted hereunder shall be given (a) with respect to the Borrower, at the address of the Borrower indicated in Section 13.2 of the Credit Agreement, (b) with respect to each Subsidiary which is a Pledgor hereunder, at the address then in effect for the giving of notices to such Subsidiary under the Facility Guaranty to which it is a party, and (c) with respect to the Administrative Agent or a Lender, at the Administrative Agent's address indicated in Section 10.02 of the Credit Agreement. All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder. 23. JOINDER. Each Person who shall at any time execute and deliver to the Administrative Agent a Pledge Joinder Agreement substantially in the form attached as Exhibit B hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Pledgor and shall have thereupon pursuant to Section 1 hereof granted a security interest in and collaterally assigned and pledged to the Administrative Agent for the benefit of the Secured Parties all Pledged Interests which it has at its Applicable Date or thereafter acquires any interest or the power to transfer, and all references herein and in the other Loan Documents to the Pledgors or to the parties to this Pledge Agreement shall be deemed to include such Person as a Pledgor hereunder. Each Pledge Joinder Agreement shall be accompanied by the Supplemental Schedules referred to therein, appropriately completed with information relating to the Pledgor executing such Pledge Joinder Agreement and its property. Each of the applicable Schedules attached hereto shall be deemed amended and supplemented without further action by such information reflected on the Supplemental Schedules. 13 24. RULES OF INTERPRETATION. The rules of interpretation contained in Sections 1.02 through 1.05 of the Credit Agreement shall be applicable to this Pledge Agreement and each Pledge Joinder Agreement and are hereby incorporated by reference. All representations and warranties contained herein shall survive the delivery of documents and any extension of credit referred to herein or secured hereby. 25. GOVERNING LAW; WAIVERS. (a) THIS PLEDGE AGREEMENT AND EACH PLEDGE JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE (I) WITH RESPECT TO THOSE INSTANCES IN WHICH THE APPLICABLE CHOICE OF LAWS RULES OF SUCH STATE, INCLUDING SECTION 9-301 OF THE UCC, REQUIRE THAT THE MANNER OF CREATION OF A SECURITY INTEREST IN SPECIFIC COLLATERAL OR THE MANNER OR EFFECT OF PERFECTION OR NONPERFECTION OR THE RULES GOVERNING PRIORITY OR SECURITY INTERESTS ARE TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION, THEN THE LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH MATTERS, AND (II) IN THOSE INSTANCES IN WHICH THE LAWS OF THE JURISDICTION IN WHICH COLLATERAL IS LOCATED GOVERN MATTERS PERTAINING TO THE METHODS AND EFFECT OF REALIZING ON COLLATERAL, SUCH LAWS SHALL BE GIVEN EFFECT WITH RESPECT TO SUCH MATTERS. (b) EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR ANY PLEDGE JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS PLEDGE AGREEMENT OR A PLEDGE JOINDER AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) EACH PLEDGOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PLEDGOR PROVIDED IN SECTION 14 22 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (d) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR ANY PLEDGE JOINDER AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY PLEDGOR OR ANY OF SUCH PLEDGOR'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS PLEDGE AGREEMENT OR ANY PLEDGE JOINDER AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. (f) EACH PLEDGOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. [SIGNATURE PAGES FOLLOW.] 15 IN WITNESS WHEREOF, the parties have duly executed this Pledge Agreement on the day and year first written above. PLEDGORS: ALLTRISTA CORPORATION, a Delaware corporation By: /s/ Desiree DeStefano -------------------------------------- Name: Desiree DeStefano Title: Vice President QUOIN CORPORATION, a Delaware corporation By: /s/ Ian G. H. Asken -------------------------------------- Name: Ian G. H. Asken Title: Treasurer ALLTRISTA NEWCO CORPORATION, an Indiana corporation By: /s/ Desiree DeStefano -------------------------------------- Name: Desiree DeStefano Title: Vice President CASPERS TIN PLATE COMPANY, an Illinois corporation By: /s/ Desiree DeStefano -------------------------------------- Name: Desiree DeStefano Title: Vice President Securities Pledge Agreement Signature Page 1 AGENT: BANK OF AMERICA, N. A., as Administrative Agent for the Lenders By: /s/ Igor Suica ------------------------------------- Name: Igor Suica Title: Vice President Securities Pledge Agreement Signature Page 2 EX-10.6 9 file008.txt ASSET PURCHASE AGREEMENT EXECUTION COPY ================================================================================ ASSET PURCHASE AGREEMENT AMONG TILIA INTERNATIONAL, INC., TILIA, INC., TILIA CANADA, INC., ALEXANDER SCHILLING and ALLTRISTA CORPORATION ------------------------ Dated as of March 27, 2002 ------------------------ ================================================================================ TABLE OF CONTENTS Page RECITALS......................................................................1 SECTION 1. DEFINITIONS.......................................................1 SECTION 2. PURCHASE AND SALE OF THE PURCHASED PROPERTY......................12 SECTION 2.1. Transfer of Assets.......................................12 SECTION 2.2. Sale at Closing Date.....................................12 SECTION 2.3. Subsequent Documentation.................................12 SECTION 2.4. Assumed Liabilities......................................12 SECTION 2.5. Excluded Liabilities.....................................13 SECTION 3. PURCHASE PRICE...................................................13 SECTION 3.1. Purchase Price...........................................13 SECTION 3.2. Contingent Consideration.................................14 SECTION 3.3. Payment of Purchase Price................................18 SECTION 4. CLOSING..........................................................18 SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS....................18 SECTION 5.1. Corporate Organization; Subsidiaries.....................19 SECTION 5.2. Qualification to Do Business.............................19 SECTION 5.3. Authorization and Validity of Agreement..................19 SECTION 5.4. No Conflict or Violation.................................19 SECTION 5.5. Consents and Approvals...................................20 SECTION 5.6. Financial Statements.....................................20 SECTION 5.7. Absence of Certain Changes or Events.....................20 SECTION 5.8. Tax Matters..............................................22 SECTION 5.9. Absence of Undisclosed Liabilities.......................22 SECTION 5.10. Leased Property..........................................23 SECTION 5.11. Intellectual Property....................................24 SECTION 5.12. Licenses, Permits and Governmental Approvals.............26 SECTION 5.13. Compliance with Law......................................26 SECTION 5.14. Litigation...............................................27 SECTION 5.15. Assigned Contracts.......................................27 SECTION 5.16. Receivables..............................................27 SECTION 5.17. Inventory................................................27 SECTION 5.18. Product Liability; Warranty..............................28 SECTION 5.19. Product Recalls..........................................28 SECTION 5.20. Customers, Suppliers and Competitors.....................28 SECTION 5.21. Employee Benefits........................................28 SECTION 5.22. Labor Matters............................................31 SECTION 5.23. [Intentionally Omitted]..................................31 SECTION 5.24. Ownership of Purchased Property..........................31 SECTION 5.25. Condition of Purchased Property..........................31 i SECTION 5.26. Environmental Matters....................................31 SECTION 5.27. Transactions with Directors, Officers and Affiliates....32 SECTION 5.28. Ownership of Shares......................................32 SECTION 5.29. Foreign Corrupt Practices Act............................33 SECTION 5.30. Insurance Policies.......................................33 SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER......................33 SECTION 6.1. Corporate Organization...................................33 SECTION 6.2. Authorization and Validity of Agreement..................33 SECTION 6.3. No Conflict or Violation.................................34 SECTION 6.4. Approvals and Consents...................................34 SECTION 6.5. Delivery of the Shares...................................34 SECTION 6.6. SEC Filings; Financial Statements........................35 SECTION 7. COVENANTS OF THE SELLERS.........................................35 SECTION 7.1. Conduct of Business Before the Closing Date..............35 SECTION 7.2. Consents and Approvals...................................37 SECTION 7.3. Access to Properties and Records.........................37 SECTION 7.4. Negotiations.............................................38 SECTION 7.5. Best Efforts.............................................38 SECTION 7.6. Covenant Not To Compete..................................38 SECTION 7.7. Notice of Breach.........................................39 SECTION 7.8. Bulk Sales Compliance....................................39 SECTION 7.9. Assignment of Contracts and Warranties...................39 SECTION 7.10. Change of Name; Intellectual Property....................39 SECTION 7.11. Estoppel Certificates....................................40 SECTION 7.12. Monthly Financials.......................................40 SECTION 7.13. Assistance...............................................40 SECTION 7.14. Audited Financial Statements.............................40 SECTION 7.15. Liquidation of Tilia Hungary.............................40 SECTION 7.16. Tilia Shareholder Approval...............................41 SECTION 7.17. Tax Matters..............................................41 SECTION 8. COVENANTS OF THE BUYER...........................................41 SECTION 8.1. Consents and Approvals...................................41 SECTION 8.2. Access to Tax Records....................................41 SECTION 8.3. Notice of Breach.........................................41 SECTION 8.4. Operations of Business Post Close........................41 SECTION 8.5. Best Efforts.............................................42 SECTION 9. EMPLOYEES........................................................42 SECTION 9.1. Offer of Employment......................................42 SECTION 9.2. Liability................................................42 SECTION 9.3. Rights...................................................43 SECTION 9.4. Employee Benefits Arrangements...........................43 SECTION 10. HSR ACT; GOVERNMENTAL APPROVALS..................................44 ii SECTION 11. CONDITIONS TO OBLIGATIONS OF THE SELLERS.........................44 SECTION 11.1. Representations and Warranties of the Buyer..............44 SECTION 11.2. Performance of the Obligations of the Buyer..............45 SECTION 11.3. No Violation of Orders...................................45 SECTION 11.4. HSR Act; No Governmental Restraints......................45 SECTION 11.5. Consents and Approvals...................................45 SECTION 11.6. Liquidation of Tilia Hungary.............................45 SECTION 11.7. Buyer Closing Documents..................................45 SECTION 11.8. Legal Matters............................................46 SECTION 12. CONDITIONS TO OBLIGATIONS OF THE BUYER...........................46 SECTION 12.1. Representations and Warranties of the Sellers............46 SECTION 12.2. Performance of the Obligations of the Sellers............46 SECTION 12.3. Consents and Approvals...................................46 SECTION 12.4. No Violation of Orders...................................46 SECTION 12.5. Seller Closing Documents.................................47 SECTION 12.6. Legal Matters............................................48 SECTION 12.7. Employment Agreements....................................48 SECTION 12.8. HSR Act; No Governmental Restraints......................48 SECTION 12.9. Business EBITDA..........................................48 SECTION 12.10. Liquidation of Tilia Hungary.............................48 SECTION 12.11. Financing................................................48 SECTION 12.12. Accounts.................................................48 SECTION 12.13. Shareholder Approval.....................................48 SECTION 13. INDEMNIFICATION..................................................48 SECTION 13.1. Indemnification by the Sellers...........................49 SECTION 13.2. Procedures for Indemnification by the Sellers............49 SECTION 13.3. Indemnification by the Buyer.............................52 SECTION 13.4. Procedures for Indemnification by the Buyer..............53 SECTION 13.5. Survival.................................................54 SECTION 13.6. Insurance; Limitation on Indemnity.......................54 SECTION 13.7. Successors and Assigns...................................55 SECTION 13.8. Purchase Price Adjustment................................55 SECTION 13.9. Sellers' Representative..................................55 SECTION 13.10. Sole Remedy..............................................56 SECTION 14. TERMINATION......................................................56 SECTION 14.1. Conditions of Termination................................56 SECTION 14.2. Fees for Termination.....................................57 SECTION 14.3. Effect of Termination....................................57 SECTION 15. PURCHASE PRICE ALLOCATION........................................57 SECTION 16. MISCELLANEOUS....................................................57 SECTION 16.1. Successors and Assigns...................................57 SECTION 16.2. Governing Law; Jurisdiction..............................58 iii SECTION 16.3. Expenses.................................................58 SECTION 16.4. Broker's and Finder's Fees...............................58 SECTION 16.5. Severability.............................................58 SECTION 16.6. Notices..................................................58 SECTION 16.7. Amendments; Waivers......................................60 SECTION 16.8. Public Announcements.....................................60 SECTION 16.9. Right of Setoff..........................................60 SECTION 16.10. Entire Agreement.........................................60 SECTION 16.11. Parties in Interest......................................60 SECTION 16.12. Scheduled Disclosures....................................61 SECTION 16.13. Section and Paragraph Headings...........................61 SECTION 16.14. Counterparts.............................................61 Exhibits: Exhibit A Assignment and Assumption Agreement Exhibit B-1 Form of Sellers' Escrow Agreement Exhibit B-2 Form of Long Term Escrow Agreement Exhibit C-1 List of Persons executing Guarantee Agreement Exhibit C-2 List of shareholders executing Indemnity Agreement Exhibit D-1 Form of Short Term Promissory Note Exhibit D-2 Form of Long Term Promissory Note Exhibit E Form of Patent Assignment Agreement Exhibit F Form of Trademark Assignment Agreement Exhibit G Trademarks Exhibit H Form of Domain Name Assignment Agreement Exhibit I Form of Non-Competition Agreement Exhibit J Persons with Knowledge Exhibit K Budgeted Business EBITDA Index To Schedules: 1-A Affiliate Transactions 2.4 Assumed Liabilities 2.5 Excluded Liabilities 2.5(v) Liabilities of Shareholders 25(vii) Other Excluded Liabilities 3.1 Allowed Distributions 3.3 Payment of Purchase Price Instructions 5.1 Subsidiaries 5.2 Qualification 5.4 No Conflict or Violation 5.5 Consents, Waivers, Authorizations and Approvals 5.7 Material Changes or Events 5.8 Tax Matter Exceptions 5.9 Undisclosed Liabilities iv 5.10(a) Leased Property 5.10(b) Lease Consents 5.10(c) Zoning 5.10(d) Insurance Notices 5.10(e) Eminent Domain 5.11(c) Intellectual Property 5.11(d) Agreements relating to Intellectual Property 5.12 Licenses, Permits and Governmental Approvals 5.13 Exceptions to Compliance with Law 5.14 Litigation 5.15 Assigned Contracts 5.16 Accounts Receivable 5.18(a) Product Liability 5.19 Product Recalls 5.20 Customers, Suppliers and Competitors 5.21(a) Employee Benefit Plans 5.21(i) Maintenance of Plans 5.21(k) Additional Obligations to Employee 5.21(l) Sellers' Equity as Part of Employee Benefit Plan 5.22 Labor Matters 5.27 Affiliate Transactions 5.30 Summary of Insurance Policies 6.4 Approvals and Consents 7.1 Operations of Business 7.6 List of persons executing Non-Competition Agreements 8.4 Management 9.1 Listed Employees 12.7 List of persons executing Employment Agreements 12.9 Employment Agreements 15 Allocations v ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT, dated as of March 27, 2002 among Tilia International, Inc., a Cook Islands corporation ("TILIA"), Tilia, Inc., a California corporation ("TILIA U.S.") and Tilia Canada, Inc., a corporation organized under the Canada Business Corporation Act ("TILIA CANADA") (Tilia, Tilia U.S. and Tilia Canada are collectively referred to herein as the "SELLERS", and each individually, a "SELLER"), Alexander Schilling (the "SELLERS' REPRESENTATIVE") and Alltrista Corporation, a Delaware corporation (the "BUYER"). W I T N E S S E T H: WHEREAS, the Sellers are engaged in the business of contracting for the manufacture and the marketing and sale of vacuum packaging, food preservation and food processing systems for household use, including systems sold under the FOODSAVER brand name; and WHEREAS, the Buyer desires to purchase substantially all of the assets of the Sellers' Business (as defined below), and the Sellers desire to sell such assets to the Buyer, in each case upon the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements hereinafter contained, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS. As used in this Agreement (including the recitals and Schedules hereto), the following terms shall have the following meanings (such meanings to be applicable equally to both singular and plural forms of the terms defined): "ACCOUNTS RECEIVABLE" shall mean all accounts and notes receivable (including without limitation amounts due from vendors whether recorded as accounts receivable or reductions in accounts payable) relating to the Business, other than accounts and notes receivable and unpaid interest thereon by one or more of the Sellers solely from one or more of the Sellers; "ACQUIRED LEASES" shall have the meaning set forth in Section 5.10(a) hereof; "AFFILIATE" shall mean, 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" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of the 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) of such Person; "AGREED ALLOCATION" shall have the meaning set forth in Section 15 hereof; "ALLOWED DISTRIBUTIONS" shall mean any amount paid by the Sellers for the repurchase of shares from employees, officers, directors, consultants or other service providers, pursuant to agreements listed on Schedule 3.1 hereto or pursuant to any other repurchase agreement in form and substance reasonably satisfactory to the Buyer; "ARBITRATING ACCOUNTANT" shall have the meaning set forth in Section 3.2(b) hereof; "ASSIGNED CONTRACTS" shall mean all leases, subleases, occupancy agreements, contracts, licenses and other agreements, whether written or oral, in respect of the Business, to which any Seller or any Affiliate of any Seller is a party or may be bound or receive benefits or by which the Purchased Property may be affected or receive benefits, including, without limitation, manufacturing and supply orders, distributorship agreements, software licenses and all other agreements primarily used by, pertaining or relating to the Business and all claims arising thereunder at any time, including, without limitation, all third-party representations and warranties that are related to the Purchased Property and any rights of the Sellers under express or implied warranties and licenses received from manufacturers and sellers of the aforesaid items, other than (i) the Howard Street Lease; and (ii) the Infomercial Agreements; "ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Bill of Sale, Assignment and Assumption Agreement to be executed at Closing to effect the transfer of the Purchased Property (except to the extent any portion of the Purchased Property is transferred pursuant to a Trademark Assignment Agreement, Patent Assignment Agreement or Domain Name Assignment Agreement) and the assumption of the Assumed Liabilities, in substantially the form attached hereto as EXHIBIT A; "ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.4 hereof; "AVERAGE ANNUAL BUSINESS EBITDA" shall have the meaning set forth in Section 3.2(e) hereof; "BUSINESS" shall mean the business and operations of the Sellers; "BUSINESS DAY" shall mean days other than Saturdays, Sundays and other legal holidays or days on which the principal office of Bank of America is closed; "BUSINESS EBITDA" shall have the meaning set forth in Section 3.2(e) hereof; "BUSINESS LOCATIONS" shall have the meaning set forth in Section 5.10(a) hereof; "BUYER" shall have the meaning set forth in the Preamble hereto; "BUYER COMMON STOCK" shall have the meaning set forth in Section 3.2(f) hereof; "BUYER EVENTS OF BREACH" shall have the meaning set forth in Section 13.3 hereof; "BUYER INDEMNITEES" shall have the meaning set forth in Section 13.1 hereof; 2 "BUYER LOSSES" shall have the meaning set forth in Section 13.1 hereof; "BUYER REGISTRATION STATEMENT" shall have the meaning set forth in Section 3.2(f) hereof; "BUYER RIGHTS AGREEMENT" shall mean that certain Rights Agreement, dated as of March 22, 1993, as amended and restated as of May 7, 1999 and as further amended as of July 19, 2001 and December 14, 2001 (the "Agreement"), between the Buyer and EquiServe Trust Company, N.A., a national banking association; "BUYER TERMINATION LIABILITIES" shall mean liabilities and obligations of the Sellers, including, without limitation, cash severance obligations and liability for wrongful termination, resulting from the termination of employment with the Sellers of any Listed Employee to whom the Buyer does not make an offer of employment pursuant to Section 9.1 hereof; "CAPITAL STOCK" shall mean (a) in the case of a corporation, all classes of capital stock of such corporation, (b) in the case of a partnership, partnership interests (whether general or limited), (c) in the case of a limited liability company, membership interests and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person; "CASH AND CASH EQUIVALENTS" shall mean cash, currency, checks and drafts received, certificates of deposit, notes, commercial paper, checking, deposit and money market accounts, treasury securities and any other cash equivalents of the types described in the December Balance Sheet or otherwise; "CASH PAYMENT ELECTION" shall have the meaning set forth in Section 3.2(f) hereof; "CLOSING" shall have the meaning set forth in Section 4 hereof; "CLOSING DATE" shall have the meaning set forth in Section 4 hereof; "CODE" shall mean the Internal Revenue Code of 1986, as amended; "CONTINGENT CONSIDERATION" shall have the meaning set forth in Section 3.1 hereof; "DECEMBER BALANCE SHEET" shall have the meaning set forth in Section 5.6 hereof; "DETERMINATION PERIOD" shall have the meaning set forth in Section 3.2(f) hereof; "DISPUTE" shall have the meaning set forth in Section 3.2(a) hereof; "DISPUTE NOTICE" shall have the meaning set forth in Section 3.2(a) hereof; 3 "DISPUTE PERIOD" shall have the meaning set forth in Section 3.2(a) hereof; "DOMAIN NAMES" shall have the meaning set forth in Section 5.11(a) hereof; "DOMAIN NAME ASSIGNMENT AGREEMENT" shall mean the agreement, substantially in the form attached hereto as EXHIBIT H, pursuant to which the Sellers will, on the Closing Date, sell and assign all of its right, title and interest in and to the Domain Names to the Buyer; "EARN-OUT PERIOD" shall have the meaning set forth in Section 3.2(a) hereof; "EARN-OUT STATEMENT" shall have the meaning set forth in Section 3.2(a) hereof; "EMPLOYEE BENEFIT PLAN" means an Employee Pension Benefit Plan or an Employee Welfare Benefit Plan, where no distinction is required by the context in which the term is used; "EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in Section 3(2) of ERISA and shall include comparable arrangements offered to Employees outside of the United States; "EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in Section 3(1) of ERISA and shall include comparable arrangements offered to Employees outside of the United States; "EMPLOYEES" means each individual who, on the applicable date, performs services as an employee primarily for any of the Sellers (including such persons who are on an approved leave of absence, vacation, short-term disability or otherwise treated as an active employee of the Sellers); "EMPLOYMENT AGREEMENTS" means the employment agreements to be entered into between the Buyer and each of the persons listed on Schedule 12.7 of this Agreement; "ENVIRONMENTAL LAWS" shall have the meaning set forth in Section 5.26 hereof; "EQUIPMENT AND MACHINERY" shall mean (i) all the equipment, machinery, furniture, fixtures and improvements owned by the Sellers and Affiliates of the Sellers used in connection with the Business, wherever located (including, without limitation, all such items reflected on the December Balance Sheet with additions thereto, net of dispositions of obsolete items, in the ordinary course of business), (ii) all the replacements for any of the foregoing owned by the Sellers and Affiliates of the Sellers, (iii) any rights of the Sellers and Affiliates of the Sellers under express or implied warranties and licenses received from manufacturers and sellers of the aforesaid items and (iv) any related claims, credits, rights of recovery and set-off with respect thereto; "ERISA" shall mean Employee Retirement Income Security Act of 1974, as amended; 4 "ERISA AFFILIATE" shall have the meaning set forth in Section 5.21(a) hereof; "ESCROW AGENT" shall have the meaning set forth in the Escrow Agreement; "ESCROW AGREEMENTS" shall mean, together, the Sellers' Escrow Agreement and the Long Term Escrow Agreement; "ESCROWED AMOUNT" shall have the meaning set forth in Section 3.1 hereof; "EXCLUDED EXPENSES" shall mean the following expenses: (i) expenses associated with any new ventures by the division outside of the operations of the Business which are proposed by the Buyer and are in excess of $750,000 for any Earn-Out Period, provided, however, that Business EBITDA shall include any income generated from such ventures; (ii) the Buyer's and any of its Affiliates' general corporate overhead and administrative expenses, other than those directly related to the division operating the Business; (iii) nonrecurring business activities, not expected to generate revenues in subsequent fiscal periods, mutually approved by the Sellers' Representative and Buyer as nonrecurring expenses and agreed upon in writing as appropriate exclusions; (iv) any compensation expenses relating to the issuance, conversion, cancellation and payments with respect to options or stock; (v) direct and indirect costs (including time and travel expenses) incurred by the division operating the Business in working with Buyer's corporate office on matters not directly pertaining to the Business, and (vi) other expenses allocated to the division operating the Business agreed to by the Buyer and the Sellers' Representative. "EXCLUDED LIABILITIES" shall have the meaning set forth in Section 2.5 hereof; "FAMILY MEMBER" shall mean with respect to any individual any member of such individual's "immediate family" as such term is defined in Rule 16a-1(e) under the Securities Exchange Act of 1934, as amended; "FILES AND RECORDS" shall mean all files and records, whether in hard copy or magnetic or other format, of the Sellers specifically relating to the Business or the Purchased Property or of any Affiliate of any of the Sellers used in the Business, including, without limitation, the following types of files and records specifically relating to or used in the Business: customer and supplier files, equipment maintenance records, equipment warranty information, manufacturer specifications and drawings and customer specifications and all files relating to Hired Employees, correspondence with federal, state and local governmental agencies relating to the operation of the Business, all telephone numbers, fax numbers, Internet addresses and similar numbers or addresses, leases, correspondence and lease files and specifically excluding any corporate income tax returns, corporate books and records including, without limitation, shareholder and director consents and minutes; "FINANCIAL STATEMENTS" shall have the meaning set forth in Section 5.6 hereof; "FINANCING MATTERS" shall have the meaning set forth in Section 7.16 hereof; "GAAP" shall mean United States generally accepted accounting principles as in effect on the date on which the document or calculation to which it refers relates, applied on a 5 consistent basis throughout the periods covered thereby; provided, however, for Section 3.2 "GAAP" shall mean United States generally accepted accounting principles as in effect on the date hereof; "GOVERNMENT" shall mean any agency, division, subdivision, audit group or procuring office of the Government of the United States, any state of the United States or any foreign government, including the employees or agents thereof; "GUARANTEE AGREEMENT" shall mean the guarantee agreement executed by the Person listed on EXHIBIT C-1 and appended hereto; "HAZARDOUS MATERIALS" shall have the meaning set forth in Section 5.26 hereof; "HIRED EMPLOYEES" shall have the meaning set forth in Section 9.1 hereof; "HOWARD STREET LEASE" shall mean the Office Lease dated March 12, 1994 by and between Invesmaster Corporation and Tilia U.S. for the property located at 568 Howard Street, San Francisco and the Office Lease Extension dated April 1, 1997 with respect thereto and the related Basic Lease Information for the 2nd floor premises for the term of April 1, 1998 through July 1, 2002, Basic Lease Information for the 3rd floor premises for the term of August 1, 1998 through July 31, 2002 and Basic Lease Information for the Basement for the term of June 15, 2000 through July 31, 2002; "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder; "HSR FEE" means the fee paid by the Buyer in connection with any filing under the HSR Act in connection with the transaction contemplated by this Agreement; "INDEMNITY AGREEMENTS" shall mean the indemnity agreements to be executed by the shareholders listed on EXHIBIT C-2 and appended hereto; "INFOMERCIAL AGREEMENTS" shall mean the infomercial agreements related to the FOODSAVER product as set forth on Schedule 2.5 hereto; "INTANGIBLE PROPERTY" shall mean all intangible personal property rights of the Sellers in connection with the Business or of any Affiliate of the Sellers used in the Business, including, without limitation, all rights on the part of the Sellers and Affiliates of the Sellers to proceeds of any insurance policies held by the Sellers and all claims on the part of the Sellers and Affiliates of the Sellers for recoupment, reimbursement and coverage under any insurance policies held by the Sellers, in each case in connection with the Business and all goodwill of the Sellers and Affiliates of the Sellers in connection with the Business; "INTELLECTUAL PROPERTY" shall have the meaning set forth in Section 5.11 hereof; "INVENTORY" shall mean (i) all the finished goods, raw materials, work in progress and inventoriable supplies relating to the Business (including, without limitation, all such items as reflected in the December Balance Sheet with additions thereto and subtractions therefrom in 6 the ordinary course of business) specifically for use in the operations of the Business and (ii) any and all rights to the warranties received from suppliers of the Business with respect to the foregoing and any and all related claims, credits, rights of recovery and set-off with respect thereto; "KNOWLEDGE OF THE SELLERS" shall mean, with respect to any matter, the actual knowledge of any of the persons listed on EXHIBIT J; "LIEN" shall mean any mortgage, pledge, security interest, encumbrance, lien (statutory or other) or conditional sale agreement; provided, however, that the term "Lien" shall not include (i) statutory liens for Taxes to the extent that the payment thereof is not in arrears or otherwise due and payable; (ii) encumbrances in the nature of zoning restrictions, easements, rights or restrictions of record on the uses of real property if the same do not impair the use of such property in the Business as currently conducted; (iii) statutory or common law liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented to the extent that no payment or performance under any such lease or rental agreement is in arrears or is otherwise due; (iv) deposits or pledges made in connection with, or to secure payment of, worker's compensation, unemployment insurance, old age pension programs mandated under applicable laws or other social security regulations and (v) statutory common law liens in favor of carriers, warehousemen, mechanics, materialmen, and subcontractors statutory or common law liens to secure claims for labor, materials or supplies and other like liens, which secure obligations to the extent that payment thereof is not in arrears or otherwise due; and in the case all such liens and other matters described in clauses (i) - (v), which have been incurred in the ordinary course of business and which are not individually, or in the aggregate, material to the Business. "LISTED EMPLOYEE" shall have the meaning set forth in Section 9.1 hereof; "LISTED INTELLECTUAL PROPERTY" shall have the meaning set forth in Section 5.11(c) hereof; "LONG TERM ESCROW AGREEMENT" shall mean the escrow agreement substantially in the form attached hereto as EXHIBIT B-2, to be entered into by Tilia, the Buyer, the Sellers' Representative and either Bank of New York or JP Morgan/Chase, as mutually agreed; "LONG TERM ESCROWED AMOUNT" shall have the meaning set forth in Section 3.1(a)(ii) hereof; "LONG TERM NOTE" shall mean that certain promissory note to be executed by the Buyer in favor of Tilia, substantially in the form of EXHIBIT D-2 hereto; "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 5.21(b) hereof; "NET INCOME" shall mean, for any period, net income as determined in accordance with GAAP in a manner consistent with the Sellers' past practices as reflected in the Financial Statements; 7 "NON-COMPETITION AGREEMENTS" means the non-competition agreements, substantially in the form attached hereto as EXHIBIT I, between the Buyer and the persons listed on Schedule 7.6 of this Agreement; "NOTES" shall mean, together, the Short Term Note and Long Term Note; "OBSOLETE INVENTORY" shall have the meaning set forth in Section 5.17 hereof; "OCCURRENCE" shall have the meaning set forth in Section 5.18(b) hereof; "PATENT ASSIGNMENT AGREEMENT" means the agreement, substantially in the form attached hereto as EXHIBIT E, pursuant to which the Sellers will, on the Closing Date, sell and assign all of their right, title and interest in and to the Patents to the Buyer; "PATENTS" shall have the meaning set forth in Section 5.11(a) hereof; "PERMITS" shall have the meaning set forth in Section 5.12 hereof; "PERSON" shall mean and include any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, any other unincorporated organization or Government; "PREFERRED STOCK" shall have the meaning set forth in Section 6.5(b) hereof; "PROCEEDING" shall have the meaning set forth in Section 13.2 hereof; "PRODUCT" shall have the meaning set forth in Section 5.18(a) hereof; "PURCHASE PRICE" shall have the meaning set forth in Section 3.1 hereof; "PURCHASED PROPERTY" means: (i) the Inventory; (ii) the Equipment and Machinery; (iii) the Assigned Contracts; (iv) the Accounts Receivable; (v) Cash and Cash Equivalents, excluding (i) any Cash and Cash Equivalents received by the Sellers pursuant to Section 3 hereof, (ii) any Cash received by the Sellers pursuant to the exercise of any options to purchase shares of common stock of Tilia after February 1, 2002, and (iii) an amount of Cash equal to the remaining rent owed in respect of the Howard Street Lease; (vi) the Intellectual Property; (vii) the Files and Records; 8 (viii) the Permits; (ix) any prepaid expenses with respect to the Purchased Property or the Business; and (x) the Intangible Property. Purchased Property shall not include (i) any deferred tax assets or refunds with respect to Taxes not reflected on the Financial Statements or that constitute Excluded Liabilities; (ii) shares of capital stock of Tilia US and Tilia Canada; (iii) any distributions of Purchase Price proceeds; (iv) assets not enumerated in items (i) through (x) above; (v) any rights under this Agreement or under any other agreement between Sellers and Buyer entered into on or after the Closing Date; (vi) the bank account held at BNP Paribas located in Hong Kong, which immediately prior to the Closing shall have a Cash balance of no more than $100; (vii) the bank account held at Union Bank of California located in California, which immediately prior to the Closing shall have a Cash balance of no more than $100; and (viii) the bank account held at CIBC Oppenheimer located in Canada, which immediately prior to the Closing shall have a Cash balance of no more than $100. "RESTRICTED PAYMENTS" shall mean: (a) any payment by any Seller in connection with a transaction described in Section 5.27 hereof, except such transactions as are pursuant to written contracts that existed on December 31, 2001 and that are listed on Schedule 1-A hereto; or (b) any (i) dividend or other payment or distribution, direct or indirect, on account of any shares of any class of Capital Stock of any Seller, now or hereafter outstanding (including without limitation any payment in connection with any dissolution, merger, consolidation or disposition involving any Seller), or to the holders, in their capacity as such, of any shares of any class of Capital Stock of any Seller, now or hereafter outstanding (other than dividends or distributions payable in Capital Stock of the applicable Seller), (ii) redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of any Seller, now or hereafter outstanding, or (iii) payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of any Seller, now or hereafter outstanding. Notwithstanding the foregoing, any payments made by one or more of the Sellers solely to one or more of the Sellers shall not be deemed Restricted Payments; "RESTRICTED PERIOD" shall have the meaning set forth in Section 7.7(a) hereof; "SEC" shall have the meaning set forth in Section 3.2(f) hereof; "SECURITIES ACT" shall mean the Securities Act of 1933, as amended; "SELLER" and "SELLERS" shall have the meanings set forth in the Preamble hereto. References to the "Sellers" shall mean all of the Sellers together or any one or more of them alone or as a group; 9 "SELLER EMPLOYEE BENEFIT PLANS" shall have the meaning set forth in Section 5.21(a) hereof; "SELLER INDEMNITEES" shall have the meaning set forth in Section 13.3 hereof; "SELLER LOSSES" shall have the meaning set forth in Section 13.3 hereof; "SELLER PENSION PLANS" shall have the meaning set forth in Section 5.21(a) hereof; "SELLERS' EMPLOYMENT LIABILITIES" shall have the meaning set forth in Section 9.2 hereof; "SELLERS' ESCROW AGREEMENT" shall mean the escrow agreement substantially in the form attached hereto as EXHIBIT B-1, to be entered into by the parties hereto and either Bank of New York or JP Morgan/Chase, as mutually agreed; "SELLERS' ESCROWED AMOUNT" shall have the meaning set forth in Section 3.2(a)(ii) hereof; "SELLERS' EVENTS OF BREACH" shall have the meaning set forth in Section 13.1 hereof; "SELLERS' REPRESENTATIVE" shall have the meaning set forth in the Preamble hereto; "SENIOR CREDIT FACILITY" means that certain Credit Agreement, to be entered into in April 2002, by and among the Buyer, Bank of America, N.A., as administrative agent, Banc of America Securities LLC, as co-lead arranger, and CIBC World Markets Corp., as co-lead arranger, providing for $50.0 million of term loan borrowings and up to $50.0 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, amended and restated, supplemented, modified, renewed, refunded, replaced or refinanced from time to time. "SHARES" shall have the meaning set forth in Section 5.28 hereof; "SHAREHOLDER EXPENSES" shall mean any fees, costs or expenses paid by any Seller after December 31, 2001, in connection with legal, accounting, investment banking or any other services rendered in connection with the transactions contemplated by the Transaction Documents; "SHORT TERM NOTE" shall mean that certain promissory note to be executed by the Buyer in favor of the Seller, substantially in the form of EXHIBIT D-1 hereto; "STOCK PAYMENT ELECTION" shall have the meaning set forth in Section 3.2(f) hereof. 10 "SUBSIDIARY" shall mean any corporation or other legal entity of which a Person (either alone or through or together with any other Subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity; "TAXES" shall mean (i) all federal, state, local or foreign taxes, including, but not limited to, income, gross income, gross receipts, capital, production, excise, employment, sales, use, transfer, transfer gain, ad valorem, premium, profits, license, capital stock, franchise, severance, stamp, withholding, Social Security, employment, unemployment, disability, worker's compensation, payroll, utility, windfall profit, custom duties, personal property, real property, environmental, registration, alternative or add-on minimum, estimated and other taxes, governmental fees or like charges of any kind whatsoever, (ii) any interest, penalties or additions thereto whether disputed or not, and (iii) any tax liabilities of another party related thereto by operation of Treas. Reg. ss. 1.1502-6 (or similar provision of state, local or foreign law) or by contract; "TAX RETURNS" shall mean any return, report, information return or other document (including any schedule or attachment thereto, and including any amendment thereof) filed or required to be filed with any governmental body in connection with the determination, assessment, collection or administration of any Taxes; "TILIA" shall have the meaning set forth in the Preamble hereto; "TILIA CANADA" shall have the meaning set forth in the Preamble hereto; "TILIA HUNGARY" shall mean Tilia Hungary Business Services Limited, a limited liability company organized under the laws of Hungary; "TILIA TRUST" shall mean Tilia Trust Reg., a trust organized under the laws of Liechtenstein; "TILIA U.S." shall have the meaning set forth in the Preamble hereto; "TRADEMARK ASSIGNMENT AGREEMENT" means the agreement, substantially in the form attached hereto as EXHIBIT F, pursuant to which the Sellers will, on the Closing Date, sell and assign all of its right, title and interest in and to the Trademarks to the Buyer; "TRADEMARKS" means the trademarks and service marks (registered or unregistered) and trade names listed on EXHIBIT G attached hereto; "TRANSACTION DOCUMENTS" shall mean this Agreement, the Trademark Assignment Agreement, the Patent Assignment Agreement, the Domain Name Assignment Agreement, the Assignment and Assumption Agreement, the Notes, the Escrow Agreements, the Guarantee Agreement, the Indemnity Agreements, the Non-Competition Agreements, the exhibits and schedules hereto, and all other agreements, instruments, certificates and other documents to be entered into or delivered by any party in connection with the transactions contemplated to be consummated pursuant to any of the foregoing; 11 "TRANSFER TAXES" shall have the meaning set forth in Section 16.3 hereof; "WARN" shall have the meaning set forth in Section 5.21(m) hereof; and "XEME" shall mean Xeme Capital Corporation, a Cook Islands entity; SECTION 2. PURCHASE AND SALE OF THE PURCHASED PROPERTY. SECTION 2.1. Transfer of Assets. Upon the terms and subject to the conditions herein set forth, the Sellers shall sell, convey, transfer, assign and deliver to the Buyer and/or its designated Affiliates, free and clear of any Liens (other than any Liens constituting a part of the Assumed Liabilities), and the Buyer and/or its designated Affiliates shall purchase and accept from the Sellers, on the Closing Date, all of Sellers' and Affiliates of Sellers' right, title and interest in and to the Purchased Property. SECTION 2.2. Sale at Closing Date. The sale, transfer, assignment and delivery by the Sellers of the Purchased Property to the Buyer, as herein provided, shall be effected on the Closing Date by the Assignment and Assumption Agreement, the Trademark Assignment Agreement, the Patent Assignment Agreement, the Domain Name Assignment Agreement and any other deeds, bills of sale, endorsements, assignments and other instruments of transfer and conveyance as counsel for the Buyer may reasonably require. SECTION 2.3. Subsequent Documentation. The Sellers shall, at any time and from time to time after the Closing Date, upon the request of the Buyer and at the expense of the Sellers, do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further deeds, assignments, consents, transfers and conveyances as may be required for the better assigning, transferring, granting, conveying and confirming to the Buyer or its successors and assigns, or for aiding and assisting in collecting and reducing to possession, any or all of the Purchased Property. The Sellers hereby constitute and appoint, effective as of the Closing Date, the Buyer, its successors and assigns as the true and lawful attorney of all of the Sellers with full power of substitution in the name of the Buyer or in the name of any of the Sellers but for the benefit of the Buyer (a) to collect for the account of the Buyer all Accounts Receivable and any other item of Purchased Property and (b) to institute and prosecute all proceedings which the Buyer may in its discretion deem proper in order to collect the Accounts Receivable or to assert or enforce any right, title or interest in, to or under the Purchased Property and to defend or compromise (subject to Section 13 hereof, if applicable) any and all actions, suits or proceedings in respect of any of the Purchased Property. The Sellers agree to hold in trust for the account of the Buyer all Accounts Receivable received by Sellers on or after the Closing Date and further agree to promptly deliver such Accounts Receivable to the Buyer. The Buyer shall be entitled to retain for its own account any amounts collected pursuant to the foregoing powers, including any amounts payable as interest in respect thereof. SECTION 2.4. Assumed Liabilities. Upon the terms and subject to the conditions set forth in this Agreement, from and after the Closing, the Buyer will assume and pay, perform, discharge and be responsible for the following obligations and liabilities of the Sellers: (a) the obligations and liabilities of the Sellers 12 in connection with or arising from the Assigned Contracts (excluding breaches thereof prior to the Closing Date); (b) the obligations and liabilities of the Sellers reflected on the December Balance Sheet or incurred by the Sellers in connection with the Business in the ordinary course of business consistent with past practice since December 31, 2001; and (c) the obligations and liabilities set forth on Schedule 2.4 hereto (collectively, the "ASSUMED LIABILITIES"). The Buyer shall, at any time and from time to time after the Closing Date, upon the request of the Sellers and at the expense of the Sellers, do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further assignment, transfer, assumption, endorsement, direction or authorization and other documents as may be reasonably required for the assumption of the Assumed Liabilities from the Sellers. SECTION 2.5. Excluded Liabilities. Notwithstanding the provisions of Section 2.4, any other provision of this Agreement or any schedule or exhibit hereto and regardless of any disclosure to the Buyer, the Buyer shall not assume any liabilities, obligations or commitments (i) relating to or arising out of the operation of the Business or the ownership or leasing of the Purchased Property prior to or on the Closing Date other than the Assumed Liabilities or (ii) enumerated in the second sentence of this Section 2.5 (such unassumed liabilities, the "EXCLUDED LIABILITIES"). Excluded Liabilities shall include without limitation: (i) any liabilities for (a) Taxes relating to or arising out of the Business accruing prior to or on the Closing Date (including, without limitation, accrued sales taxes), (b) Taxes retained by the Sellers pursuant to this Agreement, (c) one-half of the Transfer Taxes, and (d) Taxes of any Seller or any other Person, whether pursuant to an agreement, by operation of Treasury Regulation ss. 1.1502-6 (or any similar provision of state, local, or foreign law), transferee or successor liability, or otherwise, (ii) accounts payable and unpaid interest thereon by one or more of the Sellers to one or more of the Sellers, (iii) any liabilities arising under Environmental Laws attributable to or incurred as a result of any acts, omissions, or conditions first occurring or in existence as of or prior to the Closing Date, including, but not limited to, liabilities for the release, handling, discharge treatment, storage, disposal, or presence of Hazardous Materials, (iv) except for the Buyer Termination Liabilities, any liabilities relating to (A) the Employees or Employees previously employed by the Sellers or (B) any Employee Benefit Plans maintained by the Sellers or any Affiliate of the Sellers or covering the Employees, (v) any liabilities to shareholders of the Sellers and Affiliates of the Sellers other than pursuant to agreements listed on Schedule 2.5(v) hereof, (vi) any fees, costs or expenses incurred by the Sellers or by any shareholder or any Affiliates of the Sellers in connection with legal, accounting, investment banking or any other services rendered in connection with the transactions contemplated by the Transaction Documents, and (vii) any liabilities listed on Schedule 2.5(vii) hereof. SECTION 3. PURCHASE PRICE. SECTION 3.1. Purchase Price. Upon the terms and subject to the conditions set forth in this Agreement, in reliance on the representations, warranties, covenants and agreements of the Sellers contained herein, the purchase price (the "PURCHASE PRICE") for the sale and transfer of the Purchased Property to be delivered at Closing, by the Buyer to the Sellers shall consist of: (a) an aggregate amount equal to the sum of the following: 13 (i) One hundred and Thirty Five Million dollars ($135,000,000) in cash to the Sellers, less (A) any Allowed Distributions, (B) payments made or to be made pursuant to the non-competition agreements entered into pursuant to Section 7.6(b) hereof, (C) one-half of the HSR Fee, and (D) any Shareholder Expenses (the "CASH PURCHASE PRICE"); (ii) Ten Million Dollars ($10,000,000) in cash (the "ESCROWED AMOUNT"), Five Million Dollars ($5,000,000) of which shall be held in escrow until March 31, 2003 (the "SELLERS' ESCROWED AMOUNT") pursuant to the Sellers' Escrow Agreement and Five Million Dollars ($5,000,000) of which shall be held in escrow until June 30, 2005 (the "LONG TERM ESCROWED AMOUNT") pursuant to the Long Term Escrow Agreement to provide a fund, but not an exclusive means for, the payment of any successful indemnification claims against Sellers pursuant to Section 13.1 hereof; (iii) subject to applicable tax withholding requirements, Ten Million dollars ($10,000,000) in the form of the Short Term Note payable to the Sellers; provided, that such Short Term Note shall be offset by the amount that is the difference between $750,000 and the actual credit received by the Buyer on or prior to December 31, 2002, from the supplier in connection with the inventory described on Schedule 5.7 hereto; notwithstanding the foregoing, Buyer will notify Sellers' Representative at least ten (10) days prior to any withholding of applicable taxes; (iv) subject to applicable tax withholding requirements, Five Million dollars ($5,000,000) in the form of the Long Term Note payable to Tilia; notwithstanding the foregoing, Buyer will notify Sellers' Representative at least ten (10) days prior to any withholding of applicable taxes; (v) subject to applicable tax withholding requirements, the right to receive the Contingent Consideration, on the terms set forth in Section 3.2 hereof (the "CONTINGENT CONSIDERATION"); and (b) the assumption by the Buyer of the Assumed Liabilities. SECTION 3.2. Contingent Consideration. (a) As soon as practicable, but in any event no later than 90 days following each of December 31, 2002, 2003, and 2004, the Buyer (i) shall prepare in accordance with GAAP, applied on a basis consistent with the Financial Statements, a statement derived from the audited financial statements of the Buyer (the "EARN-OUT STATEMENT") of the Business EBITDA (as defined below) for each such full fiscal year (such one-year periods each being an "EARN-OUT PERIOD"), and (ii) shall deliver each Earn-Out Statement to the Sellers' Representative. The Buyer shall, and shall cause the Buyer's accountant, to provide access to the Sellers' Representative and the Sellers' accountant any and all work papers used in the preparation of the Earn-Out Statements. The Sellers' Representative shall have forty-five (45) days after receipt of any Earn-Out Statement (except for the Final Earn-Out Statement) ("PRELIMINARY DISPUTE PERIOD") to dispute any or all amounts or elements of such Earn-Out Statement ("PRELIMINARY DISPUTE"). The Sellers' Representative shall provide to the Buyer, prior to the end of the 14 Preliminary Dispute Period, written notice of the Preliminary Dispute (a "PRELIMINARY DISPUTE NOTICE"), setting forth in reasonable detail the amounts and elements with which it disagrees. If the Sellers' Representative does not deliver a Preliminary Dispute Notice to the Buyer prior to the end of each Preliminary Dispute Period, the Earn-Out Statement for such Earn-Out Period shall be final and binding upon the Sellers in the form in which it was delivered to the Sellers' Representative and no amounts in such Earn-Out Statement may be disputed by the Sellers in the Final Dispute Notice. The Sellers' Representative shall have forty-five (45) days after receipt of the Earn-Out Statement prepared for the fiscal year ended December 31, 2004 (the "FINAL EARN-OUT STATEMENT") (such period, the "FINAL DISPUTE PERIOD") to dispute any or all amounts or elements of the Final Earn-Out Statement and the items set forth in a Preliminary Dispute Notice with respect to any Preliminary Dispute Periods (a "DISPUTE"), but no Dispute can be based on the proper application of accounting policies and practices that are in accordance with GAAP and are applied on a basis consistent with the Financial Statements. If the Sellers' Representative determines to pursue a Dispute, the Sellers' Representative shall provide to the Buyer, prior to the end of the Final Dispute Period, written notice of the Dispute (a "DISPUTE NOTICE"), setting forth in reasonable detail the amounts and elements with which it disagrees, and any Dispute by the Sellers' Representative shall be limited to the matters included by the Sellers' Representative in the Dispute Notice and any Preliminary Dispute Notice previously delivered to the Buyer. If the Sellers' Representative does not deliver a Dispute Notice to Buyer prior to the end of the Final Dispute Period, the Final Earn-Out Statement shall be final and binding upon the Sellers in the form in which it was delivered to the Sellers' Representative. (b) If the Sellers' Representative shall have delivered to the Buyer a Dispute Notice prior to the end of the Dispute Period, the Sellers' Representative and the Buyer shall attempt to resolve the Dispute and agree in writing upon the final content of the Final Earn-Out Statement within fifteen (15) days following delivery by the Sellers' Representative of the Dispute Notice to the Buyer. If the Sellers' Representative and the Buyer are unable to resolve the Dispute within such fifteen (15) day period, then the Sellers' Representative and the Buyer shall submit the Dispute for resolution to an independent certified public accounting firm of recognized international standing, mutually acceptable to the Sellers' Representative and the Buyer (the "ARBITRATING ACCOUNTANT"), for review and resolution of any and all matters that remain in dispute and that were properly included in the Dispute Notice. In connection with the resolution of any Dispute, the Arbitrating Accountant shall have access to all documents and facilities necessary to perform its functions as arbitrator. The Arbitrating Accountant's function shall be to resolve the matters in Dispute in accordance with the terms and provisions of this Section 3.2 and to revise the Final Earn-Out Statement (if required) in order to conform with its resolution of the Dispute. In rendering its decision, the Arbitrating Accountant shall, in its sole discretion, apportion its fees and expenses in connection with the Dispute, based on its views as to the relative merits of the positions of each party in the Dispute; provided, however, that the Sellers' Representative shall advance half, and the Buyer shall advance the other half, of any retainer fee or deposit required by the Arbitrating Accountant in advance of a final resolution, subject to reapportionment by the Arbitrating Accountant of its fees and expenses as aforesaid. All determinations of the Arbitrating Accountant, including any revisions made to the Final Earn-Out Statement and the Arbitrating Accountant's apportionment of expenses as between the Sellers' Representative and the Buyer, shall be final and binding on the parties hereto, and neither the Sellers' Representative nor the Buyer shall have the right to appeal such determinations. 15 (c) The Sellers' Representative and the Buyer agree to cooperate fully and expeditiously with the Arbitrating Accountant in order to facilitate the receipt of the final determinations of the Arbitrating Accountant within thirty (30) days following submission of a Dispute to the Arbitrating Accountant. (d) No later than five (5) Business Days following the final determination of the Final Earn-Out Statement (whether as a result of a failure by the Sellers' Representative to timely deliver a Dispute Notice, agreement by the Sellers' Representative and the Buyer of the final content of the Final Earn-Out Statement or the determination of the Arbitrating Accountant), the Buyer shall pay to Tilia or its assigns or designees in cash or in registered stock of the Buyer (in the same proportions as the Cash Purchase Price was paid to the Sellers, unless the Buyer has been notified by all the Sellers of a different arrangement prior to January 1, 2005, the following amount (subject to any applicable withholding requirements) if any, in respect of the Contingent Consideration: (i) If the Average Annual Business EBITDA (as defined below) is less than $40,000,000, no amount shall be required to be paid; (ii) If the Average Annual Business EBITDA is equal to or greater than $46,000,000, the sum of $25,000,000; and (iii) If the Average Annual Business EBITDA is equal to or greater than $40,000,000 but less than $46,000,000, an amount equal to (A) $10,000,000 plus (B) (x) the excess of Average Annual Business EBITDA over $40,000,000 multiplied by (y) 15.0 and divided by (z) 6.0. The parties acknowledge and agree that the right to receive the Contingent Consideration represents additional consideration and not a royalty payment. Further, the parties agree to file Tax Returns that are consistent with this characterization. Notwithstanding the foregoing, Buyer agrees to notify Sellers' Representative at least ten (10) days prior to any withholding. (e) For purposes of Section 3.2, the following terms shall have the following meanings: (i) "BUSINESS EBITDA" shall mean, for each full fiscal year in the Earn-Out Period, the Net Income of the Business (without deducting any legal, accounting, investment banking and other expenses in connection with the Transaction Documents and the transactions contemplated thereby, including Transfer Taxes and any payments made pursuant to the Buyer Termination Liabilities) plus an amount which, in the determination of Net Income for each such fiscal year, has been deducted for (i) interest expense for such fiscal year, (ii) total federal, state, foreign or other income taxes for such fiscal year, (iii) depreciation and amortization expense for such fiscal year, and (iv) Excluded Expenses. For the period of the fiscal year ending December 31, 2002 prior to the Closing Date, Business EBITDA shall refer to the operations of the Sellers as conducted for such period and shall be pro forma, in accordance with GAAP, to reflect such operations as though the Closing Date had occurred on December 31, 2001 (without 16 deducting any legal, accounting, investment banking and other expenses in connection with the Transaction Documents and the transactions contemplated thereby). (ii) "AVERAGE ANNUAL BUSINESS EBITDA" shall mean (x) the sum of the Business EBITDA for each of the three full fiscal years ending December 31, 2002, 2003 and 2004 divided by (y) 3.0. (f) At the time of delivery of the Final Earn-Out Statement to the Sellers' Representative, the Buyer shall provide to the Sellers' Representative a written statement electing, in its sole discretion, subject to the limitations set forth in the last two sentences of this Section 3.2(f), to pay the Contingent Consideration, if any, either in cash ("CASH PAYMENT ELECTION") or in shares of the common stock, par value $.01 per share, of the Buyer ("BUYER COMMON STOCK") the transfer of which to Tilia or its assigns or designees has been registered under the Securities Act ("STOCK PAYMENT ELECTION"); provided, however, subject to the last sentence of this Section 3.2(f), the Buyer shall only be entitled to make a Stock Payment Election if (A) the average closing price per share of Buyer Common Stock on the New York Stock Exchange for the ten (10) consecutive trading days ending on the second trading day prior to the date of payment (the "MEASURED PERIOD") is at least $5.00 per share ("Price Per Share"); and (B) the product obtained by multiplying the average trading volume for the Measured Period by the Price Per Share is at least $250,000. If a Stock Payment Election is made by the Buyer, the number of shares of Buyer Common Stock to be delivered to Tilia or its assigns or designees pursuant to this Section 3.2 shall be calculated on the basis of the average closing price of the Buyer Common Stock for the ten (10) consecutive trading days prior to the five day period immediately preceding the date of delivery of the Buyer Common Stock to Tilia or its assigns or designees (such 10 day period, the "DETERMINATION PERIOD"). Notwithstanding anything in this Section 3.2 to the contrary and except for the last sentence of this Section 3.2(f), if the Buyer makes a Stock Payment Election, (i) the Buyer shall be entitled to deliver the Contingent Consideration to the Sellers promptly following effectiveness of its registration statement under the Securities Act in respect of the transfer of the Buyer Common Stock to the Sellers (the "BUYER REGISTRATION STATEMENT"), provided that such registration statement has been filed with the United States Securities and Exchange Commission (the "SEC") more than thirty (30) days prior to the time payment of the Contingent Consideration otherwise was due pursuant to Section 3.2(d) and provided further that the Buyer uses its best efforts to cause such registration statement to be declared effective as promptly as practicable, and if such registration statement is not declared effective at or prior to the sixtieth (60th) day following the time payment of the Contingent Consideration is due pursuant to Section 3.2(d), then the Buyer shall pay the Contingent Consideration in cash, and (ii) the Buyer shall be entitled to change a Stock Payment Election to a Cash Payment Election at any time in its sole discretion, provided that, if the Buyer so changes its election, it shall pay the Contingent Consideration no later than the second Business Day following delivery of notice of such change, and (iii) if the Buyer withdraws the Buyer Registration Statement, the Buyer shall pay the Contingent Consideration no later than the second Business Day following such withdrawal. Notwithstanding the provisions of the preceding sentence, the Cash Payment Election may only be exercised if (A) both before and after the Contingent Consideration would be paid by the Cash Payment Election, the Buyer is in pro forma compliance with the Senior Credit Facility, and (B) after the Contingent Consideration is paid by the Cash Payment Election, the Buyer would have availability under the revolving credit portion of the Senior Credit Facility of not less than $20,000,000. If the Buyer makes a 17 Cash Payment Election or is otherwise required to pay the Contingent Consideration in cash and is unable to pay the Contingent Consideration in cash because of its failure to satisfy the conditions in the preceding sentence relating to the Senior Credit Facility, then the Buyer and the Sellers agree that the Buyer shall, to the extent permitted, pay to the Sellers the Contingent Consideration in cash, and shall pay the balance of any amounts due to the Sellers pursuant to Section 3.2(d) in registered Buyer Common Stock, notwithstanding the proviso set forth in the first sentence of this Section 3.2(f). (g) The Sellers agree that neither they nor any of their Affiliates shall acquire or dispose of any Buyer Common Stock at any time commencing ninety (90) days prior to the commencement of the Determination Period and ending on the day following the Determination Period. The Sellers further agree that prior to June 30, 2005 they shall (i) cause all shares of Buyer Common Stock beneficially owned by them to be represented, in person or by proxy, at all meetings of Buyer's stockholders so that such shares of Buyer Common Stock may be counted for the purpose of determining the presence of a quorum at all such meetings, (ii) vote at any such meeting all shares of Buyer Common Stock beneficially owned by them in the same proportion as the votes cast (whether for, against or abstaining) by all other holders of Buyer Common Stock and (iii) not participate in, solicit or encourage any solicitation of proxies or consents with respect to any matter to be voted upon or consented to (or any matter sought to be voted upon or consented to) by the holders of the Buyer Common Stock except for a solicitation of proxies or consents in conformity with the recommendation to the holders of Buyer Common Stock of the board of directors of Buyer. (h) If a Stock Payment Election is made by the Buyer pursuant to Section 3.2(f) above, the Buyer shall, prior to the issuance of any Buyer Common Stock in connection with such Stock Payment Election, take such steps, if any, as are necessary to ensure that the acquisition of such Buyer Common Stock by the Sellers will not cause the Sellers or their Affiliates to become an "Acquiring Person" under the Buyer Rights Agreement. SECTION 3.3. Payment of Purchase Price. On the Closing Date, the Buyer shall deliver the Purchase Price in accordance with the instructions set forth on Schedule 3.3 hereto. SECTION 4. CLOSING. The closing of the sale and purchase of the Purchased Property (the "CLOSING") shall take place at the offices of Willkie Farr & Gallagher at 787 Seventh Avenue, New York, New York 10019-6099 or Morrison & Foerster LLP at 755 Page Mill Road, Palo Alto, California 94304 at 10:00 a.m., Pacific Standard Time on a date two (2) Business Days after the conditions in Section 11 and Section 12 have been met or waived, or at such other place and time as may be mutually agreed to by the parties hereto (the "CLOSING DATE"). SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Except as set forth on the Sellers Disclosure Schedule (the "Disclosure Schedule") attached to this Agreement (the parts of which are numbered to correspond to the individual Section numbers of this Section 5), the Sellers hereby represent and warrant, jointly and severally, to the Buyer as follows: 18 SECTION 5.1. Corporate Organization; Subsidiaries. Each of the Sellers is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. Copies of the organizational documents of each of the Sellers, with all amendments thereto to the date hereof, have been furnished to the Buyer or its representatives, and such copies are accurate and complete as of the date hereof. Except as described in Schedule 5.1 of the Disclosure Schedule, none of the Sellers have any Subsidiaries and none of the Sellers is a partner in any partnership or member in any limited liability company. SECTION 5.2. Qualification to Do Business. Each of the Sellers has the requisite corporate power and authority and all necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on the Business as it is now being conducted, and is duly qualified to do business as a foreign corporation, and is in good standing, in each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary, except any such jurisdiction where the failure to be so qualified and in good standing would not have a material adverse effect on the business, financial condition or results of operations of the Business as currently conducted and taken as a whole. Schedule 5.2 of the Disclosure Schedule sets forth all jurisdictions in which the Sellers are qualified to do business. SECTION 5.3. Authorization and Validity of Agreement. Each of the Sellers has all requisite corporate power and authority to enter into the Transaction Documents and to carry out its obligations thereunder. The execution and delivery of the Transaction Documents and the performance of the Sellers' obligations thereunder have been duly authorized by all necessary corporate action of each of the respective Sellers (except for the execution and delivery of the Transaction Documents and performance of Tilia's obligations thereunder, which are subject to shareholder approval), and no other proceedings on the part or in respect of the Sellers is necessary to authorize such execution, delivery and performance. The Transaction Documents have been duly executed by each of the Sellers and constitute their valid and binding obligations, enforceable against them in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, moratorium or similar laws of general application relating to or affecting creditors' rights generally and except for the limitations imposed by general principles of equity. SECTION 5.4. No Conflict or Violation. Subject to obtaining all consents and approvals on Schedule 5.5 of the Disclosure Schedule and except as set forth on Schedule 5.4 of the Disclosure Schedule and except for filings as may be required under the HSR Act and the rules and regulations thereunder, the execution, delivery and performance by the Sellers of the Transaction Documents (i) does not and will not violate or conflict with any provision of the organizational documents of the Sellers; (ii) does not and will not violate any provision of law, rule or regulation, or any order, judgment or decree of any court or other governmental or regulatory authority; (iii) does not violate and will not result in a material breach of or constitute (with due notice or lapse of time or both) a default under, or give rise to any acceleration of remedies or any right of termination under, any contract, lease, sublease, occupancy agreement, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which any of the Sellers is a party or by which any Seller is bound or to which any of the Sellers' properties or assets is subject; (iv) will not result in the creation or imposition of any 19 Lien upon any of the Purchased Property; (v) will not result in the cancellation, termination, modification, revocation or suspension of any of the licenses, leases, franchises, Permits, authorizations or approvals referred to in Sections 5.12 or 5.13 hereof; or (vi) will not otherwise interfere in any material manner with the operation of the Business or the Purchased Property or have any material adverse effect thereon. SECTION 5.5. Consents and Approvals. Schedule 5.5 of the Disclosure Schedule sets forth a true and complete list of each consent, waiver, authorization or approval of any governmental or regulatory authority, domestic or foreign, or of any other Person, and each declaration to or filing or registration with any such governmental or regulatory authority, that is required in connection with the execution and delivery of the Transaction Documents by the Sellers or the performance by the Sellers of their obligations thereunder. SECTION 5.6. Financial Statements. The audited consolidated balance sheets of the Sellers as of December 31, 2001 (the "DECEMBER BALANCE SHEET") and as of December 31, 2000 and December 31, 1999 fairly present the consolidated financial position of the Sellers, as of the dates thereof, and the related audited statements of income, retained earnings and changes in cash flows for the fiscal periods ended on such dates including the schedules and notes thereto fairly present the results of operations and changes in cash flows of the Sellers for the respective periods indicated (collectively, the "FINANCIAL STATEMENTS"). The Financial Statements (a) were prepared in accordance with GAAP, (b) are complete, correct and in accordance with the books of account and records of the Seller, and (c) can be legitimately reconciled with the financial statements and the financial records maintained and the accounting methods applied by the Sellers for federal income tax purposes. The Sellers have delivered to the Buyer or its representatives copies of the Financial Statements. SECTION 5.7. Absence of Certain Changes or Events. (a) Except as set forth in Schedule 5.7 of the Disclosure Schedule, since December 31, 2001, there has not been: (i) any adverse change in the business, operations, properties, assets, or condition (financial or other) of the Business in any material respect (including, without limitation, as a result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo or act of God), and, to the knowledge of the Sellers, no fact or condition exists and no event has occurred that would be reasonably likely to result in any such change; (ii) any material loss, damage, destruction or other casualty to the Purchased Property (whether or not covered by insurance or insurance awards have been received or guaranteed); or (iii) any change in any tax election or any method of accounting or accounting practice of the Sellers other than as required by GAAP and noted in the Financial Statements. 20 (b) Since December 31, 2001 the Sellers have operated the Business in the ordinary course of business and consistent with past practice and, except as set forth on Schedule 5.7 of the Disclosure Schedule hereto, have not: (i) incurred any obligation or liability (whether absolute, accrued, contingent or otherwise) relating to the operations of the Sellers, in an amount greater than $25,000 or having a term or duration of more than one year; (ii) failed to discharge or satisfy any Lien or pay or satisfy any obligation or liability (whether absolute, accrued, contingent or otherwise) arising from the operation of the Business, other than liabilities being contested in good faith and for which adequate reserves have been provided and Liens arising in the ordinary course of business that do not, individually or in the aggregate, interfere with the use, operation, enjoyment or marketability of any of the Purchased Property; (iii) mortgaged, pledged or subjected to any Lien any of the Purchased Property; (iv) sold or transferred any of the assets of the Business material to the Business or canceled any debts or claims (other than intercompany debts solely among Sellers) or waived any rights material to the Business relating to the operations of the Business, except for the sale of Inventory in the ordinary course of business consistent with past practice; (v) disposed of, relinquished or allowed to lapse any patents, trademarks or copyrights (or any interest therein) or any patent, trademark, or copyright applications (or any interest therein) used (or that were, or are intended to be used) in the operations of the Business; (vi) defaulted on any material obligation relating to the operations of the Business; (vii) entered into any transaction material to the Business or relating to the Business, except in the ordinary course of business consistent with past practice; (viii) written down the value of any Inventory in excess of $10,000 individually or $50,000 in the aggregate in excess of what was reserved on the audited financial statements for the fiscal period ended December 31, 2001, or written off as uncollectible any Accounts Receivable in excess of $10,000 individually or $50,000 in the aggregate in excess of what was reserved on the audited financial statements for the fiscal period ended December 31, 2001; (ix) granted any increase in the compensation or benefits of employees of the Business (other than increases in accordance with existing contractual arrangements identified on Schedule 5.7 of the Disclosure Schedule) or entered into any employment or severance agreement or arrangement with any employee earning more than $50,000 annually; 21 (x) made any capital expenditure in excess of $50,000, or additions to property, plant and equipment used in the operations of the Business other than ordinary repairs and maintenance; (xi) laid off any employee earning more than $50,000 annually; (xii) incurred any obligation or liability for the payment of severance benefits; (xiii) used any cash generated by the Business other than for working capital purposes (other than for Allowed Distributions or Shareholder Expenses subsequent to the date hereof); (xiv) lost or received notice of potential loss of any customers or of a material reduction in orders from any customer listed on Schedule 5.20 of the Disclosure Schedule hereof; or (xv) entered into any agreement or made any commitment to do any of the foregoing. SECTION 5.8. Tax Matters. Except as set forth in Schedule 5.8 of the Disclosure Schedule, all material Tax Returns required to be filed before the Closing Date in respect of the Sellers have been (or will have been by the Closing Date) timely filed, and each of the Sellers has (or will have by the Closing Date) timely paid, accrued or otherwise adequately reserved for the payment of all material Taxes required to be paid in respect of the periods covered by such Tax Returns (whether or not shown on any Tax Return) and has (or will have by the Closing Date) adequately reserved for the payment of all material Taxes with respect to periods ended on or before the Closing Date for which Tax Returns have not yet been filed. All material Taxes of the Sellers have been paid or adequately provided for and the Sellers know of no proposed additional tax assessment against them. In addition, (i) each of the Sellers has withheld and paid all Taxes required to be withheld and paid (including federal, state and local requirements) with respect to amounts paid or owing to any employee, creditor, independent contractor or other third party, and (ii) none of the Purchased Property is "tax-exempt use property" within the meaning of Section 168(h) of the Code. SECTION 5.9. Absence of Undisclosed Liabilities. Except as set forth on Schedule 5.9 of the Disclosure Schedule, none of the Sellers has any known indebtedness or liability, absolute or contingent, which is not shown or provided for on the December Balance Sheet other than liabilities as shall have been incurred or accrued in the ordinary course of business since December 31, 2001 and other than liabilities in respect of fees, costs or expenses in connection with legal, accounting, investment banking or other services rendered in connection with the transactions contemplated by the Transaction Documents. Except as shown in the December Balance Sheet or on Schedule 5.9 of the Disclosure Schedule, none of the Sellers is directly or indirectly liable upon or with respect to (by discount, repurchase agreements or otherwise), or obliged in any other way to provide funds in respect of, or to guarantee or assume, any debt, obligation or dividend of any person, except endorsements in the ordinary 22 course of business in connection with the deposit, in banks or other financial institutions, of items for collection. SECTION 5.10. Leased Property. (a) Lease Obligations. Set forth on Schedule 5.10(a) of the Disclosure Schedule hereto is a true, correct and complete list of all of the real property leases, subleases or occupancy agreements (together with all amendments, modifications and supplements thereto) for the Business Locations (individually or collectively as the context so requires, the "ACQUIRED LEASES") to which any of Sellers is a party or is bound. The Sellers are not party to or bound by any lease, sublease or occupancy agreement other than the Acquired Leases. The Sellers do not own any real property. True, complete and accurate copies of the Acquired Leases have been delivered to the Buyer, and each of the Acquired Leases is in full force and effect without modification, amendment or supplement from the form delivered. No option has been exercised under any Acquired Leases, except options whose exercise has been evidenced by a written document, a true, complete and accurate copy of which has been delivered to the Buyer with the corresponding Acquired Lease. Except as identified on Schedule 5.5 of the Disclosure Schedule, none of the assignments of the Acquired Leases pursuant to this Agreement requires the consent or approval of the other party or parties to the leases for the properties or facilities related to the Acquired Leases (the "BUSINESS LOCATIONS"). None of the Sellers nor, to Sellers' knowledge, any of the other parties to the Acquired Leases, is in material default under any of such Acquired Leases, and no material amount due under such leases remains unpaid, no material controversy, claim, dispute or disagreement exists between the parties to such Acquired Leases, and, to the knowledge of the Sellers, no event has occurred which with the passage of time or giving of notice, or both would constitute a material default thereunder. (b) Restrictive Covenants. To the Sellers' knowledge, there is no violation of a condition or agreement contained in any covenant, easement or right-of-way affecting any Business Location. To the knowledge of the Sellers, the covenants, easements or rights-of-way affecting the Business Locations do not materially impair any of the Sellers' ability to use any such Business Locations in the operation of the Business as presently conducted. To the knowledge of the Sellers, the Sellers have access to public roads, streets or the like or valid perpetual easements over private streets, roads or other private property for such ingress to and egress from the Business Locations, except as would not materially impair the Sellers' ability to use any such Business Locations in the operation of the Business as presently conducted. (c) Zoning. Except as set forth on Schedule 5.10(c) of the Disclosure Schedule: (i) none of the Sellers have received any notice of any violation of any applicable building, zoning, land use or other similar statutes, laws, ordinances, regulations, permits or other requirements (including, without limitation, the American With Disabilities Act) in respect of the Business Locations, which has not been heretofore remedied, and to the knowledge of the Sellers, there do not exist any such violations which, individually or in combination with any others, materially and adversely affect the ability of the Sellers to use the affected Business Locations in the manner and scope in which it is now being used or operated; (ii) none of the Sellers have received any notice and none has any knowledge that any operations on or uses of the Business Locations constitute non-conforming uses under any applicable building, zoning, land use or other similar statutes, laws, ordinances, regulations, permits or other requirements; 23 and (iii) to the knowledge of the Sellers, no Seller has received any notice (other than published notice not actually received) of any pending or contemplated rezoning proceeding affecting the Business Locations. (d) Insurance Notices. Except as set forth in Schedule 5.10(d) of the Disclosure Schedule, none of the Sellers have received any notice from any insurance carrier regarding defects or inadequacies in the Business Locations, which, if not corrected, would result in termination of the insurance coverage therefor or an increase in the cost thereof. (e) Eminent Domain. Except as set forth on Schedule 5.10(e) of the Disclosure Schedule, (i) there is no pending, or, to the Sellers' knowledge, threatened condemnation of any part of the Business Locations by any governmental authority; (ii) there is no pending, or, to the Sellers' knowledge, threatened special assessment against any part of the Business Locations; and (iii) there is no pending, or, to the Sellers' knowledge, threatened litigation against the Sellers or owners of any Business Location for breach of any restrictive covenant affecting any part of the Business Locations which is not covered, or could be covered, by insurance. (f) Utilities. None of the Sellers have received any notice from any utility company or municipality of any fact or condition which could result in the discontinuation of presently available or otherwise necessary sewer, water, electric, gas, telephone or other utilities or services for the Business Locations. (g) Foreign Investments. No Seller that is a "foreign person" within the meaning of Section 1445(f) of the Code owns an interest in any Purchased Property that is a United States real property interest within the meaning of Section 897 of the Code. (h) No Commissions. All brokerage commissions and other compensation and fees payable by the Sellers by reason of the Business Locations or the leases or have been paid in full or are reflected in the December Balance Sheet, except for such commissions and other compensation related to options or extensions in the leases which are not yet exercised. SECTION 5.11. Intellectual Property. (a) "INTELLECTUAL PROPERTY" shall mean all of the following, owned or used in the Business: (i) Trademarks, logos, trade dress, product configurations, packaging designs and other indications of origin, applications or registrations in any jurisdiction pertaining to the foregoing and all goodwill associated therewith; (ii) inventions (whether or not patentable), discoveries, improvements, ideas, know-how, formula methodology, research and development, business methods, processes, technology, software and applications or patents in any jurisdiction pertaining to the foregoing, including re-issues, continuations, divisions, continuations-in-part, renewals or extensions and including the applications and patents set forth on Schedule 5.11(c) of the Disclosure Schedule (collectively, the "Patents"); (iii) trade secrets, including confidential information and the right in any jurisdiction to limit the use or disclosure thereof; (iv) copyrights in writings, designs, software, mask works or other works, applications or registrations in any jurisdiction for the foregoing and all moral rights related thereto; (v) database rights; (vi) Internet Web sites, Web pages, domain names and applications and registrations pertaining thereto (the 24 "DOMAIN NAMES") and all intellectual property used in connection with or contained in all versions of the Sellers' Web sites; (vii) all rights under agreements relating to the foregoing; (viii) books and records pertaining to the foregoing; and (ix) claims or causes of action arising out of or related to past, present or future infringement or misappropriation of the foregoing. (b) The Sellers own all right, title and interest in and to or, have a valid and enforceable license to use, all Intellectual Property, which represents all intellectual property rights necessary to the conduct of the Business as now conducted. The Sellers are in compliance with contractual obligations relating to the protection of such of the Intellectual Property as they use pursuant to license or other agreement. To the knowledge of the Sellers, there are no conflicts with or infringements of any Intellectual Property by any third party. To the knowledge of the Sellers, the conduct of the business of the Sellers as currently conducted does not conflict with or infringe any intellectual property or other proprietary right of any third party. There is no claim, suit, action or proceeding pending or, to the knowledge of the Sellers, threatened against the Sellers: (i) alleging any such conflict or infringement with any third party's intellectual property or other proprietary rights; or (ii) challenging the Sellers' ownership or use of, or the validity or enforceability of, any Intellectual Property. (c) Schedule 5.11(c) of the Disclosure Schedule sets forth a true, complete and current list of registrations/patents and applications pertaining to the Intellectual Property ("LISTED INTELLECTUAL PROPERTY") and the registration/patent and application number, date of application or issuance and relevant jurisdiction as to each. Except as described in Schedule 5.11(c) of the Disclosure Schedule, all Listed Intellectual Property is owned by the Sellers, free and clear of Liens. All Listed Intellectual Property is valid, subsisting, unexpired, in proper form, enforceable and owned in the name of a Seller, and all renewal fees and other maintenance fees that have fallen due on or prior to the effective date of this Agreement have been paid. Except as listed in Schedule 5.11(c) of the Disclosure Schedule, no Listed Intellectual Property is the subject of any final refusal of registration. The consummation of the transactions contemplated hereby will not alter or impair any Intellectual Property. (d) Schedule 5.11(d) of the Disclosure Schedule sets forth a complete list of all agreements relating to the Intellectual Property or to the right of the Sellers to use the intellectual property or other proprietary rights of any third party. Except as set forth in Schedule 5.11(d) of the Disclosure Schedule, the Sellers are not under any obligation to pay royalties or other payments in connection with any agreement, nor are they restricted from assigning their rights respecting Intellectual Property, nor will the Sellers or any Affiliates of the Sellers otherwise be, as a result of the execution and delivery of this Agreement or the performance of the Sellers' obligations under this Agreement, in breach of any agreement relating to the Intellectual Property. (e) To the knowledge of the Sellers, no Person (except the Sellers), including, without limitation, any present or former employee, officer or director of any Seller, or agent or outside contractor of any Seller, holds any right, title or interest, directly or indirectly, in whole or in part, in or to any Intellectual Property. (f) To the knowledge of the Sellers, (i) none of the Intellectual Property has been used, disclosed or appropriated to the detriment of the Sellers for the benefit of any Person 25 other than the Sellers; and (ii) no employee, independent contractor or agent of any Seller has misappropriated any trade secrets or other confidential information of any other Person in the course of the performance of his or her duties as an employee, independent contractor or agent of any Seller. (g) To the knowledge of the Sellers, the Sellers' transmission, reproduction, use, display or modification (including framing and linking Web site content) or other practices with respect to Web, infomercial or other marketing content proprietary to any other Person do not infringe or violate any proprietary or other right of any other Person and no claim relating to such infringement or violation is pending, or, to the knowledge of the Sellers, threatened. (h) Sellers own or have the right to use, disclose and transfer, without the consent of any third party, all computer software, software systems and databases and all other information systems used in the Business. SECTION 5.12. Licenses, Permits and Governmental Approvals. Schedule 5.12 of the Disclosure Schedule sets forth a true and complete list of all licenses, permits, franchises, authorizations and approvals issued or granted to the Sellers with respect to the Business by the Government, any state or local government, any foreign national or local government, or any department, agency, board, commission, bureau or instrumentality of any of the foregoing (the "PERMITS"), and all pending applications therefor. Such list contains the name of each such item and, where applicable, specifies the date issued, granted or applied for, the expiration date and the current status thereof. Each Permit has been duly obtained, is valid and in full force and effect, and is not subject to any pending or, to the Sellers' knowledge, threatened administrative or judicial proceeding to revoke, cancel or declare such Permit invalid in any respect. The Permits are sufficient and adequate in all respects to permit the continued lawful conduct of the Business in the manner now conducted, and none of the operations of the Business are being conducted in a manner that violates any of the terms or conditions under which any Permit was granted. Except as set forth in Schedule 5.12 of the Disclosure Schedule, no such Permit will in any way be affected by, or terminate or lapse by reason of, the transactions contemplated by the Transaction Documents. SECTION 5.13. Compliance with Law. Except as set forth in Schedule 5.13 of the Disclosure Schedule, the operations of the Business have been conducted in material compliance with all applicable laws, rules, regulations, orders and other requirements of all courts and other governmental or regulatory authorities having jurisdiction over the Sellers and their assets, properties and operations. Except as set forth in Schedule 5.13 of the Disclosure Schedule, none of the Sellers have received notice of any violation of any such law, regulation, order or other legal requirement, and none of the Sellers is in default with respect to any order, writ, judgment, award, injunction or decree of any federal, state or local court or governmental or regulatory authority or arbitrator, domestic or foreign, applicable to the Business or any of its assets, properties or operations. To the knowledge of the Sellers, there is no proposed change in any such laws, rules or regulations (other than United States federal or state laws of general applicability) that would materially and adversely affect the transactions contemplated by the Transaction Documents or all or a material part of the Business or the Purchased Property. The Sellers have, where the operations of the Business are located outside of the United States of America, maintained and complied in all material respects with comparable and customary 26 standards and codes of operation as would be required for the operation of the Business under United States federal laws and regulations. SECTION 5.14. Litigation. Except as set forth in Schedule 5.14 of the Disclosure Schedule, there are no claims, actions, suits, proceedings, labor disputes or investigations pending or, to the best knowledge of the Sellers, threatened, before any federal, state, provincial or local court or governmental or regulatory authority, domestic or foreign, or before any arbitrator of any nature, brought by or against the Sellers or any of their respective officers, directors, employees, agents or Affiliates involving, affecting or relating to the Business, the Purchased Property, or the transactions contemplated by the Transaction Documents. Schedule 5.14 of the Disclosure Schedule sets forth a list and a summary description of all such pending actions, suits, proceedings, disputes or investigations. Neither the Business nor the Purchased Property is subject to any order, writ, judgment, award, injunction or decree of any national, state, provincial or local court or governmental or regulatory authority or arbitrator, domestic or foreign, that affects or might affect the Business or the Purchased Property, or that would or might interfere with the transactions contemplated by the Transaction Documents. SECTION 5.15. Assigned Contracts. Each Assigned Contract is valid, binding and enforceable against the parties thereto in accordance with its terms, and in full force and effect on the date hereof, except as may be limited by applicable bankruptcy, insolvency, moratorium or similar laws of general application relating to or affecting creditors' rights generally and except for the limitations imposed by general principles of equity. The Sellers have performed all obligations required to be performed by them to date under, and are not in default or delinquent in performance, status or any other respect (claimed or actual) in connection with, any Assigned Contract, and, to the knowledge of the Sellers, no event has occurred which, with due notice or lapse of time or both, would constitute such a default. To the knowledge of the Sellers, no other party to any Assigned Contract is in default in respect thereof, and, to the knowledge of the Sellers, no event has occurred which, with due notice or lapse of time or both, would constitute such a default. Schedule 5.15 of the Disclosure Schedule sets forth a list all written contracts that are material to the Business and a summary of all oral contracts that are material to the Business. The Sellers have delivered to the Buyer or its representatives true and complete originals or copies of all written contracts listed on Schedule 5.15 of the Disclosure Schedule. SECTION 5.16. Receivables. Except as set forth in Schedule 5.16 of the Disclosure Schedule, all Accounts Receivable reflected on the December Balance Sheet, or acquired by the Sellers after the date thereof and before the Closing Date arose in the ordinary course of business. SECTION 5.17. Inventory. The value of the net Inventory included on the December Balance Sheet is carried at not more than the lower of cost or net realizable value, and does not include any Obsolete Inventory. As used herein, "OBSOLETE INVENTORY" is Inventory which, at December 31, 2001, was not usable or saleable in the lawful and ordinary course of business of the Business as now conducted because of legal restrictions, failure to meet specifications, loss of market, damage, physical deterioration or for any other cause in each case net of reserves provided therefor on the December Balance Sheet. All of the Inventory to be sold 27 to the Buyer or its Affiliates hereunder consists of items of a quality and quantity usable or saleable in the ordinary course of business. SECTION 5.18. Product Liability; Warranty. (a) Except as set forth on Schedule 5.18(a) of the Disclosure Schedule, (i) there is no notice, demand, claim, action, suit, inquiry, hearing, proceeding, notice of violation or investigation of a civil, criminal or administrative nature by or before any court or governmental or other regulatory or administrative agency, commission or authority against or involving any product, substance or material (collectively, a "PRODUCT"), or class of claims or lawsuits involving the same or similar Product produced, distributed or sold by or on behalf of any of the Sellers which is pending or, to the knowledge of the Sellers, threatened, resulting from an alleged defect in design, manufacture, materials or workmanship of any Product produced, distributed or sold by or on behalf of any of the Sellers, or any alleged failure to warn, or any breach of implied warranties or representations, and (ii) there has not been, to the knowledge of the Sellers, any material Occurrence (as defined below) since January 1, 2000. (b) For purposes of this Section 5.18, the term "OCCURRENCE" shall mean any accident, happening or event which was caused or allegedly caused by any alleged hazard or alleged defect in design, manufacture, materials or workmanship including, without limitation, any alleged failure to warn or any breach of express or implied warranties or representations with respect to, or any such accident, happening or event otherwise involving, a Product (including any parts or components thereof) manufactured, produced, distributed or sold by or on behalf of the Sellers which is likely to result in a claim or loss. SECTION 5.19. Product Recalls. Except as disclosed in Schedule 5.19 of the Disclosure Schedule, there has not been any product recall of any product manufactured, shipped or sold by the Business since January 3, 1997. SECTION 5.20. Customers, Suppliers and Competitors. Schedule 5.20 of the Disclosure Schedule sets forth a complete and correct list of (a) the top twenty (20) customers of the Sellers during fiscal year 2001, and (b) the top five (5) suppliers by dollar volume of the Business and the aggregate dollar volume of purchases (broken down by principal categories) by the Business from such suppliers for such periods. Except as set forth in Schedule 5.20 of the Disclosure Schedule, none of such customers or suppliers has, or to the knowledge of the Sellers, intends to terminate or change significantly its relationship with the Business. SECTION 5.21. Employee Benefits. (a) Schedule 5.21(a) of the Disclosure Schedule sets forth: (i) all Employee Benefit Plans, and all other employee benefit arrangements or payroll practices, including, without limitation, any such arrangements or payroll practices providing severance pay, sick leave, vacation pay, salary continuation for disability, retirement benefits, deferred compensation, bonus pay, incentive pay, stock options, hospitalization insurance, medical insurance, life insurance, scholarships or tuition reimbursements, maintained by the Sellers or to which the Sellers contributes or is obligated to contribute thereunder for current or former Employees (the "SELLER EMPLOYEE BENEFIT PLANS"), and (ii) all Employee Pension Benefit Plans maintained by the Sellers or any trade or business (whether or not incorporated) which is or has 28 ever been under control or treated as a single employer with any of the Sellers under Section 414(b), (c), (m), or (o) of the Code ("ERISA AFFILIATE") or to which the Sellers or any ERISA Affiliate has contributed or has ever been obligated to contribute thereunder (the "SELLER PENSION PLANS"). (b) None of the Seller Employee Benefit Plans or Seller Pension Plans is a multiemployer plan, as defined in Section 3(37) of ERISA ("MULTIEMPLOYER PLAN"), and none of the Sellers nor any ERISA Affiliate has withdrawn in a complete or partial withdrawal from any Multiemployer Plan, nor has any of them incurred any liability due to the termination or reorganization of a Multiemployer Plan. (c) None of the Seller Employee Benefit Plans or Seller Pension Plans is subject to Title IV of ERISA and none of the Sellers nor any ERISA Affiliate has any liability with respect to any plan subject to Title IV of ERISA. Each Seller Employee Benefit Plan that is intended to qualify under Section 401 of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the current requirements of Code Section 401(a) and any trust maintained pursuant to any such Seller Employee Benefit Plan is exempt from federal income taxation under Section 501 of the Code, or has remaining a period of time under applicable Treasury regulations or Internal Revenue Service pronouncements in which to apply for such a letter and make any amendments necessary to obtain a favorable determination as to the qualified status of each such Seller Employee Benefit Plan and each such Seller Employee Benefit Plan that has not received a determination letter is currently qualified under Section 401(a) as to form. To the knowledge of the Sellers, nothing has occurred with respect to the operation of any such Seller Employee Benefit Plan that could reasonably be expected to cause the loss of such qualification or exemption or the imposition of any liability, penalty or tax under ERISA or the Code. (d) All contributions (including all employer contributions and employee salary reduction contributions) required to have been made under any of the Seller Employee Benefit Plans or Seller Pension Plans or by law to any funds or trusts established thereunder or in connection therewith have been made or will have been paid or accrued on or prior to the Closing Date and there is no material liability for the failure to make timely contributions to any Seller Employee Benefit Plans or Seller Pension Plans. (e) There has been no material violation of ERISA or the Code with respect to the filing of applicable reports, documents and notices regarding the Seller Employee Benefit Plans with the Secretary of Labor or the Secretary of the Treasury or the furnishing of required reports, documents or notices to the participants or beneficiaries of the Seller Employee Benefit Plans. (f) True, correct and complete copies of the following documents, with respect to each of the Seller Employee Benefit Plans and Seller Pension Plans, where applicable, have been delivered or made available to the Buyer by the Sellers: (i) all plans documents and related trust documents, and amendments thereto; (ii) the most recent Forms 5500; (iii) the last IRS determination letter; (iv) summary plan descriptions; (v) the most recent actuarial report relating to the Seller Employee Benefit Plans and Seller Pension Plans; and (vi) written descriptions of all non-written agreements relating to the Seller Employee Benefit Plans. 29 (g) There are no pending actions, claims or lawsuits which have been asserted or instituted against, or to the knowledge of the Sellers after due inquiry, are threatened, concerning or involving, the Seller Employee Benefit Plans, the assets of any of the trusts under such plans or the plan sponsor or the plan administrator, or against any fiduciary of the Seller Employee Benefit Plans with respect to the operation of such plans (other than routine benefit claims), nor to the knowledge of the Sellers, are there any facts which could form the basis for any such claim or lawsuit. (h) All amendments and actions required to bring the Seller Employee Benefit Plans and Seller Pension Plans into conformity in all material respects with all of the applicable provisions of ERISA, the Code and other applicable laws have been made or taken except to the extent that such amendments or actions are not required by law to be made or taken until a date after the Closing Date. (i) Except as set forth in Schedule 5.21(i) of the Disclosure Schedule, the Seller Employee Benefit Plans have been maintained, in all material respects, in accordance with their terms and with all provisions of ERISA and the Code (including rules and regulations thereunder) and other applicable federal and state laws and regulations, and neither of the Sellers, nor any "party in interest" or "disqualified person" with respect to the Seller Employee Benefit Plans has engaged in a "prohibited transaction" within the meaning of Section 406 of ERISA or 4975 of the Code. No fiduciary has any liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any Seller Employee Benefit Plan. (j) None of the Seller Employee Benefit Plans provides retiree life or retiree health benefits except as may be required under Section 4980B of the Code or Section 601 of ERISA or comparable state law and at the expense of the participant or the participant's beneficiary. The Sellers and the ERISA Affiliates have at all times complied with the notice and health care continuation requirements of Section 4980B of the Code and Sections 601 through 608 of ERISA or comparable state law. (k) Except as set forth in Schedule 5.21(k) of the Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment becoming due to any Employee (current, former or retired), (ii) increase any benefits otherwise payable under any Seller Employee Benefit Plan, (iii) result in the acceleration of the time of payment or vesting of any benefits under any Seller Employee Benefit Plan (except as may otherwise be required under Section 411(d)(3) of the Code and related Treasury Regulations), (iv) qualify as a "change of control" or similar event under any Seller Employee Benefit Plan or (v) result in any payment becoming due to any Employee that could reasonably be expected to be nondeductible under Section 280G of the Code. (l) Except as set forth on Schedule 5.21(l) of the Disclosure Schedule, no stock or other security issued by the Sellers or any of their Affiliates forms or has formed a material part of the assets of any Seller Employee Benefit Plan or Seller Pension Plan. 30 (m) There has been no "mass layoff" or "plant closing" as defined by the Worker Adjustment and Retraining Notification Act or any similar state or local "plant closing" law ("WARN") with respect to the current or former Employees. (n) There has not been any event requiring any disclosure under Section 4041(c)(3)(C), 4063(a) or 4068(b) of ERISA with respect to any Seller Pension Plans. SECTION 5.22. Labor Matters. Except as set forth in Schedule 5.22 of the Disclosure Schedule, (i) there is no labor strike, dispute, slowdown, stoppage or lockout actually pending, threatened against or affecting the Business, and since December 31, 1998, there has not been any such action, (ii) none of the Sellers has received a written notice or other communication that a union claims to represent any of the Employees, nor has any union made such claim to the Sellers since December 31, 1998, (iii) none of the Sellers is bound by any collective bargaining or similar agreement, letter of understanding or any other agreement, formal or informal, with any labor organization or work rules or practices agreed to with any labor organization or employee association applicable to the Employees, (iv) none of the Employees is represented by any labor organization, and since December 31, 1998, there have been no union organizing activities among any of the Employees. SECTION 5.23. [Intentionally Omitted] SECTION 5.24. Ownership of Purchased Property. The Sellers are in the aggregate the owners of (or in the case of Purchased Property that is leased, subleased or licensed, hold a valid leasehold, subleasehold or license interest in) the Purchased Property. The Sellers will have, and at the Closing the Buyer will receive, good and valid title to all of the Purchased Property, free and clear of any Liens. SECTION 5.25. Condition of Purchased Property. The Purchased Property constitutes all of the assets (tangible and intangible), properties and rights necessary to conduct the Business in all material respects as currently conducted. SECTION 5.26. Environmental Matters. The Sellers have obtained, maintained in effect and are in material compliance with all licenses, permits and other authorizations required under all applicable laws, regulations and other requirements of governmental or regulatory authorities relating to pollution or to health, safety or to the protection of the environment ("ENVIRONMENTAL LAWS") and are and have in the past been in material compliance with all Environmental Laws. The Sellers have not performed or suffered any act which could give rise to, or has otherwise incurred, liability to any Person (governmental or not) under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq. ("CERCLA") or any other Environmental Laws, nor have the Sellers received notice of any such liability or any claim therefor or submitted notice pursuant to Section 103 of CERCLA or any analogous state or local statute, rule or regulation to any governmental agency with respect to any of its assets. The Sellers have not used any hazardous substance, hazardous waste, contaminant, pollutant or toxic substance (as such terms are defined in any applicable Environmental Law, "HAZARDOUS MATERIALS") on, at, beneath or near any of the Purchased Property or any surface waters or groundwaters thereon or thereunder. To the knowledge of the Sellers, the Sellers do not own or operate, and have never owned or operated, an underground 31 storage tank containing a regulated substance, as such term is defined in Subchapter IX of the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6991 et seq., or a surface impoundment, landfill, gas or oil well, PCB containing electrical equipment, urea formaldehyde containing materials, or asbestos containing materials. The Sellers have delivered or otherwise made available for inspection to the Buyer or its agents true, complete and correct copies of any inventories, reports, studies, assessments, analyses, evaluations, test or monitoring results possessed, available to or initiated by or on behalf of the Sellers pertaining to hazardous materials on, at, beneath or near any of the Purchased Property or any surface waters or groundwaters thereon or thereunder, or regarding the Sellers' compliance with or liability under any Environmental Law. SECTION 5.27. Transactions with Directors, Officers and Affiliates. Since December 31, 2000, there have been no transactions between any of the Sellers and any Affiliate of any Seller or, to the knowledge of the Sellers, any Family Members of any such Affiliate (other than inter-company transactions between Sellers). To the knowledge of the Sellers, since December 31, 2000, none of the officers, directors or employees of any of the Sellers, has been a director or officer of, or has had any direct or indirect interest in, any firm, corporation, association or business enterprise which during such period has been a supplier, customer or sales agent of any of the Sellers or has competed with or been engaged in any business of the kind similar to the Business. No Affiliates of the Sellers (other than the Sellers) or Family Members of such Affiliates owns or has any rights in or to any of the Purchased Property used by the Sellers in the Business. SECTION 5.28. Ownership of Shares. (a) Tilia understands that any Buyer Common Stock to be delivered pursuant to a Stock Payment Election (the "SHARES") has not been registered under the Securities Act, nor has it been registered or qualified under any state securities laws, and that Tilia's commitment to take and accept the Shares in satisfaction of the Contingent Consideration should a Stock Payment Election be made is pursuant to an exemption from such registration and qualification based in part upon Tilia's representations contained herein. (b) Tilia is familiar with the business and operations of the Buyer and has been given the opportunity to obtain from the Buyer all information requested by Tilia regarding its business plans and prospects. Tilia has such knowledge and experience in financial and business matters as is necessary to evaluate the merits and risks of owning the Shares, and is able to bear the economic risk of owning the Shares (including a complete loss of the value of the Shares). (c) Tilia confirms that neither the Buyer, nor any of its directors, executive officers, employees, Affiliates or agents has made any representations or warranties concerning their investment in the Buyer including, without limitation, any representations or warranties concerning the return Tilia may receive on its Shares or tax consequences that may arise in connection with the Shares other than such representations and warranties contained herein and contained in the Transaction Documents. In making the decision to acquire the Shares, Tilia has relied upon independent investigations made by it and by its professional advisors. Tilia and its advisors have been furnished any and all nonproprietary materials requested from the Buyer and 32 have been afforded the opportunity to ask questions concerning the Buyer, its business and any other matters relating to the Buyer, the transactions contemplated by the Transaction Documents and the offer and sale of the Shares. (d) Tilia hereby represents and warrants that it is an "accredited investor" as such term is defined in Rule 501(a) promulgated under the Securities Act. SECTION 5.29. Foreign Corrupt Practices Act. The Sellers understand and acknowledge that the Foreign Corrupt Practices Act ("FCPA") prohibits United States companies and individuals acting on their behalf, including the foreign subsidiaries or affiliates of U.S. companies and their employees, from paying or offering to pay "any money. . . gift. . . or anything of value" to any foreign official, political party official, or candidate for political office in order to influence a business decision, including the obtaining or retaining of business. The Sellers also understand and acknowledge that the FCPA requires companies to maintain books and records that accurately and fairly reflect corporate transactions and to establish a system of internal accounting controls to provide reasonable assurance to their own management and to their United States parent of the type of financial transactions undertaken by such companies and their employees. The Sellers represent and warrant that the Sellers and each employee and, to the knowledge of the Sellers, each agent of the Sellers has complied in all respects with the FCPA and the requirements it imposes. SECTION 5.30. Insurance Policies. Schedule 5.30 of the Disclosure Schedule is a description of all insurance policies held by Sellers concerning the Purchased Property. All these policies are in the respective principal amounts set forth in Schedule 5.30 of the Disclosure Schedule. SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer hereby represents and warrants to the Sellers as follows: SECTION 6.1. Corporate Organization. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority and all necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its businesses as now conducted. The Buyer is duly qualified to do business as a foreign corporation, and is in good standing in each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary, except any such jurisdiction where the failure to be so qualified and in good standing would not have a material adverse effect on the business, financial condition or results of operations of the Business as currently conducted and taken as a whole. SECTION 6.2. Authorization and Validity of Agreement. The Buyer has all requisite corporate power and authority to enter into the Transaction Documents and to carry out its obligations thereunder. The execution and delivery of the Transaction Documents and the performance of the Buyer's obligations thereunder have been duly authorized by all necessary corporate action by the Buyer, and no other proceedings on the part of the Buyer are necessary to authorize such execution, delivery and performance. Each of the Transaction Documents has been duly executed by the Buyer and constitutes its valid and binding obligation, enforceable 33 against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium or similar laws of general application relating to or affecting creditors' rights generally and except for the limitations imposed by general principles of equity. SECTION 6.3. No Conflict or Violation. Subject to obtaining all consents and approvals set forth on Schedule 6.4 of the Disclosure Schedule and except for filings as may be required under the HSR Act and the rules and regulations thereunder, the execution, delivery and performance by the Buyer of the Transaction Documents (i) does not and will not violate or conflict with any provision of the Certificate of Incorporation and the By-laws of the Buyer (ii) does not and will not violate any provision of law, rule or regulation, or any order, judgment or decree of any court or other governmental or regulatory authority; (iii) does not violate or will not result in a breach of or constitute (with due notice or lapse of time or both) a default under, or give rise to any acceleration of remedies or any right of termination under, any contract, lease, sublease, occupancy agreement, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which Buyer is a party or by which either is bound or to which any of the Buyers' properties or assets is subject, except for such breaches, defaults and accelerations as would not have a material adverse effect on the business, financial condition or results of operations of its business as currently conducted taken as a whole. SECTION 6.4. Approvals and Consents. Except (i) as set forth on Schedule 6.4 of the Disclosure Schedule, (ii) as may be required to transfer any Permits, and (iii) such consents, approvals and filings, the failure to obtain or make would not, individually or in the aggregate, have a material adverse effect on the ability of the Buyer to consummate the transactions contemplated hereby, the execution, delivery and performance of the Transaction Documents on behalf of the Buyer do not require the consent, waiver, authorization or approval of, or filing with, any government, governmental or regulatory body or agency or other entity or Person. SECTION 6.5. Delivery of the Shares. (a) The Shares, when issued in accordance with the provisions hereof, will be validly issued by the Buyer, fully paid and nonassessable securities of the Buyer, free of any preemptive rights and issued in compliance with applicable federal and state securities laws. The Shares will be freely tradable by persons other than Affiliates of the Buyer. (b) As of the date of this Agreement, the authorized capital stock of the Buyer consists of 50,000,000 shares of Buyer Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per share (the "PREFERRED STOCK"), of which 250,000 are designated as Series A Junior Preferred Stock. As of March 3, 2002, there were (1) 6,936,244 shares of Buyer Common Stock issued and outstanding, (2) no shares of Preferred Stock issued and outstanding, (3) 1,180,582 shares of Buyer Common Stock reserved for issuance upon the exercise of stock options issued by the Buyer to current or former employees and directors of the Buyer and its Affiliates, (4) 462,479 shares of Buyer Common Stock subject to issued and outstanding options, and (5) no other outstanding rights, warrants, convertible securities, commitment of sales or liens granted by the Buyer or any of its Affiliates relating to or entitling any person to purchase or otherwise to acquire any shares of the capital stock of the Buyer or any of its Affiliates. 34 SECTION 6.6. SEC Filings; Financial Statements. (a) Except as set forth on Schedule 6.6, the Buyer has timely filed all forms, reports and documents required to be filed with the SEC since December 31, 2000 (collectively, the "SEC REPORTS"). The SEC Reports (i) were prepared in accordance in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, as in effect at the time they were filed and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) The financial statements contained in the SEC Reports were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the financial position of the Buyer as at the respective dates thereof and the statements operations and cash flows of the Buyer for the periods indicated, except that the unaudited interim financial statements were or are subject to normal year-end adjustments. SECTION 7. COVENANTS OF THE SELLERS. The Sellers, jointly and severally, covenant as follows: SECTION 7.1. Conduct of Business Before the Closing Date. (a) Except as set forth on Schedule 7.1 of the Disclosure Schedule, without the prior written consent of the Buyer, between the date hereof and the Closing Date, the Sellers shall not, except as required or expressly permitted pursuant to the terms hereof: (i) make any material change in the conduct of the Business or enter into any transaction in an amount greater than $25,000 or having a term or duration of more than one year or other than in the ordinary course of business consistent with past practices; (ii) make any sale, assignment, transfer, abandonment or other conveyance of the Purchased Property or any part thereof, except transactions pursuant to existing contracts set forth in the Schedules hereto and dispositions of inventory or of worn-out or obsolete Equipment and Machinery in the ordinary course of business consistent with past practice; (iii) subject any of the Purchased Property, or any part thereof, to any Lien or suffer such to exist other than such Liens as may arise in the ordinary course of business consistent with past practice by operation of law and that will not, individually or in the aggregate, interfere materially with the use, operation, enjoyment or marketability of any of the Purchased Property; (iv) acquire any assets, raw materials or properties, other than in the ordinary course of business consistent with past practice; 35 (v) enter into any new (or amend any existing) Employee Benefit Plan or employment, severance or consulting agreement, grant any general increase in the compensation of officers or employees (including any such increase pursuant to any Employee Benefit Plan) or grant any increase in the compensation payable or to become payable to any employee, except in accordance with pre-existing contractual provisions or consistent with past practice; (vi) fail to keep in full force and effect insurance comparable in amount and scope of coverage maintained in respect of the Business; (vii) take any other action that would cause any of the representations and warranties made by them in the Transaction Documents not to remain true and correct in all material respects (except as to representations and warranties which are qualified as to materiality, which representations and warranties must remain true and correct in all respects); (viii) without notifying the Buyer in writing at least five (5) Business Days prior thereto, (A) make any change in any tax election or in any accounting principle, method, estimate or practice (except for any such change required by reason of a concurrent change in GAAP) or (B) except in the ordinary course of business consistent with past practice, write down the value of any inventory or write off as uncollectible any accounts receivable; (ix) make, enter into, modify, amend in any material respect, renew, extend or terminate any Assigned Contract in an amount greater than $50,000 or having a term or duration of more than one year or other than in the ordinary course of business consistent with past practice; (x) make any Restricted Payments, other than accrued bonus payments to existing Employees to the extent reflected in the December Balance Sheet and Allowed Distributions; (xi) settle, release or forgive any claim or litigation or waive any right, in an amount greater than $25,000 or having a term or duration of more than one year or other than in the ordinary course of business and consistent with past practice; (xii) enter into any real property lease, sublease or occupancy agreement or assign or sublet any existing real property lease, sublease or occupancy agreement; or (xiii) agree or commit to do any of the foregoing. (b) From and after the date hereof and until the Closing Date, the Sellers shall: (i) continue to maintain, in all material respects, the Purchased Property in accordance with present practice in a condition suitable for its current use; 36 (ii) file, when due or required, subject to applicable extensions, federal, state, foreign and other Tax Returns and other reports required to be filed and pay when due all Taxes, assessments, fees and other charges lawfully levied or assessed against them, unless the validity thereof is contested in good faith and by appropriate proceedings diligently conducted; (iii) continue to conduct the Business in the ordinary course of business consistent with past practice; (iv) keep the books of account, records and files in the ordinary course of business and in accordance with existing practice; (v) use commercially reasonable efforts to maintain existing business relationships with landlords, lenders, suppliers and customers with respect to the Business in accordance with past practice; and (vi) use all cash generated by the Business solely for working capital purposes in accordance with past practice. SECTION 7.2. Consents and Approvals. The Sellers (i) shall, at their cost and expense, and with the reasonable cooperation of the Buyer, use their best efforts to obtain all necessary consents, waivers, authorizations and approvals of all governmental and regulatory authorities, domestic and foreign, and of all other Persons required in connection with the execution, delivery and performance by it of the Transaction Documents, and (ii) shall diligently assist and cooperate with the Buyer in preparing and filing all documents required to be submitted by the Buyer to any governmental or regulatory authority, domestic or foreign, in connection with such transactions and in obtaining any governmental consents, waivers, authorizations or approvals which may be required to be obtained by the Buyer in connection with such transactions (which assistance and cooperation shall include, without limitation, timely furnishing to the Buyer all information concerning the Sellers that counsel to the Buyer determines is required to be included in such documents or would be helpful in obtaining any such required consent, waiver, authorization or approval). SECTION 7.3. Access to Properties and Records. Subject to compliance with that certain Confidentiality Agreement dated December 5, 2001 between Sellers and the Buyer, the Sellers shall afford to the Buyer, and to the accountants, counsel and representatives of the Buyer, reasonable access during normal business hours throughout the period prior to the Closing Date (or the earlier termination of this Agreement pursuant to Section 14 hereof) to all properties, books, contracts, commitments, and records of the Sellers relating to the Business and, during such period, shall furnish promptly to the Buyer all other information concerning the Business, its properties and its personnel as the Buyer may reasonably request, provided that no investigation or receipt of information pursuant to this Section 7.3 shall qualify any representation or warranty of the Sellers or the conditions to the obligations of the Buyer. Neither Buyer nor any of its representatives or agents shall contact any customers, vendors or employees of Sellers without Seller's prior consent, which shall not be unreasonably withheld. 37 SECTION 7.4. Negotiations. From and after the date hereof until the Closing Date or termination of the Agreement pursuant to Section 14 hereof, none of the Sellers, any Affiliate, nor any of their respective officers or directors nor anyone acting on behalf of the Sellers or such persons shall, directly or indirectly, encourage, solicit, engage in negotiations with, or provide any information to, any Person, firm, or other entity or group (other than the Buyer or its representatives) concerning any merger, sale of substantial assets, purchase or sale of shares of capital stock or similar transaction involving either of the Sellers, the Business or any other transaction inconsistent with the transactions contemplated hereby. The Sellers shall promptly communicate to the Buyer any inquiries or communications concerning any such transaction which they may receive or of which they may become aware. SECTION 7.5. Best Efforts. Upon the terms and subject to the conditions of this Agreement, the Sellers will use their best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable consistent with applicable law to consummate and make effective in the most expeditious manner practicable the transactions contemplated hereby. SECTION 7.6. Covenant Not To Compete. (a) The Sellers acknowledge that the agreements and covenants contained in this Section 7.6 are essential to protect the value of the Business being acquired by the Buyer. Therefore, the Sellers agree that for the period commencing on the Closing Date and ending on the fourth (4th) anniversary of the Closing Date (such period is hereinafter referred to as the "RESTRICTED PERIOD"), the Sellers shall not anywhere in the United States of America or any of the countries in which the Sellers have engaged in business on the Closing Date, participate or engage, for themselves, through or on behalf of or in conjunction with any Person, whether as an agent, consultant, shareholder, partner, joint venturer, investor or in any other capacity, in the Non-Compete Activities (defined below); provided, however, that the foregoing shall not prohibit the ownership by the Sellers of equity securities of a public company in an amount not to exceed 2% of the issued and outstanding shares of such company. For purposes of this Agreement, the "NON-COMPETE ACTIVITIES" means any business activity involving (i) the manufacture, marketing or sale of vacuum packaging systems and related accessories for household or other non-commercial use; or (ii) food storage, preservation or preparation which is competitive with the Sellers' business as conducted and proposed to be conducted as of the Closing Date. (b) During such Restricted Period, the Sellers agree that they will not at any time or for any reason, with respect to the Non-Compete Activities, (i) solicit or divert any business or clients or customers away from the Buyer or its Affiliates; (ii) induce any customers, clients, suppliers, agents or other Persons under contract or otherwise associated or doing business with the Buyer or its Affiliates, to reduce or alter any such association or business with the Buyer or its Affiliates; and/or (iii) knowingly solicit any person in the employment of the Buyer or its Affiliates to (A) terminate such employment, and/or (B) accept employment, or enter into any consulting arrangement, with any Person other than the Buyer or its Affiliates. (c) The Sellers shall cause each of the persons listed on Schedule 7.6 hereto to enter into the Non-Competition Agreements at or prior to the Closing Date. 38 (d) The Sellers agree that a monetary remedy for a breach of the agreement set forth in Section 7.6(a) hereof will be inadequate and impracticable and further agree that such a breach would cause the Buyer irreparable harm, and that the Buyer shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damages. In the event of such a breach, the Sellers agree that the Buyer shall be entitled to such injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions as a court of competent jurisdiction shall determine. (e) If any provision of this Section 7.6 is invalid in part, it shall be curtailed, as to time, location or scope, to the minimum extent required for its validity under the laws of the United States or any applicable law and shall be binding and enforceable with respect to the Sellers as so curtailed. SECTION 7.7. Notice of Breach. Through the Closing Date, the Sellers shall promptly give the Buyer written notice with particularity upon having knowledge of any matter that shall constitute a material breach of any representation, warranty, agreement or covenant of any of the Sellers contained in this Agreement. SECTION 7.8. Bulk Sales Compliance. The Buyer hereby waives compliance by the Sellers with any applicable laws relating to bulk transfers in connection with the transactions contemplated hereby. The Sellers shall indemnify the Buyer with respect to any failure to comply with such bulk transfer laws. SECTION 7.9. Assignment of Contracts and Warranties. At the Closing and effective as of the Closing Date, the Sellers shall assign to the Buyer all their rights under the Assigned Contracts. Notwithstanding the foregoing, no Assigned Contract shall be assigned contrary to law or the terms of such Assigned Contract and, with respect to Assigned Contracts that cannot be assigned to the Buyer at the Closing Date, the performance obligations of the Sellers, as the case may be, thereunder shall, unless not permitted by such Assigned Contract, be deemed to be subleased or subcontracted to the Buyer until such Assigned Contract has been assigned. Each of the Sellers shall (i) use its best efforts to obtain all necessary consents, (ii) cooperate with the Buyer in any arrangement designed to provide to the Buyer the benefits (including the exercise of rights) under any such Assigned Contracts, including enforcement for the benefit of the Buyer (and at the Buyer's expense) of any and all rights of Sellers against a third party thereto arising out of the breach or cancellation by such third party or otherwise, (iii) hold all monies paid thereunder in trust for the account of the Buyer and (iv) remit all such money without set-off of any kind whatsoever to the Buyer as promptly as possible. SECTION 7.10. Change of Name; Intellectual Property. As soon as practicable after the Closing Date but in any event prior to June 30, 2002, each of the Sellers shall take all action necessary to change their respective corporate names to a name that is not (and that is not confusingly similar to) Tilia International Inc., Tilia, Inc. or Tilia Canada, Inc. and does not include the "Tilia" name in any form, it being the intent of the parties hereto that from and after the Closing Date, the Buyer will have the sole and exclusive right as against the Sellers and all other Parties to conduct business under such name and that the Buyer may commence doing so at time of the Closing; provided, however, that the Buyer shall negotiate in good faith an agreement with Tilia Trust, that will allow Tilia Trust to retain its name after the Closing Date, upon certain 39 agreed upon terms and conditions relating to the limitations on the use of such name. The Sellers shall not, at any time after the Closing Date, use, seek to register, register or authorize others to use, seek to register or register the Intellectual Property or any other intellectual property substantially or confusingly similar thereto anywhere in the world and shall not challenge Buyer's right to use, seek to register or register the Intellectual Property anywhere in the world. SECTION 7.11. Estoppel Certificates. Each of the Sellers shall use its reasonable best efforts to obtain estoppel certificates in form and substance reasonably satisfactory to the Buyer from its respective landlord under the leases, subleases or occupancy agreements for the Business Locations in favor of the Buyer and any lender providing financing for the purchase of the Purchased Property. SECTION 7.12. Monthly Financials. The Sellers shall, no later than the 10th day following completion of each calendar month commencing with January, 2002, and prior to the Closing Date, deliver to the Buyer their internally generated profit and loss statement, balance sheet and cash flow statement on a monthly basis, in form consistent with those previously provided to the Buyer. SECTION 7.13. Assistance. The Sellers agree to make reasonable efforts to provide, and will cause their respective officers, employees and advisors to make reasonable efforts to provide, such cooperation as is reasonably necessary in connection with the arrangement of any financing to be consummated in respect of the transactions contemplated by this Agreement, including (i) participation in meetings, due diligence sessions and road shows, (ii) the preparation of, and provision of information for inclusion in, the offering memoranda, private placement memoranda, prospectuses and similar documents, (iii) the provision of requested reports (environmental and others), audited financial statements, certificates or documents and comfort letters and consents of accountants as may be reasonably requested by the Buyer, and (iv) taking such other actions as are reasonably required to be taken by the Sellers in connection with any financing. SECTION 7.14. Audited Financial Statements. The Sellers acknowledge that Arthur Andersen LLP has agreed, subject to review of the offering documents, to the inclusion of the Financial Statements in any materials, including materials filed with the SEC and any state of foreign regulatory authority, used in connection with obtaining the financing contemplated by any commitment letters, any registered exchange offer required to be made in connection with such financing and any subsequent financing or securities offering ("FINANCING MATTERS"). The Sellers shall use reasonable efforts to cause Arthur Andersen LLP to provide to the Buyer, at the Buyer's expense, (a) any consents required in connection with the use of the Financial Statements with respect to any Financing Matter, (b) comfort letters, in form and substance customary for such matters, with respect to the periods covered by the Financial Statements, and (c) such other assistance as the Buyer may reasonably request. SECTION 7.15. Liquidation of Tilia Hungary. Tilia shall cause the liquidation and winding up of Tilia Hungary, with the result that (i) Tilia will be the owner of all the capital stock of Tilia U.S. and Tilia Canada, (ii) Tilia will succeed to all of the assets, liabilities and business of Tilia Hungary, and (iii) Tilia Hungary will not continue to conduct any business. 40 SECTION 7.16. Tilia Shareholder Approval. Prior to the Closing Date, Tilia shall obtain all necessary shareholder approval or ratification in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement. SECTION 7.17. Tax Matters. The Sellers shall provide to the Buyer copies of any and all of the Sellers' corporate income tax returns, corporate books and records including, without limitation, shareholder and director consents and minutes at or prior to the Closing Date. SECTION 8. COVENANTS OF THE BUYER. SECTION 8.1. Consents and Approvals. The Buyer (i) shall, at its cost and expense, and with the cooperation of Sellers, use its best efforts to obtain all necessary consents, waivers, authorizations and approvals of all governmental and regulatory authorities, domestic and foreign, and all other Persons required to be obtained by the Buyer in connection with the execution, delivery and performance by it of the Transaction Documents, and (ii) shall diligently assist and cooperate with the Sellers in preparing and filing all documents required to be submitted by the Sellers to any governmental or regulatory authority, domestic or foreign, in connection with such transactions and in obtaining any governmental consents, waivers, authorizations or approvals which may be required to be obtained by the Sellers in connection with such transactions (which assistance and cooperation shall include, without limitation, timely furnishing to the Sellers all information concerning the Buyer that counsel to the Sellers determines is required to be included in such documents or would be helpful in obtaining any such required consent, waiver, authorization or approval). SECTION 8.2. Access to Tax Records. From and after the Closing, the Buyer shall provide representatives of the Sellers with reasonable access to all records and files relating to taxation in connection with the Business for periods ending on or prior to the Closing Date. The Buyer shall retain such records and files for a period of six (6) years after the Closing Date. SECTION 8.3. Notice of Breach. Through the Closing Date, the Buyer shall promptly give the Sellers written notice with particularity upon having knowledge of any matter that shall constitute a material breach of any representation, warranty, agreement or covenant of the Buyer contained in this Agreement. SECTION 8.4. Operations of Business Post Close. Between the Closing Date and continuing through December 31, 2004, the Buyer agrees as follows: (a) The Buyer agrees to operate and manage the Business consistent with reasonable business practices. The Buyer further agrees and undertakes to the Sellers that the Buyer will use its reasonable efforts to promote, support and continue the operations of the Business and will act in good faith to with regard to the achievement of the Business EBITDA for 2002, 2003 and 2004. Notwithstanding the foregoing and subject to Section 8.5(b), the Buyer shall be entitled to do any act (or refrain therefrom) in the conduct of the Business if it acts in good faith, consistent with reasonable business practices and reasonably considers such action (or determination not to act) to be in the best interests of the business of the Buyer and not 41 for the purpose of adversely affecting the calculation of the 2002, 2003 or 2004 Business EBITDA. (b) The Buyer agrees that it will not, without the prior approval of the Sellers' Representative, mix the business or revenue of the Business with the businesses or revenues of any other subsidiaries or divisions of the Buyer in a manner that , after taking into account all positive and negative effects, materially adversely affects the calculation of the 2002, 2003 or 2004 Business EBITDA for purposes of the Contingent Consideration and payments to the Sellers. (c) In the event of the sale of the stock or substantially all of the assets of the Business or the Buyer to a third party prior to December 31, 2004, the Buyer shall, at or prior to the closing of such sale: (i) fund the Contingent Consideration (less any amounts claimed by the Buyer under Section 13 hereof), calculated pursuant to Section 3.2(d)(iii), into an escrow account for the benefit of the Sellers (or their assignees), assuming the Average Annual Business EBITDA is $46,000,000, and (ii) if the employment of any two of the persons listed on Schedule 8.4 hereto (or the replacements of such persons) is terminated in connection with the sale or within ninety (90) days following such sale for any reason other than the voluntary termination by the employee, then the Contingent Consideration (less any amounts claimed by the Buyer under Section 13 hereof) shall be paid to Tilia or its assigns or designees on the date of termination of the second such employee to be terminated, assuming the Average Annual Business EBITDA is $46,000,000. SECTION 8.5. Best Efforts. Upon the terms and subject to the conditions of this Agreement, the Buyer will use its best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable consistent with applicable law to consummate and make effective in the most expeditious manner practicable the transactions contemplated hereby. SECTION 9. EMPLOYEES. SECTION 9.1. Offer of Employment. Schedule 9.1 hereto sets forth a true and complete list of all individuals who are employees of the Business as of the date hereof ("LISTED EMPLOYEES"). The Buyer intends to, but shall not be obligated to, offer to hire, effective as of the Closing Date, each of the Listed Employees. The employees who accept such offers of employment shall be referred to herein as "HIRED EMPLOYEES". SECTION 9.2. Liability. (a) Except for the Buyer Termination Liabilities, neither the Buyer nor its Affiliates shall assume or have any direct or indirect obligation or liability of any nature, whether matured or unmatured, accrued or contingent, due or to become due or otherwise, to any Hired Employee or other present or former employee of any Seller or its respective Affiliates, or to any dependent, survivor or beneficiary thereof, arising out of or in relation to such person's employment with the Sellers or their respective Affiliates or the termination of such employment (the "SELLERS' EMPLOYMENT LIABILITIES") and the Sellers shall retain and be fully liable for all of 42 Sellers' Employment Liabilities, including any WARN or COBRA or comparable state liabilities that arise prior to the Closing Date. (b) As provided by Treas. Reg.ss.54.4980B-9 Q&A-8(c), the Buyer shall satisfy its obligations under Treas. Reg.ss.54.4980B-9 (the "COBRA Obligations") to any "M&A qualified beneficiaries" (as defined in Treas. Reg.ss.54.4980B-9 Q&A-4(a)) on and after the Closing Date. The Sellers shall notify the Buyer, within five (5) Business Days of the later of the Closing Date or the date on which the Sellers cease to provide any health plan coverage to any Seller employee, as to the identity of all such M&A qualified beneficiaries and their respective contact information. SECTION 9.3. Rights. Nothing herein expressed or implied shall confer upon any Hired Employee or other employee or former employee of the Sellers or legal representatives thereof, any rights or remedies, including, without limitation, right to employment or continued employment for any specified period, under or by reason of this Agreement. SECTION 9.4. Employee Benefits Arrangements. (a) As of the Closing Date, Buyer shall make available to Hired Employees, a total compensation package of salary, bonus opportunity and employee benefits (excluding stock options) that, in the aggregate, is substantially similar to that being paid to such employees by the Sellers immediately prior to the Closing Date. The Buyer shall take such reasonable actions as may be required to permit any electing Hired Employees to roll over all or any part of their account balances (including any outstanding plan loans) in the Tilia, Inc. 401(k) Profit Sharing Plan to the comparable benefit plan or plans maintained by the Buyer. With respect to any outstanding plan loans under the Tilia, Inc. 401(k) Profit Sharing Plan relating to the Hired Employees, unless expressly contemplated by this Agreement, in no event will the transactions contemplated by this Agreement alter the terms of such loans or the controlling provisions in the Tilia, Inc. 401(k) Profit Sharing Plan; provided, however, that, such plan loans shall not be deemed to be in default solely by reason of such employees' termination of employment with the Sellers. (b) The Buyer shall undertake commercially reasonable efforts to cause each of its benefit plans to recognize (i) for purposes of satisfying any deductibles, co-pays and out-of-pocket maximums during the coverage period that includes the Closing Date, any payment made by any Hired Employee towards deductibles, co-pays and out-of-pocket maximums in any of the Sellers' health or other insurance plan incurred during the portion of the calendar year prior to the Closing Date, in which the Closing Date occurs for the purposes of satisfying applicable deductible, co-insurance, and maximum out-of-pocket expenses, and (ii) for all purposes, including for purposes of eligibility to participate, early retirement eligibility, early retirement subsidies, vesting, schedule of benefits and benefit accrual (including vacation and PTO accrual), all service with the Sellers, including service with predecessor employers that was recognized by the Sellers; provided that such service shall not be recognized to the extent such recognition would result in or have the effect of a duplication of benefits, the determination of which will be in the reasonable discretion of the Buyer. 43 (c) With respect to any Hired Employee who participated in a Seller Benefit Plan immediately prior to the Closing Date which was a "flexible spending arrangement," within the meaning of Proposed Treasury Regulation ss. 1.125-2 (a "SELLER FSA"), the Buyer shall permit such Hired Employee to participate after the Closing Date in a flexible spending account maintained by the Buyer on a continuation basis, and shall credit such Hired Employee with an account balance equivalent to that which applied, as of the Closing Date, to the Hired Employee under the applicable Seller FSA. The Sellers shall, as soon as practicable after the Closing Date, pay to the Buyer, by wire transfer in a cash lump sum, the aggregate amount deferred through such date by Hired Employees under such Seller FSAs during the plan year in which the Closing Date occurs, less claims paid for such year on behalf of such Hired Employees under the Seller FSAs. The Buyer shall, as soon as practicable after the Closing Date, pay to the Sellers, by wire transfer in a cash lump sum, the excess of the aggregate amount of the claims paid with respect to Hired Employees and their dependents under the Seller FSAs during the year in which the Closing Date occurs over the aggregate amount deferred through such date by such Hired Employees under the Seller FSAs. SECTION 10. HSR ACT; GOVERNMENTAL APPROVALS. (a) Each of the Sellers and the Buyer shall use its best efforts to file, or cause its "ultimate parent entity" to file, as soon as practicable notifications under the HSR Act in connection with this Agreement and the transactions contemplated by it, and to respond as promptly as practicable to any inquiries received from the Federal Trade Commission or the Antitrust Division of the Department of Justice for additional information or documentation, and to respond as promptly as practicable to all inquiries and requests received from any State Attorney General or other Government body in connection with antitrust matters. The Buyer will pay the HSR Fee at the time of filing, and the Sellers shall reimburse the Buyer one-half of such fees on the Closing Date in accordance with Section 3.1(a)(i) of the Agreement. (b) Each of the parties hereto shall use all commercially reasonable efforts (i) to obtain from any Government body any other Permits required to be obtained or made by the Buyer or the Sellers in connection with this Agreement and the transactions contemplated by it and (ii)(x) to make all necessary filings, and (y) thereafter make any other required submissions with respect to this Agreement and the transactions contemplated by it required under the HSR Act and any other applicable Government body. The parties hereto shall cooperate with each other in connection with the making of all such filings. SECTION 11. CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations of the Sellers to consummate the transactions contemplated by the Transaction Documents are subject to the fulfillment, at or before the Closing Date, of each of the following conditions, any one or more of which may be waived by the Sellers in its sole discretion: SECTION 11.1. Representations and Warranties of the Buyer. All representations and warranties made by the Buyer in this Agreement shall be true and correct in all material respects (except as to representations and warranties which are qualified as to materiality, which representations and warranties shall be true and correct in all respects) on and as of the Closing Date as if again made by the Buyer on and as of such date, and the Sellers shall 44 have received a certificate dated the Closing Date and signed by the chief executive officer or chief financial officer of the Buyer to that effect. SECTION 11.2. Performance of the Obligations of the Buyer. The Buyer shall have performed in all material respects all obligations required under this Agreement to be performed by it on or before the Closing Date, and the Sellers shall have received a certificate dated the Closing Date and signed by the chief executive officer or chief financial officer of the Buyer to that effect. SECTION 11.3. No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or other governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, domestic or foreign, that declares any of the Transaction Documents invalid or unenforceable in any respect or which prevents the consummation of the transactions contemplated hereby shall be in effect. SECTION 11.4. HSR Act; No Governmental Restraints. (a) HSR Act. The waiting period (and any extension thereof) applicable to this Agreement and the transactions contemplated by it under the HSR Act shall have been terminated or shall have expired. (b) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of this Agreement and the transactions contemplated by it shall be in effect. SECTION 11.5. Consents and Approvals. All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, required in connection with the execution, delivery and performance of the Transaction Documents shall have been duly obtained and shall be in full force and effect on the Closing Date. SECTION 11.6. Liquidation of Tilia Hungary. Tilia shall have caused the liquidation and winding up of Tilia Hungary. SECTION 11.7. Buyer Closing Documents. The Buyer shall have delivered to the Sellers the following documents: (a) officer's certificates pursuant to Sections 11.1 and 11.2; (b) all instruments that are necessary or desirable to effect the assumption by Buyer of the Assumed Liabilities, including the Assignment and Assumption Agreement; (c) a duly executed Patents Assignment Agreement; (d) a duly executed Trademark Assignment Agreement; (e) a duly executed Domain Name Assignment Agreement; 45 (f) a duly executed Short Term Note; (g) a duly executed Long Term Note; (h) duly executed Escrow Agreements; (i) an opinion of counsel to the Buyer in form and substance reasonably satisfactory to counsel to the Sellers; and (j) such other documents relating to the transactions contemplated by the Transaction Documents to be consummated at the Closing as the Sellers shall reasonably request. SECTION 11.8. Legal Matters. All certificates, instruments, opinions and other documents required to be executed or delivered by or on behalf of the Buyer under the provisions of the Transaction Documents, and all other actions and proceedings required to be taken by or on behalf of the Buyer in furtherance of the transactions contemplated hereby and thereby, shall be reasonably satisfactory in form and substance to counsel for the Sellers. SECTION 12. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer to consummate the transactions contemplated by the Transaction Documents are subject to the fulfillment, at or before the Closing Date, of each of the following conditions, any one or more of which may be waived by the Buyer in its sole discretion: SECTION 12.1. Representations and Warranties of the Sellers. All representations and warranties made by the Sellers in this Agreement shall be true and correct in all material respects (except as to representations and warranties which are qualified as to materiality, which representations and warranties shall be true and correct in all respects) on and as of the Closing Date as if again made by the Sellers on and as of such date, and the Buyer shall have received a certificate dated the Closing Date and signed by the chief executive officer or chief financial officer of each of the Sellers to that effect with respect to the respective Seller. SECTION 12.2. Performance of the Obligations of the Sellers. The Sellers have performed in all material respects all obligations required under this Agreement to be performed by them on or before the Closing Date, and the Buyer shall have received a certificate dated the Closing Date and signed by the chief executive officer or chief financial officer of each of the Sellers to that effect with respect to the respective Seller. SECTION 12.3. Consents and Approvals. All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other Person required in connection with the execution, delivery and performance of the Transaction Documents shall have been duly obtained and shall be in full force and effect on the Closing Date. SECTION 12.4. No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or other governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, domestic or foreign, that 46 declares any of the Transaction Documents invalid or unenforceable in any respect or which prevents the consummation of the transactions contemplated hereby shall be in effect. SECTION 12.5. Seller Closing Documents. The Sellers shall have delivered to the Buyer the following documents: (a) a certificate, executed by the Secretary of each Seller, certifying the board of directors and the shareholders of such Seller have approved the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby (with copies of the resolutions duly adopted by such Seller's board of directors and shareholders attached), and certifying the incumbency of the officer or officer's of such Seller signing the Transaction Documents; (b) the officer's certificate referred to in Section 12.2; (c) a certificate (dated not less than 5 Business Days prior to the Closing Date) of the Secretary of State of the jurisdiction of each Seller's state of incorporation as to the good standing of such Seller in such jurisdiction; (d) a certification of non-foreign status from each Seller that is selling the Purchased Property consisting of a United States real property interest (within the meaning of Section 897(c) of the Code) pursuant to this Agreement, in the form and manner that complies with the requirements of Section 1445 of the Code and the regulations promulgated thereunder; (e) the Files and Records forming a part of the Purchased Property; (f) the Assignment and Assumption Agreement; (g) opinions of counsel to the Sellers and those Persons listed on Exhibits C-1 and C-2 in form and substance reasonably satisfactory to counsel to the Buyer; (h) such other documents relating to the transactions contemplated by the Transaction Documents as the Buyer reasonably requests; (i) a duly executed Trademark Assignment Agreement; (j) a duly executed Patent Assignment Agreement; (k) a duly executed Domain Name Assignment Agreement; (l) duly executed Escrow Agreements; (m) physical possession and control of the Purchased Property; (n) all consents that are required to transfer the Assigned Contracts and the Assumed Liabilities; and (o) such other documents relating to the transactions contemplated by the Transaction Documents to be consummated at the Closing as the Sellers shall reasonably request. 47 SECTION 12.6. Legal Matters. All certificates, instruments, opinions and other documents required to be executed or delivered by or on behalf of the Sellers under the provisions of the Transaction Documents, and all other actions and proceedings required to be taken by or on behalf of the Sellers in furtherance of the transactions contemplated hereby and thereby, shall be reasonably satisfactory in form and substance to counsel for the Buyer. SECTION 12.7. Employment Agreements. The Buyer and the other parties thereto shall have entered into the Employment Agreements on terms satisfactory to the Buyer. SECTION 12.8. HSR Act; No Governmental Restraints. (a) HSR Act. The waiting period (and any extension thereof) applicable to this Agreement and the transactions contemplated by it under the HSR Act shall have been terminated or shall have expired. (b) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of this Agreement and the transactions contemplated by it shall be in effect. SECTION 12.9. Business EBITDA. The aggregate Business EBITDA (after adding back any Allowed Distributions that have been deducted in such period in calculating Business EBITDA) for each month for which the internally generated financial statements have been delivered to the Buyer prior to the Closing Date shall be equal to the budgeted Business EBITDA for such periods as described on EXHIBIT K attached hereto. SECTION 12.10. Liquidation of Tilia Hungary. Tilia shall have caused the liquidation and winding up of Tilia Hungary, with the result that (i) Tilia is the owner of all the capital stock of Tilia U.S. and Tilia Canada, (ii) Tilia will have succeeded to all of the assets, liabilities and business of Tilia Hungary, and (iii) Tilia Hungary does not continue to conduct any business. SECTION 12.11. Financing. The Buyer shall have in place on the Closing Date sufficient financing to consummate the transactions contemplated by the Transaction Documents. SECTION 12.12. Accounts. The Sellers shall have consolidated all Cash of the Sellers in a single bank account located within the United States of America, and evidence of such consolidation shall have been provided to the Buyer at or prior to the Closing Date. All Cash Equivalents of the Sellers shall be located within the United States of America at or prior to the Closing Date, and evidence of such existence shall have been provided to the Buyer at or prior to the Closing Date. SECTION 12.13. Shareholder Approval. Tilia shall have obtained all necessary shareholder approval in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement. SECTION 13. INDEMNIFICATION. 48 SECTION 13.1. Indemnification by the Sellers. Notwithstanding the Closing or the delivery of the Purchased Property and regardless of any investigation at any time made by or on behalf of the Buyer or of any knowledge or information that the Buyer may have, the Sellers shall indemnify and fully defend, save and hold the Buyer, any Affiliate of the Buyer and its directors, officers and employees (the "BUYER INDEMNITEES"), harmless from and against any and all damages, liabilities, losses, costs, expenses (including all reasonable attorneys' fees and expenses of investigation incurred by the Buyer Indemnitees in any action or proceeding between the Sellers and the Buyer Indemnitees or between the Buyer Indemnitees and any third party or otherwise), deficiencies, interests, penalties, impositions, assessments or fines (collectively, "BUYER LOSSES"), whether or not in connection with a third-party claim, arising out of, resulting from or related to any and all the Sellers' Events of Breach. As used herein, "SELLERS' EVENTS OF BREACH" shall be and mean any one or more of the following: (a) any untruth or other breach of any representation or warranty of the Sellers contained in the Transaction Documents; (b) any failure of the Sellers duly to perform or observe any term, provision, covenant, agreement contained herein on the part of the Sellers to be performed or observed; and (c) any claim or cause of action by any party against any Buyer Indemnitee, with respect to any liabilities of the Sellers and Affiliates of the Sellers other than the Assumed Liabilities. provided, however, that (i) the Sellers shall not be liable to the Buyer Indemnitees for any Buyer Losses in respect of Sellers' Events of Breach described in clause (a) of the definition thereof (other than Buyer Losses in respect of any untruth or other breach of Sections 5.3, 5.8, 5.24 and 5.26) to the extent that the aggregate of such Buyer Losses exceeds $50,000,000, or in the case of Buyer Losses in respect of any untruth or other breach of Sections 5.3, 5.8, 5.24 and 5.26, the Purchase Price actually received by the Sellers or their assignees; and (ii) the Sellers shall not be required to make any payment in respect of a claim for indemnification in respect of any Sellers' Events of Breach described in clause (a) of the definition thereof (other than for Buyer Losses in respect of any untruth or other breach of Sections 5.3, 5.8, 5.21, 5.24 and 5.26) until the aggregate of such Buyer Losses shall exceed $500,000, but once such Buyer Losses shall exceed $500,000 the Buyer Indemnitees shall have the right to indemnification hereunder, and the Sellers shall be required to make payment in respect thereof, to the full extent of such Buyer Losses subject to the other limitations set forth in this Section 13. SECTION 13.2. Procedures for Indemnification by the Sellers. (a) Satisfaction of Indemnification Claims. Any indemnification claims made by the Buyer Indemnitees shall be satisfied in the following order: first, through an offset against the Short Term Note (in accordance with the terms of the Short Term Note); second, through claims made against the Sellers' Escrowed Amount (in accordance with the terms of the Sellers' Escrow Agreement); third, through claims made against the Sellers; and fourth, if the Sellers do not satisfy such indemnification claims within 30 days after notice thereof from the Buyer Indemnitee, then through claims made against those shareholders of Tilia who have executed Indemnity Agreements (in accordance with the terms of such Indemnity Agreements). In the 49 case of Tilia Trust, a shareholder of Tilia and party to an Indemnity Agreement, if Tilia Trust does not satisfy its indemnification obligations to Buyer Indemnitees within 30 days after notice thereof from the Buyer Indemnitee, then the Buyer Indemnitees may pursue Hanns Kristen, personally in accordance with the terms of the Guarantee Agreement. Any indemnification claims made by the Buyer Indemnitees against Xeme, a shareholder of Tilia and party to an Indemnity Agreement, shall be satisfied in the following order: first, through an offset against the Long Term Note (in accordance with the terms of the Long Term Note); and second, against the Long Term Escrowed Amount (in accordance with the terms of the Long Term Escrow Agreement). (b) Notice of Claims. If a Sellers' Event of Breach occurs or is alleged and a Buyer Indemnitee asserts that the Sellers have become obligated to such Buyer Indemnitee pursuant to Section 13.1 hereof ("DIRECT CLAIM"), or if any suit, action, investigation, claim or proceeding (a "THIRD PARTY PROCEEDING") is begun, made or instituted by a third party as a result of which the Sellers may become obligated to a Buyer Indemnitee hereunder, such Buyer Indemnitee shall give prompt written notice thereof to the Sellers' Representative (the "BUYER'S CLAIMS NOTICE"). The Buyer's Claims Notice shall describe the claim and the specific facts and circumstances of the claim in reasonable detail, the nature of the claim in reasonable detail, and shall indicate the amount of the losses, if then ascertainable and, if not then ascertainable, a good faith estimate of the amount thereof, and the provision(s) in this Agreement on which the claim is based, but the Buyer's Claims Notice shall not in any respect limit the obligation of the Sellers to any Buyer Indemnitee under Section 13.1, except in the case of a failure to timely notify the Sellers Representative, in which case such obligation shall be limited to the extent the Sellers are actually prejudiced thereby. (c) Response to Claims. Subject to Section 13.2(f), the Sellers' Representative shall have thirty (30) calendar days after his actual receipt of the Buyer's Claim Notice to reject or accept the claim as an indemnifiable claim for Buyer Losses under this Section 13. If, within thirty (30) calendar days after actual receipt by the Sellers' Representative of the Buyer's Claim Notice, the Sellers' Representative delivers notice to the Buyer Indemnitee containing a written objection to the claim by the Buyer Indemnitee, stating the nature of and grounds for such objection, then such claim shall be deemed to be a "DISPUTED CLAIM" and such claim shall be resolved in accordance with Section 13.2 (e) hereof. If, within thirty (30) calendar days after actual receipt by the Sellers' Representative of the Buyer's Claim Notice, the Sellers' Representative delivers notice to the Buyer Indemnitee containing a written acceptance of the claim, then such claim shall be deemed an indemnifiable claim under this Section 13 (the "INDEMNIFIABLE CLAIM"). (d) Escrow Agreements. The Sellers' Representative and Buyer Indemnitee shall provide joint written notice to the Escrow Agent of the existence of a Disputed Claim or an Indemnifiable Claim (including the amount of any Indemnifiable Claim). Any Disputed Claim shall be treated as an "Open Claim" for purposes of the applicable Escrow Agreement. The joint written notice of an Indemnifiable Claim shall constitute a notice to the Escrow Agent in accordance with Section 3(a) of the applicable Escrow Agreement. (e) Dispute Resolution. Any disputes arising under this Section 13 shall be submitted to binding arbitration in accordance with the provisions of this Section 13.2. This 50 Section 13.2 shall not apply in the case of claims for injunctive relief. In the event any dispute remains unresolved after good faith attempts by the Buyer Indemnitee and the Sellers' Representative to resolve such dispute, either the Buyer Indemnitee or the Sellers' Representative may request that the dispute be submitted to arbitration. Such arbitration shall be conducted as follows: (i) Each party shall have ten (10) business days after written notice by either party of the commencement of arbitration proceedings hereunder to appoint an arbitrator who is on the approved panel of arbitrators of the American Arbitration Association. Each party shall immediately notify the other party of such appointment. If either party shall fail to so appoint such an arbitrator within such ten (10) business day period, the other party may appoint such arbitrator and shall so notify the party failing to appoint an arbitrator. The two arbitrators so appointed shall then select a third arbitrator within ten (10) business days after the appointment of the second arbitrator to then constitute the Board of Arbitration. The Board of Arbitration shall then proceed under the Commercial Arbitration Rules of the American Arbitration Association. (ii) Following the designation of such Board of Arbitration, the parties, together with the members of the Board of Arbitrators, shall promptly undertake appropriate informal efforts to mediate and negotiate a solution to the matter covered by the original notice. (iii) If a negotiated solution cannot be achieved within twenty (20) days after the date on which the Board of Arbitration is constituted, then the Board of Arbitration shall notify the parties. The proceeding, upon such notification, will then become a compulsory arbitration to be conducted under the Commercial Arbitration Rules of the American Arbitration Association by the Board of Arbitration. These rules shall be subject to the following modifications: A. discovery shall be permitted under the same standards provided for in the Federal Rules of Civil Procedure; B. the members of the Board of Arbitration shall interpret and apply the provisions of this Agreement; C. the arbitration costs may be charged to the losing party or allocated between the parties as may be determined by the Board of Arbitration; and D. the proceedings will be held in the State of Delaware, unless the parties shall otherwise agree in writing. (iv) In connection with the enforcement of the mediation and arbitration provisions of this Section 13.2, any agreement, decision or award shall be final and conclusive as to any such claim. (f) Third Party Proceeding. The Sellers agree to defend, contest or otherwise protect the Buyer Indemnitee against any Third Party Proceeding at their sole cost and expense. The Buyer Indemnitee shall have the right, but not the obligation, to participate at its own expense in the defense thereof by counsel of the Buyer Indemnitee's choice and shall in any event cooperate with and assist the Sellers to the extent reasonably possible. If, within 20 days 51 of Sellers' receipt of a Buyer's Claims Notice, the Sellers shall not have provided the written notice electing to defend the Third Party Proceeding, the Buyer Indemnitee shall have the right to do so, including, without limitation, the right to make any compromise or settlement thereof, and the Buyer Indemnitee shall be entitled to recover the entire cost thereof from the Sellers, including, without limitation, reasonable attorneys' fees, disbursements and amounts paid as the result of such Third Party Proceeding, and the Sellers shall be bound by any determination made in such Third Party Proceeding or any compromise or settlement effected by the Buyer. If the Sellers assume the defense of any Third Party Proceeding, (a) it will be conclusively established for purposes of this Agreement that the claims made in that Third Party Proceeding are within the scope of and subject to indemnification, (b) no compromise or settlement of such claims may be effected by the Sellers without the Buyer Indemnitee's consent (which consent shall not be unreasonably withheld in a case where such compromise or settlement will have no effect on the ongoing operation of the Business) unless (i) there is no finding or admission of any violation of federal, state, local, municipal, foreign, international, multinational or other administrative order, law, ordinance, principal of common law, regulation, statute or treaty or any violation of the rights of any Person and no effect on any other claims that may be made against the Buyer Indemnitee and (ii) the sole relief provided is monetary damages that are paid in full by the Sellers; and (c) the Buyer Indemnitee will have no liability with respect to any compromise or settlement of such claims effected without its consent. The party assuming the defense of any Third Party Proceeding shall keep the other party reasonably informed at all times of the progress and development of its or their defense of and compromise efforts with respect to such Third Party Proceeding and shall furnish the other party with copies of all relevant pleadings, correspondence and other papers. In addition, the parties to this Agreement shall cooperate with each other and make available to each other and their representatives all available relevant records or other materials required by them for their use in defending, compromising or contesting any Third Party Proceeding. In the event both a Seller and a Buyer Indemnitee are named as defendants in an action or proceeding initiated by a third party, they shall both be represented by the same counsel (on whom they shall agree), unless such counsel, a Seller, or such Buyer Indemnitee shall determine that such counsel has a conflict of interest in representing both parties same action or proceeding and the Buyer Indemnitee and Seller do not waive such conflict to the satisfaction of such counsel. SECTION 13.3. Indemnification by the Buyer. Notwithstanding the Closing or the delivery of the Purchased Property and regardless of any investigation at any time made by or on behalf of the Sellers or of any knowledge or information that the Sellers may have, the Buyer shall indemnify and agree to fully defend, save and hold the Sellers and Affiliates of the Sellers and their directors, officers and employees (the "SELLER INDEMNITEES"), harmless from and against any and all damages, liabilities, losses, costs, expenses (including all reasonable attorneys' fees and expenses of investigation incurred by the Seller Indemnitees in any action or proceeding between the Buyer and the Seller Indemnitees or between the Seller Indemnitees and any third party or otherwise), deficiencies, interests, penalties, impositions, assessments or fines (collectively, "SELLER LOSSES"), whether or not in connection with a third party claim, arising out of, resulting from or related to any and all the Buyer Events of Breach. As used herein, "BUYER EVENTS OF BREACH" shall be and mean any one or more of the following: (a) any untruth or other breach of any representation or warranty of the Buyer contained in the Transaction Documents; 52 (b) any failure of the Buyer duly to perform or observe any term, provision, covenant, agreement or condition contained herein on the part of the Buyer to be performed or observed; and (c) any claim or cause of action by any party arising after the Closing Date against any Seller Indemnitee with respect to the Assumed Liabilities. provided, however, that (i) the Buyer shall not be liable to the Seller Indemnitees for any Seller Losses in respect of Buyer Events of Breach described in clause (a) of the definition thereof (other than Seller Losses in respect of any untruth or other breach of Section 6.2 and 6.5) to the extent that the aggregate of such Seller Losses exceeds $50,000,000, or in the case of Seller Losses in respect of any untruth or other breach of Sections 6.2 or 6.5, the Purchase Price; and (ii) that the Buyer shall not be required to make any payment in respect of a claim for indemnification in respect of any Buyer Events of Breach described in clause (a) of the definition thereof (other than for Seller Losses in respect of any untruth or other breach of Section 6.2) until the aggregate of such Seller Losses shall exceed $500,000, but once such Seller Losses shall exceed $500,000, the Seller Indemnitees shall have the right to indemnification hereunder, and the Buyer shall be required to make payment in respect thereof, to the full extent of such Seller Losses subject to the other limitations set forth in this Section 13. SECTION 13.4. Procedures for Indemnification by the Buyer. If a Buyer's Event of Breach occurs or is alleged and a Seller Indemnitee asserts that the Buyer has become obligated to such Seller Indemnitee pursuant to Section 13.3 hereof, or a Third Party Proceeding is begun, made or instituted by a third party as a result of which the Buyer may become obligated to a Seller Indemnitee hereunder, such Seller Indemnitee shall give prompt written notice thereof to the Buyer (the "SELLERS' CLAIMS NOTICE"). The Sellers' Claims Notice shall describe the claim and the specific facts and circumstances known to the Seller Indemnitee in reasonable detail, and shall indicate the amount, if known, or an estimate, if possible, of the losses that have been or may be incurred or suffered by such Seller Indemnitee, but the Seller's Claims Notice shall not in any respect limit the obligation of the Buyer to any Seller Indemnitee under Section 13.3, except in the case of a failure to timely notify the Buyer of a Third Party Proceeding, in which case such obligation shall be limited only to the extent the Buyer is actually prejudiced thereby. The Buyer agrees to defend, contest or otherwise protect the Seller Indemnitee against any Third Party Proceeding at their sole cost and expense. The Seller Indemnitee shall have the right, but not the obligation, to participate at its own expense in the defense thereof by counsel of the Seller Indemnitee's choice and shall in any event cooperate with and assist the Buyer to the extent reasonably possible. If, within 20 days of Sellers' receipt of a Sellers' Claims Notice, the Buyer shall not have provided the written notice electing to defend the Third Party Proceeding, the Seller Indemnitee shall have the right to do so, including, the right to make any compromise or settlement thereof, and the Seller Indemnitee shall be entitled to recover the entire cost thereof from the Buyer, including, without limitation, reasonable attorneys' fees, disbursements and amounts paid as the result of such Third Party Proceeding, and the Buyer shall be bound by any determination made in such Proceeding or any compromise or settlement effected by the Seller. If the Buyer assumes the defense of any Third Party Proceeding, (a) it will be conclusively established for purposes of this Agreement that the claims made in that Third Party Proceeding are within the scope of and subject to indemnification, (b) no compromise or settlement of such claims may be effected by the Buyer without the Seller Indemnitee's consent (which consent 53 shall not be unreasonably withheld in a case where such compromise or settlement will have no effect on the ongoing operation of the Business) unless (i) there is no finding or admission of any violation of federal, state, local, municipal, foreign, international, multinational or other administrative order, law, ordinance, principal of common law, regulation, statute or treaty or any violation of the rights of any Person and no effect on any other claims that may be made against the Seller Indemnitee and (ii) the sole relief provided is monetary damages that are paid in full by the Buyer; and (c) the Seller Indemnitee will have no liability with respect to any compromise or settlement of such claims effected without its consent. The party assuming the defense of any Third Party Proceeding shall keep the other party reasonably informed at all times of the progress and development of its or their defense of and compromise efforts with respect to such Third Party Proceeding and shall furnish the other party with copies of all relevant pleadings, correspondence and other papers. In addition, the parties to this Agreement shall cooperate with each other and make available to each other and their representatives all available relevant records or other materials required by them for their use in defending, compromising or contesting any Third Party Proceeding. In the event both the Buyer and a Seller Indemnitee are named as defendants in an action or proceeding initiated by a third party, they shall both be represented by the same counsel (on whom they shall agree), unless such counsel, the Buyer, or such Seller Indemnitee shall determine that such counsel has a conflict of interest in representing both parties same action or proceeding and the Seller Indemnitee and the Buyer do not waive such conflict to the satisfaction of such counsel. SECTION 13.5. Survival. Each of the representations and warranties set forth in Article 5 shall survive the Closing notwithstanding any investigation on the part of the Buyer for a period terminating on the second (2nd) anniversary of the Closing Date, provided however, that representations and warranties contained in Section 5.3 and 5.24 hereof shall survive indefinitely and provided, further that the representations and warranties contained in Section 5.4(i) and Section 5.4(ii) shall survive until the sixth (6th) anniversary of the Closing Date, and Sections 5.8, 5.21 and 5.26 hereof shall survive for the applicable statute of limitations. Each of the representations and warranties set forth in Article 6 shall survive the Closing notwithstanding any investigation on the part of the Seller for a period terminating on the second (2nd) anniversary of the Closing Date; provided however, that representations and warranties contained in Section 6.2 shall survive indefinitely and provided further that the representations and warranties contained in Section 6.5 shall survive until the fifth (5th) anniversary of the Closing Date. No claim for indemnity hereunder shall be brought for any Sellers' Events of Breach pursuant to clause (a) of the definition thereof or for any Buyer Events of Breach pursuant to clause (a) of the definition thereof after the expiration of the applicable representation and warranty as provided in this Section 13.5. SECTION 13.6. Insurance; Limitation on Indemnity. In determining the amount of any indemnity, there shall be taken into account any insurance proceeds actually received by the party to be indemnified. The Buyer acknowledges and agrees that it shall have no right to indemnity pursuant to this Section 13 with respect to any breach or failure by any officers, directors or employees of any Seller to fully perform his or her obligations under such individual's respective non-competition agreement, employment or consulting agreement and/or similar agreement, as applicable, and that any cause of action arising as a result of such breach or failure to perform shall be asserted only in a separate action by the Buyer against the individual who 54 breached or failed to perform and shall be independent of this Section 13. In no event shall the Sellers be liable for special, incidental or consequential damages. SECTION 13.7. Successors and Assigns. All of the rights and obligations of the Sellers and the Buyer pursuant to this Section 13 shall survive any sale, assignment or other transfer by the Buyer of title to or interest in any of the Purchased Property or any part thereof and shall apply to and bind each and every successor and assign of the Buyer to any of the Purchased Property or any assignment by Sellers to a liquidating trust or similar entity. SECTION 13.8. Purchase Price Adjustment. The Buyer and each of the Sellers agree to treat any payments under this Section 13 as an adjustment to the Purchase Price for all federal, state and local Tax purposes. SECTION 13.9. Sellers' Representative. (a) Alexander Schilling shall be constituted and appointed as the agent and attorney-in-fact for each Seller for and on behalf of the Seller to (i) give and receive notices and communications, (ii) authorize delivery to Buyer of amounts under the Notes and from the Escrowed Fund in satisfaction of claims by Buyer Indemnitees and object to such deliveries, (iii) authorize any and all actions on behalf of the Sellers related to the payment or allocation of the Notes, the Escrowed Fund and the Contingent Consideration, (iv) agree to, negotiate, enter into settlements and compromises of, and comply with orders of courts with respect to the payment of Contingent Consideration and Buyer Losses, and (v) take all actions necessary or appropriate in the judgment of the Sellers' Representative for the accomplishment of the foregoing or implementation of any provision of this Agreement for which the Sellers' Representative is authorized by the shareholders of Tilia. (b) A decision, act, consent or instruction of the Sellers' Representative shall constitute a decision of all the Sellers and shall be final, binding and conclusive upon each of them, and Buyer, the Escrow Agent and any arbitrator handling disputes under this Section 13 may rely upon any such decision, act, consent or instruction of the Sellers' Representative as being the decision, act, consent or instruction of each Seller. Buyer, the Escrow Agent and any arbitrator handling disputes under this Section 13 are hereby relieved from any liability to any person for any acts done by them in accordance with such decision, act, consent or instruction of the Sellers' Representative. (c) In the event that the Sellers' Representative is unable or unwilling to serve as such, the Sellers shall, within five (5) Business Days following notice of such inability or unwillingness, appoint a successor Sellers' Representative, which person shall be (i) a shareholder or representative of a shareholder of Tilia on the date of this Agreement, and (ii) a resident of the United States of America. (d) The Sellers' Representative shall not be liable for any act done or omitted hereunder as Sellers' Representative while acting in good faith and in the exercise of reasonable judgment. The Sellers shall jointly and severally indemnify the Sellers' Representative and hold the Sellers' Representative harmless against any loss, liability or expense incurred without gross negligence or willful or intentional misconduct on the part of the Sellers' Representative and 55 arising out of or in connection with the acceptance or administration of the Sellers' Representative's duties hereunder, including the reasonable fees and expenses of any legal counsel retained by the Sellers' Representative. SECTION 13.10. Sole Remedy. The Buyer Indemnitees acknowledge and agree that, except to the extent any Buyer Losses result from any fraudulent misrepresentation by Sellers, the Buyer Indemnitees' sole and exclusive remedy with respect to any and all claims based upon, resulting from or arising out of the untruth or other breach of any representation or warranty of Sellers contained in this Agreement or the other Transaction Documents to which Sellers are a party or any schedule or exhibit hereto or thereto, shall be pursuant to the indemnification obligations provisions of this Section 13. The Seller Indemnitees acknowledge and agree that, except to the extent any Seller Losses result from any fraudulent misrepresentation by Buyer, the Seller Indemnitees' sole and exclusive remedy with respect to any and all claims based upon, resulting from or arising out of the untruth or other breach of any representation or warranty of Buyer contained in this Agreement or the other Transaction Documents to which Buyer is a party or any schedule or exhibit hereto or thereto, shall be pursuant to the indemnification obligations provisions of this Section 13. SECTION 14. TERMINATION. SECTION 14.1. Conditions of Termination. Notwithstanding anything to the contrary contained herein, this Agreement may be terminated at any time before the Closing: (a) By mutual consent of the Sellers and the Buyer, (b) By either the Sellers or the Buyer if the other party shall have breached this Agreement in any material respect and such breach continues for a period of ten (10) days after the receipt of written notice of the breach from the non-breaching party, (c) By the Sellers if, at April 30, 2002, any of the conditions set forth in Section 11 (except for the condition set forth in Section 11.6 (Liquidation of Tilia Hungary)) shall not have been met, unless any of the Sellers' breach of any of their obligations under this Agreement (including, but not limited to, a breach of Section 7.5 hereof) is the reason for the failure of such conditions to be satisfied; (d) By the Buyer if, at April 30, 2002, any of the conditions set forth in Section 12 (except for the condition set forth in Section 12.10 (Liquidation of Tilia Hungary)) shall not have been met, unless the Buyer's breach of any of its obligations under this Agreement (including, but not limited to, a breach of Section 8.5 hereof) is the reason for the failure of such conditions to be satisfied; provided, however, that if the condition set forth in Section 12.11 (Financing) has not been met on or prior to April 30, 2002, then such date shall be extended to May 31, 2002. In the event that the such date is extended to May 31, 2002 due to Buyer's failure to meet the condition set forth in Section 12.11, then the condition set forth in Section 12.1 as such Section 12.1 relates to Section 5.7(a)(i) or (ii) (no material adverse change) shall no longer apply after April 30, 2002, and shall not constitute a condition to Buyer's obligation to close the Transaction; 56 (e) By the Sellers if, at September 30, 2002, the condition set forth in Section 11.6 (Liquidation of Tilia Hungary) shall not have been met, unless any of the Sellers' breach of any of their obligations under this Agreement (including, but not limited to, a breach of Section 7.5 hereof) is the reason for the failure of such condition to be satisfied; or (f) By the Buyer if, at May 31, 2002, the condition set forth in Section 12.10 (Liquidation of Tilia Hungary) shall not have been met. SECTION 14.2. Fees for Termination. If the Buyer terminates this Agreement pursuant to Section 14.1(f) by reason of the failure of the Sellers to satisfy the condition set forth in Section 12.10 (Liquidation of Tilia Hungary), then the Sellers shall promptly pay to the Buyer $1,500,000. If the Sellers terminate this Agreement pursuant to Section 14.1(e) (Liquidation of Tilia Hungary) by reason of its failure to satisfy the condition set forth in Section 11.6 (Liquidation of Tilia Hungary), then the Sellers shall promptly pay to the Buyer $1,500,000. If the Buyer terminates this Agreement pursuant to Section 14.1(d) by reason of its failure to satisfy the condition set forth in Section 12.11 (Financing), then the Buyer shall promptly pay to the Sellers an aggregate of $1,500,000, divided among the Sellers as the Sellers shall direct the Buyer in writing. SECTION 14.3. Effect of Termination. Subject to Section 14.2, if this Agreement is terminated in accordance with Section 14.1 hereof, this Agreement shall become null and void and have no effect, with no liability on the part of the Sellers or the Buyer, or their directors, officers, agents or shareholders, except for the obligations set forth in this Section 14 and the Confidentiality Agreement dated December 5, 2001 between the Buyer and Tilia both of which shall survive any termination; provided however, that nothing herein shall relieve any party from liability for the breach of any of its representations, warranties, covenants or agreements set forth in this Agreement. SECTION 15. PURCHASE PRICE ALLOCATION. The parties agree to allocate the Purchase Price among the Purchased Assets as specified on Schedule 15. The allocation of the Purchase Price set forth on Schedule 15 is intended to comply with the requirements of Section 1060 of the Code. The parties covenant and agree that (i) such allocation was determined in an arm's length negotiation and none of the parties shall take a position on any Tax Return (including IRS Form 8594), before any tax authority or in any judicial proceeding that is in any way inconsistent with such allocation without the written consent of the other parties to this Agreement or unless specifically required pursuant to a determination by an applicable tax authority; (ii) they shall cooperate with each other in connection with the preparation, execution and filing of all Tax Returns related to such allocation; and (iii) they shall promptly advise each other regarding the existence of any tax audit, controversy or litigation related to such allocation. SECTION 16. MISCELLANEOUS. SECTION 16.1. Successors and Assigns. Except as otherwise provided in this Agreement, no party hereto shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other parties hereto and any such attempted assignment 57 without such prior written consent shall be void and of no force and effect, provided, that the Buyer may assign its rights hereunder to one or more Affiliates and to any party providing financing in connection with the transactions contemplated hereby (provided that such assignment shall not serve as a novation) and the Sellers may assign their rights and obligations to a liquidating trust or similar entity, to the shareholders of Tilia or their assignees or to any Affiliates of the Sellers, provided further, that no such assignment shall reduce or otherwise vitiate any of the obligations of the Sellers hereunder. This Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the parties hereto. SECTION 16.2. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE CONSTRUED, PERFORMED AND ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. THE PARTIES HERETO IRREVOCABLY ELECT AS THE SOLE JUDICIAL FORUM FOR THE ADJUDICATION OF ANY MATTERS ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, AND CONSENT TO THE JURISDICTION OF, THE FEDERAL AND STATE COURTS OF THE STATE OF DELAWARE LOCATED IN WILMINGTON, DELAWARE. SECTION 16.3. Expenses. Except as otherwise provided herein, each of the parties hereto shall pay its own expenses in connection with this Agreement and the transactions contemplated hereby, including, without limitation, any legal and accounting fees, whether or not the transactions contemplated hereby are consummated. The Sellers and the Buyer shall each pay one-half of all state and local sales, transfer, excise, value-added or other similar Taxes (including all applicable real estate transfer Taxes), and all recording and filing fees that may be imposed by reason of the sale, transfer, assignment and delivery of the Purchased Property (collectively, the "Transfer Taxes"). SECTION 16.4. Broker's and Finder's Fees. There are no claims for brokerage commissions or finder's fees or similar compensation in connection with the transactions contemplated by the Transaction Documents based on any arrangement made by or on behalf of the parties hereto (except for fees due to Credit Suisse First Boston by the Sellers and fees due to Bank of America Securities by the Buyer) and each party shall indemnify and hold the other harmless against any costs or damages incurred as a result of any such claim. SECTION 16.5. Severability. In the event that any part of this Agreement is declared by any court or other judicial or administrative body to be null, void or unenforceable, said provision shall survive to the extent it is not so declared, and all of the other provisions of this Agreement shall remain in full force and effect. SECTION 16.6. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission, (iii) on the day after delivery to Federal Express or similar overnight courier or the Express Mail service maintained by the U.S. Postal Service or (iv) on the fifth day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and properly addressed, to the party as follows: 58 If to the Sellers: Tilia, Inc. Tilia International, Inc. c/o Tilia, Inc. Tilia Canada, Inc. c/o Tilia, Inc. 303 Second Street North Tower, 5th Floor San Francisco, CA 94107 Attn: Alexander Schilling Telecopy: (415) 392-1928 Copy to: Morrison & Foerster LLP 755 Page Mill Road Palo Alto, CA 94304-1018 Attn: Paul "Chip" L. Lion III, Esq. Telecopy: (650) 494-0792 If to the Sellers' Representative: Alexander Schilling c/o Tangent Fund Management, LLC One Union Square 180 Geary Street, Suite 500 San Francisco, CA 84108 Telecopy: (415) 392-1928 Copy to: Morrison & Foerster LLP 755 Page Mill Road Palo Alto, CA 94304-1018 Attn: Paul "Chip" L. Lion III, Esq. Telecopy: (650) 494-0792 If to the Buyer: Alltrista Corporation 555 Theodore Fremd Avenue, Suite B302 Rye, New York 10580 Attn: Ian G.H. Ashken Telecopy: (914) 967-9405 Copy to: 59 Willkie Farr & Gallagher 787 7th Avenue New York, New York 10019-6099 Attn: William J. Grant, Esq. and Michael A. Schwartz, Esq. Telecopy: (212) 728-8111 Any party may change its address for the purpose of this Section by giving the other party written notice of its new address in the manner set forth above. SECTION 16.7. Amendments; Waivers. This Agreement may be amended or modified, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the parties hereto, or in the case of a waiver, by the party waiving compliance. Any waiver by any party of any condition, or of the breach of any provision, term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall not be deemed to be nor construed as further or continuing waiver of any such condition, or of the breach of any other provision, term, covenant, representation or warranty of this Agreement. SECTION 16.8. Public Announcements. The parties agree that after the signing of this Agreement, neither party shall make any press release or public announcement concerning the transactions contemplated by the Transaction Documents without the prior written approval of the other parties unless a press release or public amendment is required by law. If any such announcement or other disclosure is required by law, the disclosing party agrees to give the nondisclosing parties prior notice and a reasonable opportunity to comment on the proposed disclosure. SECTION 16.9. Right of Setoff. Subject to the limitations and compliance with the provisions set forth in Section 13 hereof, if an indemnification claim is made in respect of Buyer Losses (an "Indemnifiable Amount"), the Buyer Indemnitee claiming such Indemnifiable Amount may, to the fullest extent permitted, set off and apply any and all such Indemnifiable Amounts against the Contingent Consideration payable in accordance with Section 3.2(d) hereof. SECTION 16.10. Entire Agreement. This Agreement, the Guarantee Agreements, the Exhibits hereto and that certain Confidentiality Agreement dated December 5, 2001 between the Buyer and Tilia contain the entire understanding between the parties hereto with respect to the transactions contemplated hereby and thereby and supersedes and replaces all prior agreements and understandings, oral or written, with regard to such transactions. All schedules hereto and any documents and instruments delivered pursuant to any provision hereof are expressly made a part of this Agreement as fully as though completely set forth herein. This Agreement shall only be binding on the parties hereto upon execution and delivery of this Agreement by each of the parties. SECTION 16.11. Parties in Interest. Nothing in this Agreement is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the Sellers, and the Buyer and their respective successors and permitted assigns. Nothing in this Agreement is intended to relieve or discharge the obligations or liability of any third persons to 60 the Sellers or the Buyer. No provision of this Agreement shall give any third persons any right of subrogation or action over or against the Sellers or the Buyer. SECTION 16.12. Scheduled Disclosures. Disclosure by the Sellers of any matter, fact or circumstance in the Seller Disclosure Schedules to this Agreement shall, where applicable, be made for each individual Seller. Disclosure in a Schedule on the Seller Disclosure Schedule shall not be deemed to be disclosure thereof for purposes of any other Schedule thereof, except where it is evident from the language of the Schedule itself that such exception would be applicable to another Schedule. SECTION 16.13. Section and Paragraph Headings. The section and paragraph headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. SECTION 16.14. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. [Signature page follows.] 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. TILIA INTERNATIONAL INC. by Corporate Directors Limited, Director By: /s/ Leanne Corvette ------------------------------------- Name: Leanne Corvette Title: Authorized Signatory TILIA INC. By: /s/ Linda Graebner ------------------------------------- Name: Linda Graebner Title: President and CEO TILIA CANADA, INC. By: /s/ Linda Graebner ------------------------------------- Name: Linda Graebner Title: President and CEO ALLTRISTA CORPORATION By: /s/ Ian G.H. Ashken ------------------------------------- Name: Ian G.H. Ashken Title: Vice Chairman, Chief Financial Officer and Secretary By: /s/ Alexander Schilling ------------------------------------- Alexander Schilling As Sellers' Representative 62 EX-10.7 10 file009.txt AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT EXECUTION COPY ASSET PURCHASE AGREEMENT THIS AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT, dated as of April __, 2002 (the "Amendment") among Tilia International, Inc., a Cook Islands corporation ("TILIA"), Tilia, Inc., a California corporation ("TILIA U.S.") and Tilia Canada, Inc., a corporation organized under the Canada Business Corporation Act ("TILIA CANADA") (Tilia, Tilia U.S. and Tilia Canada are collectively referred to herein as the "SELLERS", and each individually, a "SELLER"), Alexander Schilling (the "SELLERS' REPRESENTATIVE") and Alltrista Corporation, a Delaware corporation (the "BUYER"). W I T N E S S E T H: WHEREAS, the Buyer, Sellers and Sellers' Representative entered into an Asset Purchase Agreement, dated as of March 27, 2002 (the "PURCHASE AGREEMENT") whereby the Buyer will purchase substantially all of the assets of the Sellers' Business; and WHEREAS, each of the parties wishes to amend the Purchase Agreement, as set forth herein. NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements hereinafter contained, the parties hereto hereby agree that the Purchase Agreement shall be amended in the manner and effective upon the terms and conditions set forth below: Capitalized terms used herein, unless otherwise defined, shall have the meanings ascribed to them in the Purchase Agreement. 1. Section 1. The definitions of "Assignment and Assumption Agreement", "Patent Assignment Agreement", "Purchased Property" and "Trademark Assignment Agreement" in Section 1 of the Purchase Agreement are hereby amended and restated in their entirety as follows: "ASSIGNMENT AND ASSUMPTION AGREEMENT" means those several Bill of Sale, Assignment and Assumption Agreements to be executed at Closing to effect the transfer of the Purchased Property (except to the extent any portion of the Purchased Property is transferred pursuant to a Trademark Assignment Agreement, Patent Assignment Agreement or Domain Name Assignment Agreement) and the assumption of the Assumed Liabilities, in substantially the form attached hereto as EXHIBIT A; "PATENT ASSIGNMENT AGREEMENT" means those several agreements, substantially in the form attached hereto as EXHIBIT E, pursuant to which the Sellers will, on the Closing Date, sell and assign all of their right, title and interest in and to the Patents to the Buyer; "PURCHASED PROPERTY" means: (i) the Inventory; (ii) the Equipment and Machinery; (iii) the Assigned Contracts; (iv) the Accounts Receivable; (v) Cash and Cash Equivalents, excluding (i) any Cash and Cash Equivalents received by the Sellers pursuant to Section 3 hereof, (ii) any Cash received by the Sellers pursuant to the exercise of any options to purchase shares of common stock of Tilia after February 1, 2002, and (iii) an amount of Cash equal to the remaining rent owed in respect of the Howard Street Lease (such excluded Cash and Cash Equivalents, collectively the "EXCLUDED CASH"); (vi) the Intellectual Property; (vii) the Files and Records; (viii) the Permits; (ix) any prepaid expenses with respect to the Purchased Property or the Business; and (x) the Intangible Property. Purchased Property shall not include (i) any deferred tax assets or refunds with respect to Taxes not reflected on the Financial Statements or that constitute Excluded Liabilities; (ii) shares of capital stock of Tilia US and Tilia Canada; (iii) any distributions of Purchase Price proceeds; (iv) assets not enumerated in items (i) through (x) above; (v) any rights under this Agreement or under any other agreement between Sellers and Buyer entered into on or after the Closing Date; (vi) the bank account held at J.P. Morgan International Bank Limited located in Hong Kong, which immediately prior to the Closing shall have a Cash balance of no more than $100; (vii) the bank account held at Union Bank of California located in California, which immediately prior to the Closing shall have a Cash balance of no more than $100; (viii) the bank account held at CIBC Oppenheimer located in Canada, which immediately prior to the Closing shall have a Cash balance of no more than $100; and (ix) any Excluded Cash held in the bank accounts described in (vi) through (viii) of this paragraph; "TRADEMARK ASSIGNMENT AGREEMENT" means those several agreements, substantially in the form attached hereto as EXHIBIT F, pursuant to which the Sellers will, on the Closing Date, sell and assign all of its right, title and interest in and to the Trademarks to the Buyer; 2. Section 8.4(c). Section 8.4(c) of the Purchase Agreement is hereby amended and restated in its entirety and Section 8.4(d) is hereby added at the end of Section 8.4(c) as follows: (c) In the event of a Change of Control, the Buyer shall, at or prior to the date of such Change of Control fund the Contingent Consideration (less any amounts claimed by the Buyer under Section 13 hereof) into an escrow account for payment of the Contingent Consideration to the Sellers (or their assignees), which amount shall be cash equal to the amount 2 of the Aggregate Consideration received in connection with the Change of Control in excess of $160,000,000, such excess amount not to exceed $25,000,000 (the "Funded Amount"). If the employment of any two of the persons listed on Schedule 8.4 hereto (or the Replacements of such persons) is terminated in connection with such Change of Control or within ninety (90) days following such Change of Control for any reason other than the voluntary termination by the employee, then the Funded Amount (less any amounts claimed by the Buyer under Section 13 hereof), shall be paid to Tilia or its assigns or designees on the date of termination of the second such employee to be terminated. The Sellers hereby acknowledge that the Contingent Consideration may be funded into an escrow account pursuant to this Section 8.4(c) only if (A) both before and after the Contingent Consideration would be paid, the Buyer is in pro forma compliance with the Senior Credit Facility, and (B) after the Contingent Consideration is paid, the Buyer would have availability under the revolving credit portion of the Senior Credit Facility of not less than $20,000,000. If the Buyer is unable to fund the Contingent Consideration (less any amounts claimed by the Buyer under Section 13 hereof) into an escrow account because of its failure to satisfy the conditions in the preceding sentence relating to the Senior Credit Facility, then the Buyer and the Sellers agree that the Buyer shall fund into an escrow account that amount of such Contingent Consideration in cash to the extent permissible under the Senior Credit Facility. (d) For the purposes of Section 8.4(c) the following terms shall have the following meanings A. "AGGREGATE CONSIDERATION" shall mean the amount that is equal to the value of consideration received in such Change of Control including any amount of any debt assumed, acquired, remaining, outstanding, retired or defeased in connection with such Change of Control, and any noncompete payments, and in the case of a Change of Control resulting from the adoption of a plan relating to the liquidation or dissolution of the Buyer, the aggregate value of the outstanding stock of the Buyer. Amounts paid into escrow and deferred payments in connection with a Change of Control will be included as part of the Aggregate Consideration. Deferred payments will be valued at their net present value. B. "CAUSE" shall mean any one or more of the following occurrences: (i) the employee's conviction by, or entry of a plea of guilty or nolo contendere in, a court of competent and final jurisdiction for any crime which constitutes a felony in the jurisdiction involved; or (ii) the employee's commission of an act of fraud or misappropriation of funds or property, whether prior to or subsequent to the date hereof, upon the Buyer or an Affiliate of the Buyer; or (iii) gross negligence by the employee in the scope of the employment of such employee resulting in a material injury to the Buyer or an Affiliate of the Buyer, violation by such employee of any duty of loyalty to the Buyer or any Affiliate of the Buyer resulting in a material injury to the Buyer or an Affiliate of the Buyer, or any other misconduct on the part of such employee resulting in a material injury to the Buyer or an Affiliate of the Buyer; or (iv) breach of any Non Competition Agreement between the employee and the Buyer or an Affiliate of the Buyer; or (v) employee's willful breach of a material obligation under the Employment Agreement between the employee and the Buyer or an Affiliate of the Buyer. Notwithstanding the foregoing, as to clauses (c) and (d) only, the employee shall not be deemed to have been terminated for Cause without (i) five (5) days written notice to the employee setting forth the reasons for the intention of the Buyer or the Affiliate of the Buyer who employs such employee to terminate for Cause, 3 and (ii) an opportunity for the employee, within such five (5) day period, to cure (if the matter is susceptible to cure). C. "CHANGE OF CONTROL" shall mean any of the following transactions which occurs prior to December 31, 2004: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the division operating the Business or the Buyer and its subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Securities and Exchange Act of 1934, as amended) other than a Permitted Person; (2) the adoption of a plan relating to the liquidation or dissolution of the Buyer; or (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than a Permitted Person, becomes the beneficial owner, directly or indirectly, of more than 50% of the voting stock of the Buyer, measured by voting power rather than number of shares. D. "CONSTRUCTIVE TERMINATION" shall mean the employee's voluntary resignation from employment following the occurrence (without the employee's express written consent) of any of the following events: (i) an adverse change of the employee's title, (ii) a significant reduction in the employee's duties, position or responsibilities, or the removal of the employee from such position or responsibilities; (iii) requiring the employee to be based at any place outside a 40-mile radius from employee's current job location; or (iv) a reduction in the employee's base salary as provided in the employment agreement between the Buyer or an Affiliate of the Buyer and the employee. E. "PERMITTED PERSON" shall mean (i) Martin E. Franklin or Ian Ashken; (ii) any member of the family of Martin E. Franklin or Ian Ashken; (iii) any conservatorship, custodianship or decedent's estate of any Person specified in the foregoing clause (i) or (ii); (iv) any trust established for the benefit of any Person specified in the foregoing clause (i) or (ii); or (v) any corporation, limited liability company, partnership or other entity, the controlling equity interests in which are held by or for the benefit of any one or more Person specified in the foregoing clause (i) or (ii). F. "REPLACEMENT" shall mean those employees who have been hired to replace any employee listed on Schedule 8.4 in the event that any such listed employee is terminated by the Buyer or an Affiliate of the Buyer for Cause or voluntarily terminates his or her employment other than by way of Constructive Termination. 3. Schedule 2.4. Schedule 2.4 to the Purchase Agreement is hereby amended and restated in its entirety and is attached hereto as so amended. 4. Schedule 2.5. Schedule 2.5 to the Purchase Agreement is hereby amended and restated in its entirety and is attached hereto as so amended. 5. Schedule 5.15. Schedule 5.15 to the Purchase Agreement is hereby amended and restated in its entirety and is attached hereto as so amended. 6. Schedule 15. Schedule 15 to the Purchase Agreement is hereby amended and restated in its entirety and is attached hereto as so amended. 4 5. This Amendment shall be effective as if the amendments provided hereby were included as part of the original Purchase Agreement. Except as amended hereby, the Purchase Agreement, as amended, shall remain in full force and effect in accordance with the provisions thereof. 6. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. 7. All exhibits and schedules hereto and any documents and instruments delivered pursuant to any provision hereof are expressly made a part of this Amendment as fully as though completely set forth herein. 8. Each party shall execute and deliver such further documents and instruments and shall take such other further actions as may be required to carry out the intent and purposes of this Amendment. [Signature page follows.] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written. TILIA INTERNATIONAL INC. by Corporate Directors Limited, Director By: /s/ Leanne Corvette ------------------------------------ Name: Leanne Corvette Title: Authorized Aignatory TILIA INC. By: /s/ Linda Graebner ------------------------------------ Name: Linda Graebner Title: President CEO TILIA CANADA, INC. By: /s/ Linda Graebner ------------------------------------ Name: Linda Graebner Title: President CEO ALLTRISTA CORPORATION By: /s/ Ian G. H. Ashken ------------------------------------ Name: Ian G. H. Ashken Title: Vice Chairman, Chief Financial Officer and Secretary By: /s/ Alexander Schilling ------------------------------------ Alexander Schilling As Sellers' Representative [AMENDMENT 1 TO ASSET PURCHASE AGEEMENT] EX-10.8 11 file010.txt UNSECURED SUBORDINATED PROMISSORY NOTE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR INDEFEASIBLE CASH PAYMENT IN FULL OF THE SENIOR OBLIGATIONS IN RESPECT OF ALL SENIOR DEBT (AS DEFINED HEREIN), IN ACCORDANCE WITH THE TERMS HEREOF. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. ALLTRISTA CORPORATION (A Delaware corporation) Amount: $5,000,000 April 24, 2002 UNSECURED SUBORDINATED PROMISSORY NOTE For value received, ALLTRISTA CORPORATION, a Delaware corporation ("PAYOR"), with its principal offices at 555 Theodore Fremd Avenue, Suite B302, Rye, New York 10580, unconditionally promises to pay Tilia International, Inc., a Cook Islands corporation, or its assigns ("PAYEE"), the principal sum of Five Million Dollars ($5,000,000). The outstanding principal amount shall be due and payable on April 24, 2004 (the "MATURITY DATE"). 1. INTEREST. The outstanding principal amount on this Unsecured Subordinated Promissory Note (this "NOTE") shall bear the same interest rate as the applicable rate under the Senior Credit Facility at the beginning of each calendar quarter, whereby such interest shall be added to the outstanding principal amount at the end of each such calendar quarter and shall bear interest at the same rate as the principal amount, and such accrued interest shall be due and payable on the Maturity Date. Notwithstanding the foregoing, any amount outstanding under this Note shall bear interest from and after the Maturity Date at the rate of the Senior Subordinated Debt. Any interest on this Note accruing after the Maturity Date shall accrue and be compounded semi-annually until the obligation of Payor with respect to the payment of such interest and principal has been discharged (whether before or after judgment). 2. PAYMENTS. Subject to the provisions of SECTION 5, Payor may prepay all or any portion of this Note at any time without penalty. All payments shall be made to Payee at its offices at, or at such other address as Payee may specify in writing, and all such payments shall be accompanied by a certificate from an officer of Payor certifying that Payor is not prohibited from making payments under Sections 5.2(b)(i) and (ii). All payments received from Payor hereunder shall be applied first, to the payment of any expenses due to Payee pursuant to the terms of this Note, and second, to reduce the principal balance hereunder. Any payments of expenses, principal or interest, if any, shall be made in U.S. dollars. Notwithstanding the foregoing, and subject to payment under Section 3 hereof, Payor and Payee agree that within two (2) business days of the Maturity Date, the principal and any interest accrued on this Note (subject to any adjustments made to such amounts pursuant to Section 6 hereof) shall be delivered by Payor in cash to the Escrow Agent under the Long Term Escrow Agreement. 3. PREPAYMENT. Payor shall be obligated to prepay this Note and any interest thereon upon the occurrence of either of the following events: (i) there is a Change of Control, or (ii) if the Leverage Ratio calculated on a pro forma basis for any acquisition transaction during the most recent fiscal year is greater than 3.5 to 1. In the event of either (i) or (ii), immediately prior to the closing of a transaction or the occurrence of a Change of Control, Payor shall deliver in cash the principal and interest on this Note accrued as of the date of such transaction or Change of Control to the Escrow Agent under the Long Term Escrow Agreement. 4. PURCHASE AGREEMENT. This Note is issued pursuant to the Asset Purchase Agreement, dated as of March 27, 2002, among Tilia International, Inc., a Cook Islands corporation, Tilia, Inc, a California corporation, Tilia Canada, Inc., a corporation organized under the Canada Business Corporation Act, Alexander Schilling and Payor (the "PURCHASE AGREEMENT"), and is subject to the provisions thereof, including, without limitation, Section 13.2(a) of the Purchase Agreement. Capitalized terms used herein shall the same meanings set forth in the Purchase Agreement unless otherwise specifically defined herein. 5. SUBORDINATION. By accepting this Note, Payee expressly agrees to discharge its obligations under this SECTION 5. 5.1. AGREEMENT TO SUBORDINATE. Payor and Payee agree that this Note is and shall be subordinate, to the extent and in the manner hereinafter set forth, in right of payment to the prior indefeasible cash payment in full of all of Payor's payment obligations now or hereafter existing in respect of any Senior Debt, whether for principal, interest (including, without limitation, interest, accruing after the filing of a petition initiating any proceeding referred to in SECTION 5.2 hereof whether or not such interest accrues after the filing of such petition or is an allowed claim in such proceeding), fees, expenses or otherwise (such payment obligations being the "SENIOR OBLIGATIONS"). 5.2. EVENTS OF SUBORDINATION. (a) Senior Debt Holders will be entitled to receive payment in full of all Senior Obligations due in respect of Senior Debt (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Debt) before Payee will be entitled to receive any payment with respect to this Note, in the event of any distribution to creditors of Payor: (i) in a liquidation or dissolution of Payor; (ii) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to Payor or its property; (iii) in an assignment for the benefit of creditors; or (iv) in any marshaling of Payor's assets and liabilities. (b) Payor may not make any payment in respect of the Note: (i) in the event any default in the payment of principal of, interest or premium, if any, on any Designated Senior Debt occurs and is continuing beyond any 2 applicable period of grace in the agreement, indenture or other document governing such Designated Senior Debt (a "PAYMENT EVENT OF DEFAULT"), or (ii) in the event any other default occurs and is continuing beyond any applicable period of grace with respect to any Designated Senior Debt (the "NON-PAYMENT EVENT OF DEFAULT") which permits Designated Senior Debt Holders as to which such default relates to accelerate its maturity and Payor receives notice of such default (a "PAYMENT BLOCKAGE NOTICE") from the Designated Senior Debt Holders (or their representative). (iii) Payments on this Note may and shall be resumed (x) in the case of a Payment Event of Default, upon the date on which such default is cured or waived and (y) in case of a Non-payment Event of Default, the earlier of the date on which such Non-payment Event of Default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received unless a Payment Event of Default has occurred and is continuing with respect to the applicable Designated Senior Debt. No new period of payment blockage may be commenced by a Payment Blockage Notice unless and until (i) 360 days have elapsed since the first day of the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal and interest on the Note that have come due have been paid in full in cash. No Nonpayment Event of Default that existed or was continuing on the date of delivery of any Payment Blockage Notice to Payor may be, or may be made, the basis for a subsequent Payment Blockage Notice. (c) Upon the occurrence of an Event of Default hereunder, Payor will promptly notify the Senior Debt Holders of the Event of Default. (d) In the event that Payee receives any payment with respect to the Note at a time when such payment is prohibited by SECTION 5.2 hereof and Payee, has actual knowledge that such payment is prohibited by SECTION 5.2 hereof, such payment (the "UNPERMITTED PAYMENT") shall be held by Payee, in trust for the benefit of the Senior Debt Holders. Upon written request of a Designated Senior Debt Holder (the "PAYMENT INSTRUCTION NOTICE"), Payee shall deliver the Unpermitted Payment in trust to the senior most Designated Senior Debt Holder in accordance with the instructions contained in the Payment Instruction Notice of such Designated Senior Debt Holder, without regard to any other conflicting instructions received by Payee. Under no circumstances shall Payee be liable to Payor or to any Senior Debt Holders, or any other person, (i) for its delivery to the senior most Designated Senior Debt Holder of any Unpermitted Payment upon its receipt of a Payment Instruction Notice from a Designated Senior Debt Holder as provided in this Section 5.2(d), or (ii) for its failure to deliver any amounts pursuant to this paragraph to any other Designated Senior Debt Holder. Payee shall not be required to determine the existence of any Senior Debt or the existence or validity of any Designated Senior Debt Holder, or decide any questions of law. (e) Payor shall promptly notify Payee in writing of any facts known to Payor that would cause a payment of any amounts under this Note to violate this SECTION 5.2, but failure to give such notice shall not affect the subordination of this Note to the Senior Debt as provided in this SECTION 5.2, except as specifically provided in Section 5.2(m). 3 (f) After all Senior Debt is paid in full and until this Note is paid in full, Payee shall be subrogated (equally and ratably with the holders of all Indebtedness of Payor which by its express terms is subordinated to Senior Debt of Payor to the same extent as the Note is subordinated and which is entitled to like rights of subrogation) to the rights of Senior Debt Holders to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to Payee have been applied to the payment of Senior Debt. A distribution made under this SECTION 5.2 to Senior Debt Holders that otherwise would have been made to Payee is not, as between Payor and Payee, a payment by Payor on this Note. (g) This SECTION 5.2 defines the relative rights of Payee and Senior Debt Holders. Nothing in this Note shall: (i) impair, as between Payor and Payee, the obligation of Payor, which is absolute and unconditional, to pay principal of and interest on this Note in accordance with its terms; (ii) affect the relative rights of Payee and creditors of Payor other than their rights in relation to Senior Debt Holders; or (iii) prevent the Payee from exercising its available remedies upon a Default or Event of Default, subject to the rights of Senior Debt Holders to receive distributions and payments otherwise payable to Payee. (h) If Payor fails because of this SECTION 5.2 to pay principal of or interest on this Note on the due date, the failure is still a Default or Event of Default. (i) No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by this Note shall be impaired by any act or failure to act by Payor or Payee or by the failure of Payor or Payee to comply with the terms of this Note (subject to Section 5.2(m) hereof. (j) Whenever a distribution is to be made or a notice given to Senior Debt Holders, the distribution may be made and the notice given to their representative. (k) Upon any payment or distribution of assets of Payor referred to in this SECTION 5.2, Payee shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of a representative or of the liquidating trustee or agent or other Person making any distribution to Payee of this Note for the purpose of ascertaining the Persons entitled to participate in such distribution, the Senior Debt Holders and other Indebtedness of Payor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this SECTION 5.2. (l) For the purposes of this Note, the Senior Obligations shall not be deemed to have been paid in full unless the Senior Debt Holders shall have received indefeasible cash payment in full of the Senior Obligations (whether matured or unmatured). 4 (m) Any payment under this Note is permitted and shall not be subject to Section 5.2(d) hereof, unless such payment is specifically prohibited by Section 5.2(b) hereof and Payee has actual notice of such prohibition. 5.3. RIGHT OF SETOFF. Subject to the limitations of and compliance with the provisions set forth in Section 13 of the Purchase Agreement (including, without limitation, Section 13.2(a) of the Purchase Agreement) and Section 1.4 of the Indemnity Agreement dated March 27, 2002 between Xeme Capital Corporation, a Cook Islands corporation and Payor, and notwithstanding the provisions of SECTION 5 above, if an indemnification claim is made against Sellers under SECTION 13 of the Purchase Agreement for Buyer Losses and indemnification is payable to the Buyer in accordance with the terms of Section 13 thereof (the "INDEMNIFIABLE AMOUNT"), Payor is hereby authorized at any time and from time to time, to the fullest extent permitted by law, and until the Maturity Date, to set off and apply any and all such Indemnifiable Amounts against any of and all the obligations of the Payor under this Note, provided that Payor shall provide Payee with a minimum of ten (10) days advance written notice to the address set forth on the signature page hereto (in accordance with the notice provisions of the Purchase Agreement) of any intended setoff under this Note irrespective of whether or not Payor shall have made any demand under the Purchase Agreement. The rights of Payor under this SECTION 5 are in addition to other rights and remedies (including other rights of setoff) which Payor may have. 6. NO VOTING RIGHTS. This Note shall not entitle Payee to any voting rights or other rights as a stockholder of Payor. 7. TRANSFERS. This Note may be transferred or assigned in whole or in part by Payee to any other person or entity without the prior written consent of Payor, provided that such transfer is in compliance with applicable federal and state securities laws, if any, and Payee surrenders the original Note (or an affidavit of lost promissory note containing appropriate indemnification) for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form reasonably satisfactory to Payor. Thereupon, a new promissory note for like principal amount will be issued to, and registered in the name of, the transferee. Interest, if any, and principal are payable only to the registered holder of this Note. Payee agrees to provide a form W-8 to Payor on request. 8. ASSIGNS. This Note shall inure to the benefit of and bind the successors, permitted assigns, heirs, executors, and administrators of Payor and Payee. Failure of Payee to assert any right herein shall not be deemed to be a waiver thereof. 9. EVENT OF DEFAULT. This Note shall become immediately due and payable upon the occurrence of an Event of Default (as defined below), whereupon (i) this Note and any interest shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Payor; and (ii) Payee, at its option, may proceed to enforce all other rights and remedies available to Payee under applicable law. For purposes hereof, the occurrence of any of the following shall constitute an "EVENT OF DEFAULT" under this Note: 5 (a) the failure to make any payment of principal or any other amount payable hereunder when due under this Note (whether or not prohibited by the subordination provisions of SECTION 5) or the breach of any other condition or obligation under this Note; or (b) the filing of a petition by or against Payor under any provision of applicable bankruptcy or similar law; or appointment of a receiver, trustee, custodian or liquidator of or for all or any part of the assets or property of Payor; or the insolvency of Payor; or the making of a general assignment for the benefit of creditors by Payor. 10. DEFINITIONS. 10.1. "ASSET SALE" means: (1) the sale, lease, conveyance or other disposition of any assets or rights, other than sales of inventory and accounts receivable in the ordinary course of business consistent with past practices; and (2) the issuance of Equity Interests by any of Payor's Subsidiaries or the sale of Equity Interests in any of its Subsidiaries. Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale: (i) any single transaction or series of related transactions that involves assets having a fair market value of less than $1.0 million; (ii) a transfer of assets between or among Payor and its Subsidiaries, (iii) an issuance of Equity Interests by a Subsidiary to Payor or to another Subsidiary; (iv) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; (v) the sale or other disposition of cash or Cash Equivalents or Government Securities; (vi) transfers of accounts receivable and related assets by Payor or any of its Subsidiaries in connection with a Qualified Receivables Transaction (as defined in the Indenture); and (vii) a Restricted Payment or Permitted Investment that is permitted under the Indenture. 10.2. "BOARD OF DIRECTORS" shall mean the board of directors of Payor. 10.3. "CAPITAL LEASE OBLIGATION" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. 10.4. "CAPITAL STOCK" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 10.5. "CHANGE OF CONTROL" means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of Payor and its subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder; (2) the adoption of a plan relating to the liquidation or dissolution of Payor; or (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than a Permitted Holder, becomes the beneficial owner, 6 directly or indirectly, of more than 50% of the voting stock of Payor, measured by voting power rather than number of shares. 10.6. "CONSOLIDATED NET INCOME" means, with respect to Payor for any period, the aggregate of the Net Income of Payor and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a wholly owned Subsidiary of the Person; (2) the Net Income of any Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders; 10.7. "DEFAULT" shall mean any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. 10.8. "DESIGNATED SENIOR DEBT" shall mean (1) any Indebtedness outstanding under the Senior Credit Facility, (2) any Indebtedness under the Senior Subordinated Debt, and (3) after payment in full of all Senior Obligations under the Senior Credit Facility and the Senior Subordinated Debt, any other Senior Debt permitted under the Indenture the outstanding principal amount of which is $25 million or more and that has been designated by Payor as "Designated Senior Debt". 10.9. "DESIGNATED SENIOR DEBT HOLDER" shall mean the trustee under the Indenture, and the administrative agent under the Senior Credit Facility, and any successors or assigns thereto, and any other Senior Debt Holder specifically designated in writing by Payor. Any notice to a Specified Senior Debt Holder shall be given in accordance with the notice provisions set forth in the Indenture, Senior Credit Facility, or at the address set forth in the designation provided by Payor with respect to any other Senior Debt Holder, as applicable. 10.10. "EBITDA" shall mean, with respect to Payor for any period, the Consolidated Net Income of Payor for such period, plus (without duplication): (1) an amount equal to any extraordinary loss plus any net loss realized by Payor or any of its Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; (2) provision for taxes based on income or profits of Payor and its Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; (3) consolidated interest expense of Payor and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding 7 amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of Payor and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; and (5) the net adjustment of EBITDA to calculate adjusted EBITDA on a pro forma basis for the year ended December 31, 2001 as shown in the Offering Memorandum for the Senior Subordinated Debt and any future pro forma adjustments allowed under the Senior Credit Facility calculation of Leverage Ratio; minus non-cash items increasing such Consolidated Net Income for such period, other than any items that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period, in each case, on a consolidated basis and determined in accordance with GAAP. 10.11. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). 10.12. "EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended. 10.13. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. 10.14. "GUARANTEE" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. 10.15. "GUARANTOR" means: (i) each of Payor's direct and indirect domestic subsidiaries existing on the date of the Indenture, and (ii) any other subsidiary that executes a Guarantee in accordance with the provisions of the Indenture. 10.16. "HEDGING OBLIGATIONS" means the obligations of Payor under: (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (ii) other agreements or arrangements designed to protect Payor against fluctuations in interest rates. 10.17. "INDEBTEDNESS" shall mean any indebtedness of Payor, whether or not contingent, (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of Payor prepared in accordance with GAAP. In addition, the term "INDEBTEDNESS" includes all Indebtedness of others secured by 8 a Lien on any asset of Payor (whether or not such Indebtedness is assumed by Payor) and, to the extent not otherwise included, a Guarantee by Payor of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date will be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; (2) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness; (3) the lesser of the Indebtedness and the fair market value of the collateral asset, in the case of any Indebtedness of others secured by a Lien on any asset of Payor; and (4) the lesser of the primary Indebtedness and any stated limit on recourse under the Guarantee, in the case of Indebtedness of others secured by a guarantee of the specified Person. 10.18. "INDENTURE" shall mean that certain Indenture, dated as of April 24, 2002, among Payor, the Guarantors and The Bank of New York, as trustee, as in effect on the date hereof, together with such modifications and amendments as may be consented to by Payor and Payee. 10.19. "LEVERAGE RATIO" shall mean with respect to Payor for any period, the ratio of the Indebtedness of Payor and its Subsidiaries for such period to the EBITDA of Payor and its Subsidiaries for such period. 10.20. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset. 10.21. "NET INCOME" means, with respect to Payor, the net income (loss) of Payor, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by Payor or any of its Subsidiaries or the extinguishment of any Indebtedness of Payor or any of its Subsidiaries; and (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). 10.22. "PERMITTED HOLDER" means (i) Martin E. Franklin or Ian Ashken; (ii) any member of the Family of Martin E. Franklin or Ian Ashken; (iii) any conservatorship, custodianship or decedent's estate of any Person specified in the foregoing clause (i) or (ii); (iv) any trust established for the benefit of any Person specified in the foregoing clause (i) or (ii); or (v) any corporation, limited liability company, partnership or other entity, the controlling equity interests in which are held by or for the benefit of any one or more Person specified in the foregoing clause (i) or (ii). 10.23. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. 10.24. "SENIOR CREDIT FACILITY" shall mean that certain Credit Agreement, dated as of April 24, 2002, by and among Payor, Bank of America, N.A., as administrative agent, Banc of 9 America Securities LLC, as co-lead arranger, and CIBC World Markets Corp., as co-lead arranger, providing for $50.0 million of term loan borrowings and up to $50.0 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, amended and restated, supplemented, modified, renewed, refunded, replaced or refinanced from time to time. 10.25. "SENIOR DEBT" shall mean: (i) the Senior Credit Facility and the Senior Subordinated Debt, (ii) other Indebtedness of Payor permitted to be incurred under the terms of the Indenture that is specifically identified in the terms of such Indebtedness to rank in parity or senior to the Senior Subordinated Debt, and (iii) all Senior Obligations with respect to the items listed in the preceding clauses (i) and (ii). Notwithstanding anything to the contrary in the preceding, Senior Debt shall not include: (i) any intercompany Indebtedness of Payor or any of its subsidiaries to Payor or any of its Affiliates, (ii) any liability for federal, state, local or other taxes owed or owing, (iii) any trade payables, (iv) the portion of any Indebtedness that is incurred in violation of the terms of any Senior Debt or (v) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to Payor or any Guarantor. 10.26. "SENIOR DEBT HOLDERS" shall mean the beneficial owners of Senior Debt and shall include any representatives thereof, including, but not limited to, in the case of an indenture, the trustee under such indenture, or in the case of a credit facility, the agent of the lender. 10.27. "SENIOR OBLIGATIONS" shall have the meaning set forth in Section 5.1 hereof. 10.28. "SENIOR SUBORDINATED DEBT" shall mean the senior subordinated notes issued under the Indenture. 10.29. "SUBSIDIARY" means, with respect to Payor: any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by Payor or one or more of the other Subsidiaries of Payor (or a combination thereof); and any partnership (a) the sole general partner or the managing general partner of which is Payor or a Subsidiary of Payor or (b) the only general partners of which are Payor or one or more Subsidiaries of Payor (or any combination thereof). 11. USURY SAVINGS CLAUSE. Payor and Payee intend to comply at all times with applicable usury laws. If at any time such laws would render usurious any amounts due under this Note under applicable law, then it is Payor's and Payee's express intention that Payor not be required to pay interest on this Note at a rate in excess of the maximum lawful rate, that the provisions of this SECTION 11 shall control over all other provisions of this Note which may be in apparent conflict hereunder, that such excess amount shall be immediately credited to the principal balance of this Note, and the provisions hereof shall immediately be reformed and the amounts thereafter decreased, so as to comply with the then applicable usury law, but so as to permit the recovery of the fullest amount otherwise due under this Note. 10 12. COSTS. Payor agrees to pay all reasonable costs of collection of any amounts due hereunder arising as a result of any default hereunder, including without limitation, reasonable attorneys' fees and expenses. 13. GOVERNING LAW. This Note is made in accordance with and shall be construed under the laws of the State of Delaware, other than the conflicts of law principles thereof. 14. WAIVER. Payor hereby expressly waives presentment, demand for payment, dishonor, notice of dishonor, protest, notice of protest and any other formality. ALLTRISTA CORPORATION By: /s/ Ian G.H. Ashken -------------------------------- Name: Ian G.H. Ashken Title: Vice Chariman, Chief Financial Officer and Secretary 11 EX-10.9 12 file011.txt UNSECURED SUBORDINATED PROMISSORY NOTE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR INDEFEASIBLE CASH PAYMENT IN FULL OF THE SENIOR OBLIGATIONS IN RESPECT OF ALL SENIOR DEBT (AS DEFINED HEREIN) IN ACCORDANCE WITH THE TERMS HEREOF. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. ALLTRISTA CORPORATION (A Delaware corporation) Amount: $10,000,000 April 24, 2002 UNSECURED SUBORDINATED PROMISSORY NOTE For value received, ALLTRISTA CORPORATION, a Delaware corporation ("PAYOR"), with its principal offices at 555 Theodore Fremd Avenue, Suite B302, Rye, New York 10580, unconditionally promises to pay Tilia International, Inc. or its assigns ("PAYEE"), the principal sum of Ten Million Dollars ($10,000,000). The outstanding principal amount shall be due and payable on March 31, 2003 (the "MATURITY DATE"). 1. INTEREST. The outstanding principal amount on this Unsecured Subordinated Promissory Note (this "NOTE") shall bear no interest until this Note is paid in full in accordance with SECTION 2. Notwithstanding the foregoing, any amount outstanding under this Note shall bear interest from and after the Maturity Date at the rate of eight (8%) per annum. Any interest on this Note accruing after the Maturity Date shall accrue and be compounded daily until the obligation of Payor with respect to the payment of such interest and principal has been discharged (whether before or after judgment). 2. PAYMENTS. Subject to the provisions of SECTION 4, Payor may prepay all or any portion of this Note at any time without penalty. All payments shall be made to Payee at its offices at, or at such other address as Payee may specify in writing, and all such payments shall be accompanied by a certificate from an officer of Payor certifying that Payor is not prohibited from making payments under Sections 4.2(b)(i) and (ii). All payments received from Payor hereunder shall be applied first, to the payment of any expenses due to Payee pursuant to the terms of this Note, and second, to reduce the principal balance hereunder. Any payments of expenses, principal or interest, if any, shall be made in U.S. dollars. 3. PURCHASE AGREEMENT. This Note is issued pursuant to the Asset Purchase Agreement, dated as of March 27, 2002, among Tilia International, Inc., a Cook Islands corporation, Tilia, Inc, a California corporation, Tilia Canada, Inc., a corporation organized under the Canada Business Corporation Act, Alexander Schilling and Payor (the "PURCHASE AGREEMENT"), and is subject to the provisions thereof, including, without limitation, Section 13.2(a) of the Purchase Agreement. Capitalized terms used herein shall the same meanings set forth in the Purchase Agreement unless otherwise specifically defined herein. 4. SUBORDINATION. By accepting this Note, Payee expressly agrees to discharge its obligations under this SECTION 4. 4.1. AGREEMENT TO SUBORDINATE. Payor and Payee agree that this Note is and shall be subordinate, to the extent and in the manner hereinafter set forth, in right of payment to the prior indefeasible cash payment in full of all of Payor's payment obligations now or hereafter existing in respect of any Senior Debt, whether for principal, interest (including, without limitation, interest, accruing after the filing of a petition initiating any proceeding referred to in SECTION 4.2 hereof whether or not such interest accrues after the filing of such petition or is an allowed claim in such proceeding), fees, expenses or otherwise (such payment obligations being the "SENIOR OBLIGATIONS"). 4.2. EVENTS OF SUBORDINATION. (a) Senior Debt Holders will be entitled to receive payment in full of all Senior Obligations due in respect of Senior Debt (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Debt) before Payee will be entitled to receive any payment with respect to this Note, in the event of any distribution to creditors of Payor: (i) in a liquidation or dissolution of Payor; (ii) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to Payor or its property; (iii) in an assignment for the benefit of creditors; or (iv) in any marshaling of Payor's assets and liabilities. (b) Payor may not make any payment in respect of the Note: (i) in the event any default in the payment of principal of, interest or premium, if any, on any Designated Senior Debt occurs and is continuing beyond any applicable period of grace in the agreement, indenture or other document governing such Designated Senior Debt (a "PAYMENT EVENT OF DEFAULT"), or (ii) in the event any other default occurs and is continuing beyond any applicable period of grace with respect to any Designated Senior Debt (the "NON-PAYMENT EVENT OF DEFAULT") which permits Designated Senior Debt Holders as to which such default relates to accelerate its maturity and Payor receives notice of such default (a "PAYMENT BLOCKAGE NOTICE") from the Designated Senior Debt Holders (or their representative). (iii) Payments on this Note may and shall be resumed (x) in the case of a Payment Event of Default, upon the date on which such default is cured or waived and (y) in case of a Non-payment Event of Default, the earlier of the date on which such Non-payment Event of Default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received unless a Payment Event of Default has occurred and is continuing with respect to the applicable Designated Senior Debt. No 2 new period of payment blockage may be commenced by a Payment Blockage Notice unless and until (i) 360 days have elapsed since the first day of the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal and interest on the Note that have come due have been paid in full in cash. No Nonpayment Event of Default that existed or was continuing on the date of delivery of any Payment Blockage Notice to Payor may be, or may be made, the basis for a subsequent Payment Blockage Notice. (c) Upon the occurrence of an Event of Default hereunder, Payor will promptly notify the Senior Debt Holders of the Event of Default. (d) In the event that Payee receives any payment with respect to the Note at a time when such payment is prohibited by SECTION 4.2 hereof and Payee, has actual knowledge that such payment is prohibited by SECTION 4.2 hereof, such payment (the "UNPERMITTED PAYMENT") shall be held by Payee, in trust for the benefit of the Senior Debt Holders. Upon written request of a Designated Senior Debt Holder (the "PAYMENT INSTRUCTION NOTICE"), Payee shall deliver the Unpermitted Payment in trust to the senior most Designated Senior Debt Holder in accordance with the instructions contained in the Payment Instruction Notice of such Designated Senior Debt Holder, without regard to any other conflicting instructions received by Payee. Under no circumstances shall Payee be liable to Payor or to any Senior Debt Holders, or any other person, (i) for its delivery to the senior most Designated Senior Debt Holder of any Unpermitted Payment upon its receipt of a Payment Instruction Notice from a Designated Senior Debt Holder as provided in this Section 4.2(d), or (ii) for its failure to deliver any amounts pursuant to this paragraph to any other Designated Senior Debt Holder. Payee shall not be required to determine the existence of any Senior Debt or the existence or validity of any Designated Senior Debt Holder, or decide any questions of law. (e) Payor shall promptly notify Payee in writing of any facts known to Payor that would cause a payment of any amounts under this Note to violate this SECTION 4.2, but failure to give such notice shall not affect the subordination of this Note to the Senior Debt as provided in this SECTION 4.2, except as specifically provided in Section 4.2(M). (f) After all Senior Debt is paid in full and until this Note is paid in full, Payee shall be subrogated (equally and ratably with the holders of all Indebtedness of Payor which by its express terms is subordinated to Senior Debt of Payor to the same extent as the Note is subordinated and which is entitled to like rights of subrogation) to the rights of Senior Debt Holders to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to Payee have been applied to the payment of Senior Debt. A distribution made under this SECTION 4.2 to Senior Debt Holders that otherwise would have been made to Payee is not, as between Payor and Payee, a payment by Payor on this Note. (g) This SECTION 4.2 defines the relative rights of Payee and Senior Debt Holders. Nothing in this Note shall: (i) impair, as between Payor and Payee, the obligation of Payor, which is absolute and unconditional, to pay principal of and interest on this Note in accordance with its terms; 3 (ii) affect the relative rights of Payee and creditors of Payor other than their rights in relation to Senior Debt Holders; or (iii) prevent the Payee from exercising its available remedies upon a Default or Event of Default, subject to the rights of Senior Debt Holders to receive distributions and payments otherwise payable to Payee. (h) If Payor fails because of this SECTION 4.2 to pay principal of or interest on this Note on the due date, the failure is still a Default or Event of Default. (i) No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by this Note shall be impaired by any act or failure to act by Payor or Payee or by the failure of Payor or Payee to comply with the terms of this Note (subject to Section 4.2(m) hereof. (j) Whenever a distribution is to be made or a notice given to Senior Debt Holders, the distribution may be made and the notice given to their representative. (k) Upon any payment or distribution of assets of Payor referred to in this SECTION 4.2, Payee shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of a representative or of the liquidating trustee or agent or other Person making any distribution to Payee of this Note for the purpose of ascertaining the Persons entitled to participate in such distribution, the Senior Debt Holders and other Indebtedness of Payor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this SECTION 4.2. (l) For the purposes of this Note, the Senior Obligations shall not be deemed to have been paid in full unless the Senior Debt Holders shall have received indefeasible cash payment in full of the Senior Obligations (whether matured or unmatured). (m) Any payment under this Note is permitted and shall not be subject to Section 4.2(d) hereof, unless such payment is specifically prohibited by Section 4.2(b) hereof and Payee has actual notice of such prohibition. 5. RIGHT OF SETOFF. Subject to the limitations of and compliance with the provisions set forth in Section 13 of the Purchase Agreement (including, without limitation, Section 13.2(a) of the Purchase Agreement), and notwithstanding the provisions of SECTION 4 above, if an indemnification claim is made against Sellers under SECTION 13 of the Purchase Agreement for Buyer Losses and indemnification is payable to the Buyer in accordance with the terms of Section 13 thereof (the "INDEMNIFIABLE AMOUNT"), Payor is hereby authorized at any time and from time to time, to the fullest extent permitted by law, and until the Maturity Date, to set off and apply any and all such Indemnifiable Amounts against any of and all the obligations of the Payor under this Note, provided that Payor shall provide Payee with a minimum of ten (10) days advance written notice to the address set forth on the signature page hereto (in accordance with the notice provisions of the Purchase Agreement) of any intended setoff under this Note irrespective of whether or not Payor shall have made any demand under the Purchase Agreement. The rights of Payor under this SECTION 5 are in addition to other rights and remedies (including other rights of setoff) which Payor may have. 4 6. NO VOTING RIGHTS. This Note shall not entitle Payee to any voting rights or other rights as a stockholder of Payor. 7. TRANSFERS. This Note may be transferred or assigned in whole or in part by Payee to any other person or entity without the prior written consent of Payor, provided that such transfer is in compliance with applicable federal and state securities laws, if any, and Payee surrenders the original Note (or an affidavit of lost promissory note containing appropriate indemnification) for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form reasonably satisfactory to Payor. Thereupon, a new promissory note for like principal amount will be issued to, and registered in the name of, the transferee. Interest, if any, and principal are payable only to the registered holder of this Note. Payee agrees to provide a form W-8 to Payor on request. 8. ASSIGNS. This Note shall inure to the benefit of and bind the successors, permitted assigns, heirs, executors, and administrators of Payor and Payee. Failure of Payee to assert any right herein shall not be deemed to be a waiver thereof. 9. EVENT OF DEFAULT. This Note shall become immediately due and payable upon the occurrence of an Event of Default (as defined below), whereupon (i) this Note and any interest shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Payor; and (ii) Payee, at its option, may proceed to enforce all other rights and remedies available to Payee under applicable law. For purposes hereof, the occurrence of any of the following shall constitute an "EVENT OF DEFAULT" under this Note: (a) the failure to make any payment of principal or any other amount payable hereunder when due under this Note (whether or not prohibited by the subordination provisions of SECTION 4) or the breach of any other condition or obligation under this Note; or (b) the filing of a petition by or against Payor under any provision of applicable bankruptcy or similar law; or appointment of a receiver, trustee, custodian or liquidator of or for all or any part of the assets or property of Payor; or the insolvency of Payor; or the making of a general assignment for the benefit of creditors by Payor. 10. DEFINITIONS. 10.1. "CAPITAL LEASE OBLIGATION" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. 10.2. "DEFAULT" shall mean any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. 10.3. "DESIGNATED SENIOR DEBT" shall mean (1) any Indebtedness outstanding under the Senior Credit Facility, (2) any Indebtedness under the Senior Subordinated Debt, and (3) after payment in full of all Senior Obligations under the Senior Credit Facility and the Senior Subordinated Debt, any other Senior Debt permitted under the Indenture the outstanding 5 principal amount of which is $25 million or more and that has been designated by Payor as "Designated Senior Debt". 10.4. "DESIGNATED SENIOR DEBT HOLDER" shall mean the trustee under the Indenture, and the administrative agent under the Senior Credit Facility, and any successors or assigns thereto, and any other Senior Debt Holder specifically designated in writing by Payor. Any notice to a Specified Senior Debt Holder shall be given in accordance with the notice provisions set forth in the Indenture, Senior Credit Facility, or at the address set forth in the designation provided by Payor with respect to any other Senior Debt Holder, as applicable. 10.5. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. 10.6. "GUARANTEE" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. 10.7. "GUARANTOR" means: (i) each of Payor's direct and indirect domestic subsidiaries existing on the date of the Indenture, and (ii) any other Subsidiary that executes a Guarantee in accordance with the provisions of the Indenture. 10.8. "HEDGING OBLIGATIONS" means the obligations of Payor under: (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (ii) other agreements or arrangements designed to protect Payor against fluctuations in interest rates. 10.9. "INDEBTEDNESS" shall mean any indebtedness of Payor, whether or not contingent, (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of Payor prepared in accordance with GAAP. In addition, the term "INDEBTEDNESS" includes all Indebtedness of others secured by a Lien on any asset of Payor (whether or not such Indebtedness is assumed by Payor) and, to the extent not otherwise included, a Guarantee by Payor of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date will be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; (2) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness; (3) the lesser of the Indebtedness and the fair market value of the collateral asset, in the case of any Indebtedness of others secured by a Lien on any asset of Payor; and (4) the lesser of the primary Indebtedness and any stated 6 limit on recourse under the Guarantee, in the case of Indebtedness of others secured by a guarantee of the specified Person. 10.10. "INDENTURE" shall mean that certain Indenture, dated as of April 24, 2002, among Payor, the Guarantors and The Bank of New York, as trustee, as in effect on the date hereof, together with such modifications and amendments as may be consented to by Payor and Payee. 10.11. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset. 10.12. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. 10.13. "SENIOR CREDIT FACILITY" shall mean that certain Credit Agreement, dated as of April 24, 2002, by and among Payor, Bank of America, N.A., as administrative agent, Banc of America Securities LLC, as co-lead arranger, and CIBC World Markets Corp., as co-lead arranger, providing for $50.0 million of term loan borrowings and up to $50.0 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, amended and restated, supplemented, modified, renewed, refunded, replaced or refinanced from time to time. 10.14. "SENIOR DEBT" shall mean: (i) the Senior Credit Facility and the Senior Subordinated Debt, (ii) other Indebtedness of Payor permitted to be incurred under the terms of the Indenture that is specifically identified in the terms of such Indebtedness to rank in parity or senior to the Senior Subordinated Debt, and (iii) all Senior Obligations with respect to the items listed in the preceding clauses (i) and (ii). Notwithstanding anything to the contrary in the preceding, Senior Debt shall not include: (i) any intercompany Indebtedness of Payor or any of its subsidiaries to Payor or any of its Affiliates, (ii) any liability for federal, state, local or other taxes owed or owing, (iii) any trade payables, (iv) the portion of any Indebtedness that is incurred in violation of the terms of any Senior Debt or (v) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to Payor or any Guarantor. 10.15. "SENIOR DEBT HOLDERS" shall mean the beneficial owners of Senior Debt and shall include any representatives thereof, including, but not limited to, in the case of an indenture, the trustee under such indenture, or in the case of a credit facility, the agent of the lender. 10.16. "SENIOR OBLIGATIONS" shall have the meaning set forth in Section 4.1 hereof. 10.17. "SENIOR SUBORDINATED DEBT" shall mean the senior subordinated notes issued under the Indenture. 7 10.18. "SUBSIDIARY" means, with respect to Payor: any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by Payor or one or more of the other Subsidiaries of Payor (or a combination thereof); and any partnership (a) the sole general partner or the managing general partner of which is Payor or a Subsidiary of Payor or (b) the only general partners of which are Payor or one or more Subsidiaries of Payor (or any combination thereof). 11. USURY SAVINGS CLAUSE. Payor and Payee intend to comply at all times with applicable usury laws. If at any time such laws would render usurious any amounts due under this Note under applicable law, then it is Payor's and Payee's express intention that Payor not be required to pay interest on this Note at a rate in excess of the maximum lawful rate, that the provisions of this SECTION 11 shall control over all other provisions of this Note which may be in apparent conflict hereunder, that such excess amount shall be immediately credited to the principal balance of this Note, and the provisions hereof shall immediately be reformed and the amounts thereafter decreased, so as to comply with the then applicable usury law, but so as to permit the recovery of the fullest amount otherwise due under this Note. 12. COSTS. Payor agrees to pay all reasonable costs of collection of any amounts due hereunder arising as a result of any default hereunder, including without limitation, reasonable attorneys' fees and expenses. 13. GOVERNING LAW. This Note is made in accordance with and shall be construed under the laws of the State of Delaware, other than the conflicts of law principles thereof. 14. WAIVER. Payor hereby expressly waives presentment, demand for payment, dishonor, notice of dishonor, protest, notice of protest and any other formality. ALLTRISTA CORPORATION By: /s/ Ian G.H. Ashken -------------------------------- Name: Ian G.H. Ashken Title: Vice Chariman, Chief Financial Officer and Secretary 8 EX-10.10 13 file012.txt ESCROW AGREEMENT ESCROW AGREEMENT This Escrow Agreement (this "Agreement"), dated as of April 24, 2002 among (i) Tilia International, Inc., a Cook Islands corporation ("Tilia"), (ii) Tilia, Inc., a California corporation ("Tilia U.S."), (iii) Tilia Canada, Inc., a corporation organized under the Canada Business Corporation Act ("Tilia Canada") (Tilia, Tilia U.S. and Tilia Canada are collectively referred to herein as the "Sellers" and each individually as a "Seller"), (iv) Alltrista Corporation, a Delaware corporation (the "Buyer"), (v) Alexander Schilling (the "Sellers' Representative") and (vi) J.P. Morgan Trust Company, National Association, as escrow agent (the "Escrow Agent"). W I T N E S S E T H: WHEREAS, the Buyer, the Sellers and the Sellers' Representative have entered into that certain Asset Purchase Agreement, dated as of March 27, 2002 (the "Purchase Agreement"), pursuant to which certain amounts are to be placed in escrow as a source of the payment for any indemnified claims that may arise pursuant to Section 13 of the Purchase Agreement; WHEREAS, Section 3.1 of the Purchase Agreement provides that at the Closing, the Buyer shall deposit in escrow with the Escrow Agent an amount equal to $5,000,000, constituting a part of the purchase price under the Purchase Agreement; WHEREAS, the Escrow Agent has agreed to act as escrow agent pursuant to the terms of this Agreement; and WHEREAS, capitalized terms used herein shall have the same meanings as set forth in the Purchase Agreement unless otherwise specifically defined herein. NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: SECTION 1. Establishment of Escrow. (a) On the Closing Date, the Buyer will wire transfer in immediately available funds to the Escrow Agent, in accordance with Section 3.3 of the Purchase Agreement, an amount equal to $5,000,000 (the "Escrowed Amount"). (b) The Escrow Agent hereby agrees to act as escrow agent and to hold, safeguard and disburse the Escrowed Amount pursuant to the terms and conditions hereof. SECTION 2. Investment of Funds. The Escrowed Amount shall be invested, from time to time, to the extent possible, in the [Chase Investment Money Market Account] or in such other instruments mutually agreed by both the Buyer and the Sellers' Representative, with any remainder being deposited and maintained in a money market deposit account with a bank organized under the laws of the United States of America or of the State of California, which is insured by the Federal Deposit Insurance Corporation, or in such other accounts mutually agreed by both the Buyer and the Sellers' Representative, until disbursement of the entire Escrowed Amount. All interest or any other income earned with respect to such investment shall be retained by the Escrow Agent as part of the Escrowed Amount until distributed in accordance with other provisions of this Agreement. For all federal, state and local income tax purposes, the Sellers, the Buyer and the Escrow Agent shall treat each Seller as the owner of its pro rata portion of the Escrowed Amount based on the percentage of the Purchase Price (as defined in the Purchase Agreement) allocated to such Seller on Schedule 15 to the Purchase Agreement. Accordingly, the Sellers shall pay all income, withholding and any other taxes imposed on or measured by income, to the extent attributable to any sums deposited with the Escrow Agent pursuant to Section 1 of this Agreement or attributable to interest thereon and shall file, or cause to be filed, all tax and information returns applicable thereto. The Escrow Agent is authorized to liquidate any portion of the Escrowed Amount consisting of investments to provide for payments required to be made under this Agreement. SECTION 3. Release of Escrowed Amount. The Escrow Agent shall release the Escrowed Amount (as increased by any earnings thereon and as reduced by any payments made from time to time pursuant to this Section 3 hereof, any Claim Reserve or any losses on investments), as follows: (a) The Escrow Agent shall release the Escrowed Amount in accordance with the written instructions of both the Buyer and the Sellers' Representative. (b) The Escrow Agent shall release such amounts as are authorized to be paid to the Buyer pursuant to Section 4 below. (c) On March 31, 2003, the Escrow Agent shall distribute the Escrowed Amount to Tilia, provided, that if there shall remain one or more Open Claims and/or if the Escrow Agent shall have received one or more notices from the Buyer pursuant to Section 4(a) below and/or any certificate from the Sellers' Representative pursuant to Section 15 below, then the Escrow Agent shall distribute the Escrowed Amount to Tilia less (i) the Claim Reserves in respect of any Open Claims, (ii) the aggregate amount specified in such notices for which a Claim Reserve has not been established, and (iii) the amount of the Sellers' Representative Fees pursuant to Section 15 below specified in the certificate sent by the Sellers' Representative's to the Escrow Agent. (d) Following March 31, 2003, the Escrow Agent shall from time to time distribute to Tilia any Escrowed Amount that exceeds the amount of the Claim Reserves with respect to any Open Claims as to which there has been no Final Determination; provided that if the Escrow Agent shall have received one or more notices from the Buyer pursuant to Section 4(a) below on or prior to March 31, 2003, and no Claim Reserve(s) shall have been established in respect of the Claim or Claims referred in any such notice, the Escrow Agent shall retain as part of the Escrowed Amount an amount equal to the aggregate of the amounts specified by the Buyer in any such notices. -2- SECTION 4. Buyer Claims. The procedure for payments from the Escrowed Amount shall be as follows: (a) As the Buyer shall determine that it is entitled to an indemnification payment under Section 13 of the Purchase Agreement (including without limitation Section 13.2(a) thereof) , the Buyer may request payment from the Escrowed Amount by giving written notice of such claim to the Escrow Agent and to the Sellers' Representative, certifying in such notice the nature of the claim in reasonable detail, the amount thereof if then ascertainable and, if not then ascertainable, a good faith estimate of the amount thereof and the provision(s) in the Purchase Agreement on which the claim is based. Buyer may give notice of claim in accordance with this Section 4(a) at any time on or prior to March 31, 2003 and no notice of claim may be given to the Escrow Agent after March 31, 2003. (b) If, within thirty (30) calendar days after actual receipt by the Sellers' Representative of the written notice of a claim from the Buyer in accordance with Section 4(a), the Escrow Agent has not actually received written objection to such claim from the Sellers' Representative, the claim stated in such notice shall be conclusively deemed to be approved by the Sellers' Representative and the Escrow Agent shall promptly thereafter pay to the Buyer from the Escrowed Amount the amount of such claim to the extent of the funds in the Escrowed Amount and shall notify the Sellers' Representative of such payment. (c) If within said thirty (30) calendar days the Escrow Agent shall have actually received from the Sellers' Representative a written objection to the claim by the Buyer, stating the nature of and grounds for such objection (a copy of which objection shall in each case be sent to the Buyer by the Sellers' Representative in accordance with the provisions of Section 7 below), then such claim shall be deemed to be an "Open Claim" and the Escrow Agent shall reserve within the Escrowed Amount an amount equal to the amount of the Open Claim (which amount for each Open Claim is referred to herein as the "Claim Reserve"). (d) The amount constituting the Claim Reserve for each Open Claim shall be paid by the Escrow Agent from the Escrowed Amount to the Buyer only either (i) in accordance with a joint written instruction by the Buyer and the Sellers' Representative or (ii) if and to the extent consistent with a copy of a final judgment by or order of the Board of Arbitration referred to in Section 9 hereof or a court of competent jurisdiction with respect to which any period of time to appeal such judgment or order shall have lapsed pertaining to the Open Claim, sent to the Escrow Agent by the Buyer or the Sellers' Representative, in any case accompanied by a certification that any period of time to file an appeal of such judgment or order has lapsed and no such appeal has been filed or is otherwise pending (a "Final Determination"), and any portion of the Claim Reserve for such Open Claim not so required to be paid to the Buyer shall be deemed to be part of the remaining Escrowed Amount. The Escrow Agent shall, within two banking days of having been given a copy of a Final Determination for an Open Claim, pay the Buyer an amount equal to the aggregate amount payable to the Buyer under the Final Determination for such Open Claim. (e) The parties to this Agreement hereby acknowledge and agree that all instructions, directions or other communications given by the Buyer shall be made pursuant to a writing signed by a duly authorized representative thereof, and that all instructions, directions or -3- other communications given by the Sellers' Representative shall be made pursuant to a writing signed by the Sellers' Representative or, in the event of his death or disability, his executor or guardian, as the case may be. SECTION 5. Termination of Escrow. This Agreement shall terminate at such time as there is no longer any Escrowed Amount. The provisions of Section 6 shall survive a termination of this Agreement. SECTION 6. Duties of the Escrow Agent (a) The duties and obligations of the Escrow Agent, in its capacity as such, shall be determined solely by the express provisions of this Agreement and the Escrow Agent shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement. The Escrow Agent shall not be bound in any way by any other agreement or contract among any of the parties (whether or not the Escrow Agent has knowledge thereof). (b) The Escrow Agent shall not be liable, except for its own gross negligence or willful misconduct and, except with respect to claims based upon such gross negligence or willful misconduct that are successfully asserted against the Escrow Agent, the Buyer shall indemnify and hold harmless the Escrow Agent (and any successor of the Escrow Agent) from and against any and all losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys' fees and disbursements, arising out of and in connection with this Agreement. Without limiting the foregoing, the Escrow Agent shall in no event be liable in connection with its investment or reinvestment of any cash held by it hereunder in good faith, in accordance with the terms hereof, including, without limitation, any liability for any delays (not resulting from its gross negligence or willful misconduct) in the investment or reinvestment of the Escrowed Amount, or any loss of interest incident to any such delays. In no event shall Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. (c) The Escrow Agent shall be entitled to rely in good faith upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of the service thereof. The Escrow Agent may act in good faith in reliance upon any instrument or signature believed by it to be genuine and may assume that the person purporting to give receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. In the administration of the Escrowed Amount, the Escrow Agent may execute any of its powers and perform its duties hereunder directly or through agents or attorneys and may, consult with counsel, accountants and other skilled persons to be selected and retained by it. The Escrow Agent shall not be liable for the performance of agents or for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons. (d) If a controversy arises between one or more of the parties hereto, or between any of the parties hereto and any person not a party hereto, as to whether or not or to -4- whom the Escrow Agent shall deliver the Escrowed Amount or any portion thereof or as to any other matter arising out of or relating to this Agreement or the Escrowed Amount deposited hereunder, the Escrow Agent shall not be required to determine the same and need not make any delivery of the Escrowed Amount or any portion thereof but may retain it without liability to anyone until the rights of the parties to the dispute shall have finally been determined by (i) mutual agreement, or (ii) a copy of a final judgment by or order of a board of arbitration or a court of competent jurisdiction with respect to which any period of time to appeal such judgment or order shall have lapsed, accompanied by a certification that any period of time to file an appeal of such judgment or order has lapsed and no such appeal has been filed or is otherwise pending, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings. The Escrow Agent shall be entitled to assume that no such controversy has arisen unless it has received conflicting written notice from the parties to this Agreement or a written notice from any person that such a controversy has arisen which refers specifically to this Agreement and identifies by name and address the adverse claimants to the controversy. (e) The Escrow Agent hereby accepts its appointment and agrees to act as the Escrow Agent under the terms and conditions of this Agreement. By such acceptance and agreement, however, the Escrow Agent shall not be deemed to have waived any right with respect to any transaction or representation (other than its service as Escrow Agent hereunder) between or among it and any other party or parties hereto. (f) Any company into which the Escrow Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger conversion or consolidation to which it shall be a party or any company to which the Escrow Agent may sell or transfer all of substantially all of its escrow/custody business, provided such company shall be eligible to serve as Escrow Agent hereunder, shall be the successor hereunder to the Escrow Agent without the execution or filing of any paper or any further act. In the event the Escrow Agent becomes unavailable or unwilling to continue in its capacity hereunder, the Escrow Agent may resign and be discharged from its duties or obligations by giving notice of its resignation to the parties to this Agreement, specifying a date not less than sixty (60) calendar days following such notice date when such resignation shall take effect. Buyer and the Sellers' Representative shall jointly designate a successor Escrow Agent prior to the expiration of such sixty (60) calendar days period by giving written notice to the resigning Escrow Agent. If at that time the Escrow Agent has not received a designation of a successor escrow agent, the Escrow Agent's sole responsibility after that time shall be to retain and safeguard the Escrowed Amount until receipt of a designation of successor escrow agent from the Buyer and the Sellers' Representative. The Escrow Agent shall promptly transfer the Escrowed Amount to such designated successor. (g) The Escrow Agent shall be reimbursed for all reasonable expenses, disbursements and advances incurred or made by the Escrow Agent in performance of its duties hereunder (including reasonable fees, expenses and disbursements of its counsel). Such fees, costs and expenses payable to the Escrow Agent shall be borne one-half by the Sellers and one-half by the Buyer. (h) The Sellers and the Buyer shall reimburse and indemnify the Escrow Agent for, and hold it harmless against, any loss, liability or expense, including but not limited to -5- reasonable counsel fees, incurred without bad faith, willful misconduct or gross negligence on the part of the Escrow Agent arising out of or in connection with its acceptance of, or the performance of its duties and obligations under this Agreement as well as the costs and expenses of defending against any claim or liability arising out of or relating to this Agreement. Such reimbursement to and indemnification of the Escrow Agent shall be borne one-half by the Sellers and one-half by the Buyer. (i) The Sellers, the Buyer and the Escrow Agent agree to be bound by the terms set forth on Exhibit A hereto. SECTION 7. Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt) provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties): If to the Sellers: Tilia, Inc. Tilia International, Inc. c/o Tilia, Inc. Tilia Canada, Inc. c/o Tilia, Inc. 303 Second Street North Tower, 5th Floor San Francisco, CA 94107 Attn: Alexander Schilling Copy to: Morrison & Foerster LLP 755 Page Mill Road Palo Alto, CA 94304-1018 Attn: Paul L. Lion III Telecopy: (650) 494-0792 If to the Sellers' Representative: Alexander Schilling c/o Tangent Fund Management, L.L.C. One Union Square 180 Geary Street, Suite 500 San Francisco, CA 84108 Telecopy: (415) 392 1928 Copy to: -6- Morrison & Foerster LLP 755 Page Mill Road Palo Alto, CA 94304-1018 Attn: Paul L. Lion III Telecopy: (650) 494-0792 If to the Buyer: Alltrista Corporation 555 Theodore Fremd Avenue, Suite B302 Rye, New York 10580 Attn: Ian G.H. Ashken Telecopy: (914) 967-9405 Copy to: Willkie Farr & Gallagher 787 7th Avenue New York, New York 10019-6099 Attn: William J. Grant, Esq. and Michael A. Schwartz, Esq. Telecopy: (212) 728-8111 If to Escrow Agent: J.P. Morgan Trust Company, National Association 101 California Street, Suite #3800 San Francisco, CA 94111 Attn: Hank Helley Telecopy: (415) 954-2371 SECTION 8. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE CONSTRUED, PERFORMED AND ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. SECTION 9. Arbitration. All disputes between the Buyer and the Sellers and the Sellers' Representative arising out of this Agreement shall be submitted to binding arbitration in accordance with the provisions of Section 13.2(e) of the Purchase Agreement. SECTION 10. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original and all of which, when taken together, will be deemed to constitute one and the same. SECTION 11. Section Headings. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. SECTION 12. Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this -7- Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in a writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. SECTION 13. Exclusive Agreement and Modification. This Agreement and the Purchase Agreement supersede all prior agreements among the parties with respect to their subject matter and constitute (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to their subject matter. This Agreement may not be amended except by a written agreement executed by all of the parties hereto. SECTION 14. Assignment. Neither this Agreement nor any right or interest hereunder may be assigned in whole or in part by any party without the prior consent of the other parties hereto and any such attempted assignment without such prior written consent shall be void and of no force and effect, provided, that the Buyer may assign its rights hereunder to one or more Affiliates and to any party providing financing in connection with the transactions contemplated hereby (provided that such assignment shall not serve as a novation) and the Sellers may assign their rights and obligations to a liquidating trust or similar entity, to the shareholders of Tilia or their assignees or to other Affiliates of the Sellers, provided further, that no such assignment shall reduce or otherwise vitiate any of the obligations of the Sellers or the Escrow Agent hereunder. This Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the parties hereto. SECTION 15. Sellers' Representative Expenses. (a) If Sellers' Representative pays fees and expenses on behalf of Tilia, pursuant to a separate agreement to be entered into between Tilia and the Sellers' Representative, the Sellers' Representative shall have the right to be reimbursed of such expenses and fees (the "Sellers' Representative's Fees") from any remaining Escrowed Amount which shall not have been distributed to the Buyer by the Escrow Agent pursuant to this Agreement; provided that the Escrow Agent shall have received from the Sellers' Representative, on or prior to March 31, 2003, a written certificate setting forth the amount of the Seller's Representative's Fees owed or to be owed by Tilia to the Seller's Representative. (b) The reimbursement of the Sellers' Representative's Fees shall be made by the Escrow Agent to the Sellers' Representative promptly following any distribution required pursuant to Section 3(c); provided, however, that the Escrow Agent shall reimburse to the Sellers' Representative that portion of the Sellers' Representative's Fees to the extent the Escrowed Amount exceeds the amount of the Claim Reserves plus the amount set forth in any -8- notice of the Buyer pursuant to Section 4(a) for which no Claim Reserve has yet been established. SECTION 16. Tax Reporting The Sellers agree to provide the Escrow Agent with certified tax identification numbers for each Seller by furnishing appropriate Forms W-9 (or Forms W-8, in the case of non-U.S. persons) and other forms and documents that the Escrow Agent may reasonably request (collectively, "Tax Reporting Documentation") to the Escrow Agent within thirty (30) days after the date hereof. [Signature pages follow] -9- IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. ALLTRISTA CORPORATION By: /s/ Ian G.H. Ashken -------------------------------- Name: Ian G.H. Ashken Title: Vice Chariman, Chief Financial Officer and Secretary TILIA INTERNATIONAL INC. by Corporate Directors Limited, Director By: /s/ Leanne Corvette ------------------------------------- Name: Leanne Corvette Title: Authorized Signatory TILIA INC. By: /s/ Linda Graebner ------------------------------------- Name: Linda Graebner Title: President and CEO TILIA CANADA, INC. By: /s/ Linda Graebner ------------------------------------- Name: Linda Graebner Title: President and CEO By: /s/ Alexander Schilling ------------------------------------- Alexander Schilling As Sellers' Representative [SELLER'S ESCROW AGREEMENT] J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION as Escrow Agent By: /s/ Hans H. Helley ------------------------------------- Name: Hans H. Helley Title: Vice President [SELLER'S ESCROW AGREEMENT] EXHIBIT A 1. Specimen Signatures The Escrow Agent may rely on the signatures contained on the signature page hereto as the specimen signatures of the parties, until changed in writing by a certificate to the Escrow Agent from the party so changing. 2. Funds Transfer Language a) In the event funds transfer instructions are given (other than in writing at the time of execution of the Escrow Agreement) whether in writing, by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of such instructions by telephone call-back to the person or persons designated on Attachment "A" hereto, and the Escrow Agent may rely upon the confirmations of anyone purporting to be the person or persons so designated. The persons and telephone numbers for call-backs may be changed only in a writing actually received and acknowledged by the Escrow Agent. The parties to this Agreement acknowledge that such security procedure is commercially reasonable. b) It is understood that the Escrow Agent and the beneficiary's bank in any funds transfer may rely solely upon any account numbers or similar identifying number provided by either of the other parties hereto to identify (I) the beneficiary, (ii) the beneficiary's bank, or (iii) an order it executes using any such identifying number, even where its use may result in a person other than the beneficiary being paid, or the transfer of funds to a bank other than the beneficiary's bank, or an intermediary bank designated. [SELLER'S ESCROW AGREEMENT] Attachment A Telephone Number(s) for Call-Backs and Person(s) Designated to Confirm Funds Transfer and Payment Instructions Escrow Agent is authorized to confirm payment instructions issued in the name of any of the parties to this Agreement with any person purporting to be the person designated on behalf of such party as indicated below, whether or not that person is the person who has issued the payment instructions to the Escrow Agent. Name Telephone Number - ---- ---------------- FOR THE BUYER: Ian G.H. Ashken (914) 967-9400 Martin E. Franklin Desiree DeStefano - --------------------------------------- ------------------------------------- FOR SELLERS' REPRESENTATIVE: Alexander Schilling (415) 392-9228 ext. 223 Hanns J. Kristen (415) 459-8692 [SELLER'S ESCROW AGREEMENT] EX-10.11 14 file013.txt LONG TERM ESCROW AGREEMENT LONG TERM ESCROW AGREEMENT This Escrow Agreement (this "Agreement"), dated as of April 24, 2002 among (i) Tilia International, Inc., a Cook Islands corporation ("Tilia"), (ii) Alltrista Corporation, a Delaware corporation (the "Buyer"), (iii) Alexander Schilling (the "Sellers' Representative") and (iv) J.P. Morgan Trust Company, National Association, as escrow agent (the "Escrow Agent"). W I T N E S S E T H: WHEREAS, Tilia, Tilia, Inc., a California corporation ("Tilia U.S."), Tilia Canada, Inc. a corporation organized under the Canada Business Corporation Act ("Tilia Canada") (Tilia, Tilia U.S. and Tilia Canada are collectively referred to herein as the "Sellers" and each individually as a "Seller"), the Sellers' Representative, and the Buyer have entered into that certain Asset Purchase Agreement, dated as of March 27, 2002 (the "Purchase Agreement"), pursuant to which certain amounts are to be placed in escrow as a source of the payment for any indemnified claims that may arise pursuant to Section 13 of the Purchase Agreement; WHEREAS, Section 3.1 of the Purchase Agreement provides that at the Closing, the Buyer shall deposit in escrow with the Escrow Agent an amount equal to $5,000,000, constituting a part of the purchase price under the Purchase Agreement, to provide a fund in the event that any indemnification claims are made against Tilia in accordance with Section 13 of the Purchase Agreement; WHEREAS, the Buyer has issued on the date hereof a certain promissory note payable to Tilia in the principal amount of $5,000,000 (the "Long Term Note") pursuant to which payments shall be made to the Escrow Agent under the terms thereof; WHEREAS, the Escrow Agent has agreed to act as escrow agent pursuant to the terms of this Agreement; and WHEREAS, capitalized terms used herein shall have the same meanings as set forth in the Purchase Agreement unless otherwise specifically defined herein. NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: SECTION 1. Establishment of Escrow. (a) On the Closing Date, the Buyer will wire transfer in immediately available funds to the Escrow Agent, in accordance with Section 3.3 of the Purchase Agreement, an amount equal to $5,000,000 (together with any payment received by the Escrow Agent from the Buyer pursuant to the terms of the Long Term Note, the "Long Term Escrowed Amount"). (b) The Escrow Agent hereby agrees to act as escrow agent and to hold, safeguard and disburse the Long Term Escrowed Amount pursuant to the terms and conditions hereof. SECTION 2. Investment of Funds. The Long Term Escrowed Amount shall be invested, from time to time, to the extent possible, in the [Chase Investment Money Market Account] or in such other instruments mutually agreed by both the Buyer and the Sellers' Representative, with any remainder being deposited and maintained in a money market deposit account with a bank organized under the laws of the United States of America or of the State of California, which is insured by the Federal Deposit Insurance Corporation, or in such other accounts mutually agreed by both the Buyer and the Sellers' Representative, until disbursement of the entire Long Term Escrowed Amount. All interest or any other income earned with respect to such investment shall be retained by the Escrow Agent as part of the Long Term Escrowed Amount until distributed in accordance with other provisions of this Agreement. For all federal, state and local income tax purposes, Tilia, the Buyer and the Escrow Agent shall treat Tilia as the owner of the Long Term Escrowed Amount. Accordingly, Tilia shall pay all income, withholding and any other taxes imposed on or measured by income, to the extent attributable to any sums deposited with the Escrow Agent pursuant to Section 1 of this Agreement or attributable to interest thereon and shall file, or cause to be filed, all tax and information returns applicable thereto. The Escrow Agent is authorized to liquidate any portion of the Long Term Escrowed Amount consisting of investments to provide for payments required to be made under this Agreement. SECTION 3. Release of Escrowed Amount. The Escrow Agent shall release the Long Term Escrowed Amount (as increased by any earnings thereon and as reduced by any payments made from time to time pursuant to this Section 3 hereof, any Claim or any losses on investments), as follows: (a) The Escrow Agent shall release the Long Term Escrowed Amount in accordance with the written instructions of both the Buyer and the Sellers' Representative. (b) The Escrow Agent shall release such amounts as are authorized to be paid to the Buyer pursuant to Section 4 below. (c) On June 30, 2005, the Escrow Agent shall distribute the Long Term Escrowed Amount to Tilia, provided, that if there shall remain one or more Open Claims and/or if the Escrow Agent shall have received one or more notices from the Buyer pursuant to Section 4(a) below, then the Escrow Agent shall distribute the Long Term Escrowed Amount to Tilia less (i) the Claim Reserves in respect of any Open Claims and (ii) the aggregate amount specified in such notices for which a Claim Reserve has not been established. (d) Following June 30, 2005, the Escrow Agent shall from time to time distribute to Tilia any Long Term Escrowed Amount that exceeds the amount of the Claim Reserves with respect to any Open Claims as to which there has been no Final Determination; provided that if the Escrow Agent shall have received one or more notices from the Buyer pursuant to Section 4(a) below on or prior to March 31, 2003, and no Claim Reserve(s) shall -2- have been established in respect of the Claim or Claims referred in any such notice, the Escrow Agent shall retain as part of the Escrowed Amount an amount equal to the aggregate of the amounts specified by the Buyer in any such notices. SECTION 4. Buyer Claims. The procedure for payments from the Long Term Escrowed Amount shall be as follows: (a) As the Buyer shall determine that it is entitled to an indemnification payment under Section 13 of the Purchase Agreement (including without limitation Section 13.2(a) thereof), the Buyer may request payment from the Long Term Escrowed Amount by giving written notice of such claim to the Escrow Agent and to the Sellers' Representatives, certifying in such notice the nature of the claim in reasonable detail, the amount thereof if then ascertainable and, if not then ascertainable, a good faith estimate of the amount thereof and the provision(s) in the Purchase Agreement on which the claim is based. Buyer may give notice of claim in accordance with this Section 4(a) at any time on or prior to June 30, 2005 and no notice of claim may be given to the Escrow Agent after June 30, 2005. (b) If, within thirty (30) calendar days after actual receipt by the Sellers' Representative of the written notice of a claim from the Buyer in accordance with Section 4(a), the Escrow Agent has not actually received written objection to such claim from the Sellers' Representative, the claim stated in such notice shall be conclusively deemed to be approved by Tilia and the Escrow Agent shall promptly thereafter pay to the Buyer from the Long Term Escrowed Amount the amount of such claim to the extent of the funds in the Long Term Escrowed Amount and shall notify the Sellers' Representative of such payment. (c) If within said thirty (30) calendar days the Escrow Agent shall have actually received from the Sellers' Representative a written objection to the claim by the Buyer, stating the nature of and grounds for such objection (a copy of which objection shall in each case be sent to the Buyer by the Sellers' Representative in accordance with the provisions of Section 7 below), then such claim shall be deemed to be an "Open Claim" and the Escrow Agent shall reserve within the Long Term Escrowed Amount an amount equal to the amount of the Open Claim (which amount for each Open Claim is referred to herein as the "Claim Reserve"). (d) The amount constituting the Claim Reserve for each Open Claim shall be paid by the Escrow Agent from the Long Term Escrowed Amount to the Buyer only either (i) in accordance with a joint written instruction by the Buyer and the Sellers' Representative or (ii) if and to the extent consistent with a copy of a final judgment by or order of the Board of Arbitration referred to in Section 9 hereof or a court of competent jurisdiction with respect to which any period of time to appeal such judgment or order shall have lapsed pertaining to the Open Claim, sent to the Escrow Agent by the Buyer or the Sellers' Representative, in any case accompanied by a certification that any period of time to file an appeal of such judgment or order has lapsed and no such appeal has been filed or is otherwise pending (a "Final Determination"), and any portion of the Claim Reserve for such Open Claim not so required to be paid to the Buyer shall be deemed to be part of the remaining Long Term Escrowed Amount. The Escrow Agent shall, within two banking days of having been given a copy of a Final Determination for an Open Claim, pay the Buyer an amount equal to the aggregate amount payable to the Buyer under the Final Determination for such Open Claim. -3- (e) The parties to this Agreement hereby acknowledge and agree that all instructions, directions or other communications given by the Buyer shall be made pursuant to a writing signed by a duly authorized representative thereof, and that all instructions, directions or other communications given by the Sellers' Representative or, in the event of his death or disability, his executor or guardian, as the case may be. SECTION 5. Termination of Escrow. This Agreement shall terminate at such time as there is no longer any Long Term Escrowed Amount. The provisions of Section 6 shall survive a termination of this Agreement. SECTION 6. Duties of the Escrow Agent (a) The duties and obligations of the Escrow Agent, in its capacity as such, shall be determined solely by the express provisions of this Agreement and the Escrow Agent shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement. The Escrow Agent shall not be bound in any way by any other agreement or contract among any of the parties (whether or not the Escrow Agent has knowledge thereof). (b) The Escrow Agent shall not be liable, except for its own gross negligence or willful misconduct and, except with respect to claims based upon such gross negligence or willful misconduct that are successfully asserted against the Escrow Agent, the Buyer shall indemnify and hold harmless the Escrow Agent (and any successor of the Escrow Agent) from and against any and all losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys' fees and disbursements, arising out of and in connection with this Agreement. Without limiting the foregoing, the Escrow Agent shall in no event be liable in connection with its investment or reinvestment of any cash held by it hereunder in good faith, in accordance with the terms hereof, including, without limitation, any liability for any delays (not resulting from its gross negligence or willful misconduct) in the investment or reinvestment of the Long Term Escrowed Amount, or any loss of interest incident to any such delays. In no event shall Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. (c) The Escrow Agent shall be entitled to rely in good faith upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of the service thereof. The Escrow Agent may act in good faith in reliance upon any instrument or signature believed by it to be genuine and may assume that the person purporting to give receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. In the administration of the Long Term Escrowed Amount, the Escrow Agent may execute any of its powers and perform its duties hereunder directly or through agents or attorneys and may, consult with counsel, accountants and other skilled persons to be selected and retained by it. The Escrow Agent shall not be liable for the performance of agents or for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons. -4- (d) If a controversy arises between one or more of the parties hereto, or between any of the parties hereto and any person not a party hereto, as to whether or not or to whom the Escrow Agent shall deliver the Long Term Escrowed Amount or any portion thereof or as to any other matter arising out of or relating to this Agreement or the Long Term Escrowed Amount deposited hereunder, the Escrow Agent shall not be required to determine the same and need not make any delivery of the Long Term Escrowed Amount or any portion thereof but may retain it without liability to anyone until the rights of the parties to the dispute shall have finally been determined by (i) mutual agreement, or (ii) a copy of a final judgment by or order of a board of arbitration or a court of competent jurisdiction with respect to which any period of time to appeal such judgment or order shall have lapsed, accompanied by a certification that any period of time to file an appeal of such judgment or order has lapsed and no such appeal has been filed or is otherwise pending, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings. The Escrow Agent shall be entitled to assume that no such controversy has arisen unless it has received conflicting written notice from the parties to this Agreement or a written notice from any person that such a controversy has arisen which refers specifically to this Agreement and identifies by name and address the adverse claimants to the controversy. (e) The Escrow Agent hereby accepts its appointment and agrees to act as the Escrow Agent under the terms and conditions of this Agreement. By such acceptance and agreement, however, the Escrow Agent shall not be deemed to have waived any right with respect to any transaction or representation (other than its service as Escrow Agent hereunder) between or among it and any other party or parties hereto. (f) Any company into which the Escrow Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger conversion or consolidation to which it shall be a party or any company to which the Escrow Agent may sell or transfer all of substantially all of its escrow/custody business, provided such company shall be eligible to serve as Escrow Agent hereunder, shall be the successor hereunder to the Escrow Agent without the execution or filing of any paper or any further act. In the event the Escrow Agent becomes unavailable or unwilling to continue in its capacity hereunder, the Escrow Agent may resign and be discharged from its duties or obligations by giving notice of its resignation to the parties to this Agreement, specifying a date not less than sixty (60) calendar days following such notice date when such resignation shall take effect. Buyer and the Sellers' Representative shall jointly designate a successor Escrow Agent prior to the expiration of such sixty (60) calendar days period by giving written notice to the resigning Escrow Agent. If at that time the Escrow Agent has not received a designation of a successor escrow agent, the Escrow Agent's sole responsibility after that time shall be to retain and safeguard the Escrowed Amount until receipt of a designation of successor escrow agent from the Buyer and the Sellers' Representative. The Escrow Agent shall promptly transfer the Long Term Escrowed Amount to such designated successor. (g) The Escrow Agent shall be reimbursed for all reasonable expenses, disbursements and advances incurred or made by the Escrow Agent in performance of its duties hereunder (including reasonable fees, expenses and disbursements of its counsel). Such fees, costs and expenses payable to the Escrow Agent shall be borne one-half by Tilia and one-half by the Buyer. -5- (h) The Sellers and the Buyer shall reimburse and indemnify the Escrow Agent for, and hold it harmless against, any loss, liability or expense, including but not limited to reasonable counsel fees, incurred without bad faith, willful misconduct or gross negligence on the part of the Escrow Agent arising out of or in connection with its acceptance of, or the performance of its duties and obligations under this Agreement as well as the costs and expenses of defending against any claim or liability arising out of or relating to this Agreement. Such reimbursement to and indemnification of the Escrow Agent shall be borne one-half by Tilia and one-half by the Buyer. (i) The Sellers, the Buyer and the Escrow Agent agree to be bound by the terms set forth on Exhibit A hereto. SECTION 7. Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt) provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties): If to Tilia: Tilia International, Inc. c/o Tilia, Inc. 303 Second Street North Tower, 5th Floor San Francisco, CA 94107 Attn: Alexander Schilling Copy to: Morrison & Foerster LLP 755 Page Mill Road Palo Alto, CA 94304-1018 Attn: Paul L. Lion III Telecopy: (650) 494-0792 If to the Sellers' Representative: Alexander Schilling c/o Tangent Fund Management, L.L.C. One Union Square 180 Geary Street, Suite 500 San Francisco, CA 84108 Telecopy: (415) 392 1928 Copy to: -6- Morrison & Foerster LLP 755 Page Mill Road Palo Alto, CA 94304-1018 Attn: Paul L. Lion III Telecopy: (650) 494-0792 If to the Buyer: Alltrista Corporation 555 Theodore Fremd Avenue, Suite B302 Rye, New York 10580 Attn: Ian G.H. Ashken Telecopy: (914) 967-9405 Copy to: Willkie Farr & Gallagher 787 7th Avenue New York, New York 10019-6099 Attn: William J. Grant, Esq. and Michael A. Schwartz, Esq. Telecopy: (212) 728-8111 If to Escrow Agent: J.P. Morgan Trust Company, National Association 101 California Street, Suite #3800 San Francisco, CA 94111 Attn: Hank Helley Telecopy: (415) 954-2371 SECTION 8. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE CONSTRUED, PERFORMED AND ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. SECTION 9. Arbitration. All disputes between Tilia and the Sellers' Representative and the Buyer arising out of this Agreement shall be submitted to binding arbitration in accordance with the provisions of Section 13.2(e) of the Purchase Agreement. SECTION 10. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original and all of which, when taken together, will be deemed to constitute one and the same. SECTION 11. Section Headings. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. SECTION 12. Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this -7- Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in a writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. SECTION 13. Exclusive Agreement and Modification. This Agreement and the Purchase Agreement supersede all prior agreements among the parties with respect to their subject matter and constitute (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to their subject matter. This Agreement may not be amended except by a written agreement executed by all of the parties hereto. SECTION 14. Assignment. Neither this Agreement nor any right or interest hereunder may be assigned in whole or in part by any party without the prior consent of the other parties hereto and any such attempted assignment without such prior written consent shall be void and of no force and effect, provided, that the Buyer may assign its rights hereunder to one or more Affiliates and to any party providing financing in connection with the transactions contemplated hereby (provided that such assignment shall not serve as a novation) and Tilia may assign its rights and obligations to a liquidating trust or similar entity, to the shareholders of Tilia or their assignees or to other Affiliates of Tilia, provided further, that no such assignment shall reduce or otherwise vitiate any of the obligations of Tilia or the Escrow Agent hereunder. This Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the parties hereto. SECTION 15. Tax Reporting The Sellers agree to provide the Escrow Agent with certified tax identification numbers for each Seller by furnishing appropriate Forms W-9 (or Forms W-8, in the case of non-U.S. persons) and other forms and documents that the Escrow Agent may reasonably request (collectively, "Tax Reporting Documentation") to the Escrow Agent within thirty (30) days after the date hereof. [Signature pages follow] -8- IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. ALLTRISTA CORPORATION By: /s/ Desiree DeStefano ------------------------------------ Name: Desiree DeStefano Title: Vice President TILIA INTERNATIONAL, INC. by Corporate Directors Limited, Director By: /s/ Leanne Corvette ------------------------------------ Name: Leanne Corvette Title: Authorized Signatory J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION as Escrow Agent By: /s/ Hans H. Helley ------------------------------------ Name: Hans H. Helley Title: Vice President [LONG TERM ESCROW AGREEMENT] EXHIBIT A 1. Specimen Signatures The Escrow Agent may rely on the signatures contained on the signature page hereto as the specimen signatures of the parties, until changed in writing by a certificate to the Escrow Agent from the party so changing. 2. Funds Transfer Language a) In the event funds transfer instructions are given (other than in writing at the time of execution of the Escrow Agreement) whether in writing, by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of such instructions by telephone call-back to the person or persons designated on Attachment "A" hereto, and the Escrow Agent may rely upon the confirmations of anyone purporting to be the person or persons so designated. The persons and telephone numbers for call-backs may be changed only in a writing actually received and acknowledged by the Escrow Agent. The parties to this Agreement acknowledge that such security procedure is commercially reasonable. b) It is understood that the Escrow Agent and the beneficiary's bank in any funds transfer may rely solely upon any account numbers or similar identifying number provided by either of the other parties hereto to identify (I) the beneficiary, (ii) the beneficiary's bank, or (iii) an order it executes using any such identifying number, even where its use may result in a person other than the beneficiary being paid, or the transfer of funds to a bank other than the beneficiary's bank, or an intermediary bank designated. -2- Attachment A Telephone Number(s) for Call-Backs and Person(s) Designated to Confirm Funds Transfer and Payment Instructions Escrow Agent is authorized to confirm payment instructions issued in the name of any of the parties to this Agreement with any person purporting to be the person designated on behalf of such party as indicated below, whether or not that person is the person who has issued the payment instructions to the Escrow Agent. Name Telephone Number - ---- ---------------- FOR THE BUYER: Ian G.H. Ashken (914) 967-9400 Martin E. Franklin Desiree DeStefano - ------------------------------------ -------------------------------------- FOR SELLERS' REPRESENTATIVE: Alexander Schilling (415) 392-9228 ext. 223 Hanns J. Kristen (415) 459-8692 EX-10.12 15 file014.txt PURCHASE AGREEMENT EXECUTION COPY Alltrista Corporation The guarantors party hereto $150,000,000 9 3/4% Senior Subordinated Notes due 2012 Purchase Agreement dated April 10, 2002 Banc of America Securities LLC CIBC World Markets Corp. NatCity Investments, Inc. Table of Contents
SECTION 1. Representations and Warranties.........................................................3 (a) No Registration Required........................................................................3 (b) No Integration of Offerings or General Solicitation.............................................3 (c) Eligibility for Resale under Rule 144A..........................................................3 (d) The Offering Memorandum.........................................................................3 (e) The Purchase Agreement..........................................................................4 (f) The Registration Rights Agreement and DTC Agreement.............................................4 (g) Authorization of the Credit Agreement...........................................................4 (h) Authorization of the Seller Notes...............................................................4 (i) Authorization of the Acquisition................................................................5 (j) Acquisition Agreement...........................................................................5 (k) Authorization of the Securities and the Exchange Securities.....................................5 (l) Authorization of the Indenture..................................................................5 (m) Description of the Securities and the Indenture...............................................6 (n) No Material Adverse Change....................................................................6 (o) Independent Accountants.........................................................................6 (p) Preparation of the Financial Statements.........................................................6 (q) Incorporation and Good Standing of the Company, the Guarantors and their Respective Subsidiaries7 (r) Capitalization..................................................................................7 (s) Stock Exchange Listing..........................................................................7 (t) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required......8 (u) No Material Actions or Proceedings............................................................8 (v) Intellectual Property Rights....................................................................9 (w) All Necessary Permits, etc....................................................................9 (x) Title to Properties.............................................................................9 (y) Tax Law Compliance..............................................................................9 (z) Company Not an "Investment Company"............................................................10 (aa) Insurance....................................................................................10 (bb) No Price Stabilization or Manipulation.......................................................10 (cc) Company's Accounting System..................................................................10 (dd) Compliance with Environmental Laws...........................................................10 (ee) Periodic Review of Costs of Environmental Compliance.........................................11 (ff) ERISA Compliance.............................................................................11 (gg) No Default in Senior Indebtedness............................................................12 (hh) Compliance with Regulation S.................................................................12 (ii) Reporting Issuer.............................................................................12 (jj) Other Representations and Warranties.........................................................12 SECTION 2. Purchase, Sale and Delivery of the Securities.........................................13 (a) The Securities.................................................................................13 (b) The Closing Date...............................................................................13 (c) Delivery of the Securities.....................................................................13 (d) Delivery of Offering Memorandum to the Initial Purchasers......................................13 (e) Initial Purchasers as Qualified Institutional Buyers...........................................13 SECTION 3. Additional Covenants..................................................................14 (a) Initial Purchasers' Review of Proposed Amendments and Supplements..............................14 (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters.........14 (c) Copies of the Offering Memorandum..............................................................15 (d) Blue Sky Compliance............................................................................15 (e) Use of Proceeds................................................................................15 (f) The Depositary.................................................................................15 i (g) Additional Issuer Information..................................................................15 (h) Agreement Not To Offer or Sell Additional Securities...........................................15 (i) Future Reports to the Initial Purchasers.......................................................16 (j) No Integration.................................................................................16 (k) Legended Securities............................................................................16 (l) PORTAL.........................................................................................16 (m) Acquisition..................................................................................16 (n) Contingent Payment Debt Instruments..........................................................16 SECTION 4. Payment of Expenses...................................................................17 SECTION 5. Conditions of the Obligations of the Initial Purchasers...............................17 (a) Accountants' Comfort Letter....................................................................17 (b) No Material Adverse Change or Ratings Agency Change............................................18 (c) Opinion of Counsel for the Company.............................................................18 (d) Opinion of Counsel for the Initial Purchasers..................................................18 (e) Officers' Certificate..........................................................................18 (f) Bring-down Comfort Letter......................................................................18 (g) PORTAL Listing.................................................................................19 (h) Registration Rights Agreement..................................................................19 (i) Indenture......................................................................................19 (j) Acquisition Agreement..........................................................................19 (k) Credit Agreement...............................................................................19 (l) Additional Documents...........................................................................19 SECTION 6. Reimbursement of Initial Purchasers' Expenses.........................................20 SECTION 7. Offer, Sale and Resale Procedures.....................................................20 SECTION 8. Indemnification.......................................................................21 (a) Indemnification of the Initial Purchasers......................................................21 (b) Indemnification of the Company, the Guarantors, their Directors and Officers...................22 (c) Notifications and Other Indemnification Procedures.............................................23 (d) Settlements....................................................................................23 SECTION 9. Contribution..........................................................................24 SECTION 10. Termination of this Agreement.........................................................25 SECTION 11. Representations and Indemnities to Survive Delivery...................................25 SECTION 12. Notices...............................................................................26 SECTION 13. Successors............................................................................27 SECTION 14. Partial Unenforceability..............................................................27 SECTION 15. Governing Law Provisions..............................................................27 (a) Consent to Jurisdiction........................................................................27 SECTION 16. Default of One or More of the Several Initial Purchasers..............................28 SECTION 17. General Provisions....................................................................28
ii Purchase Agreement April 10, 2002 BANC OF AMERICA SECURITIES LLC CIBC WORLD MARKETS CORP. NatCity Investments, Inc. As representatives of the several Initial Purchasers c/o BANC OF AMERICA SECURITIES LLC 9 West 57th Street, 31st Floor New York, New York 10019 Ladies and Gentlemen: Alltrista Corporation, a Delaware corporation (the "Company"), proposes to issue and sell to the several Initial Purchasers named in Schedule A (the "Initial Purchasers"), acting severally and not jointly, the respective amounts set forth in such Schedule A of the Company's 9 3/4% Senior Subordinated Notes due 2012 (the "Notes"). Banc of America Securities LLC, CIBC World Markets Corp. and NatCity Investments, Inc. have agreed to act as the representatives of the several Initial Purchasers in connection with the offering and sale of the Notes. The Notes will be issued pursuant to an indenture, to be dated as of April 24, 2002 (the "Indenture"), among the Company, the Guarantors (as defined below) and The Bank of New York, as trustee (the "Trustee"). Notes issued in book-entry form will be issued in the name of Cede & Co., as nominee of The Depository Trust Company (the "Depositary") pursuant to a DTC Agreement, to be dated as of the Closing Date (as defined in Section 2) (the "DTC Agreement"), among the Company, the Trustee and the Depositary. The holders of the Notes will be entitled to the benefits of a registration rights agreement, to be dated as of April 24, 2002 (the "Registration Rights Agreement"), among the Company, the Guarantors (as defined below) and the Initial Purchasers, pursuant to which the Company will agree to file, within 60 days of the Closing Date, a registration statement with the Commission registering the Exchange Securities (as defined below) under the Securities Act of 1933 (as amended, the "Securities Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder). The payment of principal, premium and Liquidated Damages (as defined in the Indenture), if any, and interest on the Notes and the Exchange Notes (as defined below) will be fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by (i) the parties named in Schedule B and (ii) any subsidiary of the Company or any party named in Schedule B formed or acquired after the Closing Date that executes an additional guarantee in accordance with the terms of the Indenture, and their respective successors and assigns (collectively, the "Guarantors"), pursuant to their guarantees (the "Guarantees"). The Notes and the Guarantees attached thereto are herein collectively referred to as the "Securities"; and the Exchange Notes and the Guarantees attached thereto are herein collectively referred to as the "Exchange Securities." The Securities are being issued and sold in connection with the acquisition by the Company of substantially all of the assets and liabilities of Tilia International, Inc. and its subsidiaries, Tilia, Inc. and Tilia Canada, Inc. (the "Acquisition"), pursuant to an asset purchase agreement dated as of March 27, 2002 (the "Acquisition Agreement"). In order to (a) pay for the Acquisition, (b) repay its existing revolving credit facility and existing five-year term loan facility (together, the "Existing Senior Credit Facility") and (c) pay related fees and expenses, the Company expects (i) to enter into new term loan and revolving credit facilities in the amounts of $50.0 million and $50.0 million, respectively, with none of the revolving credit facility expected to be drawn upon the closing of the Acquisition (collectively, the "New Senior Credit Facility") pursuant to a credit agreement among the Company, the Guarantors and the lenders party thereto (the "Credit Agreement") and (ii) to issue an unsecured subordinated seller note due 2003 payable to Tilia International, Inc. in the principal amount of $10.0 million and an unsecured subordinated seller note due 2004 payable to Tilia International, Inc. in the principal amount of $5.0 million (collectively, the "Seller Notes"). As used herein, the term "the Transaction" means collectively (x) the offering of the Securities, (y) entering into the New Senior Credit Facility and (z) the Acquisition. The net proceeds from the offering of the Notes (the "Net Proceeds") will be deposited with the Trustee pending the consummation of the Transaction. If the Transaction is terminated or is not consummated on or prior to July 15, 2002 (the "Special Mandatory Redemption Date"), (i) the Company will be obligated to redeem the Notes at a special mandatory redemption price of 101% of the aggregate principal amount of the Notes, plus accrued interest on the Notes (the "Special Mandatory Redemption Price"), and (ii) the Company and the Guarantors will provide, if and when due, the difference between the Net Proceeds and the Special Mandatory Redemption Price. The Company understands that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and in the Offering Memorandum (as defined below) and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers (the "Subsequent Purchasers") at any time after the date of this Agreement. The Securities are to be offered and sold to or through the Initial Purchasers without being registered with the Securities and Exchange Commission (the "Commission") under the Securities Act in reliance upon exemptions therefrom. The terms of the Securities and the Indenture will require that investors that acquire Securities expressly agree that Securities may only be resold or otherwise transferred, after the date hereof, if such Securities are registered for sale under the Securities Act or if an exemption from the registration requirements of the Securities Act is available (including the exemptions afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S") thereunder). The Company has prepared and delivered to each Initial Purchaser copies of a Preliminary Offering Memorandum, dated March 28, 2002 (the "Preliminary Offering Memorandum"), and has prepared and will deliver to each Initial Purchaser, copies of the Offering Memorandum, dated April 10, 2002 describing the terms of the Securities, each for use by such Initial Purchaser in connection with its solicitation of offers to purchase the Securities. As used herein, the "Offering Memorandum" shall mean, with respect to any date or time referred to in this Agreement, the Company's Offering Memorandum, dated April 10, 2002, including amendments or supplements thereto and any exhibits thereto, in the most recent form that has been prepared and delivered by the Company to the Initial Purchasers in connection with their solicitation of offers to purchase Securities. Further, any reference to the Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to refer to and include any Additional Issuer Information (as defined in Section 3) furnished by the Company prior to the completion of the distribution of the Securities. 2 The Company and each of the Guarantors hereby confirm their agreements with the Initial Purchasers as follows: Representations and Warranties. Each of the Company and the Guarantors, jointly and severally, hereby represent, warrant and covenant to each Initial Purchaser as follows: No Registration Required. Subject to compliance by the Initial Purchasers with the representations and warranties set forth in Section 2 hereof and with the procedures set forth in Section 7 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the Securities Act or, until such time as the Exchange Securities are issued pursuant to an effective registration statement, to qualify the Indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder). No Integration of Offerings or General Solicitation. Neither the Company nor any Guarantor has, directly or indirectly, solicited any offer to buy or offered to sell, nor will, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security that is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the Securities Act. None of the Company or the Guarantors, their respective affiliates (as such term is defined in Rule 501 under the Securities Act (each, an "Affiliate"), or any person acting on any of their respective behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation or warranty) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502 under the Securities Act. With respect to those Securities sold in reliance upon Regulation S, (i) none of the Company, the Guarantors, their respective Affiliates or any person acting on any of their respective behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation or warranty) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) each of the Company, the Guarantors and their respective Affiliates and any person acting on any of their respective behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation or warranty) has complied and will comply with the offering restrictions set forth in Regulation S. Eligibility for Resale under Rule 144A. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Date, of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated interdealer quotation system. The Offering Memorandum. The Offering Memorandum does not, and at the Closing Date will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by any Initial Purchaser through Banc of America Securities LLC expressly for use in the Offering Memorandum. Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its date, contains all the information specified in, and meeting the requirements of, Rule 144A. Neither the Company nor any Guarantor has distributed or will distribute, prior to the later of the Closing Date and the completion of the Initial Purchasers' distribution of the Securities, any offering material in connection with the offering and sale of the Securities other 3 than a Preliminary Offering Memorandum or the Offering Memorandum. The Purchase Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and except as rights to indemnification under the Registration Rights Agreement may be limited by applicable law. The Registration Rights Agreement and DTC Agreement. At the Closing Date, each of the Registration Rights Agreement and the DTC Agreement will be duly authorized, executed and delivered by, and will be a valid and binding agreement of, (i) in the case of the Registration Rights Agreement, the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, and (ii) in the case of the DTC Agreement, the Company, enforceable against the Company in accordance with its terms, except in both cases as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and except as rights to indemnification under the Registration Rights Agreement may be limited by applicable law. Authorization of the Credit Agreement. The Credit Agreement has been duly and validly authorized by the Company and each of the Guarantors and, when duly executed and delivered by the Company and each of the Guarantors, will be the valid and legally binding obligation of the Company and each of the Guarantors, enforceable in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. Authorization of the Seller Notes. The Seller Notes have been duly and validly authorized by the Company and, when duly executed and delivered by the Company, will be the valid and legally binding obligation of the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. Authorization of the Acquisition. The Acquisition has been duly authorized by all necessary corporate action of the Company including, to the extent required by applicable law, all necessary action by its board of directors and stockholders. Acquisition Agreement. The Acquisition Agreement has been duly authorized, executed and delivered by, and is a valid and binding obligation of, the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. Authorization of the Securities and the Exchange Securities. (i) The Notes to be purchased by the Initial Purchasers from the Company are in the form contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, when executed by the Company and 4 authenticated by the Trustee in the manner provided for in the Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding agreements of the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture. (ii) The Exchange Notes have been duly and validly authorized for issuance by the Company, and when issued and authenticated in accordance with the terms of the Indenture, the Registration Rights Agreement and the Exchange Offer, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting enforcement of the rights and remedies of creditors or by general principles of equity and will be entitled to the benefits of the Indenture. (iii) The Guarantees of the Notes and the Exchange Notes are in the respective forms contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, when executed by each of the Guarantors and authenticated by the Trustee in the manner provided for in the Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding agreements of the Guarantors, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture. Authorization of the Indenture. The Indenture has been duly authorized by the Company and the Guarantors and, when duly executed and delivered by the Company and the Guarantors and will constitute a valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. Description of the Securities and the Indenture. The Notes, the Exchange Notes, the Guarantees of the Notes and the Exchange Notes and the Indenture will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum. No Material Adverse Change. Except as otherwise disclosed in the Offering Memorandum, subsequent to the respective dates as of which information is given in the Offering Memorandum: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company, the Guarantors, and their respective subsidiaries, considered as one entity (any such change is called a "Material Adverse Change"); (ii) the Company, the Guarantors and their respective subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company, the Guarantors or their respective subsidiaries, by any of the Guarantors, the subsidiaries of the 5 Guarantors or the subsidiaries of the Company on any class of capital stock or repurchase or redemption by the Company, the Guarantors or their respective subsidiaries of any class of capital stock. Independent Accountants. Each of Ernst & Young LLP, who have expressed their opinion with respect to the financial statements of the Company and its subsidiaries (which term as used in this Agreement includes the related notes thereto) included in the Offering Memorandum, and Arthur Andersen LLP, who have expressed their opinion with respect to the financial statements of Tilia International, Inc. and its subsidiaries included in the Offering Memorandum, are independent public or certified public accountants within the meaning of Regulation S-X under the Securities Act and the Exchange Act. Preparation of the Financial Statements. The financial statements, together with the related schedules and notes, included in the Offering Memorandum present fairly in all material respects the consolidated financial position of each of (i) the Company, the Guarantors and their respective subsidiaries and (ii) Tilia International, Inc. and its subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The financial data set forth in the Offering Memorandum under the captions "Offering Memorandum Summary--Summary Consolidated Historical and Pro Forma Financial and Operating Data" and "Selected Historical and Financial Data" fairly present in all material respects the information set forth therein on a basis consistent with that of the audited financial statements contained in the Offering Memorandum. The pro forma condensed consolidated financial statements of the Company, the Guarantors and their respective subsidiaries and the related notes thereto included under the captions "Offering Memorandum Summary--Summary Consolidated Historical and Pro Forma Financial and Operating Data" and "Unaudited Pro Forma Condensed Consolidated Financial Statements" and included elsewhere in the Offering Memorandum present fairly in all material respects the information contained therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly presented in all material respects on the bases described therein, and the assumptions used in the preparation thereof are appropriate in all material respects to give effect to the transactions and circumstances referred to therein. Incorporation and Good Standing of the Company, the Guarantors and their Respective Subsidiaries. Each of the Company, the Guarantors and their respective subsidiaries has been duly incorporated or formed, as applicable, and is validly existing as a corporation or limited partnership, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or formation and has corporate power or limited partnership power, as the case may be, and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and, in the case of the Company and each of the Guarantors, to enter into and perform their respective obligations under each of this Agreement, the Registration Rights Agreement, the Securities, the Exchange Securities, the Indenture and the Credit Agreement, and, in the case of the Company, to enter into and perform its obligations under the DTC Agreement and the Acquisition Agreement. Each of the Company, the Guarantors and their respective subsidiaries is duly qualified as a foreign corporation or limited partnership, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. All of the issued and outstanding capital stock or limited partnership interests, 6 as applicable, of each subsidiary has been duly authorized and validly issued, is fully paid and nonassessable and, is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim, except for security interests, mortgages, pledges, liens, encumbrances or claims in connection with the Existing Senior Credit Facility and the New Senior Credit Facility. The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Schedule C hereto. Capitalization. At December 31, 2001, on a consolidated basis, after giving pro forma effect to the issuance and sale of the Securities pursuant hereto, the Company would have an authorized and outstanding capitalization as set forth in the Offering Memorandum under the caption "Capitalization" (other than for subsequent issuances of capital stock, if any, pursuant to employee benefit plans described in the Offering Memorandum or upon exercise of outstanding options described in the Offering Memorandum). Stock Exchange Listing. The Common Stock is registered pursuant to Section 12b of the Exchange Act and is listed on the New York Stock Exchange (the "NYSE"), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the NYSE, nor has the Company received any notification that the Commission or the NYSE is contemplating terminating such registration or listing. Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. None of the Company, the Guarantors or any of their respective subsidiaries is in violation of its charter or by-laws or is in default (or, with the giving of notice or lapse of time, would be in default) ("Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which the Company, the Guarantors or any of their respective subsidiaries is a party or by which any of them may be bound (including, without limitation, the Company's Existing Senior Credit Facility and letters of credit issued thereunder), or to which any of the property or assets of the Company, the Guarantors or any of their respective subsidiaries is subject (each, an "Existing Instrument"), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. The Company's and the Guarantors' execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Indenture (including, without limitation, redemption of the Securities at the Special Mandatory Redemption Price), and the Credit Agreement, the Company's execution, delivery and performance of the DTC Agreement, the Seller Notes and the Acquisition Agreement, and the issuance and delivery of the Securities or the Exchange Securities, and consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum (i) have been duly authorized by all necessary corporate action and will not result in any violation of the provisions of the charter or by-laws of the Company, the Guarantors or any of their respective subsidiaries, (ii) will not conflict with or constitute a breach of, or Default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, the Guarantors or any of their respective subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument, except for such conflicts, breaches, Defaults, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and except, with respect to the Existing Senior Credit Facility, as waived in accordance with the terms thereof, and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company, the Guarantors or any of their respective subsidiaries. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company's or the Guarantors' execution, delivery and performance of this Agreement, the Registration Rights 7 Agreement, the DTC Agreement, the Indenture (including, without limitation, redemption of the Securities at the Special Mandatory Redemption Price), the Credit Agreement, the Seller Notes, or the Acquisition Agreement, as applicable, or the issuance and delivery of the Securities or the Exchange Securities, or consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum, except such as have been obtained or made by the Company or the Guarantors and are in full force and effect under the Securities Act, applicable state securities or blue sky laws and except such as may be required by federal and state securities laws with respect to the Company's or the Guarantors' obligations under the Registration Rights Agreement. No Material Actions or Proceedings. Except as otherwise disclosed in the Offering Memorandum, there are no legal or governmental actions, suits or proceedings pending or, to the best of the Company's or any Guarantor's knowledge, threatened (i) against or affecting the Company, the Guarantors or any of their respective subsidiaries or (ii) that has as the subject thereof any property owned or leased by, the Company, the Guarantors or any of their respective subsidiaries, where in any such case (x) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Company, any Guarantor or any such subsidiary and (y) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or adversely affect the consummation of the transactions contemplated by this Agreement. No material labor dispute with the employees of the Company, the Guarantors or any of their respective subsidiaries, or with the employees of any principal supplier of the Company, exists or, to the best of the Company's or any Guarantor's knowledge, is threatened or imminent. Intellectual Property Rights. The Company, the Guarantors and their respective subsidiaries own or possess sufficient trademarks, trade names, patent rights, copyrights, licenses, approvals, trade secrets and other similar rights (collectively, "Intellectual Property Rights") reasonably necessary to conduct their businesses as now conducted; and the expected expiration of any of such Intellectual Property Rights would not result in a Material Adverse Change. None of the Company, the Guarantors or any of their respective subsidiaries has received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, would result in a Material Adverse Change. All Necessary Permits, etc. Each of the Company, the Guarantors and their respective subsidiaries possesses such valid and current certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses, except where failure to possess such certificates, authorizations or permits could not reasonably be expected to have a material adverse effect on such businesses, and none of the Company, the Guarantors, or any of their respective subsidiaries has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit that, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could result in a Material Adverse Change. Title to Properties. The Company, the Guarantors and each of their respective subsidiaries have good and marketable title to all the properties and assets reflected as owned in the financial statements referred to in Section 1 above (and elsewhere in the Offering Memorandum), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except such as do not materially and adversely affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company, such Guarantor or such subsidiary. The real 8 property, improvements, equipment and personal property held under lease by the Company, the Guarantors or any of their respective subsidiaries are held under valid and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company, such Guarantor or such subsidiary. Tax Law Compliance. The Company and its consolidated subsidiaries (including the Guarantors) have filed all necessary federal, state and foreign income and franchise tax returns and have paid all taxes required to be paid by any of them and, if due and payable, any related or similar assessment, fine or penalty levied against any of them (except taxes, assessments, fines or penalties the validity of which the Company is contesting in good faith). The Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1 above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company or any of its consolidated subsidiaries (including the Guarantors) has not been finally determined. Company Not an "Investment Company". The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Company is not, and after receipt of payment for the Securities will not be, an "investment company" within the meaning of Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act. Insurance. Each of the Company, the Guarantors and their respective subsidiaries are insured by recognized, financially sound institutions with policies in such amounts and with such deductibles and covering such risks as are, in the opinion of the Company, adequate for their businesses. Each of the Company and the Guarantors have no reason to believe that it or any of its respective subsidiaries will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. None of the Company, the Guarantors or any of their respective subsidiaries has been denied any insurance coverage that it has sought or for which it has applied. No Price Stabilization or Manipulation. Neither the Company nor any Guarantors has taken, nor will take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. Company's Accounting System. The Company and each Guarantor maintain a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Compliance with Environmental Laws. Except as otherwise disclosed in the Offering Memorandum or as would not, individually or in the aggregate, result in a Material Adverse Change (i) none of the Company, the Guarantors or any of their respective subsidiaries is in violation of any federal, state, local or foreign law or regulation relating to pollution or 9 protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, "Materials of Environmental Concern"), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "Environmental Laws"), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company, the Guarantors or their respective subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company, the Guarantors or any of their respective subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company, the Guarantors or any of their respective subsidiaries is in violation of any Environmental Law; (ii) there is no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which the Company or any Guarantor has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company, the Guarantors or any of their respective subsidiaries, now or in the past (collectively, "Environmental Claims"), pending or, to the best of the Company's or any Guarantor's knowledge, threatened against the Company, the Guarantors or any of their respective subsidiaries or any person or entity whose liability for any Environmental Claim the Company, the Guarantors or any of their respective subsidiaries has retained or assumed either contractually or by operation of law; and (iii) to the best of the knowledge of the executive officers and key employees listed as such in the Offering Memorandum and of those other officers and employees of the Company and the Guarantors with primary responsibility for managing the environmental affairs of the Company and the Guarantors and their respective facilities, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company, the Guarantors or any of their respective subsidiaries or against any person or entity whose liability for any Environmental Claim the Company, the Guarantors or any of their respective subsidiaries has retained or assumed either contractually or by operation of law. Periodic Review of Costs of Environmental Compliance. To the knowledge of the Company and the Guarantors, based upon their assessment of the effect of Environmental Laws on the business, operations and properties of the Company, the Guarantors and their respective subsidiaries, and taking into account the amount of any established reserves, the Company and the Guarantors have reasonably concluded that associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) will not, individually or in the aggregate, result in a Material Adverse Change. ERISA Compliance. The Company, the Guarantors, their respective subsidiaries and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA")) established or maintained by the Company, the Guarantors, their 10 respective subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in all material respects with ERISA. "ERISA Affiliate" means, with respect to the Company, any Guarantor or any of their respective subsidiaries, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which the Company, such Guarantor or such subsidiary is a member. No "reportable event" (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by the Company, the Guarantors or their respective subsidiaries or any of their ERISA Affiliates, except as would not, individually or in the aggregate, result in a Material Adverse Change. No employee benefit plan" established or maintained by the Company, the Guarantors, their respective subsidiaries or any of their ERISA Affiliates, if such "employee benefit plan" were terminated, would have any "amount of unfunded benefit liabilities" (as defined under ERISA), except as would not, individually or in the aggregate, result in a Material Adverse Change. None of the Company, the Guarantors, their respective subsidiaries or any of their ERISA Affiliates have incurred or reasonably expect to incur any liability under Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or Sections 412, 4971, 4975 or 4980B of the Code, except as would not, individually or in the aggregate, result in a Material Adverse Change. Except as would not, individually or in the aggregate, result in a Material Adverse Change, each "employee benefit plan" established or maintained by the Company, the Guarantors, their respective subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401 of the Code is so qualified and nothing has occurred, whether by action or failure to act, that would cause the loss of such qualification. No Default in Senior Indebtedness. No event of default exists under any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument constituting Senior Debt (as defined in the Indenture). Compliance with Regulation S. The Company, the Guarantors, their respective Affiliates and all persons acting on their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation) have complied with and will comply with the offering restrictions requirements of Regulation S in connection with the offering of the Securities outside the United States, and, in connection therewith, the Offering Memorandum will contain the disclosure required by Rule 902. Reporting Issuer. Each of the Company and the Guarantors is a "reporting issuer" as defined in Rule 902 under the Securities Act. Other Representations and Warranties. All the representations and warranties of the Company and the Guarantors set forth (1) in the Acquisition Agreement are true and correct and, as of the Closing Date, will be true and correct, and (2) in the Credit Agreement, as of the Closing Date, will be true and correct. Any certificate signed by an officer of the Company or any of the Guarantors and delivered to the Initial Purchasers or to counsel for the Initial Purchasers shall be deemed to be a representation and warranty by the Company or such Guarantor to each Initial Purchaser as to the matters set forth therein. SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. The Securities. The Company agrees to issue and sell to the several Initial Purchasers, severally and not jointly, all of the Securities upon the terms herein set forth. On the 11 basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Initial Purchasers agree, severally and not jointly, to purchase from the Company the aggregate principal amount of Securities set forth opposite their names on Schedule A, at a purchase price of 95.686% of the principal amount thereof payable on the Closing Date. The Closing Date. Delivery of certificates for the Securities in definitive form to be purchased by the Initial Purchasers and payment therefor shall be made at the offices of Latham & Watkins, 885 Third Avenue, New York, New York (or such other place as may be agreed to by the Company and the Initial Purchasers) at 9:00 a.m. New York City time, on April 24, 2002, or such other time and date as the Initial Purchasers shall designate by notice to the Company (the time and date of such closing are called the "Closing Date"). The Company hereby acknowledges that circumstances under which the Initial Purchasers may provide notice to postpone the Closing Date as originally scheduled include, but are in no way limited to, any determination by the Company or the Initial Purchasers to recirculate to investors copies of an amended or supplemented Offering Memorandum or a delay as contemplated by the provisions of Section 16. Delivery of the Securities. The Company shall deliver, or cause to be delivered, to Banc of America Securities LLC for the accounts of the several Initial Purchasers certificates for the Securities at the Closing Date against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The certificates for the Securities shall be in such denominations and registered in the name of Cede & Co., as nominee of the Depository, pursuant to the DTC Agreement, and shall be made available for inspection on the business day preceding the Closing Date at a location in New York City, as the Initial Purchasers may designate. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Initial Purchasers. Delivery of Offering Memorandum to the Initial Purchasers. Not later than 12:00 p.m. on the second business day following the date of this Agreement, the Company shall deliver or cause to be delivered copies of the Offering Memorandum in such quantities and at such places as the Initial Purchasers shall reasonably request. Initial Purchasers as Qualified Institutional Buyers. Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Company that it is a "qualified institutional buyer" within the meaning of Rule 144A (a "Qualified Institutional Buyer") and an "accredited investor" within the meaning of Rule 501 under the Securities Act (an "Accredited Investor"). Additional Covenants. The Company and the Guarantors, jointly and severally, further covenant and agree with each Initial Purchaser as follows: Initial Purchasers' Review of Proposed Amendments and Supplements. Prior to amending or supplementing the Offering Memorandum, the Company shall furnish to the Initial Purchasers for review a copy of each such proposed amendment or supplement, and the Company shall not use any such proposed amendment or supplement to which the Initial Purchasers reasonably object. Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters. If, prior to the completion of the placement of the Securities by the Initial Purchasers with the Subsequent Purchasers, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order to make the 12 statements therein, in the light of the circumstances when the Offering Memorandum is delivered to a purchaser, not misleading, or if in the opinion of the Initial Purchasers (or counsel for the Initial Purchasers) or the Company (or counsel for the Company) it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Company agrees to promptly prepare (subject to Section 3 hereof) and furnish at its own expense to the Initial Purchasers, amendments or supplements to the Offering Memorandum so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances when the Offering Memorandum is delivered to a purchaser, be misleading or so that the Offering Memorandum, as amended or supplemented, will comply with law. Following the consummation of the Exchange Offer or the effectiveness of an applicable shelf registration statement and for so long as the Securities are outstanding if, in the reasonable judgment of the Initial Purchasers, the Initial Purchasers or any of their affiliates (as such term is defined in the rules and regulations under the Securities Act) are required to deliver a prospectus in connection with sales of, or market-making activities with respect to, such securities, to periodically amend the applicable registration statement so that the information contained therein complies with the requirements of Section 10 of the Securities Act, to amend the applicable registration statement or supplement the related prospectus or the documents incorporated therein when necessary to reflect any material changes in the information provided therein so that the registration statement and the prospectus will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing as of the date the prospectus is so delivered, not misleading and to provide the Initial Purchasers with copies of each amendment or supplement filed and such other documents as the Initial Purchasers may reasonably request. The Company and the Guarantors hereby expressly acknowledge that the indemnification and contribution provisions of Sections 8 and 9 hereof are specifically applicable and relate to each offering memorandum, registration statement, prospectus, amendment or supplement referred to in this Section 3. Copies of the Offering Memorandum. The Company agrees to furnish the Initial Purchasers, without charge, as many copies of the Offering Memorandum and any amendments and supplements thereto as they shall have reasonably requested. Blue Sky Compliance. The Company shall cooperate with the Initial Purchasers and counsel for the Initial Purchasers to qualify or register the Securities for sale under (or obtain exemptions from the application of) the Blue Sky or state securities laws of those jurisdictions designated by the Initial Purchasers, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Securities. The Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. The Company will advise the Initial Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its reasonable best efforts to obtain the withdrawal thereof at the earliest possible moment. Use of Proceeds. The Company shall apply the net proceeds from the sale of the Securities sold by it in the manner described under the caption "Use of Proceeds" in the Offering Memorandum. 13 The Depositary. The Company shall cooperate with the Initial Purchasers and use its best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of the Depositary. Additional Issuer Information. Prior to the completion of the placement of the Securities by the Initial Purchasers with the Subsequent Purchasers, the Company shall file, on a timely basis, with the Commission and the New York Stock Exchange all reports and documents required to be filed under Section 13 or 15 of the Exchange Act. Additionally, at any time when the Company is not subject to Section 13 or 15 of the Exchange Act, for the benefit of holders and beneficial owners from time to time of Securities, the Company shall furnish, at its expense, upon request, to holders and beneficial owners of Securities and prospective purchasers of Securities information ("Additional Issuer Information") satisfying the requirements of subsection of Rule 144A. Agreement Not To Offer or Sell Additional Securities. During the period of 180 days following the date of the Offering Memorandum, the Company will not, without the prior written consent of Banc of America Securities LLC (which consent may be withheld at the sole discretion of Banc of America Securities LLC), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open "put equivalent position" within the meaning of Rule 16a-1 under the Exchange Act, or otherwise dispose of or transfer, or announce the offering of, or file any registration statement under the Securities Act in respect of, any debt securities of the Company or securities exchangeable for or convertible into debt securities of the Company (other than as contemplated by this Agreement and to register the Exchange Securities). Future Reports to the Initial Purchasers. For so long as any Securities or Exchange Securities remain outstanding, the Company and the Guarantors shall furnish to Banc of America Securities LLC (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company and its consolidated subsidiaries as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's and the Guarantors' independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company and the Guarantors with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company or the Guarantors mailed generally to holders of its capital stock or debt securities (including the holders of the Securities). No Integration. The Company agrees that it will not and will cause its Affiliates not to make any offer or sale of securities of the Company of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the Securities Act, such offer or sale would render invalid (for the purpose of the sale of the Securities by the Company to the Initial Purchasers, (i) the resale of the Securities by the Initial Purchasers to Subsequent Purchasers or (ii) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the Securities Act provided by Section 4 thereof or by Rule 144A or by Regulation S thereunder or otherwise. Legended Securities. Each certificate for a Note will bear the legend contained in "Notice to Investors" in the Offering Memorandum for the time period and upon the other terms stated in the Offering Memorandum. 14 PORTAL. The Company shall use its best efforts to cause such Notes to be eligible for the National Association of Securities Dealers, Inc. PORTAL market (the "PORTAL market"). Acquisition. The Company shall use its reasonable best efforts to consummate the Acquisition on or prior to the Special Mandatory Redemption Date. Contingent Payment Debt Instruments. The Company shall not treat the Securities as contingent payment debt instruments (within the meaning of United States Treasury Regulation Section 1.1275-4) for U.S. federal income tax purposes unless required to do so pursuant to a final determination of the Internal Revenue Service or a court of competent jurisdiction. Banc of America Securities LLC, on behalf of the several Initial Purchasers, may, in its sole discretion, waive in writing the performance by the Company or any Guarantor of any one or more of the foregoing covenants or extend the time for their performance. Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all expenses incident to the issuance and delivery of the Securities (including all printing and engraving costs), (ii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Securities to the Initial Purchasers, (iii) all fees and expenses of the Company's and the Guarantors' counsel, independent public or certified public accountants and other advisors, (iv) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of each preliminary Offering Memorandum and the Offering Memorandum (including financial statements and exhibits), and all amendments and supplements thereto, this Agreement, the Registration Rights Agreement, the Indenture, the DTC Agreement, the Notes and the Guarantees and the Escrow Agreement, (v) all filing fees, attorneys' fees and expenses incurred by the Company, the Guarantors or the Initial Purchasers in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Securities for offer and sale under the Blue Sky laws and, if requested by the Initial Purchasers, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising the Initial Purchasers of such qualifications, registrations and exemptions, (vi) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture, the Securities and the Exchange Securities, (vii) any fees payable in connection with the rating of the Securities or the Exchange Securities with the ratings agencies and the listing of the Securities with the PORTAL market, (viii) any filing fees incident to, and any reasonable fees and disbursements of counsel to the Initial Purchasers in connection with, the review by the National Association of Securities Dealers, Inc., if any, of the terms of the sale of the Securities or the Exchange Securities, (ix) all fees and expenses (including reasonable fees and expenses of counsel) of the Company and the Guarantors in connection with approval of the Securities by DTC for "book-entry" transfer, and the performance by the Company and the Guarantors of their respective other obligations under this Agreement. Except as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the Initial Purchasers shall pay their own expenses, including the fees and disbursements of their counsel. Conditions of the Obligations of the Initial Purchasers. The obligations of the several Initial Purchasers to purchase and pay for the Securities as provided herein on the Closing Date shall be subject to the accuracy of the representations and warranties on the part of the Company and the Guarantors set forth in Section 1 hereof as of the date hereof and as of the Closing Date as though then made and to the timely performance by the Company and the 15 Guarantors of their respective covenants and other obligations hereunder, and to each of the following additional conditions: Accountants' Comfort Letter. On the date hereof, the Initial Purchasers shall have received from each of Ernst & Young LLP, independent public or certified public accountants for the Company, and Arthur Andersen LLP, independent public or certified public accountants for Tilia International, Inc., a letter dated the date hereof addressed to the Initial Purchasers, in form and substance satisfactory to the Initial Purchasers, containing statements and information of the type ordinarily included in accountant's "comfort letters" to Initial Purchasers, delivered according to Statement of Auditing Standards Nos. 72 and 76 (or any successor bulletins), with respect to the audited and unaudited financial statements and certain financial information contained in the Registration Statement and the Offering Memorandum. No Material Adverse Change or Ratings Agency Change. For the period from and after the date of this Agreement and prior to the Closing Date: (i) in the reasonable judgment of the Initial Purchasers there shall not have occurred any Material Adverse Change; and (ii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Company, the Guarantors or any of their respective subsidiaries by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436 under the Securities Act. Opinion of Counsel for the Company. On the Closing Date, the Initial Purchasers shall have received the favorable opinion of Willkie Farr & Gallagher, counsel for the Company and the Guarantors, dated as of such Closing Date, the form of which is attached as Exhibit A. Opinion of Counsel for the Initial Purchasers. On the Closing Date, the Initial Purchasers shall have received the favorable opinion of Latham & Watkins, counsel for the Initial Purchasers, dated as of such Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers. Officers' Certificate. On the Closing Date, the Initial Purchasers shall have received a written certificate executed by the Chairman of the Board, Chief Executive Officer or President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company and each Guarantor, dated as of the Closing Date, to the effect set forth in subsection (b) of this Section 5, and further to the effect that: (iii) for the period from and after the date of this Agreement and prior to the Closing Date there has not occurred any Material Adverse Change; (iv) the representations, warranties and covenants of the Company and of such Guarantor set forth in Section 1 of this Agreement are true and correct with the same force and effect as though expressly made on and as of the Closing Date; and (v) the Company and such Guarantor has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date. 16 Bring-down Comfort Letter. On the Closing Date the Initial Purchasers shall have received from each of Ernst & Young LLP, independent public or certified public accountants for the Company, and Arthur Andersen LLP, independent public or certified public accountants for Tilia International, Inc., a letter dated such date, in form and substance satisfactory to the Initial Purchasers, to the effect that they reaffirm the statements made in the letter furnished by them pursuant to subsection of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Closing Date. PORTAL Listing. At the Closing Date the Notes shall have been designated for trading on the PORTAL market. Registration Rights Agreement. The Company and each Guarantor shall have entered into the Registration Rights Agreement and the Initial Purchasers shall have received executed counterparts thereof. Indenture . The Company, the Guarantors and the Trustee shall have entered into the Indenture and the Initial Purchasers shall have received an executed copy thereof. Acquisition Agreement. The Company shall have entered into the Acquisition Agreement prior to or on the Closing Date and the Initial Purchasers shall have received an executed copy thereof. Credit Agreement. Either (i) the Company, the Guarantors and the lenders party to the Credit Agreement shall have entered into the Credit Agreement prior to or on the Closing Date or (ii) the Company and the Guarantors shall have obtained consents from the lenders party to the Existing Senior Credit Facility permitting the Company and the Guarantors to incur the debt under the Securities, and, in either case, the Initial Purchasers shall have received an executed copy thereof. Additional Documents. On or before the Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained. If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Initial Purchasers by notice to the Company at any time on or prior to the Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination. Reimbursement of Initial Purchasers' Expenses. If this Agreement is terminated by the Initial Purchasers pursuant to Section 5, or if the sale to the Initial Purchasers of the Securities on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company or the Guarantors to perform any agreement herein or to comply with any provision hereof, each of the Company and the Guarantors agrees, jointly and severally, to reimburse the Initial Purchasers (or such Initial Purchasers as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Initial Purchasers in connection with the proposed purchase and the offering and sale of the Securities, including but not limited to reasonable fees 17 and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges. Offer, Sale and Resale Procedures. Each of the Initial Purchasers, on the one hand, and the Company and each of the Guarantors, on the other hand, hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities: (a) Offers and sales of the Securities will be made only by the Initial Purchasers or Affiliates thereof qualified to do so in the jurisdictions in which such offers or sales are made. Each such offer or sale shall only be made to persons whom the offeror or seller reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) or non-U.S. persons outside the United States to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S under the Securities Act, upon the terms and conditions set forth in Annex I hereto, which Annex I is hereby expressly made a part hereof. (b) The Securities will be offered by approaching prospective Subsequent Purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502 under the Securities Act) will be used in the United States in connection with the offering of the Securities. (c) original issuance by the Company, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Securities (and all securities issued in exchange therefor or in substitution thereof, other than the Exchange Securities) shall bear the following legend: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (i)(a) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) OF THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND 18 AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (ii) TO THE COMPANY OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY EVIDENCED HEREBY." Following the sale of the Securities by the Initial Purchasers to Subsequent Purchasers pursuant to the terms hereof, the Initial Purchasers shall not be liable or responsible to the Company for any losses, damages or liabilities suffered or incurred by the Company, including any losses, damages or liabilities under the Securities Act, arising from or relating to any resale or transfer of any Security. SECTION 3. INDEMNIFICATION. Indemnification of the Initial Purchasers. The Company and the Guarantors, jointly and severally, agree to indemnify and hold harmless each Initial Purchaser, its directors, officers and employees, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act and the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Initial Purchaser or such controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (ii) in whole or in part upon any inaccuracy in the representations and warranties of the Company or any of the Guarantors contained herein; or (iii) in whole or in part upon any failure of the Company or any of the Guarantors to perform its obligations hereunder or under law; or (iv) any act or failure to act or any alleged act or failure to act by any Initial Purchaser in connection with, or relating in any manner to, the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i) above; provided that the Company and the Guarantors shall not be liable under this clause (iv) to the extent that a court of competent jurisdiction shall have determined by a final judgment that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Initial Purchaser through its gross negligence or willful misconduct; and to reimburse each Initial Purchaser and each such controlling person for any and all expenses 19 (including the reasonable fees and disbursements of counsel chosen by Banc of America Securities LLC) as such expenses are reasonably incurred by such Initial Purchaser or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto). The indemnity agreement set forth in this Section 8 shall be in addition to any liabilities that the Company or any of the Guarantors may otherwise have. Indemnification of the Company, the Guarantors, their Directors and Officers. Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, the Guarantors and each of their respective directors and each person, if any, who controls the Company and the Guarantors within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company or any such director, or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Initial Purchaser), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or arises out of or is based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers expressly for use therein; and to reimburse the Company, any such Guarantor, or any such director or controlling person for any legal and other expenses reasonably incurred by the Company, any such Guarantor, or any such director or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company and the Guarantors hereby acknowledge that the only information that the Initial Purchasers have furnished to the Company and the Guarantors expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto) are the statements set forth (i) in the fifth paragraph on page ii of the Offering Memorandum concerning stabilization by the Initial Purchasers, (ii) in the second sentence of the paragraph under the caption "Risk Factors--Risks Relating to the Notes--You cannot be sure that an active trading market will develop for these notes," and (iii) in the last sentence of the third paragraph, in the second sentence of the fourth paragraph and in the fifth paragraph under the caption "Plan of Distribution" in the Offering Memorandum; and the Initial Purchasers confirm that such statements are correct. The indemnity agreement set forth in this Section 8 shall be in addition to any liabilities that each Initial Purchaser may otherwise have. Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement 20 contained in this Section 8 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the indemnifying party (Banc of America Securities LLC in the case of Section 8 and Section 9), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8 hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. SECTION 4. CONTRIBUTION. If the indemnification provided for in Section 8 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party 21 shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company or any of the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause above but also the relative fault of the Company or any of the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company or any of the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Securities. The relative fault of the Company or any of the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company or any of the Guarantors, on the one hand, or the Initial Purchasers, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8 with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8 for purposes of indemnification. The Company, the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9. Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the discount received by such Initial Purchaser in connection with the Securities distributed by it. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in Schedule A. For purposes of this Section 9, each director, officer and employee of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director of the Company and each director of the Guarantors, and each person, if any, who controls the Company or a Guarantor with the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company and such Guarantor. 22 Termination of this Agreement. Prior to the Closing Date, this Agreement may be terminated by the Initial Purchasers by notice given to the Company if at any time (i) trading or quotation in any of the Company's securities shall have been suspended or limited by the Commission or by the New York Stock Exchange, or trading in securities generally on either the Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the NASD; (ii) a general banking moratorium shall have been declared by any of federal, New York, Delaware or California authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States' or international political, financial or economic conditions, as in the judgment of the Initial Purchasers is material and adverse and makes it impracticable to market the Securities in the manner and on the terms described in the Offering Memorandum or to enforce contracts for the sale of securities; (iv) in the judgment of the Initial Purchasers there shall have occurred any Material Adverse Change; or (v) the Company, the Guarantors or their respective subsidiaries shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Initial Purchasers may interfere materially with the conduct of the business and operations of the Company, the Guarantors or their respective subsidiaries regardless of whether or not such loss shall have been insured. Any termination pursuant to this Section 10 shall be without liability on the part of (x) the Company and the Guarantors to any Initial Purchaser, except that the Company and the Guarantors shall be obligated to reimburse the expenses of the Initial Purchasers pursuant to Sections 4 and 6 hereof, (y) any Initial Purchaser to the Company, or (z) of any party hereto to any other party except that the provisions of Section 8 and Section 9 shall at all times be effective and shall survive such termination. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company and the Guarantors, of their respective officers and of the several Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or the Company, the Guarantors or any of its or their respective partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and any termination of this Agreement. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows: 23 If to the Initial Purchasers: Banc of America Securities LLC 9 West 57th Street, 31st Floor New York, NY 10019 Facsimile: 212-583-8324 Attention: High Yield Capital Markets and CIBC World Markets Corp. 425 Lexington Avenue, 5th Floor New York, NY 10017 Facsimile: (212) 885-4801 Attention: High Yield Capital Markets with a copy to: Latham & Watkins 885 Third Avenue, Suite 1000 New York, NY 10022 Facsimile: (212) 751-4864 Attention: Ian Blumenstein If to the Company or the Guarantors: Alltrista Corporation Suite B-302 555 Theodore Fremd Avenue Rye, NY 10580 Facsimile: (914) 967-9405 Attention: Ian G.H. Ashken with a copy to: Willkie Farr & Gallagher 787 Seventh Avenue New York, NY 10019 Facsimile: (212) 728-8111 Attention: William J. Grant Any party hereto may change the address for receipt of communications by giving written notice to the others. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Initial Purchasers pursuant to Section 16 hereof, and to the benefit of the employees, officers and directors and controlling persons referred to in 24 Section 8 and Section 9, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Securities as such from any of the Initial Purchasers merely by reason of such purchase. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in the City and County of New York or the courts of the State of New York in each case located in the City and County of New York (collectively, the "Specified Courts"), and each party irrevocably submits to the non-exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. Default of One or More of the Several Initial Purchasers. If any one or more of the several Initial Purchasers shall fail or refuse to purchase Securities that it or they have agreed to purchase hereunder on the Closing Date, and the aggregate number of Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase does not exceed 10% of the aggregate number of the Securities to be purchased on such date, the other Initial Purchasers shall be obligated, severally, in the proportions that the number of Securities set forth opposite their respective names on Schedule A bears to the aggregate number of Securities set forth opposite the names of all such non-defaulting Initial Purchasers, or in such other proportions as may be specified by the Initial Purchasers with the consent of the non-defaulting Initial Purchasers, to purchase the Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase on such date. If any one or more of the Initial Purchasers shall fail or refuse to purchase Securities and the aggregate number of Securities with respect to which such default occurs exceeds 10% of the aggregate number of Securities to be purchased on the Closing Date, and arrangements satisfactory to the Initial Purchasers and the Company for the purchase of such Securities are not made within 48 hours after such default, this Agreement shall terminate without liability of any party to any other party except that the provisions of Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination. In any such case either the Initial Purchasers or the Company shall have the right to postpone the Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Offering Memorandum or any other documents or arrangements may be effected. 25 As used in this Agreement, the term "Initial Purchaser" shall be deemed to include any person substituted for a defaulting Initial Purchaser under this Section 10. Any action taken under this Section 16 shall not relieve any defaulting Initial Purchaser from liability in respect of any default of such Initial Purchaser under this Agreement. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The Table of Contents and the section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. 26 Very truly yours, ALLTRISTA CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Vice Chairman, Chief Financial Officer and Secretary ALLTRISTA NEWCO CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary QUOIN CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer HEARTHMARK, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA PLASTICS CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary 27 ALLTRISTA ZINC PRODUCTS, L.P. By: Alltrista Newco Corporation, its General Partner By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA ACQUISITION I, INC By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA ACQUISITION II, Inc By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA ACQUISITION III, Inc By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary PENN VIDEO, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary 28 LAFAYETTE STEEL & ALUMINUM CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary CASPERS TIN PLATE COMPANY By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary UNIMARK PLASTICS, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary LUMENX CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA UNIMARK, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary TRIENDA CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary 29 The foregoing Purchase Agreement is hereby confirmed and accepted by the Initial Purchasers as of the date first above written. BANC OF AMERICA SECURITIES LLC CIBC WORLD MARKETS CORP. NATCITY INVESTMENTS, INC. As representatives of the several Initial Purchasers listed on Schedule A By: Banc of America Securities LLC By: /s/ Bruce Thompson ----------------------------- Name: Bruce Thompson Title: Managing Director 30 SCHEDULE A Aggregate Principal Amount of Securities to be Purchased Initial Purchasers - ----------------------------------------------------- ----------------------- Banc of America Securities LLC ...................... $ 75,000,000 CIBC World Markets Corp.............................. $ 67,500,000 NatCity Investments, Inc. ........................... $ 7,500,000 Total....................................... $150,000,000 SCHEDULE B Guarantors Alltrista Newco Corporation Quoin Corporation Hearthmark, Inc.* Alltrista Plastics Corporation** Alltrista Zinc Products, L.P.*** Alltrista Acquisition I, Inc. Alltrista Acquisition II, Inc. Alltrista Acquisition III, Inc. Penn Video, Inc. Lafayette Steel & Aluminum Corporation Caspers Tin Plate Company Unimark Plastics, Inc. LumenX Corporation Alltrista Unimark, Inc. TriEnda Corporation * (DBA) Alltrista Consumer Products Company ** (DBA) Alltrista Unimark Plastics Company and Alltrista Industrial Plastics Company *** (DBA) Alltrista Zinc Products Company EX-10.13 16 file015.txt REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of April 24, 2002, by and among Alltrista Corporation, a Delaware corporation (the "Company"), the guarantors listed on Schedule I attached hereto (each a "Guarantor" and, collectively, the "Guarantors"), and Banc of America Securities LLC, CIBC World Markets Corp. and NatCity Investments, Inc. (each an "Initial Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed to purchase the Company's 9 3/4% Senior Subordinated Notes due 2012 (the "Initial Notes") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated as of April 10, 2002 (the "Purchase Agreement"), by and among the Company, the Guarantors and the Initial Purchasers (i) for the benefit of each Initial Purchaser and (ii) for the benefit of the holders from time to time of the Notes (including you and each other Initial Purchaser). In order to induce the Initial Purchasers to purchase the Initial Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 5(h) of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Additional Interest Payment Date: With respect to the Initial Notes, each Interest Payment Date. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Closing Date: The date of this Agreement. Commission: The Securities and Exchange Commission. Consummate: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Initial Notes that were tendered by Holders thereof pursuant to the Exchange Offer. Effectiveness Target Date: As defined in Section 5. Exchange Act: The Securities Exchange Act of 1934, as amended. Exchange Notes: The 9 3/4% Senior Subordinated Notes due 2012, of the same series under the Indenture as the Initial Notes, to be issued to Holders in exchange for Transfer Restricted Securities pursuant to this Agreement. Exchange Offer: The registration by the Company under the Securities Act of the Exchange Notes pursuant to a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer 1 Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Initial Purchasers propose to sell the Initial Notes (i) to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act and (ii) pursuant to Regulation S under the Securities Act. Holders: As defined in Section 2(b) hereof. Indemnified Holder: As defined in Section 8(a) hereof. Indenture: The Indenture, dated as of April 24, 2002, among the Company, the Guarantors and The Bank of New York, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. Initial Purchaser: As defined in the preamble hereto. Initial Notes: The 9 3/4% Senior Subordinated Notes due 2012, of the same series under the Indenture as the Exchange Notes, for so long as such securities constitute Transfer Restricted Securities. Initial Placement: The issuance and sale by the Company of the Initial Notes to the Initial Purchasers pursuant to the Purchase Agreement. Interest Payment Date: As defined in the Indenture and the Notes. NASD: National Association of Securities Dealers, Inc. Notes: The Initial Notes and the Exchange Notes. Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Record Holder: With respect to any Damages Payment Date relating to the Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Company relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. 2 Regulation S: Regulation S promulgated under the Securities Act. Securities Act: The Securities Act of 1933, as amended. Shelf Filing Deadline: As defined in Section 4 hereof. Shelf Registration Statement: As defined in Section 4 hereof. Trust Indenture Act: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa 77bbbb) as in effect on the date of the Indenture. Transfer Restricted Securities: Each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement and (c) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act or by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 60 days after the Closing Date, a Registration Statement under the Securities Act relating to the Exchange Notes and the Exchange Offer, (ii) use their best efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 180 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of Notes held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company and the Guarantors shall cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 30 days after the date notice of the Exchange 3 Offer is mailed to the Holders. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Notes shall be included in the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 business days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission, or longer if required by applicable federal securities laws. (c) The Company and the Guarantors shall indicate in a "Plan of Distribution" section contained in the Prospectus forming a part of the Exchange Offer Registration Statement that any Broker-Dealer who holds Initial Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Initial Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company and the Guarantors shall use their best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective and (ii) the date on which a Broker-Dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities. The Company and the Guarantors shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 180-day (or shorter as provided in the foregoing sentence) period in order to facilitate such resales. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) any Holder of Transfer Restricted Securities notifies the Company prior to the 20th day following the date of the Consummation of the Exchange Offer that (A) such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) such Holder is a Broker-Dealer and holds Initial Notes acquired directly from the Company or one of its affiliates, then, upon such Holder's request, the Company and the Guarantors shall (x) use their best efforts to cause to be filed a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement") on or prior to 60 4 days after the earlier to occur of (1) the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement or permitted to Consummate the Exchange Offer because the Exchange Offer is not permitted and (2) the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above (60 days after such earlier date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use their best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 120th day after the Shelf Filing Deadline. The Company and the Guarantors shall use their best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the effective date of such Shelf Registration Statement (or shorter period that will terminate when all the Notes covered by such Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement). (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 business days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.50 per week per $1,000 in principal amount of Transfer Restricted Securities. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. 5 All obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Note shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Initial Notes. The Company and the Guarantors each hereby agrees to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Company and the Guarantors each hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a favorable resolution by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (which may include any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes obtained by such Holder in exchange for Initial Notes acquired by such Holder directly from the Company. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. 6 (c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes by Broker-Dealers), the Company and the Guarantors shall: (i) use their best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Securities Act or any regulation thereunder, financial statements of the Guarantors for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish without charge to each of the Initial Purchasers, each selling Holder named in any Registration Statement, and each of the underwriter(s), if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five business days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by 7 reference) to which an Initial Purchaser of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, shall reasonably object in writing within five business days after the receipt thereof (such objection to be deemed timely made upon confirmation of telecopy transmission within such period). The objection of an Initial Purchaser or underwriter, if any, shall be deemed to be reasonable if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the Initial Purchasers, each selling Holder named in any Registration Statement, and to the underwriter(s), if any, make the Company's representatives available and representatives of the Guarantors for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) make available at reasonable times for inspection by the Initial Purchasers, any managing underwriter participating in any disposition pursuant to such Registration Statement and any attorney or accountant retained by such Initial Purchasers or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii) cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Notes covered thereby or the underwriter(s), if any; (ix) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including financial statements and schedules, all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) enter into, and cause the Guarantors to enter into, such agreements (including an underwriting agreement), and make, and cause the Guarantors to make, such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be requested by any Initial Purchaser or by any Holder of Transfer Restricted Securities or 8 underwriter, if any, in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Guarantors shall: (A) furnish to each selling Holder and each underwriter with respect to an Underwritten Offering pursuant to a Shelf Registration Statement, if any, in such substance and scope as they may request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the effectiveness of such Shelf Registration Statement: (1) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of each of the Company and the Guarantors, confirming, as of the date thereof, the matters set forth in paragraphs (i), (ii) and (iii) of Section 5(e) of the Purchase Agreement and such other matters as such parties may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors, covering the matters set forth in paragraph (c) of Section 5 of the Purchase Agreement and such other matter as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors, the Initial Purchasers' representatives and the Initial Purchasers' counsel in connection with the preparation of such Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of the Company and the Guarantors and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent public or certified public accountants and the independent public or certified public accountants for Tilia International, Inc., in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 5(a) of the Purchase Agreement, without exception; 9 (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantors pursuant to this clause (xi), if any. If at any time the representations and warranties of the Company and the Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Company or the Guarantors shall so advise the Initial Purchasers and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities, cooperate with, and cause the Guarantors to cooperate with, the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s) may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Company nor the Guarantors shall be required to register or qualify as a foreign corporation where it is not then so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not then so subject; (xiii) shall issue, upon the request of any Holder of Initial Notes covered by the Shelf Registration Statement, Exchange Notes, having an aggregate principal amount equal to the aggregate principal amount of Initial Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Exchange Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Notes, as the case may be; in return, the Initial Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) cooperate with, and cause the Guarantors to cooperate with, the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use their best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xvi) if any fact or event contemplated by clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed 10 certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depositary Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use their reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise use their best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) cause the Indenture to be qualified under the Trust Indenture Act not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with, and cause the Guarantors to cooperate with, the Trustee and the Holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and to execute, and cause the Guarantors to execute, and use their best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xxi) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice; however, no such extension shall be taken into account in determining whether Additional Interest is due pursuant to Section 5 hereof or the amount of such Additional Interest, it being agreed that the Company's option to suspend use of a Registration Statement pursuant to this paragraph shall be treated as a Registration Default for purposes of Section 5. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's or the Guarantors' performance of or compliance with this Agreement will be borne by the Company or the Guarantors, regardless of whether a Registration 11 Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Initial Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements thereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company agrees and the Guarantors, jointly and severally, agree to indemnify and hold harmless (i) each Holder and (ii) each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the persons referred to in this clause (ii) being hereinafter referred to as a "controlling person") and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing, settling, compromising, paying or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Holder), joint or several, directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company by any of the Holders expressly for use therein. This indemnity agreement shall be in addition to any liability which the Company may otherwise have. In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Company or the Guarantors, such Indemnified Holder (or the Indemnified Holder controlled by such controlling person) shall promptly notify the Company and the 12 Guarantors in writing (provided, that the failure to give such notice shall not relieve the Company or the Guarantors of their respective obligations pursuant to this Agreement). Such Indemnified Holder shall have the right to employ its own counsel in any such action and the reasonable fees and expenses of such counsel shall be paid, as incurred, by the Company and the Guarantors (regardless of whether it is ultimately determined that an Indemnified Holder is not entitled to indemnification hereunder). The Company and the Guarantors shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for such Indemnified Holders, which firm shall be designated by the Holders. The Company shall be liable for any settlement of any such action or proceeding effected with the Company's prior written consent, which consent shall not be withheld unreasonably, and the Company agrees to indemnify and hold harmless any Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written consent of the Company. The Company shall not, without the prior written consent of each Indemnified Holder, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Holder is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Holder from all liability arising out of such action, claim, litigation or proceeding. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors and their respective directors, officers of the Company who sign a Registration Statement, and any person controlling (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company, and the respective officers, directors, partners, employees, representatives and agents of each such person, to the same extent as the foregoing indemnity from the Company and the Guarantors to each of the Indemnified Holders, but only with respect to claims and actions based on information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement. In case any action or proceeding shall be brought against the Company or its directors or officers or any such controlling person in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the Company and the Company or its directors or officers or such controlling person shall have the rights and duties given to each Holder by the preceding paragraph. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Securities giving rise to such indemnification obligation. (c) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities, judgments, actions or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from the Initial Placement (which in the case of the Company shall be deemed to be equal to the total net proceeds from the Initial Placement as set forth in the "Use of Proceeds" section of the offering memorandum prepared in connection with the Initial Placement and the liquidated damages which did not become payable as a result of the filing of the Registration Statement resulting in such losses, claims, damages, liabilities, judgments actions or expenses) and such Registration Statement, or if such allocation is not permitted by applicable law, the relative fault of the Company and the Guarantors on the one hand, and of the Indemnified Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors on the one hand and of the Indemnified Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantors or by the Indemnified Holder and the 13 parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Guarantors and each Holder of Transfer Restricted Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, none of the Holders (and its related Indemnified Holders) shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total discount received by such Holder with respect to the Initial Notes exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Initial Notes held by each of the Holders hereunder and not joint. SECTION 9. RULE 144A The Company and the Guarantors each hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Guarantors each hereby agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this 14 Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not, and will cause the Guarantors not to, on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor the Guarantors has previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Notes. The Company will not take any action, or permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered; provided that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser with respect to which such amendment, qualification, supplement, waiver, consent or departure is to be effective. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company or the Guarantors: Alltrista Corporation Suite B-302 555 Theodore Fremd Avenue Rye, NY 10580 Facsimile: (914) 967-9405 Attention: Ian G.H. Ashken With a copy to: Willkie Farr & Gallagher 787 Seventh Avenue New York, NY 10019 Facsimile: (212) 728-8111 Attention: William J. Grant 15 All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the Purchase Agreement, the DTC Agreement, the Notes, the Guarantees and the Indenture (each as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 16 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. ALLTRISTA CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Vice Chairman, Chief Financial Officer and Secretary ALLTRISTA NEWCO CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary QUOIN CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer HEARTHMARK, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA PLASTICS CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary 17 ALLTRISTA ZINC PRODUCTS, L.P. By: Alltrista Newco Corporation, its General Partner By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA ACQUISITION I, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA ACQUISITION II, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA ACQUISITION III, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary PENN VIDEO, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary 18 LAFAYETTE STEEL & ALUMINUM CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary CASPERS TIN PLATE COMPANY By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary UNIMARK PLASTICS, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary LUMENX CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary ALLTRISTA UNIMARK, INC. By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary TRIENDA CORPORATION By: /s/ Ian G.H. Ashken ---------------------------------- Name: Ian G.H. Ashken Title: Treasurer and Secretary 19 The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. BANC OF AMERICA SECURITIES LLC CIBC WORLD MARKETS CORP. NATCITY INVESTMENTS, INC. BY: BANC OF AMERICA SECURITIES LLC By: /s/ Stephan T. Jaeger ------------------------------------------- Name: Stephan T. Jaeger Title: Vice President 20 SCHEDULE I GUARANTORS Alltrista Newco Corporation Quoin Corporation Hearthmark, Inc.* Alltrista Plastics Corporation** Alltrista Zinc Products, L.P.*** Alltrista Acquisition I, Inc. Alltrista Acquisition II, Inc. Alltrista Acquisition III, Inc. Penn Video, Inc. Lafayette Steel & Aluminum Corporation Caspers Tin Plate Company Unimark Plastics, Inc. LumenX Corporation Alltrista Unimark, Inc. TriEnda Corporation * (DBA) Alltrista Consumer Products Company ** (DBA) Alltrista Unimark Plastics Company and Alltrista Industrial Plastics Company *** (DBA) Alltrista Zinc Products Company 21 EX-23.1 17 file016.txt CONSENT OF ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the inclusion in this Form 8-K of our report dated January 30, 2002. It should be noted that we have not audited any financial statements of Tilia International, Inc. subsequent to December 31, 2001 or performed any audit procedures subsequent to the date of our report. ARTHUR ANDERSEN LLP San Francisco, California May 6, 2002 EX-99.1 18 file017.txt PRESS RELEASE OF ALLTRISTA ALLTRISTA CLOSES ACQUISITION OF TILIA; PLANS NAME CHANGE TO JARDEN CORPORATION ~ STRENGTHENS ALLTRISTA'S LEADING POSITION IN HOME FOOD PRESERVATION MARKET ~ ~ TRANSACTION TO BE ACCRETIVE IMMEDIATELY ~ RYE, NEW YORK - APRIL 24, 2002 - ALLTRISTA CORPORATION (NYSE:ALC) today announced it has completed its acquisition of the business of Tilia International, Inc for $160 million. The acquisition of San Francisco-based Tilia will more than double Alltrista's consumer products revenue, consistent with Alltrista's strategic focus on food preservation products and branded kitchen consumables. In conjunction with the acquisition, Alltrista also announced that it is seeking shareholder approval at its annual meeting scheduled for May 30, 2002 to change its name to Jarden Corporation in order to more effectively convey its new business strategy. Upon approval, the stock will trade on the New York Stock Exchange under the new symbol JAH. Martin E. Franklin, Chairman and Chief Executive Officer, said, "The acquisition of Tilia is a major strategic step in our plan to pursue growth in food preservation and branded kitchen consumer products. As a result of the transaction, more than 70% of our total revenue will be derived from our consumer products business. Our decision to pursue a new corporate identity as Jarden Corporation also reflects our strategic focus and business mix. At the same time, we intend to maintain our materials-based business, as this segment is operated by a strong management team and generates consistent cash flow for our company." Based in San Francisco, Tilia is a developer and distributor of home food preservation products including FoodSaver(R), the industry's leading line of home vacuum packaging systems. Tilia will operate as a wholly owned subsidiary of Alltrista. The Tilia acquisition was financed by a $150 million offering of senior subordinated notes in a private placement pursuant to Rule 144A and refinancing of its existing indebtedness with a new $100 million senior secured credit facility. Mr. Franklin stated, "Tilia has built the leading position in home vacuum packaging systems, one of the fastest-growing categories in the $5.1 billion market for small electric kitchen appliances. In 2001, sales of its FoodSaver(R) system grew 39% over the previous year. Tilia has a well-established brand, niche market leadership, a reputation for quality, strong relationships with leading retailers and a broad and growing product line. In 2000, Tilia was recognized as one of the fastest-growing companies by Inc. magazine. We are already beginning to pursue opportunities to leverage each company's complementary strengths. These include Tilia's expertise in sales and marketing and Alltrista's logistics capabilities and distribution channels." ALLTRISTA CLOSES ACQUISITION OF TILIA PAGE 2 Mr. Franklin continued, "While creating a dynamic, entrepreneurial company, Tilia has managed its business with discipline, which is evident in the company's strong operating profitability. We are delighted to welcome Linda Graebner and her team, and look forward to working with them to maximize the growth potential of Tilia and the FoodSaver(R) brand." Linda S. Graebner commented, "We are very excited about joining Alltrista, a company with extensive food preservation experience, substantial resources and a commitment to building and supporting brands. Access to Alltrista's additional distribution channels and established customer relationships will help us realize the tremendous growth potential of our company." Mr. Franklin concluded, "This transaction also provides a number of important financial benefits. We anticipate the acquisition to be accretive to earnings per share immediately. Like Alltrista's core home canning products, Tilia has an operating model with a razor/razor blade component. Sales of replacement bags for vacuum packaging systems represent approximately 22% of total sales. In addition, Tilia's sales are historically highest in the fourth quarter, which will enable Alltrista to reduce the seasonality of its revenue streams, which have traditionally been strongest in the second and third quarters." Alltrista Corporation is a leading provider of niche consumer products used in home food preservation. Tilia's FoodSaver(R) line is the U.S. market leader in home vacuum packaging systems and accessories. Alltrista Consumer Products is the leading North American manufacturer, distributor and marketer of home canning and related products, primarily under the Ball(R), Kerr(R) and Bernardin(R) brands. The Company also operates a materials based group, which is the country's largest producer of zinc strip and manufactures injection molded and industrial plastics. This news release contains "forward-looking statements" within the meaning of the federal securities laws and is intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995, including statements regarding the outlook for Alltrista's markets and the demand for its products. These projections and statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those projected as a result of certain factors. A discussion of factors that could cause results to vary are included in the Company's periodic reports filed with the Securities and Exchange Commission, including its Form 10-K for the fiscal year ended December 31, 2001. ### -----END PRIVACY-ENHANCED MESSAGE-----